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The “Netflix Button” Violates “Net Neutrality”

By 5 January 2011 7 Comments

The newly announced “Netflix Button” that will soon show up on major CE manufacturers’ television and Blu-ray remote controls violates the spirit, and in some cases possibly the letter of the new “net neutrality” rules established by the FCC. At the very least, those who have lobbied so hard for “net neutrality,” like Public Knowledge, Free Press and Susan Crawford should be up in arms about the dominant streaming video service’s plans to preempt a “fast lane” into consumer’s homes by paying for priority. We’ll see.

The announcement that many of the major consumer electronics giants, including Sony, Panasonic and Samsung plan to include a “Netflix Button” on their remote controls gives Netflix a commanding advantage to retain its dominant position as the single largest “streaming video” Internet provider. Smaller competitors offering similar services over the Internet will have a very difficult time overcoming the consumer “fast lane” advantage Netflix has just tied down with some of the largest electronics companies.

This, according to the rhetoric of both the FCC and the prosyletizers of “net neutrality” is precisely what they claim will have serious adverse effects on the development and innovation of the “open Internet.” This is exactly what all the “net neutrality” rules that the FCC just adopted are designed to prevent. It also demonstrates, rather clearly, why those rules are destined to fail, applying, as they do, to just one small subset of the vast Internet ecosystem.

Let’s recall what this whole “net neutrality” fight was all about, or at least what its most vocal adherents claim it was about. They wanted to assure, guarantee, protect, preserve what they called the currently existing “open Internet.” The threat, they said, was that companies providing last-mile delivery of Internet service to consumers, the “ISPs,” because they are gateways, and in some cases also provided video services, like Comcast owning and distributing video programming, have an incentive to act anti-competitively, and “favor” their own programming by slowing or blocking the “open Internet” delivery of other programming or services.

The FCC has adopted this “guilty until proven innocent” model, and as Randy May points out, they have gone even farther and said that they can “protect” the “open Internet” from these potential harms even if the ISP is not dominant, and has not been shown to cause harm! What is that harm? Well, it centers on ideas like the theoretical potential that the ISP would “block” or “slow down” competitors, as noted above, or that they would offer “paid priority” for a “fast lane” on the Internet to the big, wealthy, dominant players and leave all the new, creative, small competitors in the dust, having to rely on the “dirt road” that the “open Internet” would become.

Here’s how Art Brodsky, of Public Knowledge, defined it:

“The issue is whether the company providing the network can favor one company’s content over another’s on the basis of a financial arrangement, i.e., payoff, so that one service works better than another on the Internet.”

Well, I hate to have to break it to you, Art, but Netflix just made a financial arrangement so that its service works better, and is easier and quicker to access by consumers than any other “over the top” video delivery on the Internet while you were looking the other way!

Notice that I am not linking to all the articles and FCC pronouncements that have been written repeating, ad nauseum, these theories over the past two years. I don’t think it’s necessary. We have all read them. So now let’s apply them to what is actually happening.

We are talking here about the largest, most dominant deliverer of video programming on the “open Internet”: Netflix. Well over 20% of broadband capacity is now being used by consumers watching Netflix programming. We are also talking about some of the largest manufacturers of television sets and peripheral equipment such as Blu-ray players. The devices that the “net neutrality” advocates want the “open Internet” consumer to employ. Thus they are already lobbying the FCC to adopt “AllVid” rules for a federally mandated industrial design of equipment supplied by multichannel video programming deliverers into the home.

Significantly and indisputably, we are talking about what is probably the single most important and powerful navigation tool for video; the remote control. There can be little argument that between the consumer impact of faster or slower download speeds for video programming and/or the ability to lock up the extremely limited ocean-front real estate of a special dedicated button on the front of a viewer’s remote control, the remote has far more impact on consumers than any speed differential. This isn’t even close.

So while all its competitors, existing, or new innovators, will have to rely on the consumer employing multiple button pushes, navigation screens and the like, Netflix is about to provide an exclusive “fast lane” to anyone who wants it on the remote controls of the devices that consumers will have to use to access its competitors. And there is little doubt that Netflix is paying for that button to be there. What else is this but “paid priority” for a “fast lane” to the “open Internet?” The Commission’s new rules have no clothes. The advocates of “net neutrality” have been suckered into focusing on regulating the ISP while the major “edge” companies have taken full advantage of services offered by “CDNs” (content delivery networks, like Akamai) to get exactly the priority the advocates have said they fear, and what the FCC has said it wants to prohibit. (See commentaries here, and here, for more on how the Internet was designed, and why CDNs are precisely what “paid priority” is all about, and have been since the inception of the “open Internet.”)

So now what? There are now rules prohibiting ISPs, and only ISPs, from favoring one Internet delivered site over another. This is true, in part, because the FCC is having enough trouble finding a legal justification for jurisdiction to write rules about the Internet in the first place. They believe they can survive legal challenge regarding last mile ISPs, but even they don’t dare consider extending that jurisdictional claim to the rest of the Internet ecosystem. The idea that they could extend this jurisdictional reach to remote controls built by consumer electronics manufacturers is beyond the pale.

But the “Netflix button” creates all the harms the Commission and the “net neutrality” advocates have been bemoaning, and undoubtedly does so in a more direct and demonstrable way than any of the theoretical harms surrounding network management or “paid priority.” Will ISPs be allowed to provide set top boxes, or other equipment that includes a remote control with a “fast lane” dedicated button paid for by a single, dominant Internet streaming video programmer? Will that violate the existing rules while everyone else sells the exact same device in retail stores?

The question alone should lead to some obvious conclusions. Regardless of whether the “Netflix button” can or will be considered by the FCC, the entire effort at “net neutrality” has been misdirected. The FCC will inevitably continue to try to defend its jurisdiction and rules regardless of the fact that those rules do not and never have reflected the reality of the Internet ecosystem. Broadband deployment will be slowed as we spend time in bureaucratic regulation and Court arguing over rules that one little button has already proved are irrelevant.

7 Comments »

  • George Ou said:

    So it sounds like Netflix is also violating “device neutrality” in addition to the “Net Neutrality” violation of using 3+ terabits per second of exclusive Internet fast lanes.

  • Tech at Night: Deregulation(!), Regulation, Cable TV | RedState said:

    [...] Also, Netflix itself my run afoul of the new regulations. That’s right, poor widdle Netflix, supposedly the victim of big, bad ISPs, is probably in violation of the new regulations. Heh. [...]

  • Tweets that mention Digital Society » Blog Archive » The “Netflix Button” Violates “Net Neutrality” -- Topsy.com said:

    [...] This post was mentioned on Twitter by AdamThierer, Peter Kiley. Peter Kiley said: The great Steve Effros' interesting piece on the "Netflix Button" and net-neutrality http://t.co/KimD4sk via @DigiSociety [...]

  • Brett Glass said:

    Well, Steve, OF COURSE the FCC’s efforts have been misdirected. This is because they are not data-driven (despite the FCC’s claims that it would be) but rather driven by politics and political campaign contributions. It was due to Google, which according to opensecrets.org gave nearly $1M to Obama, that Obama pledged to institute its current “net neutrality” rules. Obama not only hired Google’s chief lobbyist into a key post at the White House; he hired a good friend who had previously been working for an Internet content provider (Julius Genachowski worked for online magnate Barry Diller) as Chairman of the FCC specifically to do content provider Google’s bidding. It’s no surprise, then, that the rules that were passed looked EXACTLY like Google’s latest public proposal (made in conjunction with Verizon), or that the aforementioned lobbyist (Andrew McLaughlin) resigned from the White House the day after the rules were voted in. Nor is it a coincidence that another lobbyist – Jen Howard, who worked for two Google lobbying groups and was hired into the FCC directly from one of them – likewise resigned a few days later. (“Mission accomplished!”)

    Let’s face facts. Google has achieved regulatory capture of the FCC and has directed it to regulate ISPs in such a way as to preserve its monopolies and maximize its bottom line. Part of its regulatory agenda is not only regulation of ISPs but NO constraints upon content providers like itself (or upon its own, huge private fiber network). So, tactics like the “Netflix button” get a bye, even though there is actual harm to competition here and ISPs posed no threat to consumers.

    It’s all particularly galling to me as a small ISP. I can’t afford regulation; it’s driven away my investors and (should the new rules stick) most likely outlawed my most popular service plans – yes, the ones that CONSUMERS prefer. It’s sad to see such corruption in DC.

  • Garrett said:

    Steve,

    To start I have to say I am very disappointed in this article. This should have come with a spin warning which I dare say is even more twisted than the network news stories!

    Seriously?! This is nothing more than disinformation about a new Video On Demand button on remote controls.

    LOOK! blasphemy from then other!

    TWC — So many VOD Buttons!!! AHHH
    http://www.timewarnercable.com/corporate/programyourremote/default.ashx

    Comcast — Again with the “ON DEMAND” buttons!
    http://www.comcast.com/corporate/customers/customer_support/remotes.html

    Verizon — Need I keep listing?
    http://www.comcast.com/corporate/customers/customer_support/remotes.html

    Had enough? Let me know when you want to Stop being a troll.

    Very Disappointed,
    Garrett Heaton

    P.S. What would you call this remote? A repeat offender?
    http://www.slipperybrick.com/2008/12/philips-universal-remote-prestigo-srt9320-gets-a-touchscreen/

  • Garrett said:

    Sigh… Sorry, wrong link under the Verizon listing here’s the Net Neutrality offenders:

    http://www22.verizon.com/ResidentialHelp/FiOSTV/Remote+Controls/SetUp/SetUp.htm

    Making too many typo’s these days,
    Garrett Heaton

  • Charles Hoffman said:

    I’m glad that Netflix is succeeding. Give them some credit for surviving through the storm of idiotic cable companies that have been holding back technology for the last 20+ years. Those dinosaurs have been slow to push technology out and try to control every aspect of home entertainment. Finally the consumer has the ability to connect to Netflix, Amazon on Demand, Hulu, Boxee, and many others and create their own home media experience without cable companies controlling them. Yes, Netflix is the biggest of their kind, but compare it to the behemoth and bloated cable companies that suddenly have to play catch up on innovation as a result and I welcome it.

    “Significantly and indisputably, we are talking about what is probably the single most important and powerful navigation tool for video; the remote control”

    Nearly ever device coming out nowadays can be controlled by a Smart phone, tablet, or linked to a computer or third party device (Apple TV, Google TV, etc.) that is customizable by the end user. The remote control of yesteryear will be replaced by remotes that have far more on-screen interaction.

    “So while all its competitors, existing, or new innovators, will have to rely on the consumer employing multiple button pushes, navigation screens and the like, Netflix is about to provide an exclusive “fast lane” to anyone who wants it on the remote controls of the devices that consumers will have to use to access its competitors.”

    Um, have you seen Windows Media Center? Apple TV? Google TV? With the push of a button, you are “on the web” and able to browse a multitude of choices. Is your next article going to be about the woes of the “Microsoft” button on an HP computer remote connected to a computer?

    Netflix is an anomaly if you think about it. By all accounts, the cable companies and ISPs delivering services direct to the home should have killed Netflix before these supposed tactics that, in your words, violate net neutrality. Based on the fast growth of Netflix, I think the armies of lobbyists and lawyers employed by the cable companies and ISPs got caught flat footed. Netflix is only trying to secure their future.

    “Broadband deployment will be slowed as we spend time in bureaucratic regulation and Court arguing over rules that one little button has already proved are irrelevant.”

    I couldn’t disagree with this statement more. It’s lawyers and cable companies that will be leading the charge here. They are the problem, not a Netflix button. If the cable companies / ISPs spent as much time worrying about how to be a market leader than they did trying to beat down competition we’d all benefit. Instead, it’s articles like this that misdirect attention to the innovators and cover for the shenanigans of the cable companies and ISPs.

    The “Netflix button” may as well be a “Make sure my cable company has to innovate and keep up in order to keep me as a customer button”. I’ll take that any day.

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