As streaming service teams up with Australian ISP for preferential treatment, it’s forced to clarify US executive’s comments on broadband caps

Netflix has been accused of hypocrisy after it revealed it had teamed up with Australian ISP iiNet to obtain preferential treatment despite being a long-time proponent of net neutrality.

The news comes as it attempts to explain seemingly contradictory statements from its own chief financial officer, who told a media and technology conference that the company wasn’t pleased with the US Federal Communications Commission’s decision to regulate the internet as a “Title II” public utility, akin to telephone lines.

Netflix will launch in Australia and New Zealand on 24 March, ending the situation where customers in those countries were forced to use virtual private networks (VPNs) to access the service semi-legally.

But, as part of the launch, the video-on-demand company is pairing with iiNet in order to offer its service to the ISPs customers without impacting on their broadband caps, something which seems counter to its longstanding support of net neutrality – the principle that ISPs should treat all internet services equally.

Usage caps on iiNet’s tariffs begin at 100GB per month, and rise to 1TB, with fees of $0.60 (£0.31) for every gigabyte used over the limit. With HD streaming clocking up more than 100MB every minute, even a moderate Netflix user could go over the cap with ease – which explains why the company is eager to make a deal.

Netflix’s head of business development, Paul Perryman, said that “working with iiNet to offer quota-free Netflix content gives more people the opportunity to familiarise themselves with who we are and what our service offers”.

But in 2012, the company’s chief executive expressed a very different view on broadband caps.

That year, Reed Hastings wrote on Facebook that “Comcast should apply caps equally, or not at all.

“If I watch last night’s SNL episode on my Xbox through the Hulu app, it eats up about one gigabyte of my cap, but if I watch that same episode through the Xfinity Xbox app, it doesn’t use up my cap at all.

“The same device, the same IP address, the same Wi-Fi, the same internet connection, but totally different cap treatment.”

Netflix explained the discrepancy to The Verge with a statement: “Zero rating isn’t great for consumers as it has the potential to distort consumer choice in favor of choices selected by an ISP. We’ll push back against such efforts, but we won’t put our service or our members at a disadvantage.”

But a day later, the company was facing a new charge of hypocrisy, after chief financial officer David Wells told a technology conference that the company wasn’t too happy with the FCC’s decision to mandate that broadband internet be treated as a Title II utility, severely limiting providers’ ability to affect the traffic they carry over their cables.

“Were we pleased it pushed to Title II? Probably not,” Wells told the Morgan Stanley Technology, Media & Telecom Conference. “We were hoping there might be a non-regulated solution.”

But in 2014, the company had filed a brief with the FCC arguing that “Title II provides a solid basis to adopt prohibitions on blocking and unreasonable discrimination by ISPs. Opposition to Title II is largely political, not legal.”

In an effort to explain the discrepancy, a Netflix spokesperson told Recode that Wells was “trying to convey the evolution of our position on net neutrality in recent years”.

The company said it “supports the FCC’s action last week to adopt Title II in ensuring consumers get the internet they paid for without interference by ISPs.

“There has been zero change in our very well-documented position in support of strong net neutrality rules.”

But the explanation didn’t come in time to prevent the telecoms firms laying into the streaming service. AT&T’s Jim Cicconi released a statement excoriating Netflix: “Netflix has spun a lot of tales during this FCC proceeding. But it’s awfully hard to believe their CFO would go into a major investor conference and misspeak on an issue supposedly so crucial to their future.

“More likely he had an attack of candor. At least until his company’s lobbyists got hold of him. I’m sure they’ll also have some terrific spin to explain Netflix’s data cap deal in Australia.”

EU doubles back

While the net neutrality debate is more or less settled in the US, after the FCC’s intervention, in the EU, it’s just getting started. And the latest proposal, from the council of ministers, has “managed to alienate almost everyone with a stake”, according to industry news site The Register.

The council’s proposal bans certain forms of traffic management, preventing ISPs in the EU from blocking specific content, or even slowing it down. But it retains language that allows providers to offer “specialised services”, seen by net neutrality proponents as little more than a euphemistic term for an internet fast lane.

Dutch MEP Marietje Schaake led the signatories of an open letter that called on the ministers to “ensure consumers are protected, innovative startups can develop, and competition on the open internet is fair”.

At the same time, ETNO, the pan-European industry group for telecoms firms, also criticised the proposal. “Any future regulation must recognise how networks function,” the organisation said in a statement. “We need balanced rules on traffic management as well as measures that allow the development of specialised services and innovative offers.”