Netflix Says It Won't Be Hurt By Net Neutrality Repeal

Netflix has long been one of the most prominent supporters of net neutrality, and for good reason: Internet service providers could very quickly put a crimp in Netflix's business by degrading its traffic, or by imposing the kinds of data caps that discourage people from streaming video.

So it stands to reason that Netflix's business could be jeopardized if the new Federal Communications Commission makes good on threats to scrap the net neutrality rules.

Nonetheless, the company is now insisting that it won't be affected by a repeal of net neutrality. "Weakening of US net neutrality laws, should that occur, is unlikely to materially affect our domestic margins or service quality because we are now popular enough with consumers to keep our relationships with ISPs stable," the company says in a letter to shareholders.



Of course, it makes sense that Netflix would want to reassure shareholders that it won't lose value under a GOP-controlled Federal Communications Commission. And it's also true that Netflix is large enough that it can afford to pay extra fees to ISPs in order to keep its content available, should the neutrality rules be rolled back. (Ultimately, though, those costs would likely be passed along to consumers, who may or may not decide that Netflix is a worthwhile expense.)

But despite its recent comments, there is no serious question that the net neutrality rules benefit Netflix. Just three years ago, Netflix had to forge "interconnection" deals with major ISPs in order to end choppy video streams. While the details have never been revealed, the deals appeared to involve Netflix paying ISPs extra fees in order to connect directly with their servers.

The new net neutrality rules don't prevent those types of arrangements, but allow the FCC to intervene in disputes over interconnection.

The rules -- at least as currently interpreted -- also prohibit ISPs from playing with data caps in ways that could favor their own video content at the expense of Netflix and other online video providers.

As recently as September, Netflix called on the FCC to crack down on data caps, arguing that the limits "discourage a consumer’s consumption of broadband, and may impede the ability of some households to watch Internet television in a manner and amount that they would like."

Although Netflix says it won't be harmed by the gutting of net neutrality protections, the company also says it still supports the rules. "Strong net neutrality is important to support innovation and smaller firms," the company said in its shareholder letter. "No one wants ISPs to decide what new and potentially disruptive services can operate over their networks, or to favor one service over another."

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