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Netflix, Verizon Haggle Over Regulation of Last Mile in FCC Net Neutrality Proceeding

Netflix, whose streamed movies and TV shows are a heavy source of Internet traffic in North America, continues to press the Federal Communications Commission to regulate interconnection to the last-mile network as part of its Net neutrality proceeding.

Neflix’s position is directly at odds with one of the largest telecommunications firms in the United States, Verizon, which controls the last-mile network in a number of areas through which Netflix must connect to reach its roughly 37 million U.S. members.

Verizon maintains that the FCC should not use the Net neutrality proceeding to regulate the exchange of Internet traffic.

“This is an area where commercial negotiations have long worked to encourage innovation, and the flexibility of this approach has been central to allowing the Internet to evolve to accommodate the changing nature of services delivered over the Internet,” Maggie McCready, Verizon’s vice president of federal regulatory affairs, wrote in a Dec. 5 FCC filing.

“Heightened transparency obligations on ISPs to disclose details concerning Internet interconnection would also be challenging,” McCready added, “particularly given the myriad factors and choices – many of which are outside the control of an ISP – that may affect the delivery of traffic or presence of congestion at a particular point in time.”

But Netflix maintains that interconnection must be regulated to prevent ISPs from discriminating. On Dec. 3, Netflix representatives met with two FCC lawyers within the Office of General Counsel to discuss Net neutrality.

“Failing to address interconnection enables broadband Internet access providers to move discrimination ‘upstream’ to the point of interconnection, undermining any last-mile protections adopted by the Commission,” Markham Erickson, counsel to Netflix, said in a Dec. 5 FCC filing.

Earlier this year, Netflix reported that a lack of adequate connectivity had constrained its performance, leaving high-speed Internet customers with “high buffering rates, long wait times and poor video quality.”

“Once Netflix agrees to pay the ISP interconnection fees, however, sufficient capacity is made available and high-quality service for consumers is restored,” Netflix CEO Hastings wrote in a blog earlier this year. “If this kind of leverage is effective against Netflix, which is pretty large, imagine the plight of smaller services today and in the future.”

Hastings published his blog a month after Netflix and Comcast announced an interconnection agreement upon which a more direct connection was established between the two companies.

Jennifer Khoury, a senior vice president with Comcast, distinguished network neutrality from interconnection and declared the arrangement between Netflix and Comcast is not out of the ordinary.

“There is nothing unprecedented about our agreement with Netflix. It’s very similar to agreements that companies like Akamai, Yahoo, Limelight, and Google have with companies like Verizon, AT&T, Level 3, Sprint, and Comcast,” Khoury wrote in a blog in April. “Comcast alone has thousands of these transit relationships.”