Cloudflare CEO Matthew Prince: Italy's €14M fine is 'thuggish' internet censorship that Washington is now pushing back on

extremely scalable. Uh, our next guest, Matthew Prince, is in the reream waiting room. Let's bring him in to the TVPL Ultradome.

Matthew, good to see you again. Happy New Year. How are you doing?

Good. How are you?

That's good to hear. It seemed like you weren't doing that well a week ago when you uh posted about a court in Italy fining you. Can you take us through the process? Was was this a surprise? Um how did how did everything uh lead up to your post which went mega viral?

Yeah, first of all, not a court uh quasi governmental organization and and let me give you a little bit of background. So um in Italy uh there was concern uh by a bunch of the uh football clubs, so the soccer clubs in Italy about um online piracy of of the matches uh that were there. And in response to that, the Italian parliament uh basically designated a quasi governmental organization called AICOM uh that they would have uh the ability to essentially allow any media company executive to put any website they didn't like on a list

and then initially just the ISPs in Italy had 30 minutes to block access to that website. But they've been amended the law to be able to include other companies including Cloudflare but also folks like Amazon, Google, Microsoft, anyone that is doing anything uh that is cloud uh related. Uh they they have gotten swept up in this. And so the requirement uh was that when a website was put on this list that we would have 30 minutes to remove it globally. In other words, this small group of media executives got to choose what you could watch in the United States. uh and we already saw significant uh exposure of this beyond just uh illegal streaming where we saw political content being removed. They accidentally blocked all of Google Drive at one point. They accidentally blocked all of Cloudflare's network at one point which broke the Italian internet. So they turned that off uh pretty [laughter] quickly. And so we had been in litigation in Italy uh to um to basically say this doesn't make any sense. And what particularly doesn't make sense is we hate the illegal streamers. They cost us money. We don't make any money off of them. They waste our bandwidth. They they take up resources that we could have for paying customers. And so we have a huge team that is is trying to shut them down. We actually won a court decision

uh right before Christmas uh that said um that we could get all of the internal documents on how this commission was created, what its rules were, everything else. And um and then, you know, probably just coincidentally, of course, uh immediately after Christmas, the first meeting they had, they imposed a $17 million fine on on us and said that it will continue to escalate if we don't pay it and register for this scheme and commit to let them censor censor the internet, which obviously uh we're not going to do. That, by the way, is 2x our revenue in Italy. uh they have interpreted the law as saying that they can charge up to 2% of global revenue for any company that they find. So again,

the insanity here is is pretty pretty high.

Uh and uh and and yet that's not even what the law says. The law the law simply says it can be from um you know tens of thousands and in fact there's parts of the law that they relied on that are so old that they were actually quoted in LRA. So it was back before even the EU existed. To give you some sense of how crazy this is, even the EU,

yeah,

has said uh that this law has has sign they have significant concerns over this law. And so um we're we're in a we're in a we're in a strange situation where, you know, we're getting a lot of pressure to to literally just turn Italy off and not let them connect to Cloudflare's network, which would, you know, unfortunately everyone saw a few months ago when we had an outage how big of a an issue that is. Yeah.

Um, that doesn't seem right.

You know, putting your tinfoil hat on. What is, is there some Do you think there's some local group that wants your Italy business that says like, "Hey, that's like it purely own goal." I think there's I think that there is um so I think first of all it's a bunch of you know older um you know football uh owners

who don't understand how the internet is works who who just are saying you know piracy is a problem and instead of doing what most of the leagues around the rest of the world do with us which is work with us in order to identify what those illegal streams are and then we not only take them down but we actually put up a page that's an advertisement for the for the the correct stream in its place uh instead They were just like, you know, we're we're we're going to just, you know, be be be we're going to just make it so that you have to take these things offline. Damn the consequences. I think there are other people inside of Italy that see this as an ability for them to be able to control some political content uh that they may not like. Um obviously Italy is a a contentious political uh state and being able to shut things you don't like off the internet is is a very powerful political tool. So I think that's the that's the tinfoil hat hat side. But I think mostly this is just thuggish behavior by a bunch of people who don't understand how the internet

uh Ben take off the tinfoil hat, put on the steel man helmet. uh and try and uh steal man for me the the where the work should be done of fighting piracy on the internet because uh I have some empathy for a league owner who doesn't want their you know content streamed illegally

and it seems to be like such a hard problem like like my view is like UFC kind of just like threw in the towel and was like this is the the pay-per-view model is over we have we're going to Paramount Paramount yeah and so uh yeah I it it seems like it's a nice thing for you to do to take down these illegal streams. Maybe there's some legal reason that that falls on you.

It's a purely it's a financial reason. It's like when the when the streams come up, they they clog our pipes and that shuts down the ability and we have to pay for that bandwidth. Yeah. So, we have all the financial incentives to shut it down. It is a hard problem, right? Because again, the streamers are clever and they're always bouncing around and doing different things. But we shut down hundreds of thousands of illegal streams every single day and we work with most of the leagues around the world. So there doesn't need to be a law in order to create the incentives for us. What I do worry about though is anytime that you create some sort of rule in the name of privacy, in the name of protecting children, in the name of whatever that lets a local government and whether that's a you know state government or a or or a or or a or a nation state be able to set how global infrastructure works. That just seems per se bad, right? You shouldn't have be able to say Italy decides what you can see and watch in New York or California or Texas or Canada or China frankly and China shouldn't be able to impact like let China be crazy inside of China and they can have their own rules and regulate their networks however they want. But the the fact that this has extr territorial application that that literally some again Italian basically soccer club owners can dictate what content you watch in California or New York. That's insane and that's something that we have to push back against.

Yeah. So, what's the response been like uh in Washington, in DC? Uh I imagine that at some point, even just a passing statement from the admin, hey, Italy, back down on this. We'll, you know, buy a little bit more wine or something, some trade deal, some

or not or not impose a 100% tariff on all your good that too. Uh yeah. What What are the levers that people are considering pulling? what has been pulled? How are the how are the discussions going? Yeah. So I spent um the beginning part of this week in DC meeting with everyone from uh senators to um the United States state department the white number of different uh officials within the in the in the administration directly in the white house uh USR which is the United States trade representatives and and I didn't come across a single one that wasn't disgusted by this policy. And so like I don't think the Italians quite understand the hornets nest that they've stirred up. This is this is now sort of the cause celeb for Europe Europe using US tech companies as their piggy bank where I mean the crazy stat is that Europe makes more off finding US tech companies than they do off taxing their own technology companies. That's insane, right? And so something has to change here. And this is the most clear example that again, you know, whi whistles to all the dogs in Washington right now saying like we can't have again Europeans, let alone, you know, this sort of Italian cabal being able to dictate what is and is not online.

Yeah. What's the reaction been from uh I mean your competitors, there are other content delivery networks, other hosts. uh do they agree with you and they're just less outspoken because they're not in the founder mode that you're in perhaps or are there some uh some other companies that are just less affected or less targeted because they aren't as much of a peer play like h how how are how's the rest of the ecosystem reacting to all this?

Yeah, I think the hyperscalers are really concerned about this. I think anybody who has, you know, a a um a really large business where they have, you know, millions and millions, we have tens of millions of customers. You know, I think what's unique about us is we have a free version of our service because we believe that every small business, every um you know, developer should be able to have robust cyber security tools, robust content delivery tools. And so that that gives us a much broader portfolio than some of our competitors that only have, you know, you they won't even pick up the phone for less than a million dollars. Like that that's a diff so it's a we it's a little bit of a different thing. But if you're an AWS, if you're a Google cloud, if you're Microsoft Azure, if you're an Oracle, like they are deeply concerned that this is going to impact them because they all have broad sets of customers and it's very difficult for them to, you know, just say we're going to let Italy pick who can and cannot be a customer of ours. That's again just insane.

Okay, last question on the fine for me and then I want to move on to AI. Uh, since we have you here, uh, what what's the result of the fine? Did you just pay it or are you debating it?

No, no, no. So, we're we're we're challenging it. Italian law because it's because it's Italy doesn't have any any mechanism to stay this. I would imagine that there are going to be um some some pretty uh pointed phone calls from senior US officials uh to senior Italian officials saying like cut this out. In addition, you know, we we're considering various options. So, we may shut down our free service uh in Italy, which again is unfortunate. It'll hurt a bunch of developers there, but we can't we can't do charity for places that again earn rent.

The other thing

the other thing that's coming up is the Milan Cortina Olympics uh where we provide tens of millions of dollars of free cyber security services. Um, I I was actually a personal guest of the former president of the IOC to the Paris games because we provided the information that took the terrorist attack that almost shut down the games and allowed them to arrest 90% of the terrorists beforehand. We helped stop massive denial of service attacks again for free uh that were launched from from Russia which is trying to completely discredit the Olympics because of the doping scandals and and fans that they've that they've faced. And so um you know again I I really believe in the Olympics. I really want the Olympics to succeed. Um, but again, it seems wrong for us to be providing tens of millions of dollars of free cyber security for a for a for a showcase event in a country that's just acting completely insane.

Yeah, that makes a ton of sense. Um, uh, talk to me about the 2026 app innovation report. Tech, talk to me about this idea of a technical glass ceiling. Uh, I've been going back and forth with a lot of the AI researchers that come on the show. The models are amazing. And then I'll ask them like, well, this particular app doesn't seem to be getting better on my phone. What's going on over there? Why isn't this app uh significantly improved? Why are there still bugs in enterprise software when everyone has access to frontier models? Uh what are you seeing in AI adoption? What are you feeling internally? Just take me through your current thinking.

Well, we're we are incredibly bullish in AI. We use it internally. We use it across all of our our teams. We actually had our companywide kickoff uh today and our CTO challenged every one of our teams to say how can they use AI more and it's it's really quite incredible uh what what it's done. What I will say though is we're we're definitely in some places for some AI companies hitting some sort of a limit uh it seems in what they're able to do. And the exception to that um I I think has been Google. Um Gemini has continued to outperform uh the rest of the market. And um and and and I think that the answer to why that's the case is is actually not about the chips. Obviously they've designed their own um you know GPU chips. Um I I don't think it's about the people. They have incredibly smart people but so does Anthropic. So does OpenAI. I think it's actually about the data and we are one of the few companies that actually has a view into this and so we haven't shared this very publicly but I guess you know no time like the present. Uh, and so how much more of the web would you guess that Google sees and is able to train their AI systems on versus Open AI?

Yeah, I would probably say 50% more.

Yeah, the answer is actually 3.2 times more.

Wow.

Which is insane, right? That means that for every one page that OpenAI say is, Google is seeing, you know, 3.2 pages. So there's just so much more data that's going into it and and again open the next closest. After that, Microsoft sees Google sees 4.8 times more of the web than Microsoft. They see similar to what they see with Anthropic as well. And it just drops off from there. And so what I worry about is that because Google has this unique access to the web that nobody else has. Yeah. That the game might just go to them. Because I think that at the end of the day, whoever has the most data wins in the era of AI. And I think what a lot of these companies are seeing is they're hitting kind of a data limitation. And one of the things we're really thinking about is how can we make sure that we level the playing field? Either bring Google back to where everyone else is. Don't let them leverage search in order to get a unique advantage in AI or how do we lift everyone else up to the same place where Google is. Make sure that everybody has access to that same data. If we don't create a level playing field in terms of the data, I do feel like there's a real concern that Google is going to run away with this and no one else will catch them.

Interesting. Yeah, we've noticed that. I mean, we test all the different uh LLM apps and uh even just from a branding perspective, when you're in the Gemini app and it and it says doing a Google search, all the other apps will say we're searching the internet, but doing a Google search just gives it the brand is like, oh, it's it's doing what I would do if I were on the computer. and that uh and and it's interesting to hear that there's actually more data being accessed. It's not just the brand.

That's also the one of the only things that Elon and Sam can really agree on or sort of [laughter] a shared shared motivation is like making sure the AI race is competitive with

Google. I mean people people forget that open AI was started because Elon and Sam got together because they were so concerned about what was happening with with Google. And I think that that concern is rightly placed and Google has such a data advantage where because of search, everyone has let them behind their payw wall. Everyone has let them see parts of the internet that no one else sees. Again, we we can look at the the the restrictions on various spots. What are the robot txt files and everything else for a huge portion of the internet? And the answer is that Google just has privileged access. And until we until we level that playing field either by bringing Google back to the same level as everyone else or bringing everyone else up to the same level as Google, like I worry that that this is their their race to win. And and that's bad. Like the world shouldn't certainly shouldn't have one AI company. I don't think you should have five AI companies. I think we should be playing for a world where we have 500,000 AI companies and we make it as easy as possible for any of them to thrive and survive.

Okay. Talk to me about the defaults in uh on robots.txt where people are allowing scrapers where uh Googlebot can come in where Gemini can come in. Uh what have what's been your thinking on defaults? What how has it evolved and then what's the reaction from your customer base been to those defaults? Yeah. So, I think the this is a this is is is actually a really nuanced issue and the answer is going to be different for a number of different um companies and in some cases we don't know what the right default is. So, here here's here's where I think it's the things that are very straightforward.

Excuse me. Um if you have a knowledge base, so Cloudflare has a knowledge base on you know how to use Cloudflare workers in order to build build systems. [clears throat]

Excuse me. Tickle in my throat.

No problem. Um, if you have something like that, then that's then of course you want that to be an AI systems and that should be default scrape no matter what.

Yeah. On the other hand, if you're a publisher, which is ad or subscription supported,

maybe you don't want that to be in because AI bots don't click on ads. And if they're taking all the content that you're generating and then just regurgitating it in a place where you don't get any benefit from that, that that's a real problem for the business model of of media companies. And again, I think what we're seeing is the media companies have really locked down who has access to their content. And you're seeing much better deals from the likes of Comedy, NAS, Dot D-mmered, Reddit, who are getting more for their content from the AI companies because at the end of the day, whoever has the most data is going to be the winner that's there. What I think is somewhat unfair, and again, back to the same issue, is Google because of search is still getting almost everything for free whereas everyone else is having to pay for it. That seems wrong. That seems like something that we need to fix in some way. And again, that either we need to either bring everyone else up or bring Google back down to everyone else's level. But that's that's one of the things we're worried about. I think the most interesting thing that people aren't talking about today is what's going to happen to retail. What's going to happen to small businesses that are out there? AI is this massively consolidating force. And if you look at take three of the biggest retailers in the world, Walmart, Target, and Amazon. What's interesting is again these these are hugely well-resourced companies, smart people working at them. no lack of of you know financial resources across across them to do whatever is right and they have come to three completely different conclusions on what you should do about a aentic commerce

in the case of Walmart throw the doors open to the catalog let every agent in and in the short term I think that's clearly the right answer

um but I worry over time that the agents are going to just keep trying to figure out how can we cut Walmart out over time and I don't know what brands mean in a world where you know your agent is shopping on your behalf. Brands are a way for humans to have shortcuts that understand quality and value that goes away in a world of agented commerce. Agents will figure that out for you and report back and brands might not matter as much. And including a massive brand like Walmart, Amazon is taking the complete opposite strategy. They're literally suing Perplexity saying your agents aren't welcome here.

Again, two But but that's because they have a massive advertising business and they know that the agents aren't

Well, so is Walmart.

Sure.

Yeah. But it's not how how material is it for Walmart versus

it's a pretty big like all all I mean there's any of those sponsored listings on Walmart and they're all doing the same stuff. I think I think I would I would argue it's something different. I think Amazon thinks that they have to win the agent war themselves and so Alexa has to get much better at it whereas Walmart doesn't have as much of a stake in this. So, this is a giant bet, I think, from Amazon that their agent will be able to shop better than anyone else's. Um, that isn't my experience with Alexa yet, but again, a huge amount of resources that are going into that. Target has what I think is sort of the, oh, let's split the baby um kind of approach, which is agents are allowed, but they have to be the ones that are listed on the Target website. That obviously is not going to be a long-term sustainable approach, but but I think that that shows how challenging this is going to be. And what I really worry about is going forward, like if you think about what small businesses that you shop with, your local butcher, your local, you know, flower store, those things, a lot of it is because of the interpersonal relationships with that you have with those shop owners.

If those go away, if your agent is doing this all on your behalf, if we all become some version of the Jetsons, where you know what does how does George do his shopping? He asked Rosie, the helpful robot, to go do it for him,

and eggs show up and he doesn't really care, you know, where they came from. I worry that that's going to put enormous pressure on small businesses and I don't know that small businesses have the tools today to be able to figure out how to exist and thrive in this world of agentic commerce and that's something that I'm enormously worried about.

Jordy,

I think yeah, I think it's I think it's warranted. I I I still think at the end of the day with physical products it's like you know I care a lot about like I'm I'm drinking this here. I'm drinking this because our friend Andrew Huberman, this is the brand that he's aligned with. Like if I just sent an agent to go buy me a Yerba Mate, maybe it comes back with something else, but then I'm still like, "Ah, just get me the get me the get me the [laughter] get me the podcast in a can, please." Uh, anyway, so a lot a lot to figure out. I the the exciting thing I feel like is that every uh so many different companies are reporting that LLM traffic is converting at a high rate, which tells me that it is a great tool for product research. But

yeah,

there is a lot there is a lot of questions of like yeah, how do you

uh you know, geo is kind of like a dark art right now. It's very hard to under it's it's far easier to kind of understand how you're showing up in in results than it is to maybe influence it yet.

Um a lot of things to figure out. I did have one I I wanted an update on the ski season from you. uh uh we we I saw numbers, you know, tra basically traffic down like 20% year-over-year

probably.

Yeah. So, so the so so one one thing before like I I agree we don't quite know how this is going to play out, but I do think it's important that we articulate what we're trying to play for. So I want to play for a world where there's not five AI companies, there's 500,000, where there's not, you know, a small set of media, you know, massive conglomerates, but anyone can be a content creator. I mean, you guys are a perfect example of what I want to make sure continues to exist as we get into a world that is more AIdriven. And then for businesses, we need to make sure that you can be a small business and still thrive. That there is a way to have a level playing field and that there can be tens of millions of businesses around the world that can actually do that. And that's that's what we're thinking about. That's what we're partnering with folks like Visa and Mastercard, American Express, PayPal, you know, Shopify, Adobe, Salesforce to try and figure out how do we give those tools. And I think that's the one of the most important questions. The business model of the internet over the next 5 years is going to change radically. Rarely does that something, you know, that big have that big a change. And I think if you're not thinking about what that change is going to be, uh then uh then then again, I I I don't think you're worrying about the most important question today in terms of the ski season. [clears throat] No reason the skiing should be distracting you from thinking about what the future business model of the internet should be. It is grim. I'm sitting [laughter] in I'm sitting in Park City, Utah. It is the worst ski season. I mean, I'm 51 years old. My first year of skiing, I was the 76 77 season. This is as bad as that season. Um, I I'm

No, it's good timing for you. Like a lot of people, you know, pray for snow. You were kind of like a bad ski season is kind of convenient for you right now. You need to be pretty locked in.

I am for for I'm trying to get Veil to sell me uh Park City uh and then return it to local ownership and and make it the star that it is. And I think

Yeah. So, so Veil is trading at less than less than two times revenue. Uh, we've covered kind of the history of the business. Uh, like at what point do you just like just buy the whole buy the whole thing?

I don't think it makes sense. I don't want to run Veil. Uh, that doesn't sound like much fun, but I think somebody should. And you know, if it's, you know, if you could if you could acquire Veil for, you know, $5 billion, uh, with with some leverage and you need about a billion dollars of equity, I I know a guy who will who will write you if you're an activist investor on

That's what I was saying. One way you get your your prize uh, you know, your trophy, Park City, is you just buy veil and then you spin it out spin out Park City yourself and

Yeah, that that seems maybe we'll get to that point. I would much rather somebody else who's like good at those things that goes again like a you know Elliot management if they want to go buy Veil and then sell me Park City. That would be it's it seems like an almost it's getting close to being a no-brainer.

Amazing. Well well well we're hoping to follow that story. Thank you so much for coming on the show. Good luck with the

good luck with the Italians and thank you for all the support coming on the show early. It's been huge.

How's your Italian?

My Italian is is is not not particularly good. So

he has a great Italian lawyer. I bet I bet he's got a guy who's over there.

A [laughter] lot of lot of good employers. Full employment. Uh well, have a great rest of your day. Enjoy the rest of your day and we'll see you soon. Appreciate it. Big fan.

Goodbye. Thank you.

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