Net Neutrality Repeal Worries Niche Streaming Services

Ajit Pai FCC Chairman - Getty - H 2017
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Netflix may be fine, but smaller streamers won't have leverage to compete if the FCC chair's new proposal takes effect.

Much of the tech industry opposes Federal Communications Commission chairman Ajit Pai's Nov. 21 proposal to unravel the net neutrality rules put in place under the Obama administration. But it's upstart streaming services that could feel the greatest impact.

"If I were a smaller streaming service, I would not want to be put on a slower lane than something like Netflix," says Macquarie analyst Amy Yong.

Pai's plan, which is expected to pass the Republican-led FCC when a vote is called on Dec. 14, would prevent internet service providers from blocking or throttling online traffic or charging users for access to certain content.

Technology companies have largely condemned the proposal. Netflix, Google and Facebook all quickly released statements citing their disappointment, and on Nov. 27, some 200 firms — including Twitter, Vimeo and Airbnb — signed a letter urging the FCC not to pass the plan. But it's actually the dozens of niche streaming services that have launched in recent years, companies like Shout! Factory and Fandor that provide a new source of licensing revenue for Hollywood, that could be hurt the most if net neutrality is repealed. 

Netflix CEO Reed Hastings noted in the spring that a repeal of net neutrality would have little effect because with its 53 million U.S. subscribers, Netflix is "big enough to get the deals we want" with ISPs. NBC, owned by Comcast, and HBO, which may soon be owned by AT&T, also could benefit from their relationships with companies that control the flow of internet content.

But if access to fast web speeds becomes pay-to-play, smaller companies may not have leverage to compete. Notes David Gandler, founder and CEO of sports-based streaming bundle fuboTV: "Sadly, American citizens will suffer an unprecedented erosion of liberties and choice as a direct result of this unwise decision."

Opponents of net neutrality say that the market should regulate itself. Meanwhile, some digital executives argue that net neutrality doesn't tackle the right problems. Efe Cakarel, the founder and CEO of U.K.-headquartered film streaming service MUBI that also operates in the U.S., says his concern isn't competition from Netflix as much as it is the lack of competition among the big ISPs. "Today, privileged companies like Netflix already benefit from what are essentially internet fast lanes, and this has been the case for years," he explains. "The real issue is that such a small number of ISPs now control the pipes that reach out to U.S. customers. My real worry is that the Comcasts and Verizons are becoming too big and too powerful." 

A version of this story first appeared in the Nov. 29 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.