Will Netflix Be Affected by the Net Neutrality Decision?
The Internet has been a buzz this week with discussions on the "net neutrality" ruling, when an appeals court overturned a FCC regulation on Internet Service Providers. One of the main discussions has been about how the "end of net neutrality" will result in the death of online video streaming service Netflix.
First off, what is net neutrality? Derek Thompson, senior editor for the Atlantic said it well on the NPR show "Here and Now;"
Net neutrality is the idea that it's a single-speed Internet. Internet providers like Verizon can't discriminate against certain services. They can't make Netflix stream slower than the HERE AND NOW website or the Atlantic.com. And they can't make us pay extra to get the same treatment.
So why is this relevant to Netflix? Many Internet Service Providers, or ISPs, are also cable companies. Where I live, it's Time Warner Cable that provides both the Internet and cable. Netflix is competition for the cable company -- it's a huge piece of the paradigm shift away from cable and towards online streaming services. And Time Warner, by selling me Internet, is basically giving me access to one of its biggest competitors. Aside from that, Netflix accounts for a huge amount of peak time bandwith.
"It's important to point out that because this particular net neutrality ruling failed, it doesn't necessarily mean that net neutrality is doomed."
Derek Thompson, senior editor for The Atlantic
With an "end to net neutrality," Time Warner could cut speeds to Netflix, or force Netflix to pay a fee to get preferential treatment and the current speeds that customers enjoy. This would most likely race customer rates, and Netflix's stock prices have taken a hit because of it.
So is Netflix in danger? Not at the moment. While the appeals court struck down the enforcement of net neutrality, it did so on a technicality. The FCC still has the power to regulate, and can pass any number of measures on the subject, more if they eventually determine that broadband providers are "common carriers" -- industry speak for public utilities like landlines and phones. Under those guidelines, carriers like Time Warner and Verizon would be forced to treat all sites equally.
And, Thompson points out in his piece in the Atlantic, Netflix could cover a pretty sizeable fee ($330 million) if they upped the cost of their subscription from $8-9, still putting it at a substantially cheaper price than most cable.