Netflix Prepares To Respond As Broadband Providers Push Usage-Based Pricing
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“We have a government affairs department that’s interested in that conversation,” Netflix CFO David Wells told investors today at the Goldman Sachs Communacopia Conference. Easy to see why: Usage-based broadband pricing could hurt Netflix by leading subscribers to fear that they’ll run up their costs if they spend hours watching TV shows and movies. But cable execs and investors want companies to switch to usage based billing from today’s popular all-you-can-eat plans. It’s “only logical and fair” Liberty Media’s Greg Maffei said today. Wells counters that “the consumer is better served if there is not tolling,” adding that Internet providers already collect “a healthy [profit] margin.” Netflix would prefer to work with distributors to “lower overall delivery costs.” For example, the company often caches its content at multiple servers to minimize the distance signals travel over Internet lines. Netflix believes that the “amount of bandwidth consumed by our product can be adjusted down to reasonable caps.” Wells says that it has already done that in Canada where Rogers Cable bases broadband fees on usage in areas including Quebec. If cable companies want to increase their broadband profits, Wells says he’d prefer to see them charge higher prices to consumers who want faster speeds. He’s “optimistic we’ll get to a solution” – but adds that “we believe in an open Internet and the order that the FCC dictated” for net neutrality. Opponents of usage based pricing say that it might violate the spirit of the FCC’s rules by undermining a potential competitor to cable’s video services.