Netflix’s War on Home Data Caps

Urges the FCC to Declare Fixed Broadband Limits Unreasonable

Last week, Netflix submitted a filing to the US Federal Communications Commission (FCC) urging it to declare broadband data caps unreasonable.

In the US, some Internet service providers set limits on the amount of data a household can download similar to the way mobile operators do. Comcast, for example, is now trialling a 1TB plan, charging subscribers $10 for each additional 50GB downloaded. Comcast also offers an unlimited option for an additional $50 per month.

This business model runs counter to Netflix’s, which relies on an unlimited data pipe into the home. Netflix is making the case to the FCC that data caps are blocking access to unfettered video streaming. The review is mandated as part of the Telecommunications Act and is meant to ensure that new technologies are rolled out to citizens in a reasonable way. If high-speed Internet isn’t reaching citizens in a timely fashion, the FCC has the power to force providers to speed up the service.

According to Netflix, the FCC should hold that data caps on fixed-line networks and even low data caps on mobile networks limit viewership of online TV and are inconsistent with Section 706 of the Telecommunications Act.

There’s a Net neutrality problem here. At least on the surface, it would appear that broadband providers that also sell video services have every incentive to limit access to third-party streaming services such as Netflix. On the other side of the argument, Internet service providers claim, and with some merit, that highly active users are being subsidized by casual subscribers and a usage-based pricing policy is reasonable to ensure fair use.

The timing of Netflix’s letter is particularly interesting in light of the FCC’s recent efforts to break down the walled garden created by set-top boxes. The regulator had been proposing that, like handsets in some countries, set-top boxes should be opened and unlocked and capable of supporting third-party services. In such an environment, Netflix could offer an app for a cable set-top box.

US subscribers already pay some of the highest fixed broadband rates in the world, and cable companies in particular have a bad reputation among consumers. Imposing data limits on fixed broadband subscribers appears to run counter to the spirit of the open Internet. There’s a perception problem here for Internet service providers.

As content gets richer and heavier — 4K and virtual reality video are heading toward mainstream — this is a topic that won’t go away. Services such as Netflix and Hulu are dependent on major Internet service providers that have skin in the game. As these services become more pervasive and consumers’ appetite for data proliferates, households will need to consider taking up an unlimited fixed broadband service. The move to offer video via the Internet is a great opportunity for operators to upsell more products to households — something we’re seeing in other parts of the world.