Prior Hypocrisy Doesn’t Restrain Current Chicanery

Netflix seeks to enlist the Federal Communications Commission (FCC) as a fellow traveler in its fantasy of flat-pricing Internet access.  In this latest attack on other firms, it wants the FCC to ban Internet Service Providers (ISPs) from using “data caps,” i.e. charging for total amount of Internet data transferred above some threshold.

Landline ISPs price Internet access based on the speed at which Internet bits are transferred, e.g. 25 megabits per second service.  A few landline ISPs also charge for monthly data volume if it exceeds a high usage threshold.  For example, Comcast may set its high usage threshold at 1 Terabit per month.  Charter Cable (which now includes Time Warner Communications and Bright House cable) generally imposes no data cap.  Other ISPs will have pricing arrangements that reflect the costs and competition they face.  Terrain and population density are important cost factors in pricing that allows ISPs to be financially viable and able to pay for new infrastructure performing at the ever-increasing speed that the FCC defines as “broadband.”

Charges for total data volume are more commonly a part in mobile ISP charges.  It is common to see a $100 bundle with 4-lines and 18 gigabits suited to families with smart phones.  Families who subscribe to Netflix typically would use 300 gigabits if they switched all their customary TV viewing over to delivery from the Internet.  That would not challenge a landline broadband access service.

Ironically, for five years, Netflix meddled with the competitive marketplace, slowing the transmission of its movies to Verizon Mobile and AT&T Mobile customers while transmitting at full speed to customers of their competitors, T Mobile and Sprint.  At the same time, they hypocritically blamed ISPs for degrading the quality of the video.  That scam was successful at the FCC insofar as Netflix suffered no real consequences – just mild embarrassment, and now they are back at the FCC’s front door begging to disadvantage the ISPs again.

The FCC generally assesses broadband based on availability and speed in its reviews required in section 706 of the Communications Act.  Section 706 is intended to determine whether advanced communications capabilities are being deployed in a reasonable and timely fashion, and to determine any immediate action needed to accelerate deployment if infrastructure falls below what’s needed.

Although Netflix dreams otherwise, broadband deployment will not be accelerated by federal regulations that prevent charging for total usage above some high threshold.  Indeed, such charges would help curb bad actor customers from the excessive use that degrades everyone else’s experience of the shared infrastructure in their neighborhood.  Revenues from high volume use are needed to finance advanced equipment for higher speed Internet transmission infrastructure.

Charter, Verizon and AT&T evidently have no customers facing such charges.  Comcast’s landline customers face an Internet data charge only if they exceed three times what a typical TV viewer could transfer to Internet viewing.  Verizon and AT&T have no landline data caps and they offer speeds that go as high as 500 megabits per second.  Clearly Netflix is laying the foundation for more kvetching in the future.

Wireless is different.  Wireless services at one time inappropriately offered unlimited data plans, but most have withdrawn that offering.  The largest volume data plan Verizon Wireless now offers is a 100 Gigabit plan priced at $450 per month.  Wireless Internet services do not have the capacity to offer unlimited data that could support full-time video from Netflix, and wishing cannot make it so.  There is just insufficient wireless spectrum and infrastructure.  The FCC can help improve the volume of wireless data possible by expediting authority to use 5th generation wireless spectrum.  Spectrum in the 30 gigahertz and above bands will be essential to connecting the last 200 feet for customers.

In the interim, mobile customers are usually offered a collection of information and entertainment apps whose bit count does not accumulate against the monthly minimum.   These so-called “zero rated” services are popular among many content suppliers because the free samples or free episodes cultivate a longer term audience for the promoted program.   Netflix’s streaming competitors (including HULU and Amazon) offer programs with or without commercials and programs with or without a separate charge.  Netflix’s streaming industry is riddled with examples of price tactics that Netflix wants the FCC to ban.

Suppliers for whom the promotional approach is unappealing tend to criticize strategies employing “zero rated” services. Consumers seem to like them.  Netflix’s self-serving demand that the FCC ban data caps is unreasonable and would be counterproductive to the deployment of faster Internet.  Given Netflix’s earlier chicanery it is surprising anyone might take its opinion seriously.

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