Here’s How Netflix, Inc. (NFLX) Would be Affected by Rolled Back Net Neutrality Rules

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Netflix users could face a slowdown in streaming service, which could lead to subscriber loss

In 2014, Netflix, Inc. (NASDAQ:NFLX) was in conflict with Internet Service Providers like AT&T and Comcast on low broadband speeds ruining its subscribers’ viewing experience. To settle the matter, the world’s leading online TV network signed interconnection deals with various ISPs.

Soon after, Donald Trump bashed net neutrality rules on Twitter: “Obama’s Attack on the Internet is another top down power grab. Net neutrality is the Fairness Doctrine. Will target Conservative Media.” Following his election last month, the debate on net neutrality has intensified as the Trump administration prepares to take over the White House from January 20. Net Neutrality is the principle that ISPs should allow access to all applications and content regardless of the source, without favoring or preventing any website or product. In simpler words, all Internet traffic should be treated equally.

At the UBS Global Media and Communications conference earlier this month, Netflix was asked whether a rollback in net neutrality rules in the US and other countries would affect its service and value proposition. The company replied that it has always demanded that all Internet content should be treated equally by ISPs.

According to Market Realist, a change in the rules could serve as a setback for the video streaming heavyweight which has been focusing on enhanced customer experience. It could imply that Netflix would require paying higher interconnection fees to ISPs or allow ISPs to throttle Netflix’s streaming, leading to a loss in subscriber base.

Moreover, a major portion of mobile data traffic consists of video that surges data consumption of wireless carriers. According to Cisco’s visual networking index (VNI), video comprised 61% of mobile data traffic in the US last year and it is expected to soar to 77% by the end of 2020. Earlier this year, Netflix introduced a “data saver” option which enables users with superior data plans to stream videos in high quality, while users with inferior plans can stream at low quality.

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