Get ready for a cable-style blackout of video-streaming darling Netflix.
Consumer advocates are warning of impending blackouts involving online content providers, like Netflix and Amazon Prime, as Internet service providers begin demanding fees for improved traffic.
Regulators are setting the stage for such battles with new rules that will bar ISPs from indiscriminate or anti-competitive blocking of traffic while paving the way for them to demand fees for enhanced service.
If Netflix and others balk at paying such fees, it could lead to blackouts similar to what happened last year when Time Warner Cable’s customers in New York lost CBS programming for a month.
“That kind of thing is about to happen in the Internet,” Derek Turner, research director with Free Press, a policy and research group, is forecasting. “Both sides will blame each other” as they wrangle over fees, he said.
“Netflix could also say, you know what, we’re not going to pay you and we’re not going to let your customers access our service,” Turner said. Then it would become like the cable wars with broadcasters where “both sides blame each other,” he said, and customers would lose access to red-hot shows like Netflix’s “House of Cards.”
Federal Communication Commission Chairman Tom Wheeler on Wednesday proposed new rules to keep Web pipelines fair and open, and did leave the door open for ISPs to charge service fees to content providers.
The FCC will enforce Web equality by requiring broadband operators to disclose how they manage traffic, and by cracking down on ISPs who unfairly block or discriminate the flow, Wheeler said in a statement.
But the regulator stayed mum on the lightning-rod issue of pay-to-play.
The new FCC rules come weeks after a federal appeals court tossed out the regulator’s old rules on fairness, known as net neutrality, leaving the agency with little to no authority over how ISPs charge for their services.
The FCC “has to give carriers room to negotiate the terms of the service,” the court told the regulator, according to Charles Zielinski, a telecom lawyer with Bryan Cave in Washington.
“The new set of rules may actually provide more flexibility … with respect to pay for priority agreements” from content providers, a Barclays analyst agreed in a note to investors on Wednesday.
To regulate fees, Wheeler would have had to push Congress to reclassify broadband providers as utility companies, like the telecom industry. Despite calls from consumer advocates to pursue this route, known as Title II authority, Wheeler shelved it.
Wheeler sidestepped the move because “it would have been hotly contested,” said Zielinski, a former FCC lawyer.
Indeed, the FCC’s two Republican commissioners objected to any attempt to regulate traffic. “The Internet was free and open before the FCC adopted net neutrality rules. It remains free and open today,” Commissioner Ajit Pai said.
Some experts speculate that a blow-up is already brewing between ISPs and Netflix as broadband providers negotiate behind the scenes for fees to speed up the company’s content.
Last month, Netflix ranked Comcast No. 14 in speed out of 17 broadband providers, and ranked Verizon last.
Comcast, the largest cable TV providers in the country, earlier this months announced it had reached a deal to buy TWC, the No. 2 provider. The deal has spurred talked that regulators should press for net neutrality before approving the acquisition.
But it remains unclear how Washington would assure TV viewers that they will be able to access bandwidth-rich video-streaming companies.
A Netflix spokesman didn’t return a request for comment.