Business in the real world: Comcast & Netflix

May 24, 2014

Another example: Comcast is said to have slowed down streaming from Netflix, perhaps as prelude to an agreement in which Netflix paid for better service. Hard-nosed business practice — or something else?  

Let’s face it, we all hate our cable companies, but what do the experts say? Some thoughts from colleagues:

  • Whining? Is this a legit complaint or part of a Netflix PR campaign?
  • Free? One of the fundamentals of economics: if something is free, people will use too much of it. Any sensible arrangement will charge — somehow — for internet use. And Netflix is one of the largest users.
  • Illegal? Did Comcast cross a legal line if/when they slowed down access to Netflix? What makes this different from Amazon is that internet providers are often local monopolies, so antitrust law kicks in differently. For similar reasons, one of the conditions of the Comcast-NBCUniversal merger was a requirement that Comcast allow “non-discriminatory” access to its broadband network. (This and more in the Kwoka-White casebook.)
  • Lost opportunity?  Google makes a point out of the Adam Brandenburger playbook: look for common interests. In this case: locate Netflix servers in the same place as the internet provider. That lightens the load on the system, which is good for both Netflix and the internet provider. (But to return to the first point: Why is Google saying this?)

 

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