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TheStreet Open House

Netflix Downplays Threat of Usage-Based Broadband Access

NEW YORK ( TheStreet) -- Netflix (NFLX), often the biggest driver of Internet traffic on any given night, isn't worried about usage-based broadband charges as Internet service providers such as Time Warner Cable (TWC), Verizon (VZ) and Comcast (CMCSA) toy with new broadband pricing plans.

Neftlix Chief Financial Officer David Wells said at the Goldman Sachs Communacopia conference the streaming video service could handle a pricing regime where ISPs charge consumers for their usage. Already most wireless carriers charge consumers for their data usage in high-end smartphone plans.

Wells also said usage-based Internet pricing may be an unsuccessful strategy for ISPs.

" We feel confident that the amount of bandwidth consumed by our product can be adjusted down a little bit and are well within reasonable usage caps," Wells said of the impact of usage-based billing to Netflix.

"I don't think that through an ISP, usage caps are necessarily a successful business model, outside of particularly low income and very value oriented consumers," he added, while highlighting that charging for premium broadband service could be a more effective strategy for ISPs.

"I think the successful business model is much more, 'let me sell you a faster broadband and I'll charge you more for it,'" Wells said.

Those comments came just a day after Time Warner Cable CFO Arthur Minson said the company is continuing to test the viability of capped usage broadband plans vs. higher-priced unlimited service plans.

Verizon CEO Lowell McAdam said on Tuesday the company was forced to sue the Federal Communications Commission in a net neutrality lawsuit because it didn't want the government to decide broadband pricing.

Verizon's net neutrality lawsuit, while a matter of free speech, is seen as a referendum on whether ISPs will fall under the regulatory jurisdiction of the FCC and if they will have the ability to charge content distributors in addition to Internet users. Such a scenario is called tolling, whereby ISPs would have the ability to extract higher charges for Internet access if they believed it to be a feasible economic strategy.

Currently, the FCC and Verizon are fighting in courts over the validity of the FCC's Open Internet Order, a decree that has kept issues on net neutrality, ISP tolling and unregulated broadband pricing at bay for about a decade.

"The ISP already charges the consumer and gets a healthy return on that, a very healthy margin on that and we're using our Open Connect program to try to lower the overall delivery costs for those ISPs that would like to participate," Wells said.

Either way, Reed Hastings-run Netflix has lobbyists on the ground in Washington as they monitor a possible shift in the way ISPs charge consumers and even content distributors on the Internet.

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