Netflix CEO Argues Against Proposal for Big Tech Companies to Pay for Traffic

The European Commission has opened its consultation into the future of networks in Europe. Its aim is to address the two major questions of what infrastructure needs to be developed in order to lead the digital transformation and how those investments should be made. However, the industry’s attention has been focused on the proposal to make big tech firms pay for carriage in order to help fund network investments by telecom companies.

Hastings acknowledged that increased usage requires investment. Netflix, he said, has invested over $60 billion in content over the last five years, equal to 50% of its revenues. This is in addition to investments in production infrastructure, technology innovations, such as its worldwide cloud-based remote editing system, and a creative equity fund.

Netflix is also planning to spend €1.5 billion on European cultural levies and investment obligations over the next three years

Netflix has invested over $1 billion in a content delivery network that is available for free to ISPs, as well as in encoding technology to enhance efficiency, reduce file sizes and optimize bandwidth usage. This investment has not only increased efficiency for internet service providers but also resulted in providing high-quality service to consumers.

Hastings believes that Netflix is already paying its way. In fact, he noted that Netflix’s operating margins are significantly lower than either BT or Deutsche Telekom. Hastings suggested that “network operators should pay entertainment companies to help with the cost of our content” but argued that this was not what Netflix was asking for. He stated that a much better approach is for entertainment companies and operators to focus on what they both do best, creating “a rising tide that will lift all boats.”

Hastings argued that the European Commission’s proposal to make big tech firms pay for carriage would be counterproductive and hurt the industry, as well as consumers. He called for cooperation between entertainment companies and telecom operators, focusing on what each does best and for investments to be made in the infrastructure required to lead the digital transformation.