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Netflix says it 'should have avoided' unmetered deals with Australian ISPs

After partnering with Australian service providers to offer unlimited streaming, Netflix has reaffirmed its support for net neutrality and admitted the deals were a mistake that won't be repeated.

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Netflix CEO Reed Hastings at the company's Australian launch. Image by Claire Reilly/CNET

Netflix has had a change of heart about controversial deals it struck with Internet service providers as part of its launch last month in Australia and New Zealand.

As part of the March launch, the video-on-demand streaming service partnered with one of Australia's largest ISPs, iiNet, to offer its customers unlimited access to content streaming without counting toward their monthly data cap. One of iiNet's competitors, Optus, quickly followed suit, announcing that it too would offer its customers unmetered access to Netflix for all fixed broadband customers.

The deals themselves quickly came under fire for seeming to contravene previous comments from Netflix CEO Reed Hastings that "Net neutrality must be defended" and ISPs must not "restrict, influence, or otherwise meddle with the choices consumers make."

Shortly after the announcement, a Netflix spokeswoman defended the deals, saying that arrangements such as those struck with iiNet and Optus were "common in Australia" and that the company would not put "new members at a disadvantage to those of rival services."

Netflix has now conceded that, in light of its support of "strong Net neutrality across the globe," its deals with the Australian ISPs were a mistake. Netflix released an investor statement Wednesday admitting that it "should have avoided" signing exclusive deals, saying it continues to be a "vocal" advocate of Net neutrality -- the principle that all data on the Internet should be treated equally by ISPs and governments.

"We support strong net neutrality across the globe, allowing all consumers to enjoy the Internet access they pay for, without ISPs blocking, throttling, or influencing content in the last mile or at interconnection points," the company said in a statement [PDF] on its 2015 first quarter earnings.

"Data caps inhibit Internet innovation and are bad for consumers. In Australia, we recently sought to protect our new members from data caps by participating in ISP programs that, while common in Australia, effectively condone discrimination among video services (some capped, some not). We should have avoided that and will avoid it going forward."

It's not the first time Netflix's stance on Net neutrality has been called into question.

Shortly after the unmetered data deals were announced in Australia, Netflix CFO David Wells spoke at an investor conference in San Francisco, implying that he wasn't happy with decisions in the US to enshrine Net neutrality under Federal regulation.

The US Federal Communications Commission voted in March to reclassify Internet service as a Title II service under the country's Communications Act. In short, the decision means that ISPs in the US will be prohibited from blocking or slowing down traffic on their networks, or from offering paid services to content providers to ensure priority access -- similar to the deal Netflix struck in Australia.

But while supporters of the change said it maintained a free and open Internet, Wells seemed less than impressed with the move.

"Were we pleased that it pushed to Title II? Probably not," he said.

The company was forced to reiterate its stance on neutrality after the CFO's public comments.

"Netflix supports the FCC's action...in ensuring consumers get the Internet they paid for without interference by ISPs," said Netflix spokeswoman Anne Marie Sequeo. "There has been zero change in our very well-documented position in support of strong Net neutrality rules."

These comments were echoed in today's Netflix result note, with the company saying it had been a "vocal" advocate for the FCC's moves and was "pleased with" the decision.

Optus said that while unlimited data was "the best option" for customers looking to stream a large amount of content, it chose to offer unmetered access so customers could "watch as much Netflix as they want". iiNet has also said it will continue offering unmetered Netflix access.

Netflix declined to provide comment.

Updated at 2:40 p.m. AEST: Included comment from Optus and iiNet.