After being forced to sign interconnection or peering deals with major ISPs like Comcast, AT&T, Verizon, and Time Warner Cable, Netflix will soon have a new recourse if it feels the fees being imposed are unreasonable. The FCC will hear interconnection complaints and “take appropriate enforcement action” if it determines that the ISPs are out of line. For Netflix, this is big news.
Companies that rely on the internet to transmit large amounts of content, like Netflix which during peak hours can account for over 1/3 of all web traffic, have long faced challenges in delivering such vast quantities of data. Commercial ISPs, like your local cable and phone companies, control what’s called the “last mile” of the Internet infrastructure, that connects your individual household connection to the global network. The connections between global internet, and your ISP’s own network, have become a choke point for companies that deliver large amounts of data. As a result, Netflix has sought direct interconnection with ISPs networks, bypassing increasingly crowded web transit infrastructure. However, the ISPs have demanded hefty fees for this access, leaving Netflix alleging that the ISPs have essentially set up a toll booth at this critical infrastructure bottleneck. CEO Reed Hastings thinks that this type of interconnection should be free.
While the FCC is unlikely to overturn any of the deals that Netflix has struck with big cable and phone companies, new net neutrality regulations and the characterization of the internet as a public utility should offer Netflix and other companies that deliver video content and OTT services some protection from ISPs slapping future fees where they don’t belong.