Netflix caves in with the ISPs

[Flint]

http://techcrunch.com/2014/07/29/netfli ... fb&ncid=fb

So, all the hubbub about the carriers throttling Netflix traffic and unfairly hurting the user experience is slowing going to go away. Netflix is signing "peering agreements" with the ISPs and Carriers to reduce the main problem and main expense of their high traffic service being on the internet.

Some will see this as big corporation extortion working at its best to rip off the unexpectedly successful little guy, holding down innovation and essentially stealing from the public (surely Netflix prices will have to go up, right?).

Others will see this as evidence that Netflix knew they were wrong in some way for previously insisting that their massive outpouring of video streams onto otherwise uncontrolled networks and clogging them up should be free and no one should do anything to stop them or make them pay for this activity.

Where do you land on this topic?

Ultimately, if you are a Netflix subscriber and are on AT&T, Comcast or Verizon, things should get a little better in terms of video bandwidth quality.

 

[lulimet]

It was going to happen sooner or later. I don't really have a problem with it. I think I read that they may increase the streaming price by a $1. At $9 a month it's still a good deal.

 

[Flint]

What is the threshold where it becomes a bad deal? $12/month? $15/month?

 

[Haywood]

Where does it end though? ISPs are now talking about charging for bandwidth on the receiving end too. If regulators don't stop them, I suspect that we will all see the cost of our internet access skyrocket over the next decade, even as the cost of the services we consume also go up. ISPs are essentially monopolies and should be regulated like utilities.

 

[Flint]

How are they monopolies? Here in the Austin area I can choose from 4 different providers claiming to have 100Mbps service, or better, and a dozen others who make no performance claims. I also could, in theory, use a LTE service provider for my ISP service (at a higher cost, of course). This isn't like the cable companies where you had one choice based on where you live.

I don't get this mindset that the ISPs are monopolies, at all.

What I do know is that the cost of building the networks necessary to provide the performance we are currently getting from our ISPs is phenomenally high. You'd be shocked at what it cost, if you knew. And the technology is advancing so quickly that providers are constantly upgrading everything they put in merely 2 years ago just to remain competitive with the other ISPs. As such, I see traditional market forces driving the ISP industry - meaning, they are not monopolies.

It may seem like they are monopolies when one company, like Verizon, may have tens of millions of subscribers - but all of those subscribers have the option to leave Verizon and go with several other providers, if they choose, in most cases.

 

[Akula]

Where does it end though? ISPs are now talking about charging for bandwidth on the receiving end too. If regulators don't stop them, I suspect that we will all see the cost of our internet access skyrocket over the next decade, even as the cost of the services we consume also go up. ISPs are essentially monopolies and should be regulated like utilities.

This is what worries me.

Used to be, the end user was paying for the bandwidth- so long as you stayed under your bandwidth cap, you got that data at whatever speed tier you were paying for (albeit the ISP's love for "up to" speeds, allowing them to fudge a few Mb/s off the max speed).

Now the ISPs want to be paid at both ends. Of course, this comes out of the pocket of the end subscriber- it always does. So now those users are paying first for their own internet connection and then for whatever Verizon or others have wheedled out of their content providers further upstream. Yes, these ISPs need funding in order to cover their costs of providing that bandwidth... what I am not sure about is why the subscription fees to the end users aren't sufficient. I get the feeling that they've gotten the idea that they can get paid at both ends without having to actually do anything more and they're going whole hog to open up that revenue stream. What's more, as more ISPs do this, the rest will HAVE to do it too... I'm with Charter, who actually brags about being a good ISP for Netflix streaming. But as all their competitors (around here, it's AT&T) do this interconnect fee business, Charter will have to join in or they'll be in a poorer financial position, possibly even being gobbled up by one of these other ISPs.

Personally, I've yet to see a good argument for why ISPs shouldn't be treated as common carriers under applicable laws and regulated accordingly. If our government has decided internet access should be a right (seems that's how they're leaning), then there's no reason to NOT treat them with the same scrutiny given to electric, phone, and other utilities.

 

[jomari]

interesting.

in a general aspect, i wonder where we as consumers would be protected.

the proverbial who protects who, who pays what, and at what point do we 'determine' cost should be passed on to the consumer.

 

[Haywood]

How are they monopolies? Here in the Austin area I can choose from 4 different providers claiming to have 100Mbps service, or better, and a dozen others who make no performance claims. I also could, in theory, use a LTE service provider for my ISP service (at a higher cost, of course). This isn't like the cable companies where you had one choice based on where you live.

I don't get this mindset that the ISPs are monopolies, at all.

What I do know is that the cost of building the networks necessary to provide the performance we are currently getting from our ISPs is phenomenally high. You'd be shocked at what it cost, if you knew. And the technology is advancing so quickly that providers are constantly upgrading everything they put in merely 2 years ago just to remain competitive with the other ISPs. As such, I see traditional market forces driving the ISP industry - meaning, they are not monopolies.

It may seem like they are monopolies when one company, like Verizon, may have tens of millions of subscribers - but all of those subscribers have the option to leave Verizon and go with several other providers, if they choose, in most cases.

Most people in this country have one or two choices. It usually boils down to choosing between one cable company and one telecom company. That's not much by way of choice.

 

[Haywood]

Personally, I've yet to see a good argument for why ISPs shouldn't be treated as common carriers under applicable laws and regulated accordingly. If our government has decided internet access should be a right (seems that's how they're leaning), then there's no reason to NOT treat them with the same scrutiny given to electric, phone, and other utilities.

THIS ^^^

 

[Flint]

According this article from Ziff-Davis, 30% of Americans do not have a choice in ISPs. That means that the other 70% do have a choice.

 

[Akula]

According this article from Ziff-Davis, 30% of Americans do not have a choice in ISPs. That means that the other 70% do have a choice.

Which may not mean much. If you only have two choices, that's still not a huge help. I have two choices- one of them is AT&T, who refuses to fix the line going down my street. So that pretty much leaves me with Charter. Good thing I like Charter.

Even so, 30% is a HUGE number.

 

[Towen7]

I'm interested in how people who typically demand less regulation and government oversight would call for more in situations that impact what they pay for a service. I know what those infrastructure costs are and the speed at which that equipment is replaced and/or updated.

 

[Botch]

I'm interested in how people who typically demand less regulation and government oversight would call for more in situations that impact what they pay for a service. I know what those infrastructure costs are and the speed at which that equipment is replaced and/or updated.

Thank you.

 

[Srvy]

I expect Netflix will soon go with a one device per subscription soon on the streaming.

 

[Flint]

According this article from Ziff-Davis, 30% of Americans do not have a choice in ISPs. That means that the other 70% do have a choice.

Which may not mean much. If you only have two choices, that's still not a huge help. I have two choices- one of them is AT&T, who refuses to fix the line going down my street. So that pretty much leaves me with Charter. Good thing I like Charter.

Even so, 30% is a HUGE number.

But 30% is very far from "most" as you previously stated.

If we are going to have an argument, then the facts and implied meanings need to be clear.

My point is this... if we regulate ISPs more (they are already very heavily regulated, by most standards), then there will be less opportunity for competition, fewer participants, and pricing and service quality decisions will be made in city council meetings instead of in boardrooms.

In boardrooms the goal is to offer something more competitive than the other companies in the market in a way which increases subscribers and increases the number of services the subscribers want to pay for. They also want to lower cost, earn more profit, and grow the net revenue. Without a competitive offering they know they cannot succeed.

In city council meetings, people who know nothing about how to run an ISP make demands which seem reasonable and sometimes they are accepted and enforced without any consideration of what the costs will be to the ISP. Take the "archive everything about your customers" regulation enacted about a decade ago to catch bad actors who use the internet. That was insanely expensive and had an dramatic impact on the cost of service to users. In several cases it put small local ISPs completely out of business because the cost of implementing the regulation was much more than could be recovered from the customer.

So, which is better, a bunch of morons who think they know how to help people making and enforcing regulations which greatly impact costs, quality, and complexities of providing a service, or an open market which forcing all the companies offering a service to be creative to offer something customers will actually pay for?

I vote for the latter. In Texas it worked out in spades when they deregulated the electrical power services.

Now, there are huge portions of the North American population where it will never be profitable to offer competitive high performance internet access - probably about 10% to 15% of the population live in those areas. In that case, government subsidies and incentives can make up the difference to ensure people get access. That is already in process in the US and Canada and is working pretty well, though it could be going a bit faster. I am FOR government involvement in those cases. In France they have the same problem and what they do there is tell the carriers they must provide the same service in rural areas (the vast majority of the nation) in order to do business in the metropolitan areas (the vast majority of the population). Because of these regulations, the costs of internet access in Paris is very high because they Parisians subsidize the rural people.

 

[Akula]

I'm interested in how people who typically demand less regulation and government oversight would call for more in situations that impact what they pay for a service. I know what those infrastructure costs are and the speed at which that equipment is replaced and/or updated.

It could also be that it's not all one or the other... even those who want less regulation in some areas can think other areas can use more.

 

[Akula]

According this article from Ziff-Davis, 30% of Americans do not have a choice in ISPs. That means that the other 70% do have a choice.

Which may not mean much. If you only have two choices, that's still not a huge help. I have two choices- one of them is AT&T, who refuses to fix the line going down my street. So that pretty much leaves me with Charter. Good thing I like Charter.

Even so, 30% is a HUGE number.

But 30% is very far from "most" as you previously stated.

If we are going to have an argument, then the facts and implied meanings need to be clear.

My point is this... if we regulate ISPs more (they are already very heavily regulated, by most standards), then there will be less opportunity for competition, fewer participants, and pricing and service quality decisions will be made in city council meetings instead of in boardrooms.

In boardrooms the goal is to offer something more competitive than the other companies in the market in a way which increases subscribers and increases the number of services the subscribers want to pay for. They also want to lower cost, earn more profit, and grow the net revenue. Without a competitive offering they know they cannot succeed.

In city council meetings, people who know nothing about how to run an ISP make demands which seem reasonable and sometimes they are accepted and enforced without any consideration of what the costs will be to the ISP. Take the "archive everything about your customers" regulation enacted about a decade ago to catch bad actors who use the internet. That was insanely expensive and had an dramatic impact on the cost of service to users. In several cases it put small local ISPs completely out of business because the cost of implementing the regulation was much more than could be recovered from the customer.

So, which is better, a bunch of morons who think they know how to help people making and enforcing regulations which greatly impact costs, quality, and complexities of providing a service, or an open market which forcing all the companies offering a service to be creative to offer something customers will actually pay for?

I vote for the latter. In Texas it worked out in spades when they deregulated the electrical power services.

Now, there are huge portions of the North American population where it will never be profitable to offer competitive high performance internet access - probably about 10% to 15% of the population live in those areas. In that case, government subsidies and incentives can make up the difference to ensure people get access. That is already in process in the US and Canada and is working pretty well, though it could be going a bit faster. I am FOR government involvement in those cases. In France they have the same problem and what they do there is tell the carriers they must provide the same service in rural areas (the vast majority of the nation) in order to do business in the metropolitan areas (the vast majority of the population). Because of these regulations, the costs of internet access in Paris is very high because they Parisians subsidize the rural people.

I was *NOT* the one who said "most." I simply stated that 30% is not insignificant... we're talking what, then- over 100 million people?

I was opining that internet service providers are not so different from telecoms (who, in many cases, ARE THE SAME COMPANY)... I don't see why they shouldn't be treated under the same set of rules. If phone companies couldn't discriminate between vital business calls and 1-900-HOT-TALK calls, I'm not sure why there's any difference when it comes to packet switching.

I do believe that more competition, not less, is a good answer- while giving ISPs full monopolies under local government may be unwise for that reason, at the same time I reject the notion that we are left with "anything goes" capabilities on the part of ISPs where they can do whatever they like regarding what services they feel like offering and how well they'll interconnect without a fee. I want to be able to choose a different provider who doesn't screw around (honestly, I can see Netflix charging subscribers who predominantly use certain ISPs more to cover their costs for the interconnect fees).

But urban areas always end up subsidizing rural locations. It happens with roads. It happens with electric utilities. Any time you have denser populations it's always easier to bring services there than to places where the neighbors are a quarter mile down the road. That's just how it is.

 

[Haywood]

I'm interested in how people who typically demand less regulation and government oversight would call for more in situations that impact what they pay for a service. I know what those infrastructure costs are and the speed at which that equipment is replaced and/or updated.

Utilities are regulated for a reason. A large part of that reason is that utilities are generally either monopolies or near-monopolies. There is no functioning marketplace. In the absence of consumer choice, utility providers can pretty much charge what they want and set up whatever terms they want whether their customers are happy or not. Regulation addresses that inequity of power. I am also not someone opposed to government regulation of business. When it comes to individual liberties, I am very much libertarian in my ideology. Businesses are not people, however, and I have no problem at all regulating them to protect the public interest.

 

[Haywood]

even those who want less regulation in some areas can think other areas can use more.

Yup. The questions is not how big the government should be or how much it should regulate. The right question is what the scope of government should be and what types of regulation are necessary and appropriate. This is why I quit calling myself a libertarian. The idea that all regulation is bad and that there is no place for government in the economy is just plain silly and naive and leads nowhere good.

 

[Rope]

Government regulation on consumers behalf is one thing. Government regulation seems to become clouded when lobbyists in Washington D.C. have pockets full of money to buy political votes that enhance corporate sponsor's pocket books. Not to mention campaign contributions from the same.

The more competition dwindles the higher the price and price fixing. I know, price fixing is illegal and no one does that.

Rope