Netflix rewrites net neutrality politics, but not CDN business strategy

[Commentary] Ironically, Netflix’s anti-net neutrality position in Australia, while politically hypocritical, is perfectly consistent with a business case cited by net neutrality opponents in the recent US debate. A crowded market, or one dominated by a first mover with network effect advantages (as is the case in the content delivery network (CDN) markets of New Zealand and Australia), poses an entry barrier to a newcomer. Partnering with an Internet service provider who agrees to waive costs to end users (e.g. by not counting data from the application towards a metered ‘cap’) helps the newcomer overcome this barrier. A new application that consumers value which otherwise would struggle against entrenched competitors can enter, increasing choice and raising overall welfare.

So if US net neutrality rules prevent innovative new charging practices on behalf of new entrants, it may be more attractive to release new applications first in Australia and New Zealand. Not only are these nations’ regulatory regimes more accommodating, but there are also two brand-new, hardly-used fiber networks here crying out for an application to justify their existence. Who knows what deals could be done?

[Bronwyn Howell is general manager for the New Zealand Institute for the Study of Competition and Regulation]