Netflix Deals With Broadband Providers Said to Get Oversight
by Todd Shields
Bloomberg News
2:50 PM CST, January 28, 2015
http://www.bloomberg.com/news/articles/2015-01-28/netflix-deals-with-broadband-providers-said-to-get-fcc-oversight
(Bloomberg) -- U.S. regulators plan to issue rules next month allowing
them to review the terms Internet service providers demand for accepting
heavy Web traffic from companies such as Netflix Inc., according to a
person briefed on the plan.
Such agreements aren’t regulated now, and the move -- part of highly
anticipated net-neutrality rules -- would mark an expansion of the
Federal Communications Commission’s authority over the Internet. Cable
providers led by Comcast Corp. have argued against restrictions on what
they can charge content providers while companies such as Netflix sought
to ban any fees.
FCC Chairman Tom Wheeler has decided the rules, scheduled for a vote
next month, will permit the agreements but include a procedure for
companies to ask for agency review, said the person, who asked to remain
anonymous because the plan hasn’t been made public.
Wheeler has said he intends to follow President Barack Obama’s call for
strong rules to prevent blocking or slowing of Web content by Internet
service providers.
Adding the complaint process would give independent video providers -- a
group that includes Netflix, Amazon.com Inc. and Google Inc.’s YouTube
-- a potential avenue of relief from demands by Internet service
providers led by Comcast, AT&T Inc. and Verizon Communications Inc.
With an oversight procedure, the FCC could order an Internet service
provider to stop demanding unfair fees, or to improve its connection,
said Harold Feld, senior vice president of the Washington-based policy
group Public Knowledge. Contracts would be considered against a standard
of whether they are “just and reasonable,” Feld said.
Final Passage
Net neutrality policy traditionally has focused on fairly treating
traffic between Internet service providers and consumers. For example,
Obama has called for banning so-called fast lanes that offer quick
service over the last mile in return for payment.
Agreements governing the other end of the transaction -- when
high-volume Web companies present music, video and other data to cable
and telephone companies -- will be permitted under the new regulations,
according to the person.
Netflix accounts for 34.9 percent of Web traffic in North America in
peak evening hours, according to Sandvine Inc. The video provider has
offered direct connections to service providers to ease the flow.
The FCC is working to replace a net-neutrality regulation that was
voided by a court. Wheeler hasn’t publicly disclosed details of the
rules, set for a Feb. 26 vote at the Democratic-majority agency. Shannon
Gilson, an agency spokeswoman, declined to comment.
Netflix, Cogent
Netflix and data middleman Cogent Communications Holdings Inc. have said
their traffic was degraded by congestion that Comcast and Verizon
Communications Inc. declined to fix. Verizon said its network wasn’t
congested, and Netflix had chosen bulk Internet carriers with limited
capacity. Comcast said Netflix had changed how traffic is carried in
hopes of cutting out wholesalers.
Netflix in February agreed to pay Comcast millions of dollars annually
for more-direct connections that ensure improved speed and reliability
for its video service.
“When he signed the deal with Comcast, Netflix’s CEO said it ‘works
great for consumers.’ We think so too,” Comcast spokeswoman Sena
Fitzmaurice said in an e-mail.
Cogent and Netflix have said Web companies should not have to pay for
connections to Internet service providers, in part because subscribers
have already paid for service.
Cogent’s Chief Legal Officer Robert Beury said there are shortcomings to
a complaint process.
“It’s slow,” Beury said in an interview. “And plays right into the hands
of the cable and telephone companies. It takes two years, and in the
meantime our connections are congested.”
Anne Marie Squeo, a Netflix spokeswoman, said in an e-mail that the FCC
recognizes the importance of the treatment of companies such as hers and
Internet service providers.
“Loopholes” in regulations, she said, “could undermine the benefits of
an open Internet and prevent consumers from getting what they pay for.”
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