In recent years, Netflix has been a vocal proponent of net neutrality and an outspoken critic of ISP business models that would allow certain deep-pocketed companies to gain a competitive edge over smaller players in the streaming video market. Thus the company was heavily criticized in March when it made deals with Australian ISPs that would exempt Netflix from users’ monthly data caps. This morning, the company announced that it regrets this decision and will no longer seek exemptions going forward.

The deals that Netflix made in Australia with providers like iiNet and Optus are commonly known as “zero-rating” arrangements, where the content provider subsidizes its users’ data so that, in this case, a Netflix subscriber could binge-watch at will without any of those hours of video counting against their monthly data cap.

It’s not unlike what T-Mobile offers here in the U.S. with its Music Freedom program, which allows T-Mo subscribers to stream audio from a number of different services without dinging their data allotment.

While zero-rating deals don’t automatically run afoul of the new net neutrality rules recently passed by the FCC, the Commission does now have the authority to review them on a case by case basis. Given that the neutrality rules were just published in the Federal Register on Monday — and that there are numerous legal and legislative challenges pending — it may be some time before we get any idea on how the FCC will handle the zero-rating issue.

In Australia, and some other countries where data caps are more commonplace, these sorts of deals are less controversial. But in a letter sent yesterday to shareholders, Netflix acknowledged that it may have been hypocritical to argue for a truly neutral Internet while still making zero-rating deals in Australia.

“Data caps inhibit Internet innovation and are bad for consumers. In Australia, we recently sought to protect our new members from data caps by participating in ISP programs that, while common in Australia, effectively condone discrimination among video services (some capped, some not),” reads the letter. “We should have avoided that and will avoid it going forward. Fortunately, most fixed-line ISPs are raising or eliminating data caps in line with our belief that ISPs should provide great video for all services in a market and let consumers do the choosing.”

[via DSLreports.com]
[via ArsTechnica]

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