Netflix CEO Reed Hastings has a blunt message for Internet providers: Don't mess with net neutrality.
The video streaming service could be uniquely vulnerable should net neutrality, the principle that carriers should deliver all Internet traffic without discrimination, falter in the wake of an adverse court decision last week. Netflix may be the biggest user of Internet bandwidth on the planet, accounting for close to near a third of peak Internet traffic in the United States.
Simply by degrading its video streams or levying surcharges for the bandwidth they take up, cable and telecom companies could theoretically neuter the service. Netflix users, of course, have already paid for that bandwidth, which hasn't stopped ISPs from making noises about getting companies like Netflix to pay for it a second time.
Hastings professes unconcern about that possibility, though he also isn't shy about flexing a bit. In his letter to shareholders today, the Netflix CEO essentially warned that if cable or telecom try to play hardball, users will riot:
Unfortunately, Verizon successfully challenged the U.S. net neutrality rules. In principle, a domestic ISP now can legally impede the video streams that members request from Netflix, degrading the experience we jointly provide. The motivation could be to get Netflix to pay fees to stop this degradation. Were this draconian scenario to unfold with some ISP, we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver.
The most likely case, however, is that ISPs will avoid this consumer-unfriendly path of discrimination. ISPs are generally aware of the broad public support for net neutrality and don’t want to galvanize government action.
Moreover, ISPs have very profitable broadband businesses they want to expand. Consumers purchase higher bandwidth packages mostly for one reason: high-quality streaming video. ISPs appear to recognize this and many of them are working closely with us and other streaming video services to enable the ISPs subscribers to more consistently get the high-quality streaming video consumers desire.
In the long-term, we think Netflix and consumers are best served by strong network neutrality across all networks, including wireless. To the degree that ISPs adhere to a meaningful voluntary code of conduct, less regulation is warranted. To the degree that some aggressive ISPs start impeding specific data flows, more regulation would clearly be needed.
Shorter Hastings: It's your move, Internet providers. And if you screw up, prepare to face the wrath of your customers—and possible federal regulation.