Netflix CEO Asks: Why Aren’t Cable Companies Paying Us?

Earlier this year, Netflix customers with slow connections saw messages like this one, putting the blame on their Internet service provider.

Earlier this year, Netflix customers with slow connections saw messages like this one, putting the blame on their Internet service provider.

For years, as cable companies and other Internet Service Providers have tried to round up support for their desire to charge a toll to bandwidth-heavy content providers like Netflix, they have repeatedly said that they deserve to be paid for carrying all that data to subscribers… even though they are already being paid by their own customers, and even though they are only carrying that content for a small fraction of its journey. Now the CEO of Netflix wants to know why that argument doesn’t swing both ways?

Last week, Netflix CEO Reed Hastings appeared at CTAM EuroSummit in Copenhagen, where he spoke about the ISPs’ claims that they deserve to be paid for all their hard work.

“There’s a legitimate argument, which is: ‘Hey Netflix, you’re using 30% of the internet, you ought to pay some of the cost,'” said Hastings. “It’s a good sound bite.”

But Hastings questions exactly what it is that ISPs are doing that merit this additional money. After all, if Netflix does account for such a huge amount of traffic, couldn’t you argue that one of the reasons that consumers even have a broadband account in the first place is to stream Netflix?

“Consumers are choosing Netflix and if we’re supposed to pay some of the cost of the network, maybe we should get some of the broadband revenue,” explained Hastings, who then jokingly offered to fellow panelist Liberty Global CEO Mike Fries, “[W]e’ll pay 10% of your network costs if we get 10% of broadband revenue. Or we’ll pay 10% of your network costs if you want to pay 10% of our content costs.”

Cable companies advertise “blazing fast” downloads and their commercials show all the awesome things you can do at home with their broadband service — and streaming video is always in the forefront of that marketing.

But when customers actually try to use their broadband service as advertised, the ISPs — many of which are also pay-TV operators who stand to lose money from cord-cutters — don’t want to actually deliver it, at least not once they realize they can charge Netflix for access to the customers are paying both the ISPs and Netflix.

A year ago, the nation’s largest ISPs each began to let Netflix traffic bottleneck at the peering points, those connections between Netflix’s bandwidth provider and the ISPs’ networks. After several months of slowing speeds, Netflix finally agreed to pay Comcast, Verizon, and Time Warner Cable for better access to their networks.

Hastings admits that “the crazy thing in this whole debate is the actual amount of money being talked about is trivial to both of us – but we’re both worried on both sides about the precedent and what does it mean in the longterm?”

[via DSLreports.com]