Shareholders have little reason to quibble with Netflix Inc. CEO Reed Hastings' results in 2011. Shares of the video-streaming and DVD rental company have risen from $175 in January to $275, as Netflix passed Comcast Corp. as the largest pay-TV subscription company in the U.S.

To customers, however, a pair of aggressive price increases that Netflix issued this year come across as tone-deaf and even arrogant. The rate hikes have kindled outrage in the technology press, Twitter feeds and reader comments on Netflix's own blog. The moves arguably create an opportunity for Charlie Ergen, the new owner of Blockbuster Inc., to grab some Netflix customers.

But this isn't the only pricing dispute Netflix faces. The Los Gatos, Calif., company is a vocal party in another debate with far-reaching consequences, pitting companies that sell content online against the cable and telecom operators that provide and maintain the infrastructure. AT&T Inc. and some other broadband providers have begun to charge Internet subscribers based on how many gigabytes of data they consume, a change in pricing that has profound implications for Netflix, Pandora Media Inc. and other companies that make their money by moving content over the Internet.

Metering broadband service is a cousin to the perennially divisive issue of net neutrality, or the precept that network operators should not discriminate between certain content traveling over the Internet. So far, the Federal Communications Commission has signaled its openness to the new pricing models.

Cable and telecom network operators present usage-based pricing as an analog to the water or electricity bill: Use more, pay more. It is also a necessary realignment of their business, as the traditional pay-television networks lose revenues to online video.

To critics, however, the pricing shift has the potential to shackle the Internet and hinder the development of new services that compete with cable TV.

"The tech community is schizophrenic about the infrastructure providers," says Craig Moffett of Bernstein Research. People want a robust Internet, he says, but balk at pricing changes that would provide network operators with a return. "You constantly get this push and pull that arises from a deeply conflicted view of whether or not infrastructure providers are for-profit enterprises or are public utilities."

Netflix stirred the issue with a July op-ed in The Wall Street Journal, in which general counsel David Hyman called new billing plans anticompetitive. Hyman singled out AT&T, which limits customers to 150 gigabytes per month for DSL service and 250 GB per month for its fiber broadband, with a $10 surcharge for each additional 50 GB. He wrote that AT&T's charges are out of whack with the cost of providing the service.

AT&T counters that its broadband caps will affect only 2% of its subscribers, leaving ample room for streaming and other services.

Andy Hargreaves of Pacific Crest Securities says that the caps will not undermine Netflix's service.

At current streaming rates, he says, a subscriber could still watch 5.6 hours a day of Netflix content before hitting AT&T's cap for DSL. High-definition streams require more bandwidth, so users would have to satisfy themselves with two hours per day.

"It doesn't seem like it's going to be a huge deal in the U.S., until you want to get HD streaming," he says.

There are other sources of content besides Netflix, from e-mail and music downloads to live sports and gaming.

But for now, Netflix is the biggest user. Networking technology company Sandvine Inc. reports that at peak hours the company is responsible for nearly 30% of traffic to broadband customers' computers.

Usage-based pricing is hardly new. In the early days of the Internet, dial-up service came with a limited number of hours per month. Broadband is often priced by speed, rather than how much data a customer downloads over a month.

Charging based on consumption has been more contentious. In 2009 there were vocal protests when Time Warner Cable Inc. tested plans to charge $15 a month for one GB of broadband service and charges of $2 per additional GB. Sen. Charles Schumer, D-N.Y., personally voiced his opposition to trials of the plan in the Rochester, N.Y., area to Time Warner Cable CEO Glenn Britt. The plan died quietly.

The Federal Communications Commission signaled that it is open to usage-based pricing in a December proposed rule negotiated with industry leaders from both sides of the divide. Chairman Julius Genachowski acknowledged "the importance and value of business-model experimentation, such as tiered pricing," in an agreement about the commission's authority to regulate the Internet.

Public Knowledge and New America Foundation's Open Technology Initiative said in a recent letter to the FCC that the new plans run contrary to the commission's goals of an open Internet.

While "not inherently problematic," usage caps provide incentives for "anticompetitive and monopolistic" behavior. Moreover, the groups complained that AT&T's overage charges will be a source of revenue, rather than a means of limiting congestion.

Bernstein's Moffett calls usage-based pricing "the issue" for telecom, media and technology companies, as traditional pay-television networks give way to other models. The current model actually creates problems, he argues, because the broadband providers' economic interests are tied to pay television rather than online video.

"For telecom and cable companies themselves, usage-based pricing plans are an important step in aligning their economic interests with the technology developments of our time," he says.

Another issue is that it is relatively simple and cost efficient for Netflix or Apple Inc. to increase their capacity to send content over the Internet. The content provider can spool more fiber to a data center.

"When you look at the other end of the distribution pyramid, it's very expensive," says Sandvine co-founder and chief technology officer Don Bowman. Cable and telecom companies own the last mile of network that stretches to residences. "If I'm going to increase bandwidth to a million homes in a city, you have to drive trucks out to intersections and dig up people's begonias," he says.

In markets with high broadband growth rates, pricing plans are typically simple and are more likely to provide unlimited data. When growth slows, Bowman says, carriers are more likely to bill according to usage.

Telecom network operators and their investors often grouse about the imbalance between valuations for companies that profit from the Internet and those that maintain it. Netflix's price-to-­earnings ratio, for instance, is north of 80, while AT&T, Verizon Communications Inc. and Comcast are priced in the mid- to high teens.

Broadband caps will not change the fact that growth companies such as Netflix trade at higher multiples than mature entities like phone and cable companies. Fees for consumption may make it more difficult for Netflix to increase its prices in the future, however. There will be more context on July 25 when Netflix reports quarterly earnings.

Michael Pachter of Wedbush Securities Inc. says that Netflix's latest rate increase indicates that the costs of streaming content are growing faster than revenues. He has a $100 target for Netflix, suggesting that the company is vastly overvalued.

Conversely, Pacific Crest's Hargreaves says that Netflix's new pricing plan will likely be accretive. Even if the company loses customers, it will likely gain more revenue per customer and eliminate shipping and other costs.

"The breakeven number is 3 million subscribers that would have to churn off entirely before it would be negative to gross profits," he says.

There will certainly be questions for management on Netflix's earnings call. It may be easier then to gauge whether the increase represents a shrewd tactic in a quickly changing market or the arrogance of pricing power.