The author is Chief Operating Officer of Netflix
Old arguments die hard. A decade ago, policymakers on both sides of the Atlantic were consumed by a debate over who should foot the bill for the infrastructure that powers the Internet. On the one hand, telcos argued that content providers were “free riders” on their infrastructure and should pay more. On the other hand, a coalition led by civil society and consumer groups advocated for an open and interoperable web. Ultimately, the plans for the Internet toll were shelved and “net neutrality” triumphed.
Ten years later we’re having the same conversation again in Europe, although recent history has shown that the interests of telecoms and content companies do indeed align. Last month, the CEOs of 16 European telecoms companies said companies like Netflix should pay a premium because of the “significant costs they are currently imposing on European networks”. But internet usage isn’t being driven by businesses — traffic is being driven by consumers paying for more expensive broadband packages because they want fast, high-quality access to great movies, TV shows, games and more. Far from bearing the costs that telcos bear, entertainment creates the demand that internet service providers (ISPs) need to thrive, which is why they choose to bundle services like Netflix right into the consumer packages they offer.
ISPs benefit directly from Netflix’s $15 billion programming budget. We have invested more than €4 billion in local productions across Europe over the last five years and created tens of thousands of jobs in the creative industries. In addition, we will contribute more than €1.5 billion in European cultural levies and investment commitments over the next three years. For all the concerns about freeriding, these are in fact mutually beneficial relationships that benefit infrastructure providers and entertainment companies economically – and in business terms, that seems to be the definition of ‘fairness’.
Our partnership with ISPs extends beyond Netflix’s consumer services to the underlying networks that are at the heart of this debate. We’ve invested more than $1 billion in our content delivery network called Open Connect, which we offer to ISPs for free. We have 18,000 servers serving our content in 6,000 locations (and growing) in 175 countries. So when consumers press play, the movie or TV show is streamed around the corner – reducing traffic and costs for operators around the world, while ensuring the highest quality and lag-free experience for our members.
The dire predictions of the last decade that usage growth would not be sustainable unless content providers stopped paying have been proven unfounded: Internet traffic increased tenfold while operators’ capital expenditures remained stable. It is significant that, according to forecasts, the energy consumption of European telecommunications companies will remain unchanged for the next 10 years, despite the increase in data traffic. As research by Analysys Mason (and funded by Netflix) found, “Growing demand from end users can be sustainably met without increasing network costs over time.” This was confirmed by Europe’s telecoms regulators, who said on October 7 that the cost of Internet network infrastructure was “not very traffic-sensitive”.
A year ago, Squid Game Premiered on Netflix and quickly became a worldwide sensation. With 1.6 billion viewers in the first month, this Korean drama unexpectedly became our biggest TV show ever. We have great success with lupine from France and Casa de Papel from Spain. As consumers and broadcasters move from linear streaming to on-demand, we want a system that encourages more investment in content and supports more hits like this, whether they’re on Netflix or France Television, Rai, Telecinco, ARD, BBC or Viaplay .
Internet charges proposed by telcos today bear no relation to their real infrastructure-building costs and would divert significant resources from European content – weakening entertainment companies, weakening the appeal of more expensive broadband packages and undermining Europe’s creative community.
Taxing entertainment and media companies to subsidize telecom companies was a bad idea in 2012, and it’s still true today. We need to move away from the debates of the past and recognize that we all thrive when we work together and both invest in our respective strengths.
