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Netflix's stance on net neutrality called into question following zero-rating deal

By Jos ยท 9 replies
Mar 4, 2015
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  1. Netflix has been a very vocal supporter of net neutrality -- not surprisingly, after being strong-armed into paid peering agreements with major ISPs in the U.S. But in Australia, where the service is expected to finally launch later this month, the company has struck a deal that seems at odds with their stance against discriminating certain types of traffic. Namely, the deal says that iiNet ISP will exempt Netflix traffic from its customers’ broadband caps.

    The practice is known as zero-rating and it’s exactly why Netflix CEO Reed Hastings blasted Comcast almost three years ago when it exempted their content from counting against data caps if accessed via the Xbox 360. 

    “If I watch last night’s SNL episode on my Xbox through the Hulu app, it eats up about one gigabyte of my cap, but if I watch that same episode through the Xfinity Xbox app, it doesn’t use up my cap at all. The same device, the same IP address, the same wifi, the same internet connection, but totally different cap treatment. In what way is this neutral?”

    According to GigaOm, iiNet currently has broadband plans capped at 100GB, 300GB, 600GB and 1TB, and charges overage fees of $0.60 AUS per additional gigabyte. With Netflix being zero-rated on their network, however, it’s a more attractive choice for customers interested in a video streaming subscription. And there precisely lies the problem as zero rating gives companies with deeper pockets an advantage over smaller competitors.

    Other examples of this in the U.S. include T-Mobile's music freedom program and AT&T's sponsored data program.

    To be fair Australia is a different market from the U.S. Not only is there a higher cost of data transit, but cap free streaming deals are already commonplace in the country and nearly all of Netflix’s competitors reportedly incur in this practice. Not doing the same for the sake of taking the moral high ground would have put them at a disadvantage. Although not explicitly mentioning market conditions, Netflix acknowledges this in a statement to The Verge:

    Zero rating isn't great for consumers as it has the potential to distort consumer choice in favor of choices selected by an ISP. We'll push back against such efforts, but we won't put our service or our members at a disadvantage.

    A case of double standards or is Netflix simply being realistic and pragmatic? 

    Permalink to story.

    Last edited by a moderator: Mar 5, 2015
  2. cmbjive

    cmbjive TS Booster Posts: 777   +139

    "A case of double standards or is Netflix simply being realistic and pragmatic?"

    In either case, Netflix is being a hypocrite. But I'm not surprised by this in the least.
    rpjkw11 and cliffordcooley like this.
  3. JohnCB

    JohnCB TS Booster Posts: 118   +63

    Netflix is being hypocritical because it benefits their bottom line.

    Netflix is not our white knights of the internet, just like Google isn't. They only act "in our best interests" when it acts in their best interest.
    nickc, cmbjive, rpjkw11 and 1 other person like this.
  4. MilwaukeeMike

    MilwaukeeMike TS Evangelist Posts: 3,156   +1,411

    You've heard the expression 'it's not personal, it's business' ? This is a similar thing. Netflix isn't moral, they just used the 'fairness of net neutrality' argument to get the public on their side. Netflix was and is now acting in their own best interest. That's not hypocritical, it's normal business. In the USA Netflix needed a law passed to help their bottom line... in Australia they need a law passed to help their bottom line... the fact that it's the opposite law is pretty funny, but that's just because of the way ISP plans work in the two countries.

    True hypocrisy only exists if the point of view changes with all else being equal. that's not the case here... it's an entire different country with a different situation.
    davislane1 and Burty117 like this.
  5. This is a good move by Netflix. Consumers shouldn't be constrained by data caps, so if Netflix is exempt from the data caps, then that benefits customers. Sure, it's not the best deal, but anything is better than nothing. Ideally, they should strike such deals with every ISP that has data caps around the world, but that's not being realistic, is it?
  6. cmbjive

    cmbjive TS Booster Posts: 777   +139

    Except...the caps remain in place for everything else. So Netflix content may be exempt from the cap, but that doesn't prevent the ISP from counting Netflix content towards the cap to limit speed usage to other sites.
  7. Scshadow

    Scshadow TS Evangelist Posts: 561   +199

    This story is cringe worthy. They ARE in fact being realistic and pragmatic. Why should Netflix take the hit for the fact that governing organizations aren't regulating against these type of deals? Just let the competition run rough shot over them, is that what they should do? I'm sorry but in no universe is there EVER going to be an entertainment business that solely operates on anything except profit. Any time the playing field becomes level, I'm sure Netflix would love to operate on principal, but principal doesn't pay workers, principal doesn't pay bills. I mean, just look at you guys, those successful businesses that you are running! You obviously know what it takes to succeed. Oh wait, thats right, you don't have businesses.
    CanadEan84 likes this.
  8. Let me put it bluntly for those who say they "could use a leg up on their competition." There is no competition. Australians flat out wont use other services available here because they don't have anywhere near the same amount of programs available.
  9. jobeard

    jobeard TS Ambassador Posts: 12,812   +1,515

    Hmm; Net Neutrality is about "equal access" in terms of transport.
    That says absolutely nothing about being Free or being Charged Equal Fees.

    Try another metaphor for clarity: A taxi ride in almost any metro area:
    • fees are regulated by some agency and are consistently set for all cabbies.
    • you the rider, get charged by how far you travel
    Roaming fees are similar for cell phones. Sure, we don't like/want them, but at the end of the day, they are fair.

    Pay per Use is a good, moral and fair marketing choice. If yours are too high, in a free market system (at least in theory) you get to choose the provider with the best fees for you,
    nickc likes this.
  10. tehxion

    tehxion TS Rookie Posts: 20   +10

    This could be more about iiNet using the (much hyped) Netflix launch to piggy-back a little publicity and marketing for their own brand.

    At the end of the day iiNet as the provider can decide to offer any services outside of a cap.They could just as easily promote uncapped Youtube bandwidth if it attracts customers and benefits their commercial strategy. iiNet is a major ISP in Australia and Netflix probably has little choice in the decision.
    wiyosaya likes this.

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