Google and Netflix Aren't Going to Let Net Neutrality Die Without a Fight

After a federal court struck down key provisions protecting net neutrality last week, Netflix's stock took a dive. Why? Because without the safeguards stopping internet service providers from playing favorites with web access, ISPs could legally jab their competitors by slowing connections or charging an extra toll to cruise the internet highway.

Since some broadband providers are also big cable conglomerates, streaming video services like Netflix and YouTube are the likely targets. Which is why both Netflix and Google are now flexing their muscles to show ISPs they don't plan to be manhandled without a fight.

Netflix didn't beat around the bush. CEO Reed Hastings wrote in a letter to investors that if broadband providers started charging it a toll it would fight back, and encourage its users to revolt—and then added a little weight to the threat by throwing in that its subscriber base just shot up to 44 million people.

“Were this Draconian scenario to unfold with some ISP, we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver," wrote Hastings.

The company then pivoted to good cop mode with a reminder that since it gobbles up a huge chunk of internet traffic during peak hours, it's driving a lot of business to broadband providers, so it would behoove ISPs to play nice.

It's a pretty aggressive statement. ISPs haven't done anything yet to signal they plan to abuse their new power over the web. But media companies are digging in their heels just in case.

Google, for its part, is leveraging YouTube to keep tabs on ISPs. The company launched a Video Quality Report this week that will rate service providers based on the streaming quality of YouTube videos. Like Netflix, it's trying to get users on its side, positioning the report as a guide to better video performance.

Google will start rating services in Canada, and expand out to other countries down the road. It will log ISP connection speeds and stick providers in one of three categories: Lower Definition, Standard Definition, and "YouTube HD Verified." The web giant didn't make any mention of net neutrality, but the timing is probably not a coincidence. Naming and shaming providers could deter them from throttling video performance.

Netflix already ranks ISPs by speed, and had been doing so well before the court struck down the FCC's arguments. But the ruling adds to the tension between ISPs and video companies, both of whom blame each other for the shoddy streaming performance infuriating viewers.

But, as Hastings pointed out, charging Netflix a higher fee—or slowing traffic to any video sites—wouldn't be a strategically wise move for broadband service providers. The court's ruling did leave the door cracked open for the FCC to rewrite open web rules to try and reinstate its authority, and the minute foul play is detected it will give the agency ammunition to do just that.

Rather than rocking the boat, it looks like Verizon, hot on the heels of its legal win, has plans to jump in the media game itself. The telecom giant announced this week it's acquiring Intel's internet TV service OnCue. The set-box streaming service was Intel's attempt to take on Big Cable, but in Verizon's hands it could wind up positioning the wireless provider as a cable giant too.

Unlike rival ISPs like Comcast and Time Warner, Verizon only owns a tiny piece of the cable pie, and would like to change that. With OnCue, it plans to built out its FiOS network to offer video services from third parties (it recently bought streaming video startups upLynk and EdgeCast) and eventually its own cable packages. “The transaction will accelerate the availability of next-generation video services, both integrated with Verizon FiOS fiber-optic networks and delivered “over the top” to any device," Verizon said in a press release announcing the acquisition.

Theoretically, Verizon could then offer its video services slightly cheaper and faster than competitors like Netflix or YouTube. But if it or other ISPs do go that route, they're going to have to tread carefully to avoid a major backlash from users of those extremely popular websites, not to mention the activists fighting to keep net neutrality alive and the media heavyweights with a vested interest in keeping the internet playing field level.