Netflix Seeks To Reassure Stockholders That ISPs Won't Degrade Streams

by , Jan 23, 2014, 6:28 PM
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The leadership at Netflix is attempting to reassure stockholders that the company won't be hurt by the recent court decision gutting net neutrality rules.

In a letter to stockholders, CEO Reed Hastings and Chief Financial Officer David Wells promise to “vigorously protest” any attempt by Internet service providers to block or degrade Netflix's streaming videos.

“In principle, a domestic ISP now can legally impede the video streams that members request from Netflix,” they write. “Were this draconian scenario to unfold with some ISP, we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver.”

Of course, this raises the question of what consumers can do to stop ISPs from blocking video services offered by competitors. One possibility -- though not explicitly endorsed by Hastings and Wells in their letter -- involves asking the Federal Trade Commission to step in. After all, any ISP that lures subscribers with the promise of high-speed video, but then blocks streaming video from companies like Netflix, might well be engaged in a deceptive business practice.

Another possibility -- though one that seems remote -- is that consumers could themselves take legal action. In 2008, a group of users sued Comcast for false advertising after it was caught throttling peer-to-peer traffic. Comcast eventually settled that case by offering refunds of up to $16. Around the same time, another consumer brought a case against RCN, also alleging that the company throttled peer-to-peer services; that matter also was resolved.

Those types of lawsuits don't seem as likely now as in the past, given that many companies recently changed their terms of service to require arbitration of disputes. But some consumers -- and advocacy groups -- might decide that it's worth pursuing arbitration if an ISP is caught throttling traffic.

For their part, Hastings and Wells say they think it's likely that ISPs will follow neutrality principles. That's because ISPs “are generally aware of the broad public support for net neutrality and don’t want to galvanize government action,” according to the Netflix execs.

Netflix's leaders add that ISPs probably know that they're not going to win subscribers by degrading online video. “ISPs have very profitable broadband businesses they want to expand,” Hastings and Wells say. “Consumers purchase higher bandwidth packages mostly for one reason: high-quality streaming video.”

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