Reed Hastings, CEO of Netflix:
[O]n other big ISPs, due to a lack of sufficient interconnectivity, Netflix performance has been constrained, subjecting consumers who pay a lot of money for high-speed Internet to high buffering rates, long wait times and poor video quality. A recent Wall Street Journal article chronicled this degradation using our public data.
Once Netflix agrees to pay the ISP interconnection fees, however, sufficient capacity is made available and high quality service for consumers is restored. If this kind of leverage is effective against Netflix, which is pretty large, imagine the plight of smaller services today and in the future. Roughly the same arbitrary tax is demanded from the intermediaries such as Cogent and Level 3, who supply millions of websites with connectivity, leading to a poor consumer experience.
Without strong net neutrality, big ISPs can demand potentially escalating fees for the interconnection required to deliver high quality service. The big ISPs can make these demands — driving up costs and prices for everyone else — because of their market position.
Yours truly, writing on February 24:
Many people have predicted (and feared) that the day would come when a content provider would pay an internet provider for priority access to broadband subscribers. Now that it’s here, I can’t help but wonder why it happened now and with Comcast, especially when you consider that Netflix and Verizon have also been duking it out over the same issue (arguably in a more public way).
The answer, I think, is that Netflix is using Comcast’s bid to buy Time Warner to its advantage. As a part of the buyout approval process, both the FCC and the Department of Justice will be scrutinizing Comcast’s moves and market power in the coming months. Having made this payment, Netflix can make the case to either the FCC or the DoJ that pre-Time Warner Comcast has used its dominance in broadband—about 27 percent of the market—to extract payments from content providers like itself. Netflix could argue that if the Time Warner deal goes through, Comcast will have nearly 50 percent of the market, and its bargaining power to demand such payments will further increase.