How the Internet Was Meant to Be: Comcast and Netflix get together and solve their own problem

How the Internet Was Meant to Be

Comcast and Netflix get together and solve their own problem.

HOLMAN W. JENKINS, JR.

Feb. 25, 2014 7:07 p.m. ET

Yet another of their gods has let the net-neutrality faithful down.

Netflix‘s Reed Hastings routinely touted their ideal to gain leverage over downstream carriers like Comcast. CMCSA -0.74% Then a federal court in January invalidated Washington’s net-neut rules and he rushed out a statement of the obvious to reassure shareholders, saying in essence: Never mind! Comcast et. al. don’t really have an economic or political incentive to block our service. Just the opposite. Consumer expectations of the Internet are set. Carriers must supply unimpeded access to every kind of web content or else.

The net-neut zealots would have been wise at this point to declare victory, if not admit they had been praying to a false god all along. Now they’ve been thrown into fresh confusion by Mr. Hastings’s deal this week with the ultimate devil symbol, cable giant Comcast.

Mr. Hastings’s agreement with Comcast does not actually violate the letter of net neutrality, but it does violate the big hazy ideal of a single vast pipe through which anonymous ones and zeros democratically and communally flow. In essence, Netflix will pay to dump its bits directly into Comcast’s last-mile network, rather than by way of an Internet backbone supplier. But let’s wipe away our tears. The deal is a triumph of the Internet’s nonideological adaptability and flexibility.

Netflix faced a problem: stuttering video performance because of upstream bottlenecks that belied the high-speed downstream service customers are paying for. Why? At bottom, the happy equilibrium of the old two-way Internet has gone bye-bye thanks to a one-way video deluge stemming mainly from YouTube and Netflix.

Now in other newspapers you can read experts fretting that the cost of Netflix’s solution will be “passed along” to Netflix’s customers. This is idiotic. All businesses collect their costs from their customers or they aren’t long in business. But the real question here wasn’t who bears the cost. It was who bears the incentive to handle traffic efficiently.

Cogent Communications, CCOI -5.57% a content delivery network, was getting paid by Netflix to deliver loads of content to Comcast, without any incentive to care about Comcast’s capacity to receive it.

So Comcast could either accept an unlimited obligation to accommodate whatever traffic Netflix and its intermediate partners wanted to send, however inefficiently they wanted to send it—as, in fact, happened after Mr. Hastings in September decided every Netflix customer would get its new “SuperHD” feed.

Or Comcast could resist a blank check being drawn on its network in the only way available to it—by letting traffic back up at its interconnection point until Cogent and Netflix cried uncle.

A better solution was shriekingly obvious: Let Comcast and Netflix transact directly. Because Netflix would be helping to pay for the costs it imposes on Comcast, Netflix would have proper incentive to deliver its services efficiently. This would benefit Netflix customers and everybody else trying to send traffic through the backbone.

But if the net-neut crazies are flummoxed, the media are desperately confused about what just happened, saying it amounts to proof of Comcast’s overweening power.

We could go into a disquisition about how public policy has left America with inadequate last-mile broadband competition, but even so, the deal is favorable to Netflix, not Comcast, and perfectly expresses a claim made here three years ago when Washington first rolled out its nondiscrimination rules: “The net neut battle today really is about how much cable operators will be allowed to charge for the bandwidth that enables upstarts like Netflix, Apple and Amazon to steal their core TV customers.”

Precisely. But the net neut crowd’s search for a black cloud is never-ending. Won’t established businesses like Netflix now have an advantage over startups because Netflix can pay Comcast for quality delivery? Established businesses always have advantages, but this objection completely misunderstands the significance of the Comcast-Netflix deal: Until its traffic is big enough to cause problems at the backbone level, a startup will have no trouble getting delivery to end-users over the public Internet.

Tragically, armies of lobbyists and fake “experts” by now have made their reputations around net neutrality. It’s their Procrustean ticket to regulating the Internet and they aren’t letting go.

Let us quickly add that the new Federal Communications Commission chief Tom Wheeler fully understands what’s what, but the Washington policy circus frequently can travel only at the pace of the dimmest congressman and most bloody-minded interest group. Having to face the hyperventilating overreaction to the proposed Time Warner-Comcast merger at the same time doesn’t help matters. His great challenge, especially as a Democratic appointee, will be assuaging the demented sermons of the net-neut clergy without actually outlawing economically useful transactions.