Ending Net Neutrality Is a Business Risk, Netflix Says
"Changes in laws or regulations that adversely affect the growth, popularity or use of the internet, including laws impacting net neutrality, could decrease the demand for our service and increase our cost of doing business," the company said in its newly released annual report.
January 30, 2018 at 05:59 PM
3 minute read
Netflix headquarters. Photo: Jason Doiy/ALM
The end of net neutrality could slow down more than internet speeds, according to Netflix Inc.'s annual report. The 10-K report, released Monday afternoon, lists changes in net neutrality laws as a risk to the media streaming company's business.
“Changes in laws or regulations that adversely affect the growth, popularity or use of the internet, including laws impacting net neutrality, could decrease the demand for our service and increase our cost of doing business,” the report states.
“Given uncertainty around these rules,” the report said, “including changing interpretations, amendments or repeal, coupled with potentially significant political and economic power of local network operators, we could experience discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expense or otherwise negatively affect our business.”
A Netfilx representative declined to disclose the outside firms that had worked with the company to draft the 10-K report.
The annual report isn't the first time the Los Gatos-based company has publicly defended net neutrality. It's been mentioned in previous reports before the protections were officially repealed.
On Dec. 14, the day the Federal Communications Commission voted 3-2 to remove the Obama-era regulations that prevent internet service providers from favoring or blocking certain sites, Netflix tweeted the decision was ”the beginning of a longer legal battle.” Earlier this year, the company tweeted, “In 2018, the Internet is united in defense of # NetNeutrality. As for the FCC, we will see you in court.”
And Netflix isn't the only company worrying about the end of net neutrality in its annual report. Twitter Inc. listed “laws or practices limiting Internet neutrality” as a business risk in its recently filed 2017 annual report, noting the repeal of such laws could decrease site popularity or increase the company's operating costs.
“If we or our users experience disruptions in Internet service or if Internet service providers are able to block, degrade or charge for access to our products and services, we could incur additional expenses and the loss of users and advertisers,” Twitter's 10-K stated.
Twitter and Netflix haven't laid out company-specific plans to fight the FCC in court, but both are members of the Internet Association. The IA, an internet lobbying group for some of tech's biggest names, told Recode in early January it planned to join a lawsuit against the FCC as an intervening party, but that it wouldn't be filing its own.
But fellow IA member and e-commerce company Etsy Inc. has already announced it plans to separately sue the FCC as an individual company. Etsy also listed the end of net neutrality as a potential risk to business in an earlier annual report released in February 2017.
“In 2015, rules approved by the Federal Communications Commission went into effect that prohibit internet service providers from charging content providers higher rates in order to deliver their content over certain 'fast traffic' lanes; however, the rules are subject to pending legal challenges and if they are overturned, or if the current Federal Communications Commission revokes or changes the rules, our business could be adversely impacted,” the company's 10-K stated.
It's currently unclear whether any other IA companies will follow Etsy and separately sue the FCC and who might represent them in these suits. The Netflix representative said in an email Tuesday that the company will not pursue its own separate legal action.
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