Netflix: Comcast-Time Warner Cable Merger Threatens Internet

The streaming-video provider breaks its silence on the proposed merger.

A sign is posted in front of the Netflix headquarters on January 22, 2014 in Los Gatos, California. 
National Journal
Laura Ryan
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Laura Ryan
April 21, 2014, 2:54 p.m.

Net­flix came out against the pro­posed Com­cast-Time Warner Cable mer­ger Monday, warn­ing that a com­bined com­pany would use its power to charge web­sites tolls to reach their cus­tom­ers.

Com­cast — the coun­try’s largest In­ter­net pro­vider — is already big enough to charge web­sites “un­pre­ced­en­ted” fees, and a com­bined Com­cast-TWC would be­come even more “anti-com­pet­it­ive,” Net­flix said in its earn­ings re­port Monday,

“The In­ter­net faces a long-term threat from the largest [In­ter­net ser­vice pro­viders] driv­ing up profits for them­selves and costs for every­one else,” Net­flix said in a state­ment.

Al­though this is the first time Net­flix com­men­ted on the mer­ger, the com­pany has been very crit­ic­al of Com­cast in the past. Last month, Net­flix CEO Reed Hast­ings blas­ted Com­cast over the agree­ment Net­flix entered in­to with the In­ter­net pro­vider in Feb­ru­ary that re­quires Net­flix to pay a fee to en­sure smooth stream­ing for Com­cast sub­scribers.

This kind of deal, known as an in­ter­con­nec­tion deal, was not part of the fed­er­al gov­ern­ment’s re­cently over­turned net-neut­ral­ity rules, which re­quired all In­ter­net pro­viders to treat In­ter­net traffic equally. But Net­flix re­cently urged the Fed­er­al Com­mu­nic­a­tions Com­mis­sion to ex­pand the rules to pro­tect against such prac­tices.

“The es­sence of net neut­ral­ity is that [In­ter­net ser­vice pro­viders] such as AT&T and Com­cast don’t re­strict, in­flu­ence, or oth­er­wise meddle with the choices con­sumers make,” Hast­ings said in a March blog post. “The tra­di­tion­al form of net neut­ral­ity which was re­cently over­turned by a Ve­r­i­zon law­suit is im­port­ant, but in­suf­fi­cient.”

Com­cast called Net­flix’s ar­gu­ments for its op­pos­i­tion “in­ac­cur­ate,” say­ing that in­ter­con­nec­tion deals have “noth­ing to do with net neut­ral­ity” in a state­ment Monday. The com­pany main­tained that the mer­ger will be good for net neut­ral­ity be­cause it is the only ISP still bound by the open-In­ter­net rules, due to con­di­tions set when it ac­quired NBC Uni­ver­sal in 2009. Those rules would ex­tend to Time Warner cus­tom­ers if the mer­ger is ap­proved.

“Net­flix should be trans­par­ent that its opin­ion is not about pro­tect­ing the con­sumer or about net neut­ral­ity,” Jen­nifer Khoury, Com­cast’s seni­or vice pres­id­ent of cor­por­ate and di­git­al com­mu­nic­a­tions, wrote Monday. “Rather, it’s about im­prov­ing Net­flix’s busi­ness mod­el by shift­ing costs that it has al­ways borne to all users of the In­ter­net and not just to Net­flix cus­tom­ers.”

The pro­posed mer­ger has at­trac­ted a great deal of reg­u­lat­ory scru­tiny and is cur­rently un­der re­view by the FCC and the Justice De­part­ment.

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