Netflix Feels Big Carrier Squeeze

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If you have noticed that loading videos from Netflix Inc. (NASDAQ: NFLX) is taking a ridiculous amount of time, you are not alone. You shouldn’t be surprised. The big telecommunications companies, especially Verizon Communications Inc. (NYSE: VZ), have been slowing Netflix’s streaming capacity because Netflix will not pay for the access. And they can get away with it, in part because of a recent court decision that blew up the idea of Net Neutrality and basically gives the big carriers freedom to charge big users of their networks for the access.

Netflix says its average prime-time speeds on Verizon’s FIOS system dropped 14% in January, and customers have been complaining that they cannot get favorite shows to load, The Wall Street Journal reported. Some are thinking of cancelling their Netflix subscriptions unless the service improves.

The squeezing has come just as Netflix released its second season of the popular political drama series “House of Cards.”

Netflix and Verizon, as well as other broadband carriers, have been battling over what Netflix will pay them to move content to users. Netflix’s streaming has been growing rapidly, “like a parasite,” as Zerohedge.com not-so-subtly put it. The video company generates as much as a third of all prime-time broadband traffic, but it has resisted paying the carriers for the access.

Instead, it has offered to install OpenConnect — a server-and-software package — for the networks that would cache the most popular content for the biggest local audiences and make loading easier.

Effectively, that is asking the carriers like Verizon to compete against themselves. And they are not buying into the Netflix offer.

Not all carriers, however, are throttling Netflix back. Cablevision Systems Corp.’s (NYSE: CVC) Optimum service uses OpenConnect, and, according to Netflix data, it delivers Netflix content twice as fast as Comcast Corp. (NASDAQ: CMCSA) and a third faster than Verizon FIOS.

The Federal Communications Commission, which lost the court decision, expects to take up the Net Neutrality issue again in a bid to win court approval.

Netflix shares were down $3.44, or 0.8%, to $433.41 early Wednesday afternoon. The shares are up nearly 18% this year.

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