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In 1998, Dell Inc. became one of the first companies to redesign their business model around digital information linkages and e-commerce transactions. Today, many of the most successful companies are virtual, relying on the power and speed of the Internet to ensure smooth, cost-efficient processes between manufacturers, suppliers, and consumers.

“Understanding Net(flix) Neutrality” reveals the kinks and hidden costs a virtual company like Netflix faces in managing the transmission of their huge data files over the Internet’s backbone to individual consumers. In the past, Netflix has relied on costly CDN (“content delivery network”) services to manage the delivery of its shows, movies, and services to ISPs. Recently, Netflix has cut out the CDN middlemen, and reached agreements to interconnect directly with several major ISPs. These key ISPs already have the appropriate infrastructure to manage Netflix’s enormous content (30% of all Internet bandwidth) without additional infrastructure construction costs.

While Netflix’s new interconnection arrangements have significantly reduced costs and increased speeds by 65 percent, new threats are looming in the “last-mile” connection between ISPs and consumers’ screens. In May 2014, the Federal Communications Commission circulated new “net neutrality” rules, giving telecom providers the authority to prioritize data delivery, granting high-speed access to those companies that are willing to pay for it. Netflix, and many other large Internet-based companies, have bristled in response to this proposal, arguing that their consumers already finance high-speed internet access under monthly plans. It is clear that the Internet, while appearing seamless and unlimited in its capacity for data transmission, is not a cost-free delivery route for a company’s services.

http://www.forbes.com/sites/realspin/2014/10/01/understanding-netflix-neutrality/