Netflix digs in: don’t force us to skimp on content


Netflix’s co-chief executive Greg Peters used his first public speaking engagement in Barcelona to rebuke complaints by internet service providers (ISPs) that data-hungry streaming giants should contribute towards infrastructure costs.

ISPs everywhere, but especially in Europe, are not happy about being forced to bear most of the costs of the ongoing digital transformation. Providing the technology required by data-gobblers such as Netflix or Apple is expensive.

Reports from Frontier Economics and Axon recently reported that delivering over-the-top (OTT) traffic over EU telecom networks costs €36-40 billion annually to providers.

Telefonica, a Spanish multinational telecommunications company operating in 12 countries in Europe and South America, asked: “Shouldn’t [the] largest traffic generators fairly contribute to the cost of delivering their traffic to end customers?”

Adverse effect possible

Simply put, the ISPs are concerned that sustained traffic growth driven by content providers as they continue to make ever more shows and movies has already put huge pressure on their networks – which the ISPs have to upgrade themselves.

However, Netflix won’t have it. Peters, speaking at the Mobile World Congress in Barcelona, didn’t exactly refuse to recognize the problem, but he explained that forcing content providers to subsidize ISPs would limit their ability to invest in high-quality content.

Even though one could probably spend a long, dark night arguing about the quality of content on Netflix, Peters added that the unfortunate trade-off would hurt local creative communities around Europe.

“I believe that there is a clear and direct symbiotic relationship between a thriving creative industry and a thriving internet ecosystem. Why? Because consumers want great films, TV series, and games – and they are willing to pay for high-quality internet to enjoy the content they love,” said Peters.

“The last decade has shown, and telco leaders have also recently reaffirmed, that growing internet usage is a huge opportunity – reflecting the growing demand for the services we all provide.”

He also denied traffic costs were rising. According to Peters, traffic has consistently increased at around 30% a year but ISPs have managed the increased usage efficiently while their costs have remained stable.

netflix-chart
Netflix's co-CEO Greg Peters denies traffic costs were rising. Image by Netflix.

“Regulators have highlighted this too, calling out that infrastructure costs are not sensitive to traffic and that growing consumption will be offset by efficiency gains,” Peters stressed.

The proposed taxation of entertainment companies “would have an adverse effect, reducing investment in content – hurting the creative community, hurting the attractiveness of higher-priced broadband packages, and ultimately hurting consumers,” Netflix's co-CEO said, adding that the company has invested $60 billion in content over the past five years.

The EU wants to act

The European Union has seemingly chosen to support the position of the ISPs and is mulling rules that would require streaming services to step up financially.

The European declaration on digital rights and principles for the digital decade, signed on December 15, 2022 by the presidents of the Council of the EU, the European Parliament, and the European Commission, is quite clear.

The co-signatories commit to “developing adequate framework so that all market actors benefiting from the digital transformation assume their social responsibilities and make a fair and proportionate contribution to the costs of public goods, services and infrastructures.”

However, European Commissioner Thierry Breton, who is in charge of digital policy, criticized the idea of Big Tech versus Big Telco for being “binary.” Then again, Breton repeated that he thought a consultation was necessary because Europe’s ISPs cannot handle surging amounts of internet data traffic alone.

“The networks of today are simply not up to date with the massive transformation taking place. Industry needs to keep up with its times. Well, so does regulation,” said Breton.


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