With either an ISP lawsuit or a 2016 party shift the only way to kill our new net neutrality rules, neutrality opponents have some time to kill. As such, they’re in desperate need of somewhere to direct their impotent rage at the foul idea of a healthier Internet free from gatekeeper control. Step one of this catharsis has been to publicly shame the FCC for daring to stand up to broadband ISPs in a series of increasingly absurd and often entirely nonsensical public “fact finding” hearings. Step two is to push forth a series of editorials that tries to rewrite the history of the net neutrality debate — with Netflix as the villainous, Machiavellian centerpiece.
A few weeks ago, Netflix CFO David Wells told attendees of an investor conference that Title II was “probably not” what the company wanted at the outset. This resulted in an endless stream of stories about how Netflix had “flip-flopped” on its net neutrality position and simply could not be trusted. Except if you actually bothered to read the transcript of his comments, he goes on to note the company is very pleased where things have wound up, and happy to have a viable regulatory mechanism at the FCC to file complaints over things like interconnection:
“Were we pleased that it pushed to Title II, probably not, right? I mean, we were hoping that, there might be a non-regulated solution to it. But it seems like companies that are pursuing their commercial interests including us have to arrive at something like that. So we’re super pleased that there is now a notion, at least a vehicle, for a complaint…So I would say we are very pleased with what’s been accomplished.”
Wells pretty clearly explains that while it would have been nice if we could have protected net neutrality without regulation, it became pretty clear that Title II was the only way regulators could adequately police anti-competitive behavior in the broadband sector. That’s what Title II supporters have been saying for months: while Title II isn’t perfect, it’s the best option we have given the lack of broadband competition in the sector (which despite a lot of rhetoric isn’t improving anytime soon). There’s nothing hypocritical — or even shocking — about what Wells said.
Still, that Wells had exposed Netflix as a shady trickster has somehow become the talking point du jour in the media and among net neutrality opponents for much of the last six months, with editorials and headlines suggesting Netflix was now “shunning ObamaNet”, or was suffering “lobbyist remorse” over net neutrality. In an editorial for the Wall Street Journal, Holman Jenkins Junior declared the CFO had somehow single-handedly proven that the entire push for net neutrality was somehow a Netflix Con:
“Why, a month after this deluge of demurrers, did Netflix change its tune radically and call for utility regulation of even the upstream “network of networks,” which previously had not been considered part of the net-neutrality debate? Because Netflix was then rolling out its own network, Open Connect, to bypass the public network in favor of direct tie-ups with last-mile providers like Comcast,Verizon and AT&T. This largely ignored story has been told in detail by a disparate group of analysts and lawyers including Dan Rayburn, Larry Downes, Jonathan Lee and Fred Campbell. Netflix effectively engineered a slowdown of its own service in late 2013 by relying on an intermediary with inadequate capacity, then waved a bloody shirt in pursuit of the direct-connection deals that today allow Netflix to distribute its content more efficiently and cheaply.
At least now we understand the famous but nearly indecipherable remarks of Netflix CFO David Wells at a Morgan Stanley media conference two weeks ago. To wit, Netflix had been happy to flog the net-neutrality meme while negotiating these agreements, Mr. Wells indicated, and then unhappy when the FCC took its rhetoric seriously and imposed sweeping Title II regulation.
One, as we’ve noted repeatedly, the new rules are not “utility-style regulations.” ISPs are being classified as common carriers, but the FCC is forbearing from a massive swath of Title II regulations reserved for utilities, including price controls and local-loop unbundling. It’s more like “Title II lite,” and given the ample remaining loopholes for things like zero rated apps, it’s very, very far from “heavy handed regulation.” Two, Netflix’s Open Connect CDN is a free CDN that benefits ISPs, Netflix and consumers alike, and which ISPs are free to refuse. It’s not, as Jenkins and FCC Commissioner Pai have tried to claim, some kind of secret devil-worshiping cult (though that would certainly add an awesome twist to the story).
Three, to hear Netflix, Cogent and Level3 tell it, it was the ISPs that failed to upgrade their side of peering relationships to degrade performance and extract direct interconnection fees. That Netflix intentionally sabotaged its own business so it could enjoy the privilege of paying Comcast, AT&T, and Verizon what basically are “duopoly customer access fees” doesn’t make the slightest bit of coherent sense. Still, this is the narrative that’s now being pushed by numerous industry-friendly folk in papers and trade rags nationwide.
Broadband industry think tanker extraordinaire Fred Campbell has penned a similarly ridiculous editorial that’s circulating among industry trade magazines. Campbell, too, suggests we’re all victims of the dangerous, shadowy Netflix cabal, using the company’s out-of-context CFO comments as the only notable proof:
“Netflix revealed its Title II advocacy was a ruse on March 4, when Netflix chief financial officer David Wells said the company was disappointed by the ultimate outcome at the FCC…Wells didn’t say what “non-regulated solution” Netflix had hoped to achieve, but anyone who followed last year’s shenanigans between Netflix and major ISPs knows that its interest was aimed at obtaining free interconnection deals. Wells’s statement makes clear that Netflix hoped its public push for Title II would force ISPs to capitulate to its demands.”
So again, the proof-optional narrative being pushed by ISPs and net neutrality opponents is that the entire ten year net neutrality debate is really all just a clever ploy by Netflix — to save a few bucks. Netflix is the villain, the narrative continues, and companies like AT&T, Verizon and Comcast — with a generation of anti-competitive behavior under their belt — are the real victims here.
Except to seriously believe that you’d have to be so intentionally, willfully oblivious to the point of causing yourself personal, bodily harm. You’d have to ignore that the net neutrality really began with AT&T’s former CEO basically stating AT&T wanted to double dip content companies, billing them for doing absolutely nothing. You then have to ignore ten years of history involving giant ISP experiments aimed at trying to make this dream a reality, whether that’s AT&T blocking Facetime to push unlimited users on to throttled plans, Verizon’s history of trying to block, well, every single technological advancement it hasn’t liked over the last decade, or this latest interconnection kerfuffle.
Of course most of us realize the crime Netflix is actually guilty of here: the company stood up to ISPs on issues like net neutrality, a lack of sector competition, broadband pricing and usage caps. You can’t have a relatively-respected technology company like that talking trash about the nation’s cozy, broken broadband duopoly. As such, the only solution is to discredit Netflix using the flimsiest arguments imaginable. I personally think it would have been much more effective to claim Netflix CEO Reed Hastings is a cyborg-vampire hybrid fueled by virgin and puppy blood, but then again, clumsy character assassination has never been my forte.