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The Net Neutrality Ruling Won't Hurt Netflix as Much as Skeptics Think

By Tim Beyers – Jan 21, 2014 at 1:45PM

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A once-ridiculed move by management now looks prescient.

Netflix's (NFLX -1.53%) move to create its own content delivery network a year and a half ago looks brilliant in the wake of changes to the net neutrality guidelines, Fool contributor Tim Beyers says in the following video.

Netflix's Open Connect Network allows service providers to directly access its content at any of eight independent facilities operated at Internet peering points. A governing "appliance" hosts as much as 100 terabytes of content, including its most popular movies and shows. The result? Customers get the programming they want even as participating ISPs use less bandwidth hauling Netflix's streams.

The biggest names in Internet delivery have yet to sign on so the ruling could still cost Netflix $75 million to $100 million annually, especially if, as analysts expect, the likes of Comcast and Verizon penalize the streaming sensation via higher bandwidth charges or throttled pipes.

Yet doing so could also prove costly to ISPs. Why? Google (GOOGL -1.45%), itself a huge consumer of bandwidth via YouTube, uses Open Connect with Google Fiber. Cablevision, too, is a Netflix partner. As more of these types of deals get signed, it'll become common for consumers to expect high-speed, high-quality delivery of Web television -- and they'll drop the ISPs that don't measure up.

Do you agree? Where do you stand in the net neutrality debate? Please watch the video to get Tim's full take and then leave a comment to let us know whether you would buy, sell, or short Netflix stock at current prices.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Apple, Google, and Netflix at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends and owns shares of Apple, Google, and Netflix. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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