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Netflixreader comments 28 Share this story Netflix has long been an outspoken supporter of net neutrality rules, but the streaming video provider says it is now so popular with consumers that it wouldn't be harmed if the rules were repealed. The potential of reversing net neutrality rules increased the moment Donald Trump became president-elect, as Republicans in the Federal Communications Commission and Congress want to get rid of the rules.

But in a letter to shareholders yesterday, Netflix reassured investors that this won't affect the company's financial performance or service quality. "Weakening of US net neutrality laws, should that occur, is unlikely to materially affect our domestic margins or service quality because we are now popular enough with consumers to keep our relationships with ISPs stable," Netflix wrote. The FCC's rules prohibit ISPs from blocking or throttling traffic or giving priority to Web services in exchange for payment.

Because of the rules, small video providers that aren't as popular as Netflix don't have to worry about being blocked or throttled by ISPs or having to pay ISPs for faster access to customers.
ISPs would prefer that customers subscribe to the ISPs' own video services, and thus have incentive to shut out competitors who need access to their broadband networks. Though Netflix is no longer worried about its own access to broadband networks, the company's shareholder letter said the company still supports the net neutrality rules. "On a public policy basis, however, strong net neutrality is important to support innovation and smaller firms," Netflix said. "No one wants ISPs to decide what new and potentially disruptive services can operate over their networks, or to favor one service over another. We hope the new US administration and Congress will recognize that keeping the network neutral drives job growth and innovation." Netflix fought some high-profile battles against Comcast, AT&T, Verizon, and Time Warner Cable in 2014, before the net neutrality rules were passed. Netflix at the time was seeking free interconnection so that it could deliver video traffic to the ISPs' networks directly instead of paying transit providers to carry its traffic to the ISPs.

This alone showed that Netflix was already a giant: Most video providers aren't so big that it's worth building out their own content delivery networks. Netflix ultimately paid ISPs for interconnection but the dispute had an impact on the FCC's net neutrality proceedings. The FCC didn't ban interconnection payments but set up a complaint process so that companies like Netflix can challenge specific payment demands as being "unjust" or "unreasonable." There have been no major public disputes since then. Netflix ended 2016 with 47.9 million paid memberships in the US and another 41.2 million outside the US.
In North America, Netflix accounts for about 35 percent of downstream Internet traffic during peak viewing periods, according to Sandvine's Internet Phenomena report. Netflix's letter to shareholders this week also poked fun at rival HBO for discouraging binge-watching by doling out episodes of new shows one at a time instead of all at once as Netflix does. Despite its previous fights with ISPs, Netflix has gained a privileged status with those same companies.

For example, Netflix is now available on Comcast's X1 set-top boxes, letting customers browse Netflix video alongside Comcast content. Netflix, video, however, is not exempt from the data caps Comcast imposes on customers.

Those data caps and overage fees do remain a roadblock for online video providers that seek to offer a replacement for the cable TV services offered by ISPs.
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