Net Neutrality: I Told Your So

From the WSJ (emphasis added):

Netflix now admits that for the past five years, all through the debate on net neutrality, it was deliberately slowing its videos watched by users on AT&T and Verizon’s wireless networks. The company did so for good reason—to protect users from overage penalties. But it never told users at a time when Netflix was claiming carriers generally were deliberately slowing its service to protect their own TV businesses—a big lie, it turned out.

All this has brought considerable and well-deserved obloquy on the head of Netflix CEOReed Hastings for his role in inviting extreme Obama utility regulation of the Internet. Others deserve blame too. Google lobbied the administration privately but was too chicken to speak up publicly against utility regulation.

But Netfix appears to have acted out of especially puerile and venal motives. Netflix at the time was trying to use political pressure to cut favorable deals to connect directly to last-mile operators like Comcast and Verizon—a penny-ante consideration worth a few million dollars at best, for which Netflix helped create a major public policy wrong-turn.

This is what I wrote about net neutrality a couple of years ago:

Net Neutrality is one of those Orwellian words that mean exactly the opposite of what they sound like.  There is a battle that goes on in the marketplace in virtually every communication medium between content creators and content deliverers.  We can certainly see this in cable TV, as media companies and the cable companies that deliver their product occasionally have battles that break out in public.   But one could argue similar things go on even in, say, shipping, where magazine publishers push for special postal rates and Amazon negotiates special bulk UPS rates.

In fact, this fight for rents across a vertical supply chain exists in virtually every industry.  Consumers will pay so much for a finished product.  Any vertical supply chain is constantly battling over how much each step in the chain gets of the final consumer price.

What "net neutrality" actually means is that certain people, including apparently the President, want to tip the balance in this negotiation towards the content creators (no surprise given Hollywood's support for Democrats).  Netflix, for example, takes a huge amount of bandwidth that costs ISP's a lot of money to provide.  But Netflix doesn't want the ISP's to be be able to charge for this extra bandwidth Netflix uses - Netflix wants to get all the benefit of taking up the lion's share of ISP bandwidth investments without having to pay for it.  Net Neutrality is corporate welfare for content creators....

I am still pretty sure the net effect of these regulations, whether they really affect net neutrality or not, will be to disarm ISP's in favor of content providers in the typical supply chain vertical wars that occur in a free market.  At the end of the day, an ISP's last resort in negotiating with a content provider is to shut them out for a time, just as the content provider can do the same in reverse to the ISP's customers.  Banning an ISP from doing so is like banning a union from striking.


  • Rangi

    This changes nothing. Consumers pay ISPs for X bandwidth at Y rate, and have the right to download whatever they want with that bandwidth. Charging extra for "premium" content, whether ISPs get the extra from consumers or content providers, is like a phone company monitoring your call and increasing rates when you talk about a popular topic.

    ISPs are not "negotiating" with content providers, because content providers are not taking advantage of ISPs. It's the ISPs who take advantage of consumers, and now that consumers reasonably expect to access high-bandwidth content like streaming video, ISPs want to avoid the expense. Note that in areas where there's actual competition between ISPs, this is not an issue--Google Fiber moves in and provides gigabit speeds, and Comcast et al follow. But in plenty of locations people have one or two choices at most, and it's easy for them to take advantage of this monopoly power.

  • morganovich


    actually, no, that's very, very wrong. it DOES change everything and it makes networks far more expensive to build and run and far more difficult to evolve in sensible, responsive ways.

    let's take a simple example: voice over IP. voice is a low bandwidth application. it does not need a fat pipe. it is, however, an application that is VERY sensitive to latency. if it gets delayed, it sounds like you are talking on a walkie talkie. but, under NN, you cannot prioritize it. this is a MASSIVE problem. you are faced with 2 bad choices: either run the whole network at latency acceptable for an fttp transfer and have voice work poorly, if at all, or, run the entire network at latency low enough for voice and waste piles of money adding the infrastructure to do it despite it not being needed for most things.

    NN requires bad network structure.

    it's going to make us all pay more for the same thing we could have had for far less. DPI or any number of other techs that every company uses on its internal net to prioritize bandwidth are now ILLEGAL in the WAN.

    it's a bad, ruinous policy.

  • Noumenon72

    I don't follow the logic when you say the President wants to tip the balance in favor of 'content creators' like Hollywood and then start talking about Netflix. They're not a content creator.

  • mesaeconoguy

    They’re not? House of Cards isn’t a Netflix original program?

    Here’s a list I was able to find of Netflix original programming – I don’t watch Netflix, so some of this could be inaccurate

    Amazon is doing this, too, currently filming the next gen of Top Gear with the 3 “original” hosts (from most recent iteration).

  • Noumenon72

    I was aware of House of Cards but still thought my statement was accurate. What is that, 0.01% of Netflix's daily content streamed? One TV show produced by Amazon does not put their interests in league with Disney and MGM.

  • xtmar

    I forget if it was Amazon or Netflix, bit one of them is now producing as much scripted drama let year as a major network. They don't have the same back catalog, nor go they compete for the nightly news or reality shows and other filler, but they're moving closer to parity in terms of scripted shows.

  • mesaeconoguy

    What xtmar said, plus

    The motoring show can lay claim to being the most popular factual television programme in the world – complete with a Guinness Book of World Records entry – watched by an audience of 350 million in 214 territories.

    No, it isn’t multi-channel Disney, Buena Vista distribution, Pixar and Lucasfilm, but the effective loss of your marquee brand to online content producer Amazon is extremely significant.

    Yes, BBC is an effective SOE, so the comparison is imperfect. But online content from nontraditional sources is now highly significant.

  • mx

    There's absolutely nothing wrong with prioritizing VOIP traffic, as long as it's done in a neutral way. A number of consumer routers can prioritize applications like voice and online gaming over large file downloads within the LAN for precisely this reason. The problem is that most large ISPs are also phone companies, so there's an inherent conflict of interest. How can a VOIP company compete with AT&T, when AT&T controls the network and can prioritize its voice traffic over yours? The vision, say, Comcast has for a "sensible, responsive way" to evolve the internet will inevitably favor that company's profit motive above all else.

    Microsoft thought Skype was worth $8.5 billion. Skype built that value on commodity networks without prioritization.

  • mx

    The WSJ misstates what Netflix has been doing. Most all AT&T and Verizon wireless users have usage caps. Exceed them and you're charged overage fees (some plans will instead slow your data speeds to a crawl once you exceed the caps, but don't charge fees). These caps are radically low in comparison to the data transmitted as part of watching video. Netflix's Ultra HD video consumes, according to Netflix, around 7GB/hour. You could go through an entire family's monthly data cap in just an hour or two with no throttling. For normal HD video (the same quality anybody with a TV antenna gets), you'll use about 3GB an hour. Most Netflix users reasonably expect not to consume their entire month's data plan in one day. Given that their customers would bear the brunt of the resulting overage charges and would inevitably blame Netflix, what else could Netflix do but reduce data usage for users on capped mobile plans? To do anything else would be the equivalent of coming over to your home, turning on all the water taps, hooking up a couple extra hoses for good measure, and running away before your water bill shows up.

    I'll grant that Netflix never was super-transparent about this, but most people don't care about bandwidth rates or know their Mbps from their kWh. They have been adding more options to their settings to control bandwidth use, which is helpful, but again, not something the average user should have to know about or consider.

    Note that Netflix did not deliberately throttle non-mobile users, who frequently experienced degraded service due to the peering disputes discussed here.

  • ErikTheRed

    No offense, but you're completely misunderstanding how prioritization works on a network. Prioritizing on the CE (customer edge) router helps somewhat if the end-user connection is the point of congestion (assuming that all TCP stacks are playing nice, which may or may not be the case - there are some abusive stacks out there, especially in P2P filesharing apps), but there are still massive potential problems at the PE (provider edge) router and all over the backbone (especially congested peering points). In order to make things work properly, *every* router at *every* hop must support prioritization. That's why corporations often use MPLS for intranet communications rather than Internet VPNs - MPLS gives you end-to-end prioritization.

  • morganovich

    erik has this right mx.

    what you do in your own LAN does not matter much if the VOIP gets slowed way down in the WAN.

    it's like building a 9 lane driveway to your house but still having to sit in bumper to bumper traffic on your commute.

    net neutrality makes prioritizing VOIP illegal in the WAN.

    so, because of some hypothetical conflict that has never occurred, you want to ban sensible network architecture?

    to the extent that companies were granted monopolies on last mile connections (an increasingly tenuous claim as most homes have 3-4 potential providers) then i can see requiring them to line share, but telling the whole net it cannot prioritize data is just lunacy.

  • morganovich

    i'm not sure that's the right way to look at it.

    1. netflix is still a content provider even if they were not a content creator (and they are). the interests of the 2 are pretty much identical for this issue: they want the ability to deliver content to users as cheaply and quickly as possible. netflix may conflict with mgm over licensing content, but one they have, their interests are tightly aligned in terms of internet distribution.

    2. they provide a great deal of original content and it is some of their most highly watched programming. it's also the bedrock of their strategic positioning. at the end of the day, streaming video is basically a commodity. to keep people choosing netflix as their provider for such, netflix needs differentiation. the best differentiation is original content. this is the model HBO pioneered (with incredible success).

    3. netflix is now producing several hundred hours of original programming a year. this actually puts them in the ranks of good sized studios in terms of content output. a lot of it is quite good and is drawing significant followings.

    so, while netflix is a hybrid business model, their content creation arm alone would still be a major (and successful) studio.

  • Noumenon72

    Thanks to everyone for explaining to me how wrong I was (I feel I ought to admit I got schooled).

  • mx

    I understand that there's a difference between prioritization in your own LAN and prioritization on the rest of the internet, but how exactly do you expect the "sensible network architecture" you discuss to work? Say I'm starting the next Netflix; who do I go to and how much do I pay to get my traffic "prioritized?"

    Reality doesn't bear out the fact that most homes really have 3-4 potential providers. About 2/3rds of US households have two or fewer choices (, usually the monopoly cable company and the local phone company, who usually have competitive interests with their own MVPD businesses. Full disclosure: that assumes a minimum floor of 10Mbps down, because you can't credibly tell me that the speed of DSL in 1999 should still count as broadband today. And we're increasingly seeing AT&T and Comcast imposing data usage caps on wireline subscribers now.

  • MB

    > net neutrality makes prioritizing VOIP illegal in the WAN

    Cite, please? Everything I can come up with basically boils down to:
    - reasonable network management is not prohibited
    - pay-per-prioritization and own-service-prioritization is prohibited
    - all other issues will be decided on a case-by-case basis

    What this means is that ISPs are free to prioritize VoIP traffic as a whole (eg., by QoS'ing SIP traffic over FTP), but are not free to charge eg., Skype for prioritizing their traffic specifically. Nor are they free to prioritize their own VoIP traffic, while not (or even de-prioritizing) competing VoIP services. Or throttling eg., video services to a set rate when there's no competing higher class traffic (to, eg., make their CATV service seem better in comparison).

    For reference, I'd cite the actual FCC rules[1]:
    > Broadband providers must be permitted to engage in reasonable network management practices...[which must be used] for network management purposes, and not for business purposes.

    I'd also point to Vint Cerf (one of the literal "fathers of the Internet", and co-inventor of TCP/IP which is what the Internet traffic actually is) who points out that this entire argument is a strawman[2]:
    > There’s also some argument that says, well you have to treat every packet the same. That’s not what any of us said.

    If you can provide official language banning QoS, or an instance of the FCC banning reasonable QoS absent competitive interference, I'd love to see it. Otherwise, I've got to call this BS and hope other technical and non-technical readers don't fall for it.


  • Zachriel

    Well, you're only a couple of years behind the curve. The media landscape is changing that fast.

  • morganovich


    your read on this is overly simplistic and inaccurate. network management is NOT QoS. providers are NOT free to prioritize VOIP. they are required, by law, to provide equal access to all "content and applications".

    that is the explicit letter of the law.

    ISP's are already struggling with this issue and it has hurt the DPI (deep packet inspection) companies greatly.

    this topic has been front and center in that market for years. so, please stop with the grandstanding about "non-technical readers". you are the one pulling the wool over their eyes and misstating the issue. i know the companies involved here intimately and deal with them all the time.

    you are just using bad, selective quoting to mis-describe reality.

    if you were at all knowledgeable about this space, you'd know that. thus, i must conclude that you are not and are speaking from ignorance.

    "Net neutrality (also network neutrality, Internet neutrality, or net equality) is the principle that Internet service providers and governments should treat all data on the Internet
    the same, not discriminating or charging differentially by user,
    content, site, platform, application, type of attached equipment, or
    mode of communication."

    that ought to clear it up for you.

    if you cannot treat applications or modes of communication differently, how can you prioritize VOIP?

    note that you CAN prioritize VOIP on wireless networks. it was removing the NN requirements from them around a decade ago that led to their exploding in functionality and investment. it astounds me that after seeing how wireless thrived by removing the disastrous NN requirements, people were ignorant enough to fall for the lies told by the feds abut why we need it and how much good it would do.

    the non technical folks fell for it because it has a friendly sounding name (like the patriot act or the affordable healthcare act) and as the result of a large misinformation campaign.

    NN is not at all what you think it is. the fact that you could be so misinformed and so ready to sepak as though you are "technical" is testamant to just how well this misinformation worked.

  • morganovich

    at 10mbps, 70% of americans have access to 2 or more wired providers. they also have access to 3+ wireless providers. this does not even count point to point wireless (like i use in park city) where i have 2 more choices.

    i live on a rural road in a small town. i have 3 wired providers available, and am about to get fiber to the curb. i have 3 cellular options. i have 2 p2p wireless options.

    so, yes, the typical american DOES have 3-4 options.

    you are just counting in an overly limited way to try to bolster your point.


    10 Mbps, the typical person still is able to
    choose among two fixed ISPs. Th
    e typical
    person also has the option of choosing among three mobile ISPs"

    there's a lot of disinformation being spread on this topic to push political/regulatory agendas.

    be careful what you read.

    also: even if what you said were true, the answer is to break the last mile monopolies up and require open leasing of cables.

    then you get competition without breaking the internet with bad NN rules.

    NN issues could only realistically be problems in a monopoly/oligopoly system.

    the way to fix is is break the monopoly, not vreate another bad set of rules to protect the monopolies.

  • MB

    First, your (uncited) "Net Neutrality" quote is from Wikipedia[1] - not quite rising to the level of my requested "official language banning QoS, or an instance of the FCC banning reasonable QoS absent competitive interference". I'd also like to call your attention to the rest of that article and it's citations, which addresses some QoS concerns in a little more depth.

    Second, I'd (again) note the plain language in the FCC's Open Internet Order 2015[2] allowing for "reasonable network management" and specifically banning *paid* prioritization. If not QoS, then do you have counter-examples of what the FCC's intended "reasonable network management" exceptions to blocking and throttling are intended to address? And why they chose to call out paid prioritization instead of prioritization in general?

    Third, I'd note that to a large extent QoS over the internet is a moot point - as far as I'm aware, there are no reliable means to achieve this. That doesn't make it illegal, however - it just makes it a technical impossibility.

    Fourth, I'd concede that QoS is a somewhat contentious issue for NN advocates - not for the reasons you imply, however. Mainly, it has to do with the actual practicality, policing, and potential for abuse. For instance, this white paper[3] points out "In over ten years of debate, network neutrality proponents have struggled to come up with a rule that clearly specifies in advance which forms of differential treatment should be allowed." But, that "many network neutrality proponents see no problems with allowing network providers to offer different types of service to different provider-defined classes of applications"[4] and argues that "user-controlled Quality of Service...should be allowed under a network neutrality regime". That's basically a difference in semantics, not an argument against NN in general.

    Fifth, I'd note that the only conceivable test of the FCC's QoS stance that I know of would be the 2010 Comcast vs FCC[5] case, which really hinged on transparency with an absurd claim of QoS from Comcast. First, Comcast claimed "we don't throttle any traffic", when it was actually spoofing TCP RST packets to block connections. Comcast then claimed they were doing it during times of congestion, which also turned out to be false. If you read the memorandum outlining the FCC's position[6], they take great pains to leave the window open for reasonable network management - even noting that "experts in the field disagree strongly with Comcast’s assertion that its network management practices are reasonable" and that it's practices were not "minimally intrusive". I don't see anything in the 2015 NN rules that indicates the FCC has changed it's position on this.

    Sixth, I'd continue with the NN violations that are frequently cited[7][8]: Madison River (who offered telephone services) blocking VoIP; Verizon getting Google to pull tethering apps so they could charge an additional tethering fee (on top of the bandwidth already paid for); AT&T blocking FaceTime; Comcast exempting it's own video services from data-caps; AT&T claiming that home Wi-Fi is a theft-of-service; Cox and Comcast blocking VPN protocols; virtually every home provider not allowing "servers" unless you're on a business account; etc. None of these instances have anything to do with innovation and little to do with QoS. The idea that, absent NN, ISPs and backbone providers will get together and implement end-to-end QoS and new applications will flourish is pure fantasy.

    Seventh, the fact that NN has hurt "the DPI (deep packet inspection) companies greatly" is probably generally correct - and that's because DPI isn't really needed (or used) to offer QoS. To NN advocates, that's a feature - not a bug. Nor do I own stock in any DPI companies, so I'm not sure why I'd care about their revenues so much.

    Eighth, though you may "know the companies involved here intimately and deal with them all the time" - I'd be interested to know why you think Vint Cerf, Tim Berners Lee, Steve Wozniak, David Reed, the IETF and others who literally built the foundations of the internet are all advocates? Are you going to impugn them for being "so misinformed and so ready to speak as though [they] are 'technical'"?

    I can't quite round it out to ten - but, though I'll agree with your later point that ISP monopolies are bad and exacerbate the problem, I don't accept the assertions that "net neutrality makes prioritizing VOIP illegal in the WAN", "the non technical folks fell for [net neutrality]", or that ISPs would be showering us with unicorns and rainbows if not for the disastrous NN rules (that basically say, stop being a d*ck with the internet connection).

    And though few will read the below cites and even this paragraph, I'll rest my case with that because I try not to make unfounded arguments or assertions based on feelings or without research. I encourage others to do the same, and not accept knee-jerk reactions of the possibly malicious or ignorant posters on the Web.