The Netflix Effect

Technology and Entertainment in the 21st Century

Kevin McDonald, Daniel Smith-Rowsey, Kevin McDonald, Daniel Smith-Rowsey

• Publisher: Bloomsbury Academic
• Year: 2016
• ISBN:
  9781501309434
• Edition: 1
• Topic: Scienze sociali
• Subtopic: Scienze della comunicazione

Netflix is the definitive media company of the 21st century. It was among the first to parlay new Internet technologies into a successful business model, and in the process it changed how consumers access film and television. It is now one of the leading providers of digitally delivered media content and is continually expanding access across a host of platforms and mobile devices. Despite its transformative role, however, Netflix has drawn very little critical attention-far less than competitors such as YouTube, Apple, Amazon, Comcast, and HBO. This collection addresses this gap, as the essays are designed to critically explore the breadth and diversity of Netflix's effect from a variety of different scholarly perspectives, a necessary approach considering the hybrid nature of Netflix, its inextricable links to new models of media production, distribution, viewer engagement and consumer behavior, its relationship to existing media conglomerates and consumer electronics, its capabilities as a web-based service provider and data network, and its reliance on a broader technological infrastructure.

Part One

Technology, Innovation, and Control

1

Netflix and the Coalition for an Open Internet

Lyell Davies

Toward the end of 2013, subscribers to Netflix’s video-on-demand (VOD) service noticed a slowing in the speed at which videos they selected to watch were delivered to their viewing devices. Netflix reported that subscribers who had previously been watching the company’s streamed content at high-definition (HD) quality levels were now viewing it at resolutions close to Video Home System (VHS) quality, and charged that broadband internet service provider (ISP) Comcast was responsible for the declining video quality.¹ Netflix argued that by deliberately slowing the transfer of its content, Comcast was discriminating against Netflix by favoring the content, applications, or services offered to the public by other internet companies, as well as interfering with the choices made by internet users who had paid for broadband service with the expectation that they would to be able to access any content without discrimination.

Launched in 1997 as a DVD-by-mail service, today a majority of Netflix’s users access the company’s content via the internet, a shift that has positioned Netflix as one of the internet’s most prominent “edge providers”—a term that denotes the companies or other entities that provide content, applications, or other online services over the internet.² To stream video to its subscribers, Netflix has built a content delivery network (CDN) comprised of a nationwide network of servers which interconnect to the networks operated by broadband ISPs, the latter being the “last mile” providers that deliver the internet to homes or businesses.³ During peak periods, Netflix’s servers are the source of about 30 percent of all the internet traffic delivered to U.S. residential customers.⁴ But the company rejects that this heavy bandwidth use means that it should pay a toll to broadband ISPs to carry the content, since consumers who subscribe to broadband ISPs have paid for internet access and should be able to access whatever content they want, irrespective of its source.⁵ Nonetheless, with its VOD service compromised, in February 2014 Netflix entered into a deal with Comcast where it agreed to pay for improved access to the broadband ISP’s network. Within days of the deal, the quality of Netflix’s video streaming returned to HD-quality levels.⁶ Soon thereafter, Netflix made similar deals with other broadband ISPs. A new era seemed to have arrived for the internet: one where edge providers pay tolls to broadband ISPs in order to see their content delivered to users.

Most of the time, the general public does not give much thought to matters of media policy: the media we consume and the devices and services we use to access it are largely accepted off the shelf, and “most of us know little about the policies that structure the media surrounding us.”⁷ When not satisfied by the media content that is available to us, the speed of our internet connection, or the quality of our phone or cable TV service, we may complain to customer service representatives or shop around for a different service vendor, if one is available. But our day-to-day dissatisfaction with these matters does not typically lead to an examination of the media policies that govern the media landscape we inhabit. This is in part due to a common perception that media policy is too complex and technical for the general public to understand, and that it therefore belongs in the hands of government experts or corporate decision makers.⁸ This thinking is reinforced by the way the mainstream news media consigns media policy issues to the business or technology folios. Another factor leading to public disengagement with media policy is the illusion of our own media power: while the multitude of devices available to us seem to create opportunities for us to participate directly in the media arena, we forget that “these platforms are owned and controlled by media and telecom corporations whose agenda focuses on profit and corporate interests rather than participation, empowerment, and social justice.”⁹ In light of these conditions, it is common for U.S. lawmakers to escape public scrutiny as they introduce policies that have far-reaching impact on the communications arena and society at large.

In 2014 and early 2015, there was a break in this trajectory. Public engagement spiked during this period and media policy became one of the most contentious and far-reaching issues of our time with questions about net neutrality and an open internet in particular prompting serious debate and political activism. The slowing of Netflix’s video stream and the deals the company struck with broadband ISPs drew public attention to a policy issue that has been unfolding for more than a decade, as the Federal Communications Commission (FCC) has sought to develop rules to govern the internet. It is an issue that has engaged a diversity of constituencies. On the one hand, pressing for the strong net neutrality rules are the following: edge providers, large and small; civil society and media justice and reform organizations; and individual, concerned, internet-using members of the public. On the other side of the issue are broadband ISPs, with their extensive lobbying and public relations apparatuses and a practiced history of influencing lawmakers. Central to the issue is a theme that has been contested since the invention of electronic communications networks in the nineteenth century: should our society’s communications infrastructure be the private domain of the business interests active in this arena, or is it a public sphere, servicing a public interest?

In this chapter, I discuss Netflix’s role in the organizing efforts that took place in support of an open internet, noting that the California-based VOD company was an early lightning rod on the issue, drawing public and media attention to how moves were afoot that would dramatically alter the internet. I provide an outline of how Netflix participated in a loose, national coalition committed to ensuring that the internet is operated in such a way that all data traffic is delivered to users with equal priority. While describing the activities of this coalition, I ultimately argue that communications policy must not be set to meet the needs, present or future, of Netflix or other powerful edge providers. The internet is the preeminent communications platform of our age; therefore, the rules that govern its operation must ensure that it serves the public interest above all else.

Net neutrality and an open internet

Internet legal scholar Tim Wu coined the term “net neutrality” to describe a state where all data traffic carried by broadband ISPs on their networks is treated equally.¹⁰ Thanks to the efforts of public interest advocates, internet developers, scholars, and concerned members of the public, the basic principle of net neutrality is broadly embraced in U.S. society and there is the tacit expectation that all internet traffic will be treated neutrally.¹¹ Net neutrality is a prerequisite for an open internet, defined by the FCC as conditions where “consumers can go where they want, when they want … innovators can develop products and services without asking for permission … and broadband providers cannot block, throttle, or create special ‘fast lanes’ for that content.”¹² However, broadband ISPs have not universally been required to uphold net neutrality on their networks, and they have not always done so.¹³

The arguments presented in favor of an open internet are numerous. They include those that stress the role of the internet in fostering technological and product innovation, catalyzing economic growth, strengthening democratic processes, and advancing social justice. Integral to these arguments is a belief that the dynamism of the internet resides in two constituent spheres. On the one hand, it rests with the edge providers that generate the heterogeneous array of content, services, or applications that are available through the internet. On the other hand, it rests with the internet’s users, who freely exercise their choice as they select from the offerings presented to them by edge providers. Describing the power vested in the hands of internet users, developer Vinton Cerf argues, “[w]ith the Internet, decisions were made to allow the control and intelligence functions to reside largely with users at the ‘edges’ of the network … This is precisely the opposite of the traditional telephony and cable networks.”¹⁴ Advocates for an open internet argue that without net neutrality, control of the internet shifts from edge providers and users into the hands of broadband ISPs, who could operate as content-gatekeepers, demanding pay-to-play tolls from edge providers, and thereby determining what information or services users can access. In this scenario, the internet could start “to look like cable TV” with a handful of massive companies “deciding what you get to see and how much it costs.”¹⁵ Pressing for an open internet, Netflix’s CEO Reed Hastings argues that the “essence of net neutrality” is that users’ choices, not decisions by corporate gatekeepers, determine what flourishes on the internet.¹⁶

Others who argue for the introduction of strong net neutrality rules stress the role of open communication to the well-being of democracy. Thus, the citizen advocacy organization Common Cause argues that an open internet is needed, since “voters inform themselves online, advocates organize themselves online, and citizens debate issues online.”¹⁷ Taking a stance that highlights the connections between internet access and social justice, the United Church of Christ (UCC)—an organization with a history of grassroots organizing on media policy issues stretching back to the civil rights era—proffers ten reasons why net neutrality is important. These range from UCC’s everyday operational needs (faith-based organizations need an affordable means to reach their constituents), to concern that without net neutrality the digital divide will deepen, ending the internet’s role as an “equalizer” that provides “a space for voices that have historically been relegated to the sidelines, like people of color and the LGBT community.”¹⁸ There are many precedents for instituting polices that guarantee an open internet: Wu argues that net neutrality “is no different than … promoting fair evolutionary competition in any privately owned environment, whether a telephone network, operating system, or even a retail store.”¹⁹

While Netflix and its CEO Hastings are vocal on the importance of strong net neutrality rules, some commentators question whether Netflix’s dispute with Comcast is really a matter of net neutrality. The slowing of Netflix’s content did not occur once it was in transit on a broadband ISP’s network. Instead, it occurred at the point of “interconnection” where it enters Comcast’s network. Thus, some commentators argued that it is erroneous to depict Comcast’s demand for an interconnection fee as an end to net neutrality. Instead, interconnection fees should be seen as one among the many financial transactions that occur between the various providers as they bring content to users.²⁰ The internet is composed of numerous autonomously operated networks: interconnecting with the last mile broadband ISPs are CDNs and long-distance internet transit providers, which operate in concert through settlement-free “peering” agreements or fee-based transit agreements. These agreements are not typically thought to pose a threat to net neutrality. The difference between paying for an improved connection to a broadband ISP’s network at an interconnection point as Netflix did, and paying for preferential treatment once on that network, is significant both legally and in principle. It is a difference noted by Hastings when he stressed that Netflix was not paying “for priority access against competitors, just for interconnection.”²¹ But while there are differences between interconnection fees and the creation of fast and slow lanes on a broadband ISP’s network, Netflix argued that the practical outcome would be the same. Thus, Hastings proposed that rules are needed to ensure that at the point of interconnection, broadband ISPs “provide sufficient access to their network without charge,” thereby support...