Netflix and other OTT giants use 'net neutrality' rules to clobber EU rivals

+Comment Cable giant Netflix and other big firms are using calls for greater net neutrality to drive down the prices they pay, according to recently published research.

Referring specifically to the Dutch internet market, late last week John Strand of Strand Consulting said: “Net neutrality law (which limits operators’ ability to manage networks and recover costs) is meant to herald a flowering of internet innovation and content. Instead, it rolls out the red carpet for the American giant [Netflix].”

“Netflix, already larger than any cable company in the world by subscribers, is not a company in need of corporate welfare,” added Strand. “It’s time to stop Netflix’s abuse of the political and regulatory system.”

Meanwhile, academic Ros Layton has drawn attention to the publication of Netflix’s “ISP speed index”, which has attracted criticism for failing to provide a real measure of quality. When Netflix began publishing the index in 2012, it was looking to expand into Europe.

Norway’s biggest ISP, Telenor, was keen to improve the quality of its OTT video service, and offered a commercial rates CDN connection, said Layton, from Aalborg University, Center for Communication, Media and Information Technologies (CMI), a PhD Fellow studying net neutrality.

“Telenor said ‘send it direct to us and customers will get a better experience’, but the US company said it preferred direct connection,” said Layton.

Now it should be remembered that "sender pays" is a founding principle of internet video — video providers can’t use reciprocal free peering swaps to deliver low latency, high bandwidth traffic.

But Netflix did not ink a deal with Telenor, and what followed is a matter of public record. That December, the Norwegian firm found itself put in 9th place on the list.

Berit Svendsen of Norway Telenor told Norwegian business daily Dagens Naeringsliv in 2012: "We got a warning that they were going to go out in the media if they did not get what they wanted, so this came as no surprise to us."

Telenor quoted from email correspondence with Netflix at the time, in which the latter boasted of “terrific” quality of service on Telenor’s network - a different story to the one it was telling its ISP Speed Index, where it gave Telenor only a low ranking. Svendsen also claimed that "traffic logs do not indicate that anything has gotten worse since then".

After a few months, Telenor signed a direct interconnect deal with Netflix. No one knows the financial terms of the arrangement.

We asked Netflix for comment and its spokesman told us:

We feel that consumers should get the Internet they pay for. Broadband providers sell packages that promise certain speeds and should deliver what they sell instead of trying to double dip and charge both consumers and content providers. We work with ISPs around the globe and deliver Netflix video as close to the viewer as we can, offering free hardware and services to ISPs as part of our Open Connect Content Delivery Network.

This year Netflix has signed deals with big boys Verizon and Comcast.

“It’s like bringing your own cockroach to McDonalds, then making a complaint about their hygiene,” claimed Layton.

Strand claims the Dutch have discovered that adopting net neutrality rules merely gives American competitors a huge boost over European startups, which the European digital agenda commission (DG-CONNECT) claims it wants promote.

In its latest letter to shareholders (PDF), Netflix said it’s now profitable in Europe.

The DG-CONNECT is convinced that calls for net neutrality enjoy grassroots support — although the calls come largely from activist groups that the EU itself helps fund. Meanwhile, Europe’s competition commission last year found no evidence that there was a net neutrality problem. ®

Comment

As I described here, there is a potential competition question arising from direct connection deals, but it affects small OTT video startups trying to take on Netflix and Google. The problem with DG-CONNECT, now swollen to three commissioners, is that it adopted a highly ideological US-centric digital agenda.

Next-generation networks with sophisticated packet management will make such arguments moot. While networks will always remain contested resources, more intelligent networks will allow new technical and business cases to flourish.

But that’s only if the mob with pitchforks permit such networks to develop. Use of language such as “pay to play” suggest they’re not yet in a position to make such decisions.