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The Netflix neutrality farce

Bret Swanson | April 11, 2016
The company’s secret throttling of data rates undercuts the arguments it had made in supporting net neutrality.

Critics said any rules should focus on the welfare of consumers, not competitors. And yet the White House and FCC insisted on a policy entirely tilted to benefit Web and content firms, shackle ISPs and mostly disregard consumers. Sure enough, Netflix’s throttling harmed both particular mobile ISPs versus their competitors and also those ISPs’ customers. In a double irony, these actions are allowed under net neutrality but may violate existing competition laws, which we said were sufficient to address exactly these types of squabbles in an environment as complex as the Internet.  

Critics said the rules would discourage creative partnerships and win-win transactions between ISPs and content firms, such as paid peering and sponsored data, that could rationalize the economics of the Internet and speed content to consumers. The new rules, however, may ban such cooperative programs as T-Mobile’s Binge On and Verizon’s FreeBee, which are designed to ameliorate the very data-limit problem Netflix says it was trying to solve with its secretive, selective throttling.  

Before The Wall Street Journal asked Netflix if it was the source of the mobile slowdown, the company was content to let the world believe that the poor quality was the fault of AT&T and Verizon. This wasn’t the first instance of Netflix sanctimony. In 2014, Netflix in sensational fashion charged ISPs with blocking its traffic at interconnection points. More than any other single incident, this narrative provided the momentum for the regulation of the Internet. Except it was false. After looking at traffic patterns, it became clear that the poor performance was due to Netflix’s own routing decisions. It was a manufactured publicity stunt, which led to the downfall of one of the nation’s most successful economic policies of the last few decades. 

In the next few days or weeks, a federal court may begin the restoration of American Internet freedom. 

Bret Swanson is president of Entropy Economics LLC and a visiting fellow at the American Enterprise Institute.


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