Netflix just released its earnings report for the fourth quarter along with an accompanying letter to shareholders.
In the letter, CEO Reed Hastings and CFO David Wells talk a little bit about the recent Verizon net neutrality ruling and how it may affect business.
They call the ruling “unfortunate,” noting that “in principle, a domestic ISP now can legally impede the video streams that members request from Netflix, degrading the experience we jointly provide.”
“The motivation could be to get Netflix to pay fees to stop this degradation,” the letter continues. “Were this draconian scenario to unfold with some ISP, we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver.”
The company doesn’t appear to expect ISPs to immediately screw consumers over.
“The most likely case, however, is that ISPs will avoid this consumer-unfriendly path of discrimination,” the two say. “ISPs are generally aware of the broad public support for net neutrality and don’t want to galvanize government action. Moreover, ISPs have very profitable broadband businesses they want to expand. Consumers purchase higher bandwidth packages mostly for one reason: high-quality streaming video. ISPs appear to recognize this and many of them are working closely with us and other streaming video services to enable the ISPs subscribers to more consistently get the high-quality streaming video consumers desire.”
This comes, by the way, as Netflix is pushing 4K ultra HD content – something else the company talked up in its letter, though acknowledging that at this point, the “short-term impact’ is mainly on consumer perception of Netflix being “a leader in Internet TV.”
“In the long-term, we think Netflix and consumers are best served by strong network neutrality across all networks, including wireless,” the letter says. “To the degree that ISPs adhere to a meaningful voluntary code of conduct, less regulation is warranted. To the degree that some aggressive ISPs start impeding specific data flows, more regulation would clearly be needed.”
Image via Netflix