Award Winning Blog

Friday, January 30, 2015

Did Netflix Want Service Quality to Degrade?

            Through mostly unofficial channels, Comcast has alleged that Netflix wanted transmission bitrates to decline ostensibly to accrue greater impact at the FCC.  A major official at Comcast told me that Netflix wanted to show a deterioration in ISP delivery speeds so that it could derail FCC approval of the Comcast-Time Warner Cable acquisition.  This official alleged that Cogent had a similar strategy.

            Would Netflix risk upsetting many of its subscribers to achieve questionable additional persuasion points with the FCC?

            In light of the trigger-quick discomfort broadband subscribers feels when real or artificial congestion occurs, I find the Comcast claim hard to believe.  Few companies, outside commercial aviation, would risk ticking off their customers to achieve a political point.  So perhaps the answer lies in determining whether Netflix has so much in common with the airlines, that it too can degrade service to nudge/push customers into paying more for same service.
            The airlines can degrade standard economy service and unbundle components of what used to be considered part of an airfare in light of limited competition.  Travelers cannot readily avoid add-on fees by shifting carriers.  Can Netflix subscribers vote with their currency and shift allegiance if the company’s video streams become a slide show?

            The answer: it depends. Increasingly one can find much—but not all—of the content available from Netflix.   Disintermediation of cable television operators has become an option for some content, but note that the cable ISP constitutes the only double digit megabit per second option for most consumers.  Comcast and other retail ISPs have raised broadband subscription rates and these ventures probably with become more aggressive should content disintermediation become more prevalent.

            Netflix does not strike me as a company willing to risk subscriber churn based on poor video quality.  The company paid quite high tuition to learn that it could not raise rates overnight by unbundling online content delivery from postal delivery.  Would Netflix risk ticking off its customers based on a view that now they are so hooked on the company’s content that they would tolerate poor delivery quality?