But it's not a violation of net neutrality principles, despite what you may have heard from some critics of the federal government's open internet policy.
That's because US rules protecting net neutrality, the principle that all content on the internet should be equally accessible, apply to internet service providers like Comcast, AT&T and Verizon—not so-called "edge providers" like Netflix and YouTube that deliver content over the internet's pipes.
"The content on the Internet isn't the same thing as the wire that connects you to it," explained Matt Wood, policy director at DC-based public interest group Free Press, in a statement:
Imagine that a movie theater is showing films at lower resolutions without telling people that it's reducing the quality and killing high definition. The practice itself might or might not harm the theater's patrons, and failing to disclose it to them seems unfair. Whatever it is, though, it's not the same kind of problem as someone blocking the roads to the theater to force people to go to a different movie house.
This distinction is understandably infuriating to the big cable and phone companies. After all, these corporate giants are obliged by the Federal Communications Commission's net neutrality policy not to favor, throttle, or discriminate against internet traffic on their networks. But edge providers like Netflix are different. They're under no regulatory obligation to deliver the highest-quality video streams to customers.
The brouhaha over Netflix's throttling policy erupted late last week when The Wall Street Journal reported that the video streaming giant has been limiting speeds to AT&T and Verizon wireless customers. In a blog post, Netflix explained that it has been capping mobile video streams at 600 kilobits per second, in order to "protect our members from overage charges when they exceed mobile data caps."
The FCC's net neutrality policy simply doesn't apply in this case
For net neutrality opponents, Netflix's apparent hypocrisy was rich. After all, Netflix has been one of the strongest supporters of US policies designed to preserve the internet's open and freewheeling nature. (That's no surprise. The company has a clear business interest in internet openness, because its video streams account for a massive amount of online traffic.)
"Failing to disclose this practice to consumers is bad enough, but Netflix's political hypocrisy is astounding," Berin Szoka, president of libertarian tech policy group TechFreedom, said in a statement. "It turns out Netflix was really saying net neutrality for thee, but not for me."
Matthew M. Polka, president of the American Cable Association, called on the FCC to "initiate a Notice of Inquiry into the practices of edge providers and how these companies can threaten the openness of the Internet."
And AT&T senior executive vice president of external and legislative affairs Jim Cicconi declared his company "outraged to learn that Netflix is apparently throttling video for their AT&T customers without their knowledge or consent."
To many tech policy experts, the real problem are monthly data caps, which open internet advocates say are unnecessary and arbitrary limits designed by mobile carriers to extract profit-boosting overage charges from consumers. "Bandwidth caps are about monetizing scarcity and avoiding the cost of upgrading the network," Harold Feld, senior vice president of DC-based consumer advocacy group Public Knowledge told Wired.
Netflix may be guilty of a lack of transparency, and its conduct may actually rise to the level of a deceptive business practice. Consumers should have an expectation that if Netflix is going to throttle their mobile video streams—even if doing so is in their best interest, as the company claims—they should be proactively notified, and not have to read about it after-the-fact in press reports.
But that's a matter for the Federal Trade Commission, which has the responsibility to ensure that companies don't mislead consumers, not the FCC, which is charged with ensuring that the internet's underlying pipes remain free and open from discrimination. The FCC's net neutrality policy simply doesn't apply in this case.
"The net neutrality rules don't exist to regulate the relationship between Comcast and Netflix, or the relationship between any other cable giant and any other internet giant," said Wood. "The rules exist to preserve your right to say what you want and go where you want online. They prevent broadband access providers from interfering with that right. But they don't apply to what any website, application maker or individual user says to you when you get to that destination."
Netflix has built a multi-billion dollar business in part thanks to internet openness. Its throttling policy doesn't violate net neutrality principles, but the least the company can do is proactively notify customers when it messes with their video streams.