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AT&T to Netflix: ‘There Is No Free Lunch’

AT&T’s chief lobbyist, Jim Cicconi, pushed back at Netflix CEO Reed Hastings’ criticism of Internet providers for seeking payments from content companies for carrying an improved signal.

“As we all know, there is no free lunch, and there’s also no cost-free delivery of streaming movies,” Cicconi wrote in a blog post on Friday. “Someone has to pay that cost. Mr. Hastings’ arrogant proposition is that everyone else should pay but Netflix. That may be a nice deal is he can get it. But it’s not how the Internet, or telecommunication for that matter, has ever worked.”

On Thursday, Hastings called for a “strong” form of net neutrality rules that would prohibit Comcast, AT&T and other Internet providers from demanding payments from content companies. His proposal was a rule that would prevent ISPs from “charging a toll for interconnection” to Netflix, YouTube or Skype, or to intermediaries like Cogent or Level 3. The latter arrange to deliver content to ISPs.

Cicconi, however, said that streaming video “is driving bandwith consumption by consumers to record levels,” with it necessary to built additional capacity to handle the traffic.

“In the current structure, the increased cost of building capacity is ultimately borne by Netflix subscribers,” he wrote. “It is a cost of doing business that gets incorporated into Netflix’s subscription rate. In Netflix’s view, that’s unfair. In its view, those additional costs, caused by Netflix’s increasing subscriber counts and service usage, should be borne by all broadband subscribers — just just those who sign up for and use Netflix service.”

Hastings wrote his blog post after Netflix agreed to a deal with Comcast last month for improved delivery of its signal to its customers, a pact he said was necessary to “protect our consumer experience.” He also chided Comcast for being an “industry leader in supporting weak net neutrality.”

For its part, Comcast noted that net neutrality rules were not designed to deal with such “peering” arrangements to deliver content to the “last mile” and to the consumer. Rather, the rules put in place by the FCC in 2010 prohibit Internet providers from blocking or degrading traffic. The Netflix-Comcast peering arrangement, Comcast’s David L. Cohen said, is an “amicable, market-based solution to our interconnection issues.”

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