After stepping down from their prominent role in the net neutrality debate in the US, Netflix cautiously entered the dialogue in India yesterday, by filing a partial response to Indian telecom regulator TRAI’s latest consultation paper on net neutrality.
What Netflix said in their TRAI filing…
Netflix’s submission to TRAI argued for regulations banning paid prioritization, blocking, and throttling (slowing down) of Internet traffic. Paid prioritization is a concept where ISPs can be paid by content providers to put their content on a “fast lane”, giving it an edge over the rest of the Internet.
However, Netflix focused more on defending Content Delivery Networks (CDNs), in the bulk of their submission. CDNs are networks that Internet companies deploy around the world to improve data transfer speeds and cut costs. In its consultation paper, TRAI passingly mentioned the possibility of regulating CDNs. Netflix vigorously defended Open Connect, its own homespun CDN, and said that CDNs “[benefit] consumers, ISPs and Internet users in general”. Netflix reasoned that CDNs are not anti-competitive, and that they reduce costs and improve speeds for both Internet users and ISPs.
…and what they didn’t
While Netflix touched on their usual arguments in favour of net neutrality and mounted a disproportionate defense of their CDN, they answered less than half of the questions TRAI asked in the consultation paper. While conceding that net neutrality should be enforced by a group where all stakeholders are represented, the submission skipped a series of questions on just how that group would go about doing that. And while agreeing that Internet providers should share information on how they manage traffic, Netflix skipped questions on exactly what information ISPs should be required to provide.
Additionally, while the company maintained that traffic management should not be discriminatory, they skipped multiple questions on how the practice should be regulated. This is odd, considering that traffic management was one of the most prominently discussed concepts in TRAI’s consultation paper.
Staying away from specifics may have been a considered move, though. In a media interaction with Indian journalists in March, CEO Reed Hastings was asked how closely Netflix was engaging with Indian regulators on net neutrality. “I’m not sure, because we’re not trying to do anything that’s controversial,” he responded. “But nothing significant.”
Netflix declined to comment any further on their filing.
Why Netflix worries about Open Connect
Netflix has been accused of hypocrisy because of their Open Connect CDN in the past, which might explain their overzealous defence of the program.
Three years ago, Ajit Pai, a commissioner at the US Federal Communications Commission (FCC), wrote a letter to Netflix, asking the company about an “apparent conflict” in their support for net neutrality. The letter was more of an attempt at whataboutism than a sincere regulatory concern, since Pai has publicly opposed the Open Internet rules that came out the following year, which banned certain practices that violate net neutrality. This year, Pai was made chairman of the FCC by US President Donald Trump.
In Open Connect, Netflix hands out free copies of their entire catalogue to participating Internet providers. Netflix does this by shipping a network appliance that stores a large amount of titles from Netflix, so that the service’s subscribers can stream videos directly from their Inernet provider, as opposed to downloading them from a distant Netflix server. The appliance is updated every night when international undersea cable bandwidth is relatively free, to accommodate new and popular titles that Netflix assumes will be popular among subscribers in a particular region.
Since Open Connect solves ISPs’ complaints that Netflix takes up too much of their network capacity, the program is highly important for Netflix’s international growth. Regulatory challenges to Open Connect and CDNs would hurt Netflix’s ability to scale in markets like India, where there is growing demand for international content, but limited international bandwidth.
Interestingly, Open Connect was the program that Ajit Pai had alleged was in contrast with Netflix’s support for net neutrality. Netflix has denied this charge, both in a response to Pai’s letter, and in this filing. In the TRAI submission, Netflix went so far in defending Open Connect that they added a detailed annexure illustrating how a hypothetical Indian ISP would save a lot of money by participating in the program.
Earlier this month, MediaNama reported that Open Connect was being rolled out by Netflix in five Indian cities, across three Internet providers. Netflix has also enrolled Pakistani state-owned Internet provider PTCL in the program, with Open Connect Appliances in Islamabad and Lahore. This expansion may also be a factor in Netflix’s emphasis on CDNs in its response.
“Not backing down in US”
A Netflix spokesperson denied that the company was backing down on net neutrality in the US. They reiterated a statement they had previously made, saying that the company is “watching the situation to see what, if any, actions are taken at the FCC or in Congress to weaken net neutrality.” The statement continued, “More than 4 million consumers lent their vocal support to ensuring that they, not Internet service providers, pick winners and losers on the Internet. And in the two years since strong net neutrality was enacted, the industry has continued to evolve with new apps and services introduced every day.”
However, Netflix isn’t as strident in their support of net neutrality as they used to be. With the FCC’s Open Internet order now imperiled, the company, whose support for net neutrality in the US once bordered on activism, has mostly gone silent. In a brief section in a letter to shareholders, the company said that the relationships it had cultivated with Internet providers in America would ensure that changes in net neutrality regulations in the country would not impact them. Speaking to Indian journalists in March, Netflix’s CEO insisted that the “cultural concepts” surrounding net neutrality would prevent American Internet providers from engaging in discriminatory practices.
In the US, net neutrality is a partisan issue, with most Republicans opposing the Open Internet regulations. The Republican party’s 2016 platform accused the Open Internet rules of being “devised in the 1930s for the telephone monopoly”.
In India, however, although net neutrality was a contentious issue when Facebook campaigned for its Free Basics service to stay legal, there is no systematic disagreement against the concept itself along ideological or party lines like there is in the US.
Other India moves
Netflix has been gradually ramping up its operations in India over the year that they have been in the country. Close on the heels of some major content deals, the company has announced that they’re opening an office in Mumbai — their India operations have so far been done out of Singapore. The company has posted two job openings for the Mumbai office — one for an executive to manage relationships with ISPs, and another to manage the technical aspects of media distribution. Netflix had 2-3 lakh subscribers in India as of this January, as we reported exclusively earlier this year.