By Sara Jerome - 03/29/11 12:10 AM EDT
Netflix is cozying up to some of the city’s leading consumer advocacy groups as it builds up its lobbying presence in Washington.
The fast-growing media company, which hired its first in-house lobbyist earlier this year and has seen its share value go through the roof, is trying to build partnerships with telecom reform gurus in the advocacy world.
Among other issues, Netflix and consumer groups — including Free Press, the Media Access Project, Public Knowledge and Consumers Union — have a common interest in fighting overage fees on Internet users who access a high volume of data.
Data limits could strain Netflix’s business model, which increasingly is built on video streamed over Internet lines, not mailed as DVDs in the company’s signature red-and-white envelopes. Public-interest groups say data caps could stifle innovation and throw a wet towel on broadband growth.
Consumer groups could bolster Netflix in future lobbying battles with well-entrenched telecommunication companies that provide Internet services.
“To the extent the public-interest groups see fit to make filings at the [Federal Communications Commission] or write letters to the Hill, that can really benefit a company,” said Cathy Sloan, vice president of government relations at the Computer and Communications Industry Association.
“Consumer groups have a good story to tell about the needs of constituents, and that’s what lawmakers want to hear,” said another tech industry source, who noted that consumer groups hold sway with congressional Democrats.
The company is meeting frequently with prominent consumer advocates, according to public interest sources. One public-interest group, which requested to remain anonymous, is working on an intensive study of how Netflix could be threatened by Internet service providers (ISPs) during fee disputes such as the one between Level 3 and Comcast.
Level 3, a network that provides streaming services for Netflix, must enter contracts with major ISPs so that video content can reach consumers. The company alleges that it has faced unfair rate hikes, a claim the phone and cable companies have fought on Capitol Hill and at the FCC.
After Netflix hired Michael Drobac as its first in-house lobbyist this year, one of his first moves was to book meetings with the most powerful public-interest groups.
Drobac worked closely with public advocates for two years as a lobbyist for IAC/InterActiveCorp, an Internet giant that took an active role in lobbying for net neutrality. Drobac has also worked for GOP Sen. Kay Bailey Hutchison (Texas) and former Sen. Gordon Smith (R-Ore.).
Netflix has also worked with public advocates as a member of the Open Internet Coalition, and bolsters its D.C. presence through the Consumer Electronics Association.
Public-interest groups also stand to benefit from corporate relationships. Google, for instance, has given hundreds of thousands of dollars to consumer advocates since sweeping into town nearly six years ago.
It is unclear whether Netflix is offering financial support to any consumer advocacy groups, funding that many organizations reject. Netflix declined through a spokesman to comment on this article.
Consumer groups stress that their new ties with Netflix are not about money.
“There are certain working relationships that get developed in Washington that are worth something without anyone writing someone a check,” Sloan said. “I think they would want to work with Netflix because it’s one of those companies that gets attention and is already a household name.”
Industry observers said Netflix faces some risks in its friendship with consumer groups.
Public advocates are vocal in criticizing phone and cable companies. They allege that the communications giants have too much power over online firms like Netflix, who depend on their networks to reach consumers.
When Google aligned with those critics in the war over net neutrality, the search company promptly collided with a swirl of opposition from cable and phone companies, who took their grievances to Congress, federal regulators and the press.
“That’s not a good place to be,” one industry source said. “You don’t want to be at the other end of the only regulatory battle that unites all the phone and cable industry together and become the enemy of a very D.C.-savvy industry. Seeking out conflicts with those companies is not a smart Washington strategy.”
That dynamic has receded since Google dialed back its net neutrality lobbying.