Netflix Reveals It Throttles AT&T, Verizon Customers To Save Them From Usage Caps, Overage Fees

from the neutrality-soap-opera dept

Netflix this week admitted that the company has been throttling the video streams of most wireless customers around the world to 600 kbps, a practice the company claims is necessary to protect users from usage caps and wireless overage fees. It was the first time Netflix acknowledged the practice, which the company said it’s been engaged in for five years. The more interesting part? The company admitted to the Wall Street Journal that it’s apparently not throttling the video streams of companies whose consumer policies Netflix agrees with:

“Netflix said it doesn?t limit its video quality at two carriers: T-Mobile and Sprint Corp., because ?historically those two companies have had more consumer-friendly policies.? When customers exceed their data plans on Sprint or T-Mobile, the carriers usually slow their network connections, rather than charge overage fees.”

The Netflix reveal came after T-Mobile CEO John Legere spent last week defending T-Mobile’s controversial Binge On service, which throttles partner video streams to 1.5 Mbps or 480p. Legere spent much of the week poking various news outlets with claims that AT&T and Verizon throttle video streams even further than Binge On, something both companies spent much of last week denying. It didn’t apparently take long for the Journal to dig deeper and get an admission out of Netflix that it was the one doing the throttling.

Despite the clear admission from Netflix that it’s the one throttling, Legere continues to take to Twitter to blame AT&T and Verizon, meaning he either didn’t understand the story he’d read, or he’s intentionally being misleading in an attempt to redirect people from recent Binge On criticisms:

AT&T, meanwhile, hoping to cash in on the story and paint Netflix as a hypocrite, had its top lobbyist pretend to be “outraged”:

“We?re outraged to learn that Netflix is apparently throttling video for their AT&T customers without their knowledge or consent,? said Jim Cicconi, AT&T?s senior executive vice president of external and legislative affairs.”

AT&T’s “outrage” likely stems from the fact that the throttling kept AT&T users from hitting their usage caps and incurring overage fees sooner, costing AT&T money.

After revealing its throttling to the Journal, Netflix posted a new blog post in which it pretended it was revealing its throttling practices by choice, “announcing” it was working on tools that would help customers better manage their data consumption:

“We believe restrictive data caps are bad for consumers and the Internet in general, creating a dilemma for those who increasingly rely on their mobile devices for entertainment, work and more. So in an effort to protect our members from overage charges when they exceed mobile data caps, our default bitrate for viewing over mobile networks has been capped globally at 600 kilobits per second. It?s about striking a balance that ensures a good streaming experience while avoiding unplanned fines from mobile providers.

This hasn?t been an issue for our members. Our research and testing indicates that many members worry about exceeding their mobile data cap, and don?t need the same resolution on their mobile phone as on a large screen TV to enjoy shows and movies. However, we recognize some members may be less sensitive to data caps or subscribe to mobile data plans from carriers that don?t levy penalties for exceeding caps. As we develop new technologies, we want to give all our members the choice to adjust their data consumption settings based on their video preferences and sensitivity to their ISPs data overage charges. We?ll provide more details as we get closer to launch.

So to be clear: Netflix should have been more transparent about what it was doing and provide users with better controls (desktop users can adjust streaming quality rather easily), especially if it’s going to lecture ISPs on transparency. That said, given Netflix’s positions on net neutrality and usage caps, you’re sure to see the story blown up into more than it is by ISPs and their various mouthpieces, who’ll likely either call this a net neutrality violation itself (it’s not; throttling yourself isn’t like throttling a competitor, and users have a choice of streaming services) or continue the industry claim that Netflix is a shady villain that treats giant, lumbering telecom duopolies unfairly.

But the crux of the problem here remains usage caps, not Netflix. Sure, Netflix isn’t being entirely altruistic. Annoyed customers banging their heads against usage caps watch less streaming video, which for many fixed-line ISPs like Comcast is the entire point. For wireless carriers it’s obviously different, with the goal being to drive consumption however possible. But the fact that a company was forced to offer a lower quality service — instead of competing to provide the best stream possible — shows how arbitrary usage caps by their very nature distort and damage markets. And that’s before you even get to the anti-competitive implications of zero rating.

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Companies: at&t, netflix, sprint, t-mobile, verizon

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Comments on “Netflix Reveals It Throttles AT&T, Verizon Customers To Save Them From Usage Caps, Overage Fees”

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Jeremy Lyman (profile) says:

I am Jack's disappointment.

I was sure TechDirt would cut through all the press release BS that referred to this as “throttling” and explain clearly and concisely why it is not throttling. It may seem very similar to what BingeOn was doing but it’s not the same. Netflix was sending smaller files to customers known to have arbitrary usage limits set by their ISP. They were not slowing network throughput. T-Mobile sought to achieve the same result with throttling, which is unacceptable as a data carrier; Netflix was engaged in quality degradation or data usage minimization or whatever other name you’d like. But it’s not throttling and calling it that, even if you’re pissed that Netflix was being deceptive or selfish, muddies the waters of our network neutrality discussion.

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