AT&T to Netflix: if you don't bribe us to do our job, you're asking for a "free lunch"

AT&T Senior Executive Vice President of Legislative Affairs James Cicconi has written a monumentally stupid attack on Reed Hasting's call for Net Neutrality. Cicconi says, "there is no free lunch, and there’s also no cost-free delivery of streaming movies. Someone has to pay that cost. Mr. Hastings’ arrogant proposition is that everyone else should pay but Netflix."

What Cicconi ignores is that Netflix is paying its ISPs to be connected to the Internet. And AT&T's customers are paying to be connected to the Internet. And AT&T's customers are asking to have the service they are paying for to be connected to the service Netflix is paying for. AT&T is then demanding that Netflix pay it a bribe in order to carry out the service that its customers are paying for.

If you're an AT&T customer paying for a 4MB/s DSL line, you have entered into a commercial arrangement whereby AT&T delivers you the bytes you ask for as quickly and efficiently as it can. You're not entering into an arrangement whereby AT&T can, if it notices that many of its customers really like a service, charge that service for the privilege of giving AT&T customers what they're already paying for.

Imagine if AT&T was a city-bus with an exclusive contract to serve your town, and it noticed that a lot of passengers were getting off at a certain stop every day to visit a restaurant. What AT&T is doing is saying "We will no longer stop near that restaurant unless it pays us a bribe," (and they're hinting, "We will stop at a competing restaurant if they do pay a bribe"). When the restaurant objects, AT&T says, "Hey, there's no such thing as a free lunch."

This isn't "just business" -- it's extortion.

When Netflix delivered its movies by mail, the cost of delivery was included in the price their customer paid. It would’ve been neither right nor legal for Netflix to demand a customer’s neighbors pay the cost of delivering his movie. Yet that’s effectively what Mr. Hastings is demanding here, and in rather self-righteous fashion. Netflix may now be using an Internet connection instead of the Postal Service, but the same principle applies. If there’s a cost of delivering Mr. Hastings’s movies at the quality level he desires – and there is – then it should be borne by Netflix and recovered in the price of its service. That’s how every other form of commerce works in our country. It’s simply not fair for Mr. Hastings to demand that ISPs provide him with zero delivery costs – at the high quality he demands – for free. Nor is it fair that other Internet users, who couldn’t care less about Netflix, be forced to subsidize the high costs and stresses its service places on all broadband networks.

As we all know, there is no free lunch, and there’s also no cost-free delivery of streaming movies. Someone has to pay that cost. Mr. Hastings’ arrogant proposition is that everyone else should pay but Netflix. That may be a nice deal if he can get it. But it’s not how the Internet, or telecommunication for that matter, has ever worked.

Who Should Pay for Netflix? [James Cicconi/AT&T Public Policy Blog]

(Image: AT&T Death Star, a Creative Commons Attribution (2.0) image from aaronpk's photostream)

Notable Replies

  1. AT&T or Insurance companies - Who are the biggest assholes on the planet ?

    Unfortunately, we will all find out the hard way,.

  2. And of course he is wrong about his USPS example too. That neighbor did help pay for the delivery of the piece of mail because his taxes went to the upkeep of the roads that USPS uses. This actually fortifies the Netflix argument even more.

  3. My understanding is that part of the problem is NetFlix's ISP, Cogent, is just a crappy peering partner with ATT sending way more data into ATT's network for delivery than they ever receive back from ATT for delivery to the Cogent customers.

    Peering arrangements are voluntary at major exchange points. If you are peered with a network operator but not holding up your end of the peering arrangement either party is free to dissolve the arrangement or offer to move the arrangement from free peering to a paid for transit agreement.

    It should also be pointed out that an ISP like ATT that has a great number of household/retail customers might by definition be expected to have difficulty finding peering partners that are truly symmetrical peers because household/retail customers are consumers of media and content, not producers.

    This is obviously not the whole issue for ATT, but it is part of it.

  4. Netflix generates no traffic to AT&T. None. AT&T customers request data from Netflix, and any data coming from Netflix bound for AT&T's network is at the request of an AT&T customer. If anyone can be said to be generating the traffic, it's AT&T's own customers.If AT&T is having problems with the amount of data traffic it's customers want to request, then it needs to hash that out with it's customers by either throttling ones that request excessive amounts of traffic or by raising their rates to allow it to pay for a high enough capacity network to handle the traffic.

    And why isn't it realistic to expect that I will get what was advertised if I'm paying for it? Suppose a store advertised a high-end washer/dryer set that normally costs $2400 for $1200 (50% off), people went in and bought and paid for it, and then the store delivered a cheap low-end set normally costing $600 (but kept the full $1200 that customers paid). If customers said "I paid $1200 for the set you advertised, I damned well better get it!" and the store tried to argue "That argument's appealing, but it just isn't realistic.", how do you think a judge would view it? Most likely he not only wouldn't accept the store's argument, he'd order the store to either deliver exactly what was advertised and paid for or refund the customer's money and then he'd order the store to pay the customer damages on top of that for the store's false advertising and breach of contract. If you advertise something and accept money for it, you'd better be prepared to deliver what you advertised. If you can't deliver what you're advertising, you need to not advertise it. The fact that advertising and then not delivering is more lucrative does not make it allowable.

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