News Analysis 4

Net Neutrality

Netflix has been claiming for years that internet service providers that support the delivery of their services have been limiting the bandwidth and speeds of their service delivery to its customers explained the back story in this news article (Fox News Business 2015). The claims have been found by unbiased third party investigation to be false and now will likely backfire on the company in that the government will likely soon be passing regulatory oversight legislation for the industry. The ethical violation claim I am making in this analysis is not that of the government rather the findings of the investigation into the operational missteps by Netflix into offering these false claims to the public in order to make a profit.

It is unethical to falsify a public relations campaign in order to gain an advantage over the market. In the text Ethical Theory and Business, the issue is raised about the purpose of the corporation being that of earning and maximizing profits (2012). Netflix ultimately based its strategy to earn more profits by minimizing barriers for their products to reach the market. The industry has long been known to be unregulated and therefore a free market place with side deals and contracts being negotiated without any government supervision keeping the system in check (Fox News Business 2015). Netflix was able to create image problems for cable companies and was able to work secret agreements with internet service providers in order to gain a larger footprint in the streaming capabilities of network traffic due to its massive system requirements. The bottom line in the government stepping in to take over regulatory control of the industry is simply based on manipulation of the truth.

The Ethical Theory and Business text also discusses how corporations are to ethically disclose information and in this case, Netflix used several third party services to stream their network traffic, all the while Netflix claimed that the cable companies at the consumer end of the service line was unethically slowing the system down in order to service their own wholesale customers (Fox News Business 2015). The way that Netflix presented this information to the public is in question based on the description in the Ethical Theory and Business text arguing that the free market dictates what the consumer wants and organizations role is simply to provide the product the consumer demands (2012). Without proper disclosure, the public will not know exactly what an organization is actually providing and whether or not the product is being consumed under false information. 

Netflix could have resolved this fiasco if they had simply demanded proper disclosure from its third party service providers in the first place. Communicating the truth to consumers would likely have kept this unregulated market off of the radar of the government regulatory committees and manipulating special interest groups interested in allowing the government to take control of everything the free market stands for. The text Ethical Theory and Business also talks about truth in free market depending on the level of sophistication of consumers but without proper disclosure, the consumer could not possibly be knowledgeable (2012). The sophistication of the consumers stems from trust that is developed between a consumer and the organization. Without the organization being truthful, trust in the product cannot be gained by the consumer.

Class discussion also brings to light an approach to ethical reasoning being that of “outcome-based ethics”. This approach describes a need for cost benefit analysis of a situation. Netflix believed they were doing the right thing in order to grow their profits by falsifying information about how their products were being delivered thinking the cable companies would be forced to go into exclusive contracts with them once it was determined that the third party service providers were no longer part of the equation. The less painful solution to the situation proved to be true but also uncovered the fact that the Netflix service providers were not telling the whole story now turning the whole situation upside down by giving a foothold to the government to take over and begin regulating the industry. This was certainly not an outcome Netflix had anticipated. Ethical decision making is a fine line that organizations must be cognizant of before making claims that are not true.

References

Fox News Business (5 February 2015). Retrieved from http://www.foxbusiness.com/technology/2015/02/05/how-obama-fcc-and-netflix-are-duping-america-on-net-neutrality/

Beauchamp, T.L., Bowie N.E., Arnold D.G., (2012). Ethical Theory and Business, 9th Edition. Upper Saddle River, NJ: Pearson Prentice Hall