Responding to the recent demise of Verizon's failed attempt at developing a competitor to Netflix's streaming business, an AT&T executive tried to frame it as evidence that net neutrality isn't really necessary.
"If the theory that ISPs have this incentive to favor their services were true, then Verizon is totally incompetent, because they went into this market with Redbox, and now they're totally shuttering it," AT&T policy executive Hank Hultquist said, according to the Washington Post.
The theory to which Hulquist is referring is the pro-net neutrality argument that Internet service providers, many of which also control web content services that travel across their networks, would impose unfair fees on and degrade the performance of competing services to tilt the scale in favor of their own. It’s an argument that some have made specifically in regards to Redbox Instant, the streaming service that Verizon and Redbox killed earlier this week. These kinds of allegations came up last summer after Verizon customers complained in a user forum about Netflix streaming quality and bandwidth provider Cogent backed them up. It's a logical argument – ISPs that have an interest in one web service performing better than others have an incentive to give their services an advantage on their network, and without net neutrality regulations, they'd be allowed to do so.
Hultquist used the opportunity not only to remind the public that a Verizon content service failed miserably, but also to claim that its failure proves that this argument is moot. If Verizon was favoring its own services, then how could it have failed to even compete with Netflix?
The story behind Redbox Instant’s failure isn’t so simple, however. Redbox stopped accepting new customers more than three months ago, after the company discovered that cybercriminals were using the service to verify illegally obtained credit card numbers, GigaOm reported late last month. The credit card fraud also prevented existing users from changing their payment information. In the three months leading up to its demise, Redbox Instant wasn't able to sign up new users nor allow existing users to update their accounts when their credit cards expired or were stolen.
It’s not a good sign that nobody in the tech media seemed to notice that a movie streaming service co-owned by Verizon wasn't accepting new users for more than three months. I doubt Netflix could go 12 hours without allowing new user registrations before it made headlines.
Redbox acknowledged this in a statement sent to GigaOm, admitting that the service was never as popular as either Redbox or Verizon had hoped.
A streaming service probably made sense for Redbox after watching it perform so well for Netflix. Both companies started as alternative DVD rental services, and both helped push the traditional video rental store to extinction. People were familiar with the Redbox name, having seen the machines every time they leave the grocery store. Adding an ISP like Verizon as a partner would only help make sure the streaming service performed well.
But Redbox Instant didn’t launch until March 2013, five years after Netflix announced its first partnership for streaming movies and three years after Netflix reached a deal to stream movies from major movie studios. By then, people had largely forgotten that Netflix was a DVD rental service, and only knew Redbox as a vending machine for movies you forgot were ever in theaters.
I could go on, specifically in regards to Netflix’s development of in-house content featuring high-profile Hollywood actors and the resurrection of beloved TV franchise titles like Arrested Development, but you get the point. If Hultquist’s joke was that Verizon couldn’t have been incompetent enough to run Redbox Instant into the ground while it had the an advantage on its network, maybe he underestimated just how incompetent the Redbox Instant plan really was.