Netflix Wins Tech Hypo(crite) Award for Lying about Video Throttling

Tech Darling Cynically Manipulated Net Neutrality Debate to Ban What It Did in Secret

WASHINGTON D.C. — ­­ Yesterday, Netflix admitted the company has long been throttling its traffic for AT&T and Verizon customers without their knowledge or consent: “to protect our members from overage charges when they exceed mobile data caps, our default bitrate for viewing over mobile networks has been capped globally at 600 kilobits per second. It’s about striking a balance that ensures a good streaming experience while avoiding unplanned fines from mobile providers.”

“Failing to disclose this practice to consumers is bad enough, but Netflix’s political hypocrisy is astounding,” said Berin Szoka, President of TechFreedom, which announced that it would award the company its first annual Tech Hypo(crite) award.

Two years ago, Netflix led the fight to get the FCC to require transparency about precisely such practices, and to ban throttling as inherently harmful,.It also claimed that Comcast was effectively throttling Netflix traffic simply by failing to offer unlimited, free interconnection to Netflix — something companies like Netflix had always had to pay for. With the help of comedian John Oliver, Netflix rallied an angry mob that ultimately succeeded in getting President Obama to tell the FCC to dramatically expand ‘net neutrality’ to include interconnection — saying that throttling should be defined “from a consumer’s perspective,” regardless of who was doing it or how it worked.

There’s nothing inherently wrong with Netflix’s throttling. ‘Throttling’ video speeds may sound scary, but it can benefit consumers for the very reasons Netflix cites today. But why didn’t Netflix just disclose the practice?

“It turns out Netflix was really saying ‘Net neutrality for thee, but not for me,’” continued Szoka. “The only question is: was Netflix throttling user traffic at the time, or did it only decide to do so later? To be clear, there’s nothing inherently wrong with Netflix’s throttling. ‘Throttling’ video speeds may sound scary, but it can benefit consumers for the very reasons Netflix cites today. But why didn’t Netflix just disclose the practice? Was Netflix afraid the angry mob it helped create would turn on it? And why where was its talk of ‘striking a balance that ensures a good streaming experience’ when it was lobbying the FCC to ban throttling outright?”

Netflix was really saying ‘Net neutrality for thee, but not for me!’

“The big question here is: Why didn’t the FCC figure this out on its own?,” concluded Szoka. “Are our new Internet cops so clueless that they failed to notice the difference between Netflix speeds on various mobile networks? Are they so blinded by their preconceived narrative — ‘Must regulate ISPs, must protect Netflix!’ — that they simply failed to ask the question? Or did they know, but look the other way — while picking winners and losers in how they applied their ‘strong net neutrality’ rules? At a minimum, FCC Chairman Tom Wheeler is guilty of gross incompetence. But if he actually knew about Netflix’s hypocrisy and covered it up, he doesn’t just deserve a Tech Hypo award of his own, he deserves to be removed from office.”

If Wheeler actually knew about Netflix’s hypocrisy and covered it up, he doesn’t just deserve a Tech Hypo award of his own, he deserves to be removed from office.”

How We Got Here

Anatomy of a Political Shakedown

On January 14, 2014, the D.C. Circuit issued its decision in Verizon v. FCC, striking down the FCC’s 2010 Open Internet rules against blocking and throttling, but upholding the rule requiring transparency about network management. The FCC scrambled to prepare alternative rules.

In the weeks leading up to the decision, Netflix had loudly decried ISPs for slowing its traffic — a claim that was quickly debunked by independent technical expert Dan Rayburn, who later cited additional data showing that Netflix itself had engineered the the blockages to make it appear Comcast was to blame. On February 23, Comcast agreed to an interconnection deal to provide cost-effective interconnection for Netflix. Most media stories asserted Comcast was shaking down Netflix, but Rayburn explained:

Naturally, many of these same people are also implying that because Netflix has to pay Comcast, consumers will foot the bill for this as Netflix will have to charge more for their service. This could not be further from the truth. Those stating this have no clue how Netflix delivers their content today or what costs they already incur. If they did, they would know this is not a new cost to Netflix, it’s simply paying a different provider, and it should be at a lower cost. It should actually be cheaper for Netflix to buy direct from Comcast, and they also get an SLA, which also improves quality and that’s a good thing. Given that Netflix has many options to buy transit from many different transit providers, why would they pay more? They wouldn’t.

Netflix quickly shifted its battle to the political realm. On March 20, Netflix CEO Reed Hastings announced Netflix’s push to have the FCC regulate interconnection in a blog post entitled “Internet Tolls And The Case For Strong Net Neutrality.”

The FCC initially resisted Netflix’s efforts to hijack the net neutrality rulemaking. When the FCC issued its proposed Open Internet rules in May, 2014, FCC Chairman Tom Wheeler said:

Separate and apart from this connectivity is the question of interconnection (“peering”) between the consumer’s network provider and the various networks that deliver to that ISP. That is a different matter that is better addressed separately. Today’s proposal is all about what happens on the broadband provider’s network and how the consumer’s connection to the Internet may not be interfered with or otherwise compromised.

In its reply comments on the FCC’s proposed net neutrality rules, filed in September 2014,

Interconnection points with terminating access networks fit comfortably within the scope of the Commission’s proposed rules: “our rules apply only as far as the limits of a broadband provider’s control over the transmission of data to and from its broadband customers.” The only way for any online service or application to reach a user is by traveling across her terminating ISP’s network. In the past, the FCC has focused only on a terminating ISP’s ability to block, slow, or degrade how content travels over its network to a consumer. The NPRM tentatively retains that narrow focus. But a terminating ISP also can block, slow, or degrade how content enters its network by failing to allocate sufficient capacity at the point of interconnection to its network. From a consumer’s perspective, whether degradation occurs on the last mile or at the interconnection point to the last mile is a distinction without a difference. Both impede a consumer’s access to the online content she has requested.

This point of interconnection can become the proverbial bottleneck for delivery of online content to consumers.

Whatever the FCC was planning to do changed when the President, on November 10, issued his major address, repeatedly using Netflix’s “strong net neutrality” framing, and specifically ordering the FCC to give Netflix what it wanted:

I am also asking the FCC to make full use of the transparency authorities the court recently upheld, and if necessary to apply net neutrality rules to points of interconnection between the ISP and the rest of the Internet.

The FCC’s final rules did precisely that.

The rules are now being challenged in the D.C. Circuit. The FCC appears most likely to lose on the issue of interconnection, at least for failing to issue a further notice of proposed rulemaking to seek public comment on the issue when it changed course.

Netflix, no doubt, will continue its cynical effort to regulate its rivals, while remaining free from FCC regulation.