Netflix Says It Will Be Fine Without Net Neutrality Rules
Last week a court decision struck down — for now — a federal agency’s attempt to enforce “net neutrality.” That move raised the possibility that Netflix, which is already fighting with broadband providers about the quality and cost of their service, could get stuck paying more to deliver its video over the Web. And Netflix stock dropped in the aftermath.
No worries, says Netflix CEO Reed Hastings.
Netflix had not made any comments about the ruling until today, but Hastings addressed it in his quarterly earnings letter to shareholders. The short version: Even if net neutrality isn’t reinstated, Hastings says, cable and telco broadband providers won’t choke the company out, because their customers would freak out.
Here’s the long version:
“Unfortunately, Verizon successfully challenged the U.S. net neutrality rules. In principle, a domestic ISP now can legally impede the video streams that members request from Netflix, degrading the experience we jointly provide. The motivation could be to get Netflix to pay fees to stop this degradation. Were this draconian scenario to unfold with some ISP, we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver.
The most likely case, however, is that ISPs will avoid this consumer-unfriendly path of discrimination. ISPs are generally aware of the broad public support for net neutrality and don’t want to galvanize government action.
Moreover, ISPs have very profitable broadband businesses they want to expand. Consumers purchase higher bandwidth packages mostly for one reason: high-quality streaming video. ISPs appear to recognize this and many of them are working closely with us and other streaming video services to enable the ISPs subscribers to more consistently get the high-quality streaming video consumers desire.
In the long-term, we think Netflix and consumers are best served by strong network neutrality across all networks, including wireless. To the degree that ISPs adhere to a meaningful voluntary code of conduct, less regulation is warranted. To the degree that some aggressive ISPs start impeding specific data flows, more regulation would clearly be needed.”
Meanwhile, investors seem just fine with the legal status quo. Following an earnings report that beat expectations, Netflix stock is trading above $388 — up more than 20 percent from where it was last week after the court ruling.
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