Racially charged jokes and celebrity squabbles dominated media coverage of emails leaked from Sony Pictures last year, but included in the cache was a debate between high level execs over the company’s position on an issue that has since engulfed Washington – net neutrality.
Those emails, included in a searchable archive of emails hacked from Sony last November by the self-described “Guardians of Peace” hacking group, expose the scrutiny applied to net neutrality by one of the world’s largest media producers.
The emails stretch back more than a year and highlight a multitude of concerns over what were then only potential FCC rules and the likelihood those rules would infringe on Sony’s ability to combat piracy, stream faster and higher-quality content to customers and more.
In one notable exchange, Sony CTO Spencer Stephens described the claims made by Netflix that Internet service providers (ISPs) were throttling their content as “complete BS.”
They also illustrate a behind-the-scenes disagreement between major media conglomerates like Sony and Silicon Valley-based content producers in favor of net neutrality, including Google, Microsoft, Amazon, Netflix, Reddit and others.
The emails begin in March 2014 shortly after a federal court ruled against the FCC in favor of Verizon, and charged the agency with stepping beyond the bounds of its authority over ISPs.
In that early exchange, Sony General Counsel Leah Weil agrees with Time Warner General Counsel John Rogovin over his reluctance to take a stance on the issue in an industry statement over its potential to block certain methods of distributing content.
“We may not like what they do on rest of docket and might put up roadblocks on how we distribute content,” Rogovin wrote. “I agree that we have a major stake in this proceeding but just not clear yet what we would want to say. Not sure this filing will make us look much like a ‘player.’ Seems very thin and not tied to what specific issues the commission is wrestling with.”
Later that month, Sony Executive Vice President of Government Affairs Keith Weaver said “We (industry we) don’t know what we want say about the FCC’s role on [net neutrality]” – an admission that was further highlighted in May, around the time the FCC was voting to begin the process of drafting new rules.
At the time, Sony Washington lobbyist Jim Morgan wrote to other Sony execs to inform them that a “coalition of Internet companies has asked Sony to join a letter to FCC Chairman Wheeler in support” of net neutrality.
“Net neutrality is contentious, and the chairman is apparently looking for public demonstrations of support that will provide the necessary political cover for him to move forward,” Morgan wrote. “The list of confirmed signatories for the letter is attached, and it includes both big names – Amazon, EBay, Netflix, Microsoft – and many smaller ones.”
Sony eventually declined to join the coalition for fear of taking an aggressive stance on an issue that could potentially place roadblocks in front of future business ventures. Morgan also agreed with another executive that “Sony might not want to be associated publicly with some of the coalition members,” such as Reddit, Tumblr, BitTorrent, and Imgur because they “might have problematic views on copyright protection.”
In later discussions about what Sony should say in the company’s own comment filing, Weaver advocated a nuanced stance again on the issue of distributing future forms of faster, higher-quality video content, which execs feared could be thwarted by the stance the FCC eventually adopted – treating all traffic equally without letting companies broker deals for higher-cost fast lanes with ISPs.
“We are in the premium content business and do not want to be on equal footing with a random ‘mom and pop’ video streaming service,” Weaver wrote. “And, if successful, we don’t want to foreclose opportunities…”
During the same discussion, Morgan questioned aspects of how the FCC could realistically enforce such paid-prioritization regulations.
“I cut most of the discussion about paid prioritization out of deference to Keith’s concerns – namely that SPE or other parts of Sony may want to take advantage of paid prioritization, and so doesn’t want to be constrained by any arguments we make in these comments,” Morgan wrote.
“The FCC has taken the position that protecting edge providers and consumers with net neutrality rules encourages edge investment and subscription growth, which in turn encourages ISP infrastructure investment,” Morgan continued. “I think it would be really hard for the FCC to guarantee that ISPs used revenues from paid prioritization to fund new infrastructure – assuming it had authority to do so, I’m not sure how such a requirement could be effectively enforced.”
It was during this same discussion in the summer of 2014 that Weaver doubted the agency would take the aggressive step of reclassifying the Internet as a public utility, which it ultimately voted to do in February.
“The consensus is that the FCC is unlikely to do nothing on this issue or reclassify the Internet as a common carrier (despite the public sentiment in support of this direction),” Weaver wrote. “So it’s really a more narrow path under Sec. 706 to manage anti-competitive behavior and the commercial reasonableness issues.”
In late July the group asked Stephens to weigh-in. In his reply, the Sony CTO explains the technical aspects and provides a scathing analysis of the issue – including its principal proponent, Netflix.
“I don’t understand why, or indeed even how, a peering connection could be regulated except possibly with a transit provider. After all if I, as [content delivery network] or more generally a content provider, make an agreement to connect directly into an ISP then surely that is a private business relationship even if it can be labeled peering?” Stephens wrote.
“The ISP cannot send its open Internet traffic over that link and therefore there isn’t, reductio ad absurdum, any traffic to discriminate against. It might benefit the content provider because it is cheaper or gets better performance to the ISP reducing the amount of congestion that its traffic has to compete with. It would benefit the ISP because it reduces the amount of open Internet traffic it has to exchange with a transit provider. Peering is about getting traffic into and out of an ISP, not management of said traffic to and from the consumer.”
“This is exactly what Netflix has done and their claims that they have been held to ransom are, IMHO, complete BS.”
Days before the company’s deadline to submit a draft of its comments in September, the internal debate continued on whether to file at all, as the range of Sony businesses in video, film, gaming, music, online, etc. presented a number of opportunities and obstacles for the company.
“FYI – the bottom line. Net neutrality rules should not apply to content producers. [The 1996 Telecommunications Act] doesn’t give FCC that authority and the free speech point,” Weaver wrote. “I maintain that Sony group should not file, as the range of Sony businesses are broad and there is no consensus regarding – for example – commercially reasonable paid prioritization agreements. Sure edge providers like SNEI or Crackle may appreciate the Netflix position today, but that does address what may appeal to us in the future.”
“Other than the independent producers (who are pro-net neutrality/banning paid agreements), no other true content companies (in the way we would define them) have filed. I think it’s because no one really knows what to say, so why lock yourself into a position.”
Sony declined to comment when contacted by InsideSources.
The emails represent a significant miscalculation by one of the world’s biggest multimedia giants on the path the government would eventually take on net neutrality, and the implications Sony and others can only guess at ahead of their imposition in June.