Netflix exploited a gaping loophole in net neutrality regulations

Netflix hasn’t looked this bad since the whole Qwikster fiasco.

The streaming video company recently admitted that is has been throttling data speeds for customers watching Netflix on Verizon and AT&T-powered devices. If you’re one of those unlucky Netflix subscribers, like me, and were wondering why your video stream wasn’t as glossy and smooth as it should have been, now you know the reason.

{mosads}Apparently, this has been going on for five years. So while Netflix was not only lobbying the Federal Communications Commission (FCC) and demanding that Internet Service Providers (ISPs) be prohibited from a litany of items that most everyone agrees are bad for the digital era, the streaming giant alleged that certain ISPs (such as Verizon) were throttling Netflix’s video traffic to their customers. The FCC relied on that misrepresentation as a basis for their regulatory intervention.

Netflix is defending itself by saying that it wasn’t trying to hurt customers. In fact, it was trying to help them because video uses a lot of data so they were just trying to save customers from the expense of exceeding their data limits. But secretively slowing traffic on its own network to a large base of its subscribers while blaming others is simply abhorrent behavior from a previously trusted brand.

And terribly hypocritical.

The Netflix story should teach everyone even remotely interested in the Net Neutrality debate that there are entities in the Internet ecosystem, beyond ISPs, that have the ability and power to impact the future of an Open Internet.  

I’d like to say I’m surprised but I’m not. When the FCC decided last year to regulate the Internet under Title II of the Communications Act, I wrote that this wasn’t the end of the fight. Although many supporters felt they had won a major victory, I pointed out that the rule was not going to be enough.

While ISPs are now required to treat all data equally, “edge providers” like Netflix do not need to abide by those same rules. So while Netflix argued that companies like Verizon were throttling its content, Netflix was lying to regulators, the press and consumers.

By failing to disclose to a large segment of its customers that their traffic was being throttled, Netflix was outed as an Internet era Pinocchio. Despite this, FCC Chairman Tom Wheeler continues to defend Netflix’s behavior and says it’s not a violation of net neutrality. It should, however, be treated as a per se violation of Net Neutrality, as their behavior is clearly inconsistent with an open, transparent and neutral Internet environment, which has been a major point of emphasis in the net neutrality debate. If Wheeler’s FCC won’t act, then the FTC should launch an investigation of Netflix under its remaining authority.

While the most recent net neutrality debacle was caused by Verizon, Netflix most certainly lit the fuse. Now we are seeing the unintended consequences of haphazard rules that claim to be non-discriminatory but are anything but.

If Congress truly cares about protecting consumer interests, it’s time to permanently and affirmatively enshrine the principles of net neutrality into law using Netflix’s throttling debacle as a cautionary tale of what can happen when different sets of rules apply in the Internet ecosystem.

Only Congress has the ability to offer a law that will actually protect consumers from these kinds of shenanigans in a way that levels the playing field for consumers. Instead of focusing on Title II as the end of the script, Congress should use this opportunity to enact a binding version of net neutrality that puts an end to such flagrantly discriminatory behavior.

Montgomery is the Executive Director of CALinnovates.