Here's why Netflix is opposed to data caps (NFLX)

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Netflix has put pressure on the Federal Communications Commissions (FCC) to suppress the practice of data caps by broadband internet service providers (ISPs), in a recently filed comment from the online video network, IB Times reports. 

Netflix has historically hit back against data caps, arguing that it limits consumers choice and infringes upon fair competition. 

The comment maintains that the low data cap and usage based models employed by ISPs violate Section 706 of the Telecommunications Act of 1996, which directs the FCC to judge “whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion." Netflix is focused on the following issues to present its opposition to data caps:

• Data caps discourage broadband usage, and video consumption. Data caps and usage based pricing raise the cost of an internet connection – either by placing a limit on, or assigning a price to, the amount of data users can consume – thereby discouraging consumers’ use of broadband. By extension, data caps specifically restrict video consumption, which accounts for the majority of downstream (downloaded) internet traffic. Netflix, YouTube, and Amazon Video top 2016’s  downstream traffic leaderboard, accounting for 35%, 18%, and 4% of downloaded data, respectively, according toSandvine.
• Video consumption is data-heavy, which compounds the issue. The average American watches 3.4 hours of television a day, according to June data from the Bureau of Labor Statistics. Watching this much TV on Netflix can use 10GB of data, while ultra HD quality can consume almost 24GB, according to Netflix. Accordingly, Netflix argues that a monthly minimum of 300 GB of data is required to meet the Internet TV needs of the average American, without consideration to other broadband activities, like web browsing and downloading games or apps. Comcast boosted its internet data allowances from 300GB to 1TB, and AT&T followed suit recently by upping data plans for its U-verse customers from 300GB to 1TB as well.
• Data caps could also infringe upon net neutrality principles. ISPs can use data caps to discriminate over content sources, and favor certain services over others. By zero-rating data traffic from their own video services and from partnering providers, ISPs can make data consumption across these networks effectively free. Services that are not exempted from zero-rated data, on the other hand, become relatively more expensive to access. This sometimes leads to content providers paying fees to ISPs in exchange for zero-rating traffic, much like the Comcast-Netflix streaming deal reached in 2014.
• Data caps don’t seem to have a legitimate technical purpose. Netflix cites a 2014report from the Government Accountability Office that found that “most fixed providers said that their networks do not face widespread congestion,” and that the “marginal costs of data delivery are low and falling.” This would mean that there's no real need for ISPs to impose data caps on traffic passing through their networks. In contrast, the FCC’s position is that pricing data on a marginal costs basis, according to the data consumption of heavy data users, would not be enough for the ISPs to recover their costs. This is despite the admission from Comcast’s VP of Internet Services had former 300-gigabyte data cap was a business policy, and not an engineering one.

Over the last few years, there’s been much talk about the “death of TV.” However, television is not dying so much as it's evolving: extending beyond the traditional television screen and broadening to include programming from new sources accessed in new ways.

It's strikingly evident that more consumers are shifting their media time away from live TV, while opting for services that allow them to watch what they want, when they want. Indeed, we are seeing a migration toward original digital video such as YouTube Originals, SVOD services such as Netflix, and live streaming on social platforms.

However, not all is lost for legacy media companies. Amid this rapidly shifting TV landscape, traditional media companies are making moves across a number of different fronts — trying out new distribution channels, creating new types of programming aimed at a mobile-first audience, and partnering with innovate digital media companies. In addition, cable providers have begun offering alternatives for consumers who may no longer be willing to pay for a full TV package.

Dylan Mortensen, senior research analyst for BI Intelligence, has compiled a detailed report on the future of TV that looks at how TV viewer, subscriber, and advertising trends are shifting, and where and what audiences are watching as they turn away from traditional TV. 

Here are some key points from the report:

• Increased competition from digital services like Netflix and Hulu as well as new hardware to access content are shifting consumers' attention away from live TV programming.
• Across the board, the numbers for live TV are bad. US adults are watching traditional TV on average 18 minutes fewer per day versus two years ago, a drop of 6%. In keeping with this, cable subscriptions are down, and TV ad revenue is stagnant.
• People are consuming more media content than ever before, but how they're doing so is changing. Half of US TV households now subscribe to SVOD services, like Netflix, Amazon, and Hulu, and viewing of original digital video content is on the rise.
• Legacy TV companies are recognizing these shifts and beginning to pivot their business models to keep pace with the changes. They are launching branded apps and sites to move their programming beyond the TV glass, distributing on social platforms to reach massive, young audiences, and forming partnerships with digital media brands to create new content.
• The TV ad industry is also taking a cue from digital. Programmatic TV ad buying represented just 4% (or $2.5 billion) of US TV ad budgets in 2015 but is expected to grow to 17% ($10 billion) by 2019. Meanwhile, networks are also developing branded TV content, similar to publishers' push into sponsored content.

In full, the report: 

• Outlines the shift in consumer viewing habits, specifically the younger generation.
• Explores the rise of subscription streaming services and the importance of original digital video content.
• Breaks down ways in which legacy media companies are shifting their content and advertising strategies.
• And Discusses new technology that will more effectively measure audiences across screens and platforms. 

Interested in getting the full report? Here are two ways to access it:

1. Subscribe to an All-Access pass to BI Intelligence and gain immediate access to this report and over 100 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. » START A MEMBERSHIP
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