UPDATE 2-Netflix sees competition down, fees up if Comcast, TWC combine

Thu Apr 24, 2014 6:50pm EDT

(Adds comment from Comcast)

By Diane Bartz

WASHINGTON, April 24 (Reuters) - Netflix Inc, which opposes the proposed Comcast deal to buy rival Time Warner Cable Inc, outlined on Thursday the ways it thinks competition will be hurt if the merger goes ahead, most notably in the extraction of "arbitrary tolls."

The popular video streaming service responded in a letter to Senator Al Franken, a vocal critic of the deal, saying a combined Comcast Corp and TWC, would mean video providers would pay more to get their movies and television shows into viewers' living rooms.

"Comcast is limiting the capacity of connections between its network and other networks, unless the network agrees to pay Comcast for access," Netflix Vice President Christopher Libertelli wrote in the letter to Franken, a Minnesota Democrat.

"Consumers experience these delays as slow page loads, poor streaming quality, and frequent streaming pauses," Libertelli wrote in the letter released by the senator's office.

In a response, Comcast accused Netflix of trying to shift the costs of its bandwidth-heavy business onto all Internet users rather than just Netflix users, and said it has many agreements similar to the one with Netflix.

"Those agreements have not harmed consumers or increased costs for content providers. If anything, they have decreased the costs those providers would have paid to others," said Jennifer Khoury, a Comcast spokeswoman.

Comcast, the No. 1 U.S. cable company that also owns NBC Universal, said in February it would buy rival cable and broadband provider Time Warner Cable, angering consumer groups who fear the pricing power of the combined entity.

Franken soon joined the criticism, and Netflix came out in opposition to the deal on Monday.

Netflix made a similar point in a blog post on Thursday.

"We're very concerned that a combined Comcast-TWC will place toll taking above consumer interests," wrote Ken Florence, vice president of content delivery at Netflix. "Comcast is double dipping by getting both its subscribers and Internet content providers to pay for access to each other."

Netflix streaming accounts for nearly one-third of all Internet traffic in North America during peak times, according to research by broadband networking equipment company Sandvine Corp.

Comcast has defended the merger by saying that the two companies do not directly compete in any market, meaning no consumer would lose a choice of an Internet or cable provider.

A Senate panel has already met to consider the merits of the deal. The House of Representatives Judiciary Committee will hold a hearing on the issue on May 8. (Reporting by Diane Bartz and Lisa Richwine; Editing by Ros Krasny, Sandra Maler and Andre Grenon)

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