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Netflix Not Worried About Death Of Net Neutrality, But Startups Should Be Terrified

(1)With Trump's team of telecom advisors having made clear their intentions to dismantle net neutrality, startups and smaller companies that lack the lobbying muscle of companies like Netflix are in a state of panic.


Guest post by Karl Bode from Techdirt

With Trump's telecom advisors and the remaining FCC Commissioners making it abundantly clear that they intend to gut net neutrality rules and dismantle pretty much all of the FCC's consumer watchdog functions, there are more than a few worried companies, startups and consumers concerned that the net neutrality fight is about to get downright stupid. One of Trump's telecom advisors doesn't even think telecom monopolies are real, which should speak volumes about our looming vacation to dysfunction junction.

One company that's busy pretending it's not worried is Netflix, which penned a letter to the company's shareholders this week (pdf) insisting that it doesn't expect the death of net neutrality rules to materially impact the company's revenues:

Weakening of US net neutrality laws, should that occur, is unlikely to materially affect our domestic margins or service quality because we are now popular enough with consumers to keep our relationships with ISPs stable.

Of course, that's easy to say when you're now the biggest pay TV provider in the United States, coming off one of your most successful quarters in history, while quickly expanding into hundreds of countries internationally. But what about the smaller, disruptive Netflix-like companies of tomorrow? They're about to face a future in which the government doesn't appear to give two flying shits about the wide variety of problems caused by AT&T, Comcast, Charter and Verizon's stranglehold over the broadband last mile. In fact, likely FCC boss Ajit Pai has made it repeatedly clear he does't even think any broadband competition issues exist.

2Clearly, smaller companies and startups won't have the size or lobbying muscle to defend themselves from ISP efforts to use this very real competitive logjam as a weapon against competing services (see: usage caps, overage fees, interconnection shenanigans, and whatever other "creative" efforts ISPs haven't even birthed yet to allow them to double dip). And Netflix appears to have forgotten that the mere presence of the FCC's rules prevented ISPs from attempting to extract significant, new interconnection fees at the network edge. So really, even companies the size of Netflix will have plenty to worry about.

Fortunately Netflix does indicate the company isn't entirely oblivious to the advantage it holds, and proceeds to acknowledge that yes, a healthy and functioning internet free of obnoxious gatekeepers is kind of important:

However, strong net neutrality is important to support innovation and smaller firms. No one wants ISPs to decide what new and potentially disruptive services can operate over their networks, or to favor one service over another. We hope the new US administration and Congress will recognize that keeping the network neutral drives job growth and innovation.

If you've spent even five seconds reading comments made by Marsha Blackburn and other Trump telecom advisors, you should realize there's a snowball's chance in hell of that happening. The most likely path forward begins with the incoming FCC simply refusing to enforce the net neutrality rules on the books. After that, you can be fairly certain (said as somebody that has watched this industry for two decades) that the GOP will be pushing a new Communications Act rewrite (or some other new stand-alone legislation) packed with breathless platitudes toward broadband expansion, jobs, and net neutrality.

In reality this legislation will have one, singular, unwavering focus: eliminating any and all government oversight of some of the least liked, and least competitive companies in any industry in America. Any network neutrality provisions in this looming legislation will be comically hollow, much like the promises surrounding job creation, innovation, and broadband competition. If Netflix execs truly think they're going to be immune from the repercussions of this shift back to letting AT&T, Comcast and Verizon dictate internet policy, they've got a lot of painful learning to do over the next few years.