The cable industry is losing customers thanks to the “cord-cutting” movement. For the first time, pay-TV subscriptions were down year-over year last year. Dish and DirecTV actually grew, but the big losers were the giant cable providers like Time Warner and Comcast, which lost 2 million subscribers.
Rather than attempt to win customers back by building a better mousetrap, however, the cable providers are double-dipping and are starting to force content providers like Netflix for access to their networks — and degrading services until they pay up.
So says Netflix CEO Reed Hastings, who came out swinging yesterday against the big cable providers that have dragged his company kicking and screaming to the negotiating table.
His comments come as the FCC is preparing to address the overturn of its 2010 Open Internet order, which was struck down in court last month. They are no doubt timed to coincide with Friday’s deadline for filing comments in the FCC’s open internet docket.
Hastings accuses the ISPs of allocating insufficient bandwidth to Netflix products, “subjecting consumers who pay a lot of money for high-speed Internet to high buffering rates, long wait times and poor video quality.” Once Netflix agrees to pay connection fees, however, he says “sufficient capacity is made available and high quality service for consumers is restored.”
According to Netflix own figures, Verizon slowed down the company’s prime time speeds by 14% in January over their FIOS network, just as Netflix was rolling out the latest season of their hit series House of Cards.
Netflix subsequently signed a traffic pact with Comcast, who no doubt were motivated by a desire to prove to the FCC that they can “play nice” as they attempt to gain approval to buy Time-Warner.
At the moment Netflix has no choice but to pay up, Hastings laments. “In the near term we will in cases pay the toll to the powerful ISPs to protect our consumer experience,” he says, but he argues that allowing ISPs to determine who gets access to customers puts them in a dangerous gatekeeper role.
Netflix is a huge data hog, to be sure. A recent report indicates that during peak hours, Netflix is responsible for 33% of all internet traffic. The company has seen remarkable growth over the past two years, when its share of network traffic was estimated to be at 20%.
But, argues Hastings, consumers are already paying steep fees for access to cable networks — and the Netflix product. “When an ISP sells a consumer a 10 or 50 megabits-per-second Internet package, the consumer should get that rate, no matter where the data is coming from,” he says.
Photo by jdlasica under Creative Commons license