NetFlix 2015 Annual Report Download - page 14

If government regulations relating to the Internet or other areas of our business change, we may need to
alter the manner in which we conduct our business, or incur greater operating expenses.
The adoption or modification of laws or regulations relating to the Internet or other areas of our business
could limit or otherwise adversely affect the manner in which we currently conduct our business. In addition, the
continued growth and development of the market for online commerce may lead to more stringent consumer
protection laws, which may impose additional burdens on us. If we are required to comply with new regulations
or legislation or new interpretations of existing regulations or legislation, this compliance could cause us to incur
additional expenses or alter our business model.
Changes in laws or regulations that adversely affect the growth, popularity or use of the Internet, including
laws impacting net neutrality, could decrease the demand for our service and increase our cost of doing business.
The failure to adopt laws protecting strong net neutrality could also increase the cost of doing business. In the
United States, on February 16, 2015, the Federal Communications Commission (“FCC”) adopted net neutrality
rules intended, in part, to prevent network operators from discriminating against legal traffic that transverse their
networks and to prevent ISP abuses at interconnection points. The FCC’s authority to adopt these rules is
currently under review by the U.S. Court of Appeals for the District of Columbia. To the extent network
operators attempt to use this ruling to extract fees from us to deliver our traffic or otherwise engage in
discriminatory practices, or if the U.S. Court of Appeals for the District of Columbia invalidates the rules, our
business could be adversely impacted. Regulators outside the United States, including the European Union, have
adopted or may adopt Network Neutrality rules. It is also possible that network neutrality rules may be nascent or
non-existent in the global markets in which we operate. Within such a regulatory environment, coupled with
potentially significant political and economic power of local network operators, we could experience
discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expense
or otherwise negatively affect our business.
Changes in how network operators handle and charge for access to data that travel across their networks
could adversely impact our business.
We rely upon the ability of consumers to access our service through the Internet. If network operators block,
restrict or otherwise impair access to our service over their networks, our service and business could be
negatively affected. To the extent that network operators implement usage based pricing, including meaningful
bandwidth caps, or otherwise try to monetize access to their networks by data providers, we could incur greater
operating expenses and our membership acquisition and retention could be negatively impacted. Furthermore, to
the extent network operators create tiers of Internet access service and either charge us for or prohibit us from
being available through these tiers, our business could be negatively impacted.
Most network operators that provide consumers with access to the Internet also provide these consumers
with multichannel video programming. As such, many network operators have an incentive to use their network
infrastructure in a manner adverse to our continued growth and success. While we believe that consumer
demand, regulatory oversight and competition will help check these incentives, to the extent that network
operators are able to provide preferential treatment to their data as opposed to ours or otherwise implement
discriminatory network management practices, our business could be negatively impacted. In some international
markets, these same incentives apply however, the consumer demand, regulatory oversight and competition may
not be as strong as in our domestic market.
Privacy concerns could limit our ability to collect and leverage our membership data and disclosure of
membership data could adversely impact our business and reputation.
In the ordinary course of business and in particular in connection with merchandising our service to our
members, we collect and utilize data supplied by our members. We currently face certain legal obligations
regarding the manner in which we treat such information. Other businesses have been criticized by privacy
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