Netflix is worried that ISPs could abuse their positions as Web-access
gatekeepers and affect their competition if they become Web-video
distributors themselves. Netflix, one of the Web’s most buzzed-about video rental services, recently asked the Federal Communications Commission (FCC) to adopt new rules to protect the fans from these practices.
‘Network operators control the delivery pipes and generate significant revenue from content that travels over those pipes,’ Netflix wrote. ‘Operators provide both the means and motive for discriminating against new ventures that might threaten revenue sources of the network operators.’
Netflix’s letter to the FCC seems aimed largely at Comcast and Time Warner, as well as anyone else launching a TV Everywhere offering, which combines their pay-TV cable content with broadband video delivery. Netflix put a lot of faith in Web-based delivery before it was the norm, aggressively pursuing streaming-only deals and even developing a streaming-only option for a country other than the US sometime this quarter. Netflix has partnered with TVs, set-top box makers and other devices for its Internet-delivered video, but all of these depend on cable, mobile and satellite companies pumping broadband into the home.
All of these companies could have the upper hand when it comes to distributing Web-based content, as well as gaining the rights to such content. The bigger they are, the more they generally have to spend on content. Netflix is also worried that those like Comcast (25 million cable TV subscribers and 15 million Internet customers) will get better deals on Web content due to their existing TV content deals.
An easy way to think of the power these operators have is to take a look at a Comcast Web search. A user with cable from Comcast that misspells a Web address will get directed to a www.search3.comcast. com page that provides suggested alternatives. This overrides any such search option setup by browsers and is very difficult to turn off.
These service providers could easily turn off searches for content or attempts to access content into areas where they direct users to their own content offerings. Netflix (12 million subscribers) is especially afraid of this because it has had some major fights with Hollywood over access to content, and these same studios readily admit a preference for cable and satellite networks because they get far better returns there.
In comments to the FCC, Netflix wrote: ‘There is substantial discrimination and consumer harm if a network operator uses its ownership affiliation with a studio or TV network or even its bulk buying leverage with a video content provider to deny attractive programming
to a competing online video service.’
The ‘ownership affiliation’ that Netflix is afraid of is Comcast’s proposed merger with NBC Universal. With that content, Hulu and Xfinity all under the roof of the nation’s largest cableco, Netflix is calling the conglomerate a wolf in sheep’s clothing. Comcast has said it will not hamper NBC Universal’s distribution avenues and will gladly continue to further its relationships ‘ but that’s still to be seen.
While all this is going on, the studios and major retailers have also been cracking down against the kiosk-based DVD rental services like RedBox. The rumor we’re hearing out of Hollywood is that more studios will look for licensing deals that increase access to older content but lengthen the window that services like Netflix and Amazon.com must wait for new content to come available.
The FCC is still taking comments, concerns and suggestions on a variety of its initiatives surrounding Net neutrality and Web-based business delivery actions.