Verizon to FCC: You can't stop Netflix-like interconnection payments
Verizon told the Federal Communications Commission yesterday that it has no right to regulate paid interconnection deals like the ones Netflix struck with Verizon and other Internet providers.
Context & Ripple Effects
By late 2014, the open fighting between Netflix and the ISPs was winding down — Netflix had agreed to pay for direct interconnection, and congestion disputes were shifting from consumer-facing standoffs to quiet negotiations between backbone operators like GTT and Zayo and providers such as Comcast and AT&T. Verizon's filing to the FCC is the legal backstop for that settlement: it asserts the agency simply has no jurisdiction over paid interconnection deals, so the fees Netflix pays are a private matter, not a regulated one.
First-order effects
- Verizon keeps collecting paid interconnection fees from Netflix and similar edge providers without regulatory oversight, since its filing argues the FCC lacks any authority over these arrangements.
- Netflix's cost structure for reaching Verizon subscribers is locked in as a commercial negotiation rather than a policy question — the company's leverage now lives entirely in its bargaining power, not in petitioning regulators.
Second-order effects
- Interconnection terms become a live variable in every major deal touching broadband: they were still being hashed out in the last-minute regulator talks over the AT&T-DirecTV merger, showing carriers must price these fees into M&A conditions.
- Rival carriers face pressure to match Verizon's stance — if the FCC concedes it cannot regulate interconnection, AT&T and Comcast gain cover to keep charging edge providers while separately managing their own backbone congestion issues with operators like GTT and Zayo.
Third-order effects
- The pattern holds through litigation: by 2020, a US Court of Appeals ruled Charter could keep charging Netflix and other streamers for interconnection even under merger conditions meant to prohibit it, cementing paid peering as a legally protected revenue line.
- If courts keep treating interconnection fees as unregulatable commerce, streaming economics permanently internalize last-mile access costs, and the FCC's authority gets channeled into adjacent fights instead — as with its preliminary finding that AT&T violated net neutrality via DirecTV data cap exemptions.
The trend: Paid interconnection is consolidating as an accepted, effectively unregulated toll on streaming distribution, with courts and carriers — not the FCC — setting the terms.