Netflix Reluctantly Pays for Faster Connections

Netflix CEO Reed Hastings accused internet service providers of demanding fees to ensure quick delivery of Netflix content.  He accused the ISPs of slowing users’ internet connection in order to extract funds from Netflix.  They did announce an agreement with Comcast, in which it would indeed pay for high speed connections for their users, and they are working on an agreement with Verizon as well.

Hastings accuses ISPs of abusing their market share to pretty much extort funds from Netflix.  ISPs, on the other hand, claim that Netflix users consume a large amount of bandwidth, and high-speed internet is expensive to deploy.  According to the National Cable and Telecommunications Association, about one percent of broadband customers consume 40% of bandwidth going into homes.  ISPs point out that nearly one third on online traffic during peak hours is Netflix users streaming videos.

It only seems fair that Netflix pays a fee to internet service providers since their customers consume so much bandwidth.  The cost of providing high-speed internet is high, so they should be compensated accordingly.  Also, increased revenue should result in better internet service in the future.  Some other companies, such as Microsoft, Google, and Facebook already have deals with the major ISPs.

One Response to Netflix Reluctantly Pays for Faster Connections

  1. I think it’s fair for the internet service providers to request Netflix to pay a fee. As said in the article, Netflix demands a lot of bandwith.Anyone who has multiple computers in a single house can tell when someone is using Netflix because of how slow the internet gets. Just as we pay for convenient screening from Netflix, it would make sense of Netflix to pay for high speed internet to make their “product” more appealing. They are essentially getting a service from internet providers. If this was about regular speed internet, there wouldn’t be a need for additional fees. Regular consumers tend to have to pay more for high speed internet, so there isn’t any reason a company, especially one that requires so much bandwidth, shouldn’t pay more as well.
    This is also a case of supply and demand and how an economy works. Since Netflix needs a faster internet service, the value of the fast internet increases. Since the demand for it is high, then internet providers need to be able to supply more. In order to do that, they will need more payment to compensate for the effort. Netflix themselves experiences high demand for speedy screening of TV shows and movies, so in order to supply that, they need to be willing to pay more for the appropriate internet service.