Were you among the millions of Netflix (NFLX) subscribers who streamed the new season of “House of Cards” last weekend? By some estimates 16% of Netflix subscribers, or somewhere close to five million people did. Unfortunately for many, the picture may have been blurry and buffering may have slowed down their viewing. As Netflix has gained in popularity it has begun eating up a large portion of the bandwidth providers have to work with. As a consequence some users claim to have experienced a throttling of data or download speeds when they use the popular video watching website.
Netflix has been fighting with providers for months over the issue, with the likes of Verizon threatening to slow speeds unless they are paid additional fees. It’s the online version of cable TV transmission fees. There have been plenty of high profile channel blackouts after squabbles between cable providers and broadcasters. Could you soon have your Netflix frozen over the same fight?
The FCC announced today that it would issue new "net neutrality" rules blocking providers from charging the likes of Netflix for the right to get content to consumers faster, but so far such attempts have been blocked by courts ruling in favor of those broadband suppliers. This means the fight between content creators and providers will continue, at least for now.
“This looks to me like shots fired,” says Yahoo Finance’s interactive editor Phil Pealrman, “you’re seeing the slow down you’re seeing reports of streaming problems on Fios and Comcast and more...When you see something like that it looks to me like failed diplomacy. That’s how wars begin.”
The victims of a war over Netflix would almost surely be you, the average consumer. As Pearlman points out, new fees probably won’t come from broadband providers like Comcast or Verizon because “there’s a price war over there going on” and those fees would target everyone, not just Netflix users. Still, assuming that money will change hands in one way or another it’s not beyond comprehension that some, if not all of that, would be passed on to fans of “House of Cards” or “Orange is the New Black" through higher Netflix subscription costs. And why not? Netflix is still the best deal in town at $7.99 a month. That’s less than half, on average, of the price of HBO.
Assuming money solves this problem for Netflix it may soon have other hurdles to deal with, namely the afforementioned debate over net neutrality and a potential merger between Comcast (CMCSA) and Time Warner Cable (TWC). Both situations would give more power to providers to dictate how they distribute content: how fast and for how much money. Streamers like Netflix who are trying to grow their subscriber base by keeping prices down may end up with users who are forced to pay more on the other end for the right to use that data required to watch those videos. No matter what happens it almost certainly means higher, not lower bills for users.