Netflix: ISPs Overcharging Subs With Tiered Data Plans

In a statement issued along with today’s earnings announcement, Netflix CEO Reed Hastings said:

“An independent negative issue for Netflix and other Internet video providers would be a move by wired ISPs to shift consumers to pay-per-gigabyte models instead of the current unlimited-up-to-a-large-cap approach. We hope this doesn't happen, and will do what we can to promote the unlimited-up-to-a- large-cap model. Wired ISPs have large fixed costs of building and maintaining their last mile network of residential cable and fiber. The ISPs’ costs, however, to deliver a marginal gigabyte, which is about an hour of viewing, from one of our regional interchange points over their last mile wired network to the consumer is less than a penny, and falling, so there is no reason that pay-per-gigabyte is economically necessary. Moreover, at $1 per gigabyte over wired networks, it would be grossly overpriced.”

That means that ISPs introducing tiered data plans could be overcharging subscribers by up to 100 percent. Netflix also takes issue with the way that some ISPs treat traffic coming into their network. While Netflix doesn't call out Comcast by name, the country’s largest cable provider recently got into a spat with Level 3, one of Netflix’s content delivery networks. That fight resulted in Comcast asking Level 3 to pay higher interconnection fees for connecting to Comcast’s last-mile network.