Now that Reed Hastings, CEO of Netflix, is agreeing to pay cable TV providers what I consider to be, in essence, protection money, he’s feeling free to criticize the deals. And he should, because the problem has nothing to do with Netflix using up a lot of ISP bandwidth. It’s the inherent conflict of interest that cable providers have by also being Internet service providers.
Cable TV companies collect the money for HBO subscriptions but they don’t collect the money for Netflix subscriptions. That’s what is driving them crazy. Their extremely profitable business model is falling apart and they’re desperate to force Internet video to be part of the old model. They want to sell the Netflix channel to their customers the same way they sell premium cable TV channels. Well, that just shouldn’t happen, because if the argument is that Netflix is using their bandwidth then they will have to charge every Internet service an additional fee for using the bandwidth, whether or not they compete with their cable TV business — bandwidth that their customers are already paying for.