AT&T executive fires shots at Netflix over net neutrality, calls Netflix CEO "arrogant"

You want net neutrality? You're "arrogant," according to Jim Cicconi, the AT&T Senior Executive Vice President of External and Legislative Affairs. In a response to the Netflix CEO's blog post on net neutrality, Cicconi has decided that Netflix is wrong for assuming that ISPs are supposed to foot the bill for high-bandwidth services and that the financial obligation of supplying content should fall onto the content creator.

"Mr. Hastings’ arrogant proposition is that everyone else should pay but Netflix.  That may be a nice deal if he can get it.  But it’s not how the Internet, or telecommunication for that matter, has ever worked."  - Cicconi

Cicconi's heavily worded blog post lays out a series of "facts" which he believes is worth considering:

  1. Streaming video is increasing the consumption of bandwidth consumption
  2. ISPs must build additional capacity to handle the increase in traffic
  3. If Netflix is the one responsible for that increased traffic, then AT&T would be forced to build additional capacity exclusively for Netflix' services

He continues on to suggest that those costs will ultimately have to be paid for by the consumers, and it is his view that it should be Netflix that pays for it instead. 

Cicconi goes on to critique other aspects of Hasting's post, mentioning that in the current arrangement it is Netflix subscribers that are paying for the ISP's additional capacity, and that cost is incorporated into Netflix' subscription rate. He explains that although Netflix views that as unfair, their net-neutral alternative means that all AT&T internet subscribers would be bearing the cost of building the additional infrastructure, and not just Netflix subscribers.

"As we all know, there is no free lunch, and there’s also no cost-free delivery of streaming movies.  Someone has to pay that cost." - Cicconi

Cicconi then cites the Netflix DVD delivery scheme, saying that Netflix factors in the delivery costs in the price and pays for those delivery costs, and that it would not be ok for Netflix to demand your neighbors to pay for the costs of delivering your movies. He suggests that delivering content over the Internet should be no different, as there still is substantial delivery costs involved, and that Netflix should continue to incorporate those costs into their service.

"If there’s a cost of delivering Mr. Hastings’s movies at the quality level he desires – and there is – then it should be borne by Netflix and recovered in the price of its service. That’s how every other form of commerce works in our country. It’s simply not fair for Mr. Hastings to demand that ISPs provide him with zero delivery costs – at the high quality he demands – for free. Nor is it fair that other Internet users, who couldn’t care less about Netflix, be forced to subsidize the high costs and stresses its service places on all broadband networks." - Cicconi

​Is Cicconi right? Netflix has already penned a deal with Comcast, and should it continue to be that way? Or should the cost of delivering the content ultimately fall onto the ISPs, who suggest that they will then push those costs onto all consumers?

​Source: AT&T via TechCrunch | Image via Shutterstock

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30 Comments

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I can see how this debate can be used politically.

Netflix users are "The Takers" expecting handouts paid for by everyone else....

oh this isn't going to go well at all.

Cable / Phone provide's want the ability to charge it's customer's AND companies like netflix for use of it's services. This is why I feel net neutrality is important.

I would understand if infrastructure companies would temporarily squeeze / load balance area's that hitting there network capacity as long as normal speeds would resume when there capacity in that area goes back down to a more normal usage.

"If Netflix is the one responsible for that increased traffic, then AT&T would be forced to build additional capacity exclusively for Netflix' services"
---
Wrong. It's your users AT&T that are responsible for requesting that traffic...you know the ones that pay you to provide that service already. This just a coordinate attempt at a money grab by the telco's and cable isp's and it's transparent as hell to any informed customer of these jackals.

Edited by knighthawk, Mar 23 2014, 11:11am :

ISPs are getting away with murder charging the exorbitant fees they do. They want Netflix to foot the bill, yet they will continue to rape the customer.

"Cicconi then cites the Netflix DVD delivery scheme, saying that Netflix factors in the delivery costs in the price and pays for those delivery costs, and that it would not be ok for Netflix to demand your neighbors to pay for the costs of delivering your movies."

I agree with Cicconi's observations... but not the conclusion he draws. He states that Netflix has to pay the postal service to deliver DVDs and therefore Netflix should pay telcos to deliver streaming movies--agreed. However, what he fails to acknowledge is that Netflix is already paying the telcos when Netflix pays for telco pipes (land lines) to the Internet. These large pipes are extremely costly. A DS3 (45 Meg pipe) could cost upwards of $7,000 per month. Netflix would need to have many, many of these pipes in order to handle Internet traffic for all its customers. Either Cicconi is being cagey with his statement or he's simply ignorant of the huge amount of money the telcos already charge businesses for Internet pipe. Seems to me, either way, AT&T is firing warning shots and looking for an excuse to raise price on consumers; obviously they're not satisfied with their already huge profits.

The phone company makes tons of money by charging people for what they don't use. It is called over subscription. The problem is that people are using the bandwidth. That means less oversubscription and less profits.

Netflix is run by absolute morons. Spoke to netflix in my earlier days, when they were better. Netflix lost alot of contracts(or called deals) with major studios. Netflix couldn't even keep up their original concept of business. Netflix is now a simple Hulu rip off.

chrisj1968 said,
Netflix is now a simple Hulu rip off.

even though Netflix came out years before Hulu and still has far better service with no commercials.

Thrackerzod said,

even though Netflix came out years before Hulu and still has far better service with no commercials.

He is referring to the Streaming half which came out after Hulu but I do agree it is superior.

Sources:
"In February 2007, the company delivered its billionth DVD[24] and began to move away from its original core business model of mailing DVDs by introducing video-on-demand via the Internet."
http://en.wikipedia.org/wiki/Netflix#History

... *goes and checks hulu*

Well I stand corrected. Netflix did indeed start before Hulu.

"The Hulu venture was announced in March 2007..."
"In October, Hulu began the private beta testing by invitation..."
http://en.wikipedia.org/wiki/Hulu

Thrackerzod said,
even though Netflix came out years before Hulu and still has far better service with no commercials.

yep, subscribed to both, dumped Hulu after the first month due to all their ads.

As I mentioned above, this is really STUPID for ATT to be taking a public and vocal position against net-neutrality.

This is very close to the original MCI deal with ATT that got ATT broken apart in the anti-trust ruling in the late 70s, early 80s. ATT was trying to dictate how connections/bandwidth was used and what could be transmitted over it.

And ironically, ATT is ONCE AGAIN doing the same stupid thing they did then. Too many consumers in the US have only one option for high speed bandwidth access.

ATT is going to screw around and not only get their faces slapped by the attorney general again, but also get themselves and other telecom companies broken apart where they have to offer bandwidth options to other ISPs over their infrastructure.

Just stupid for them to do this.

Consumers should just have the option of the size of the dumb pipe that they need for the services they want to consume. ISPs bill for bandwidth, Netflix et. Al. Should just bill for service.

This post for ATT would be completely valid if they had to supply bandwidth to Netflix in order to service non-ATT customers. But that is really not the case. ATT has broadband customers because of services like Netflix. ATT is just trying to muddy the waters.

Me thinks if AT&T can;t provide the service they're selling to their customers, then they shouldn't be selling it in the first place.

Trying to palm it off as NetFlix' problem is business doublespeak at it's finest.

Unfortunately i can see a future where they offer a special over priced 'Netflix-enabled' package. It's not a future i like the look of.

ISP's in the US are very very far behind when it comes to bandwidth speeds and those that add caps are just making it worse. AT&T, Comcast and the others for example need to just play catchup with their networks. The faster you can obtain the data which is less strain on the network the better it is for everyone so it makes sense to double,triple or even higher the speeds that are currently available to their customers at no added rate increase as they are all high enough as it is.

Toyota doesn't build roads, but people pay taxes with the expectation that there will be enough roads available to handle the amount of Toyotas on them.

Netflix doesn't build infrastructure, but consumers pay their ISPs with the expectation that there will be enough bandwidth available to handle the Netflix.

The problem is this makes too much sense... =)

Not only that, but if I didnt have netflix, I would still use my bandwidth on something else because I PAY FOR THAT! NOT Netflix streaming to my home. I pay Netflix for that... AT&T has gone crazy...

Call me crazy, but I don't see Why Netflix would need to pay at all.
Companies like AT&T, Comcast, or whatever ISP here in Europe, have customers who pay for access to their networks. I presume, with the money we pay, networks can be build and maintained.
Lets assume Netflix is no longer available on the internet, or any other service or website, would any customer still have internet, and hence need an ISP? I don't think so.
So instead of fighting content providers, Network operators should work together with companies like Netflix. For example; want a better viewing experience (HD) on Netflix and still be able to download something whilst using Skype? You need higher bandwidth, hence you pay more.

I am still keeping my fingers crossed we will have net neutrality here in Europe. Coz the way it looks now, people in the US are being screwed over..... Or soon will be as Netflix will need to up the prices for it's customers for use of the networks. Those same networks customers have already paid for by paying the ISP's. Thats double billing in my books......

What on earth...?! AT&T is solely responsible to provide data to their users and sufficient backhaul to accommodate all users, even if they decide to use streaming video at the same time. It is NOT, and never should be, up to the server owner to re-imburse the ISP. Should the fuel stations be able to force the car manufacturer to subsidise our fuel consumption? Lunacy.

The US seems to be heading backwards very quickly in terms of bandwidth limitations and speed reductions; meanwhile the rest of the world is heading where the US was a few years ago.

I live in the UK, Where unlimited internet is the standard. You pay for the bit-rate, and that is that. If you have a 10mb connection, you can max that out all you like as you payed for that bit-rate. The UK has also passed laws that forces ISP's to only make you pay for what you receive, not the rate that they are pumping it out.

But even in this all you can eat environment, they seem to be doing just fine, and the ISP's are proud to say that they are improving their infrastructure. Hell, even virgin upgraded all existing customers to double their bandwidth for free because they could.

Ad Man Gamer said,
Hell, even virgin upgraded all existing customers to double their bandwidth for free because they could.

the cost of providing telco services has been reducing for many years, and more bandwidth is being pumped down the existing links.

Only because of greed by the ISP's that our prices have been going UP rather than DOWN to reflect the newer/better technology.

It's the standard? Which UK are you in? I had to almost double my bill to get unlimited downloads. The standard was a 50gb limit. This was BT.

My bill went from £30 to £55 for unlimited.

I can't imagine there is a single customer who has any sympathy for the position of these telco and cable companies. They're far more interested in making profits than they are investing in their infrastructure and giving their customers a fair deal, and it's quite easy to see why they're coming out with these sorts of responses as companies like Netflix have made them look stupid.

Ah, now this is where they use clever wording to deceive us. He says "If Netflix is the one responsible for that increased traffic, then AT&T would be forced to build additional capacity exclusively for Netflix' services".

That is a logical fallacy. Why would this additional capacity need to be exclusive for Netflix? Here in the UK, ISPs are proudly boasting that they are building additional capacity.

AT&T should build up their infrastructure to keep up with demand, that's what users pay for. Netflix already pays for their pipe to the internet, and pays to send all that data. If AT&T can't handle what their users are doing, it's AT&T's fault, their pricing and budget for expanding their services is not well thought out. When broadband came out, hosting services had to cope, and people paying for site bandwidth had to cope, and they managed. Now here comes AT&T whining about having to do the same on their end in this modern reality. Did they think bandwidth needs were going to stop increasing suddenly? Maybe AT&T are in the wrong business and need to get their priorities straight or get out.

Geezy said,
AT&T should build up their infrastructure to keep up with demand, that's what users pay for. Netflix already pays for their pipe to the internet, and pays to send all that data. If AT&T can't handle what their users are doing, it's AT&T's fault, their pricing and budget for expanding their services is not well thought out. When broadband came out, hosting services had to cope, and people paying for site bandwidth had to cope, and they managed. Now here comes AT&T whining about having to do the same on their end in this modern reality. Did they think bandwidth needs were going to stop increasing suddenly? Maybe AT&T are in the wrong business and need to get their priorities straight or get out.

Not that I think AT&T deserves defending, but they actually have been and continue to be spending 10s of billions of dollars on upgrading their infrastructure. There was an interesting article about it sometime last year.

So if they did upgrade their infrastructure appropriately, then it's just a money grab. Who doesn't want more money? It makes business sense for AT&T to try and get more money however they can, but there is no other logic behind their scheme.