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.
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?