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, Netflix's war with the Internet providers was officially over — the company had paid its way into direct connections with major ISPs — but congestion disputes were simply migrating elsewhere, with Comcast and AT&T now clashing with backbone operators GTT and Zayo. Verizon's filing draws the regulatory line around that whole arrangement: whatever the FCC can do about retail broadband, it says the exchange points where networks settle traffic are off-limits.
The stakes are visible in dealmaking downstream — interconnection fees became a live issue in the AT&T–DirecTV approval talks — so whether the FCC concedes this ground determines what leverage regulators keep over future mergers.
First-order effects
- If the FCC accepts Verizon's framing, Netflix and other content companies have no regulator to appeal to when an ISP demands termination payments at the network boundary — the price stays a pure bilateral negotiation.
- The filing directly contests the scope of the FCC's open internet rules, forcing the agency to either defend jurisdiction over interconnection or formally narrow them to last-mile access.
Second-order effects
- Regulators are already using interconnection as merger currency — interconnection fees stayed on the table in last-minute talks over the AT&T–DirecTV deal — so Verizon's legal position threatens to strip that lever from future deal reviews.
- ISPs that still refuse paid peering, like Comcast and AT&T in their ongoing congestion fights with GTT and Zayo, gain cover to hold out or charge, since the largest provider has publicly staked out non-regulation.
Third-order effects
- The pattern ultimately held in the courts: a US appeals court ruled Charter could charge Netflix and other streamers for interconnection despite merger conditions prohibiting exactly that, indicating these disputes get settled by judges rather than the FCC.
- With paid peering effectively untouchable, regulatory attention shifted to adjacent levers — the FCC's preliminary finding that AT&T's DirecTV data-cap exemption violated net neutrality shows zero-rating becoming the next battleground.
The trend: Paid interconnection is hardening from a contested regulatory question into a market norm enforced through litigation, pushing net-neutrality debates toward data caps and zero-rating instead.