Netflix Throttling Likely Won't Face FCC Scrutiny, Says Official

​The data-saving feature is expected to debut in May, Netflix said. “We believe restrictive data caps are bad for consumers and the Internet in general, creating a dilemma for those who increasingly rely on their mobile devices for entertainment, work and more,” a Netflix spokeswoman said in a blog post. “So in an effort to protect our members from overage charges when they exceed mobile data caps, our default bitrate for viewing over mobile networks has been capped globally at 600 kilobits per second. It’s about striking a balance that ensures a good streaming experience while avoiding unplanned fines from mobile providers.”

"We're outraged to learn that Netflix is apparently throttling video for their AT&T customers without their knowledge or consent,” said Jim Cicconi, AT&T senior executive vice president-external and legislative affairs.

The implications go well beyond Netflix, said Fred Campbell, executive director of Tech Knowledge. "Policymakers in the U.S. have systematically excluded Netflix and all other 'over-the-top' companies from Internet, privacy, and video regulations that would otherwise apply based on the presumption that over-the-top companies lack the incentive or ability to engage in discriminatory or anticompetitive behavior that could harm consumers or competition," Campbell said in a blog post. "Netflix just proved that presumption is dead wrong." Campbell said Congress, the FCC and the FTC should all investigate. An FTC spokesman said the agency doesn't comment on specific companies or business practices.

Adonis Hoffman, chairman of Business in the Public Interest, said it's ironic that Netflix has been a staunch advocate of net neutrality rules. "When Netflix pointed the finger at AT&T and Verizon, it had three fingers pointing back it itself,” Hoffman told us. “Throttling traffic without notifying the customer is a violation of the principles of net neutrality 101, and they failed. Even though edge providers are technically not covered, transparency is a best practice. By the way, where is the outrage from advocates?" Hoffman formerly worked for Commissioner Mignon Clyburn and consults with businesses.

Arguments for more regulation of the Internet through net neutrality rules “are built on a faulty premise,” said former FCC Commissioner Robert McDowell, now at Wiley Rein. “Any alleged potential market failures never existed in the first place.” This latest development “highlights the plain truth that any theoretical harms would be prevented by innovation and creativity in a free market,” McDowell said. “Network operators and content and app companies all have an incentive to craft products and services to satisfy ever-demanding consumers and the lightning fast dynamics of the market."

"It’s ironic that one of the biggest cheerleaders for transparency, consumer choice, and equal treatment of traffic has spent five years discriminating against millions of its own customers," said Allison Remsen, executive director of Mobile Future, in a Friday blog post. "Why is denying consumers choice and transparency ok in any part of the mobile ecosystem? All companies in the Internet ecosystem, including edge providers, should respect and abide by the same net neutrality principles to ensure the best possible mobile experience for consumers."

Rules Clear

The net neutrality lines are clear, said Harold Feld, senior vice president at Public Knowledge. “This is like accusing the Patriots [football team] of cheating because they don't use a designated hitter like the Red Sox do,” Feld said. “At what point do people stop confusing ‘companies that sell you stuff’ with ‘companies that transport stuff that people sell you?’” If customers believe Netflix misled them about the quality of the video it streamed, that’s a different issue, he said. “That would be a deceptive practice like any other business does when it deliberately misinforms you about its service. But that has nothing to do with network neutrality.”

Netflix’s policies may or may not be good for consumers, said Matt Wood, Free Press policy director, in a Friday blog post. They aren't a violation of the net neutrality rules, he said. Anyone who says that what Netflix did has net neutrality implications is “either in the business of misleading you, woefully ignorant of the law, or both,” Wood said. “Netflix suggests it was doing this to spare wireless users from burning through their carrier-imposed data caps,” he said. “That’s not a bad idea, but it’s still off-putting. If Netflix was limiting transmission speeds and picture quality for its users without telling them, as appears all too likely, that’s a bad thing. Period, full stop.”

Netflix’s throttling policy shows the folly of edge providers engaging in network management, said Richard Bennett, network architect and free-market blogger. “Customers and ISPs know restrictions and data limits on user accounts, but firms operating at the edge don’t,” Bennett said. “Limited spectrum requires rationing, and this can only be done by ISPs and their customers. The fact that Netflix has used relative ISP performance as a public relations weapon to secure friendly regulations suggests the FTC should impose a significant fine.”

Carrier data caps are partly to blame, said Michael Calabrese, director of the Wireless Future Program at New America. If Netflix misled subscribers, it may be an FTC issue, Calabrese said. “But it’s not remotely related to network neutrality,” he said. “There are millions of edge providers and hundreds of over-the-top video providers. They can offer their content any way they like and consumers choose among them. That is entirely different from AT&T, which has a terminating access monopoly over the pipe to the consumer.”