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Posted at 12:35 PM ET, 07/08/2011

Netflix criticizes new Internet billing by bits

Netflix said Friday that moves by Internet service providers to charge users by the amount of data they use could end up costing consumers more.

In an opinion piece in The Wall Street Journal, Netflix General Counsel David Hyman, wrote that new data tiers by ISPs such as AT&T, Comcast and Verizon don’t reflect how much it costs to actually increase bandwidth on networks.

The Internet service providers argue they have to switch from flat-rate monthly data fees to tiered, or usage-based pricing, models to pay for network upgrades and prevent consumers from congestion that would lead to sluggish Internet use.

But those upgrades aren’t that hard, nor that expensive, Netflix argued.

“Wireline bandwidth is an almost unlimited resource due to advances in Internet architecture,” Hyman writes.

Netflix has argued against usaged-based billing in Canada and has warned to the Federal Communications Commission that such practices could curb Internet use or leave consumers with confusing bills and penalties for going over their limits. It said that the usage-based billing model could also hurt companies such as Skype and Hulu (and itself) that are trying to compete against cable TV companies such as Comcast.

Hyman’s editorial is focused on wireline ISPs, but recent moves by Verizon Wireless to end flatrate mobile data plans draw attention to a new era of usage-based billing for Internet customers no matter how they access the Web.

Hyman said the cost of adding an extra gigabyte of data — the equivalent of watching one episode of “30 Rock” from a streaming video site — is about one penny for wireline providers.

Yet AT&T and other broadband wireline service providers are charging 20 times that amount, he said. Verizon Wireless on Thursday began to phase out its all-you-can-eat data plans for tiered packages, preparing for what it said is a deluge of traffic heading to its 4G networks.

The cable and telecom industries have argued that data caps by Comcast, AT&T, Verizon and others are high and that it will be hard to blow past limits. They also point to user measurement tools that inform consumers when they are nearing their monthly limits.

But as more people use the Internet to watch videos, demand for more data will follow, Netflix said.

Hyman said prices may be low now but could easily increase.

“With online-content delivery providers like Netflix and voice services like Skype experiencing explosive growth, competitors see consumption-based billing as a convenient way to slow that growth by making the use of online services more expensive.”

Related:

Verizon Wireless moves to tiered data plans

Netflix biggest driver of U.S. Internet traffic

By  |  12:35 PM ET, 07/08/2011

 
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