The Case Against ISP Tolls
This is a very public battle between two companies about who should shoulder the cost of delivering video to your home.Comcast's argument is that they have built a network at great expense for carrying content that others make a profit from, and they want to capture at least some of that value.Netflix's argument is that they have built a CDN to deliver that content to Comcast's doorstep, and that Comcast won't accept it.In my mind, Netflix charges money for their service and is not entitled to a free ride. The fact remains that running an ISP is not free, and you can't scale out a network faster than the cash flows (of which, yes, profits are a part) allow. But think about this: Netflix has a 36% gross profit margin, and Comcast's cable/Internet business has an 11% gross profit margin. Netflix's cost structure is lower in large part because Comcast does a lot of the expensive work for them (i.e. last-mile network maintenance and distribution.)Netflix drives significantly increased Internet traffic usage, and Comcast's investors should not have to accept lower profit margins so that Netflix's investors can enjoy larger margins because of investments that Comcast's investors have made.I would have a lot more sympathy for Netflix if their margins weren't so high. It just comes off as greedy when they have a 36% gross margin.