The writer is chief operating officer of Netflix
Old arguments die hard. A decade ago, policymakers on both sides of the Atlantic were consumed by a debate about who should foot the bill for the infrastructure that powers the internet. On one side, telecoms companies argued that content providers were “freeriding” on their infrastructure and should pay more. On the other, a coalition led by civil society and consumer groups was lobbying for an open and interoperable web. Ultimately, plans for internet tolls were shelved and “net neutrality” won the day.
Ten years later and we’re having the same conversation again in Europe, even though recent history has shown that the interests of telcos and content companies are in fact aligned. Last month, the chief executives of 16 European telcos said that companies like Netflix should pay extra on account of the “sizeable costs they currently impose on European networks”. But internet usage is not driven by companies — the traffic is generated by consumers, who pay for higher priced broadband packages precisely because they want fast, high-quality access to great film, TV, games and more. Far from being a cost telcos must bear, entertainment generates the demand which internet service providers (ISPs) need in order to grow, which is why they choose to bundle services like Netflix directly into the consumer packages they offer.
ISPs benefit directly from Netflix’s $15bn programming budget. We’ve invested more than €4bn in local productions across Europe over the past five years, generating tens of thousands of jobs in the creative economy. We will also contribute more than €1.5bn in European cultural levies and investment obligations over the next three years. For all the concerns about freeriding, these are in fact mutually beneficial relationships from which infrastructure providers and entertainment companies gain economically — and in business terms that seems the very definition of “fairness”.
Our partnership with ISPs extends beyond Netflix’s consumer services to the underlying networks at the heart of this debate. We’ve invested more than $1bn in our content delivery network called Open Connect, which we offer free to ISPs. We have 18,000 servers containing our content in 6,000 locations (and growing) across 175 countries. So when consumers press play, the film or TV show is streamed from around the corner — reducing traffic and costs for operators around the world, while also ensuring the highest quality, no-lag experience for our members.
Last decade’s dire predictions that the growth in usage was unsustainable unless content providers paid more have proven to be unfounded: internet traffic grew tenfold yet operators’ capital spending remained stable. It’s telling that European telcos’ energy consumption is also forecast to be flat over the next 10 years, despite growing traffic. As research by Analysys Mason (and funded by Netflix) concluded: the “growing demand from end users can be handled sustainably without increasing network costs over time”. This was confirmed by Europe’s telecoms regulators who stated on October 7 that the costs of internet network infrastructure were “not very traffic-sensitive”.
A year ago, Squid Game premiered on Netflix and quickly became a global sensation. With 1.6bn hours viewed in its first month, this Korean drama unexpectedly became our biggest TV show ever. We’ve had huge successes with Lupin from France and Casa de Papel from Spain. As consumers and broadcasters shift from linear streaming to on-demand, we want a system that encourages more investment in content and supports more hits like these, whether they’re on Netflix or France Television, Rai, Telecinco, ARD, the BBC or Viaplay.
The internet tolls proposed by telcos today are unconnected to their actual infrastructure deployment costs and would divert significant resources from European content — weakening entertainment companies, the attractiveness of higher-priced broadband packages and undermining Europe’s creative community.
Taxing entertainment and media companies to subsidise telcos was a bad idea in 2012, and the same is true today. We need to move on from the debates of yesteryear and recognise that when we work together, and both invest in our respective strengths, we all thrive.