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Netflix's chief has every right to worry about net neutrality in a Trump administration

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Top executive addresses changes

Netflix's chief content officer Ted Sarandos at the 2016 Television Critics Association conference in Beverly Hills, California. Frederick M. Brown/Getty Images

Net neutrality policies have been a hot topic this week, and Ted Sarandos, Netflix’s chief content officer, said that under the changing administration in the White House, the public’s best interests were not being taken into consideration.

Two years ago, President-Elect Donald Trump voiced his opinion on President Obama’s support for net neutrality, calling it a “top down power grab” that would ultimately target conservative media. Since then, Trump has been relatively quiet about his beliefs on technology policy, but services that rely entirely on streaming, like Netflix, have been vocal on how crucial federal government prevention of the implementation of fast lanes from some internet service providers is.

Talking to Variety at an event in Los Angles, Sarandos said because of Trump’s previous remarks on net neutrality and the silence that has since followed, he’s concerned about what that could mean for the company.

“This is an unpredictable new administration, for sure,” Sarandos said. “The decision to preserve net neutrality that President Obama came to was based on the public good. It serves the public good.”

Sarandos’ comments come at a bit of a tumultuous time for over-the-top services. Along with Trump’s previous statements about his opinion on how the net neutrality debate should have played out, and the possibility of the replacement of current FCC chairman Tom Wheeler with someone who opposed the ruling, internet service providers like AT&T and Verizon have already begun to try to get around the policy.

AT&T this week announced the launch of DirecTV Now, its own OTT service, and sparked some controversy while doing so. The Verge’s wrote, “AT&T owns DirecTV, and is now giving DirecTV Now privileged access to AT&T’s wireless internet customers. The corruption is so obvious here that it doesn’t need a fancy net neutrality metaphor — AT&T is clearly favoring a company it now owns over competitors.”

While this may seem far removed from services like Netflix, Hulu and Amazon Prime, there are major issues facing each company. AT&T announced that DirectNow would be zero rated, which essentially means that it won’t count toward its customers data caps. In order for premium services like Netflix and Hulu to be able to compete with DirecTV, it would have to pay the ISP a fee to exempt its service from a subscriber’s data usage. This is an effort on behalf of AT&T to edge out competition and make its own subscriber base happy, but the issue is that it leaves the door open for other ISPs to do the same thing. Inevitably, services like Netflix and Hulu pay an additional fee to AT&T, Verizon and others to be able to compete with the content providers they own. Prior to net neutrality policies being put in place, Verizon was deliberately squeezing Netflix, which helped with the case for net neutrality.

Essentially, internet providers have become content creators, and that kind of partnership is dangerous. Not only do they own the content, but they also provide the subscriptions for people to view that content. It gives them an edge over a service like Netflix because, unlike AT&T or Verizon, Netflix can’t deliver its content to subscribers on its own; it has to go through an internet service provider.

With an incoming administration that could possibly change those rules and give total capitalistic enterprise to whichever company can afford it, Sarandos is concerned about what the future of online streaming looks like. More importantly, what “fair access” could look like in the next couple of years under a new FCC leadership.

“Some of the people that are being batted around for FCC — people are concerned that they have personal interest in not having net neutrality,” Sarandos said.

We’ve already begun to see this start to happen with AT&T, and previously with T-Mobile. T-Mobile offered free music streaming to its subscribers — using the zero data workaround that the FCC hasn’t ruled out entirely. It later introduced its BingeOn program that throttled video and allowed streaming companies, like Netflix and Hulu, to buy into so their content could be viewed by T-Mobile subscribers with no additional data required.

Combine this with the fact that Sarandos has said Netflix is going to amplify the amount of content its making, investing more money into new studios, acquiring more films and creating more original series, and this matters more than ever. Netflix isn’t going to lose out on a large consumer base because it hasn’t opted in to let subscribers stream for no additional fee, and that’s where net neutrality comes in. Unless the streaming service teams up with or becomes acquired by its own ISP.

With AT&T’s major $85 billion acquisition of Time Warner — which owns HBO, Cinemax, CNN, Adult Swim, Cartoon Network and a number of other channels — the potential edge the ISP will have over competitors is downright terrifying. Again, we’re already seeing it with DirecTV Now. For just $5, DirecTV Now subscribers will be able to subscribe to Cinemax and HBO, making it the cheapest buy in yet. That’s less than HBO’s own stand-alone streaming service, HBO Now, which costs $14.99 and Amazon Prime’s new options, which allow subscribers to access both HBO and Cinemax for $24.99 combined. Simply put, other companies can’t compete with AT&T’s new deal, and when the ISP takes full ownership of the networks that belong to Turner, there’s a chance that exclusivity could become even worse.

Sarandos is visibly concerned about what a Trump administration and Republican-backed congress could look like for the future of net neutrality. Although it seems like something that may benefit users — free video, right? — in the end, not having a competitive industry and not enforcing a sense of fairness will ultimately be consequential.