Netflix Throttling Shows Power of Edge Providers, Guggenheim Says

The revelation last week that Netflix allegedly throttled its own stream on AT&T and Verizon devices for five years (see 1603250050) isn’t a net neutrality violation, but could have other policy implications, said Guggenheim Partners analyst Paul Gallant Monday in a note to investors. The FCC last summer fined AT&T $100 million for insufficient disclosure that unlimited data service was slowed after reaching 5 GB a month, Gallant noted. “Netflix has a sensible rationale -- reducing Netflix's churn with AT&T and Verizon wireless subscribers, who might otherwise drop Netflix due to higher data charges,” he said. “But getting ‘caught’ doing this may put Netflix on its heels in Washington at a time when important [over-the-top] policies like interconnection pricing and zero rating are fluid and could go either way.” The revelation also shows the power of edge providers, he said. “ISPs have long complained that they are being unreasonably singled out for regulation within the Internet ecosystem,” Gallant wrote. “This Netflix report may highlight for government officials the leverage possessed by large Internet companies. Slowing streams to specific wireless [operators] implies a range of steps a large edge provider ... could take to disadvantage an ISP relative to its competitors.”