CFO David Wells says the company would have preferred to avoid Title II
By Ben Popper on March 4, 2015
Speaking today at a Morgan Stanley conference, Netflix chief financial officer David Wells appeared to contradict the company’s aggressive push for stronger net neutrality regulations and the use of Title II by the FCC. “Were we pleased it pushed to Title II? Probably not,” Wells reportedly said at the conference. “We were hoping there would be a non-regulated solution.”
That flies in the face of the public comments that Netflix submitted to the FCC and its aggressive push not just to enforce net neutrality, but to expand the definition to cover peering and interconnection — something the FCC did.
A Netflix spokesperson clarified that Wells was actually describing the evolution of the company’s position. Back in 2010 Netflix was pushing for the use of Section 706. At the beginning of 2014 they were still hopeful the industry could find a solution without new regulations. But when those avenues appeared to close down, they began to push for the strongest FCC position, which meant backing Title II. “Netflix supports the FCC’s action last week to adopt Title II in ensuring consumers get the Internet they paid for without interference by ISPs. There has been zero change in our very well-documented position in support of strong net neutrality rules.”
Netflix may be concerned that the FCC has overextended itself in its application of Title II. In the weeks leading up to the FCC vote, both Google and Free Press, generally advocates for strong net neutrality, warned that the common carrier designation that comes along with Title II could give ISPs an excuse to charge internet services like Netflix or YouTube twice.
“[T]his issue must be viewed in light of the efforts by some ISPs, particularly abroad, to claim that they provide a service to content providers for which they should be able to charge under a ‘sender pays’ model — while still charging their retail customers for the same traffic,” read Google’s FCC filing. “To the extent the Commission encourages the falsehood that ISPs offer two overlapping access services instead of just one, or the fiction that edge providers are customers of terminating ISPs when they deliver content to the internet, it may encourage such attempts at double-recovery. That could do serious, long-term harm to the virtuous circle of internet innovation, thus greatly undermining the benefit of adopting net neutrality rules.”
Update: Netflix published a blog post today with a longer quote that put Wells statement in context.
“So, over the last year, we’ve been very pleased that we’ve been able to rise the issues beyond that narrow piece out into the public consciousness, and I think that, that has come before. Were we pleased that it pushed to Title II, probably not, right? I mean, we were hoping that, there might be a non-regulated solution to it. But it seems like companies that are pursuing their commercial interests including us have to arrive at something like that. So we’re super pleased that there is now a notion, at least a vehicle, for a complaint where if we are in the position we were in 12 to 18 months ago, where we can show you what it looks like if you’re a subscriber on one ISP versus another. The notion of “well we’re paying this one” and that these people are getting better service, even though they’re both paying their consumer price for bandwidth. So I would say we are very pleased with what’s been accomplished. You know when you’re successful as the ISPs are at providing a service. Essentially Internet has become a utility. If you think about people’s willingness to drop their broadband, I think there’s been some studies that they’re willing to drop many other things including buying milk before they dropped their broadband. That’s a pretty strong indicator that you’ve got something that has become, you know, a utility. And in our opinion it was very important to protect those notions.”