Netflix cut a controversial deal with Comcast earlier this year to improve its shows’ transmission quality because it didn’t have a choice, said CEO Reed Hastings. But that didn’t mean Hastings liked it, or thought it was the right thing in the long run for either his company or the Internet as a whole. That’s why Hastings publicly criticized the deal less than two weeks after signing it, he said. “The basic thing is we have no power” over Comcast, Hastings said in discussing the deal at the Code Conference in Rancho Palos Verdes, CA. “We asked them for access [to their mutual Internet-using customers], and couldn’t get it. You might say, ‘Why did you compromise on the deal,’ and we would say, ‘We had to.’”
The details are complicated for non-tech types, but Hastings said Netflix had seen transmission speeds on Comcast systems for its movies and TV shows “go down and down and down.” Those shows were forward-positioned on “content-distribution networks” run by companies such as Cogent and Level3 to speed video delivery to users. Under the deal, however, Netflix now pays Comcast directly to forward-position that content on Comcast’s own servers.The Netflix traffic, which comprises about a third of all Internet use during primetime, is now “better than it was,” and “as good as it is on Cox or Cablevision,” Hastings said.
But Hastings said Comcast is trying to force Internet “wholesalers” like Cogent and Level3 to sign similar deals to deliver content to Comcast’s Internet customers, a situation he said changes the Internet’s long-accepted rules of the road. “Now, the big guy is pulling profits out of the system,” Hastings said. “It’s a general way of taxing the Internet because they’re so big. We don’t think that’s the way it should be. We think it should be settlement free.”
Comcast CEO Brian Roberts, who spoke at the same conference 24 hours earlier, said then that Netflix was just trying to avoid paying the costs it was incurring for its heavy use of Comcast’s Internet infrastructure.
The deal also angered many Internet activists concerned that it would create different classes of content on the Internet, with a “fast lane” reserved for those companies with the money to buy special treatment. Hastings voiced similar concerns, calling for “strong net neutrality” protections preventing such fast lanes as part of government approval of Comcast’s $45 billion merger with Time Warner Cable.
“The argument on their side is we should be able to charge anybody anything,” Hastings said of Comcast. “But the problem is they’re a near monopoly. They want the whole Internet to pay them when their Internet customers want to use the Internet.” The situation will only get worse as the cable industry consolidates, Hastings said, because other options for getting Internet, such as DSL wired service from telephone companies or wireless services as proposed by Sprint can’t really handle the bandwidth demands of lots of video.
“Cable is going to be the entire U.S. residential Internet over the next 20 years,” Hastings said. “The fear (I have) is somewhat for Netflix but it’s mostly for the whole Internet. That’s why we’re talking about strong net neutrality, no blocking, settlement free, no slow lane. We’re raising the question, what happens when one company has that kind of control? It’s fundamentally should Comcast be able to charge everybody else for access to their consumers?”