Netflix Throttling: Good for the Goose

News broke Thursday night that for more than five years, Netflix has been deliberately reducing the data rate of its video streams to AT&T and Verizon mobile customers. The streaming video company capped its video stream to a measly 600 Kbps, presumably to allow its customers to enjoy more video hours using less data.

First of all, this is pretty clearly not a violation of the net neutrality rules as currently implemented by the Federal Communications Commission (FCC). Nor should it be a violation of any rules. These are Netflix’s video streams, and it should be able to manage its data however it thinks will best please its customers. But what is good for the Netflix goose should be good for the gander: If Netflix is free to manage its traffic to better serve consumers, Internet Service Providers (ISPs), who are in an even better position to understand the traffic patterns and dynamics at play within the network itself, should be able to do the same. Same customers, same practice, same good outcome, but as it stands today, only one is unlawful.

That said, there are a couple of problems with Netflix’s practice. For starters, it exposes Netflix’s public policy advocacy as rather hypocritical. Netflix fought hard during the open Internet proceeding to ensure that broadband providers could not engage in this same behavior that would benefit the same customers in the same way. Most content providers already build adaptive bitrate algorithms into their streaming service, allowing the video to adjust its resolution to the network conditions. Adapting streams with a hard cap on data rates for resource-constrained mobile networks is not much different.

Also, these sorts of practices should be transparent. We probably don't need a law requiring this, but consumers as well as networks should be aware of these practices, especially when Netflix is such an important part of the online ecosystem, with nearly 40 percent of Internet traffic. I worry that these two concerns are related: that Netflix may have suspected it would look rather duplicitous arguing for “strong” net neutrality while at the same time selectively capping traffic rates to particular ISPs, setting aside their shenanigans over interconnection.

But putting those concerns aside, and assuming this application was transparent and open, it seems pretty clear that Netflix had its consumers’ interests in mind. This makes clear that so-called “throttling” based on type of traffic, source, or destination is not a “per se” bad thing—so much depends on context and the particular tradeoffs a practice is trying to make. We should be looking at the impact any particular traffic management has on people and competition, not abstract values and which type of company is doing the management.

For years, we at ITIF have been arguing that talking about abstract net neutrality principles is a path to insanity. It makes sense to talk about fair competition online and ensuring practices that don't harm consumers. But making rules about how data itself should be treated is a huge mistake. This is a big part of why the classification of broadband as a common carrier under Title II was so misguided. Title II has brought with it all sorts of unintended consequences and unnecessary burdens and not just for regulated entities. The FCC itself will continue to deal with the fallout of these practices for years to come, sorting through the legal thicket of unwinding years of precedent that assumed a relatively clear broadband/voice distinction.

This latest news makes clear that the net neutrality rules as currently implemented are ill-suited to a dynamic Internet. Hopefully the courts, Congress, or the next administration give us the opportunity to try again with something more sensible.