April 21 Video streaming service Netflix on
Monday became the most visible company with a business
relationship with Comcast to oppose the No. 1 cable
operator's $45.3 billion merger with Time Warner Cable.
"It's more in the public interest to either not have them
merge or if the government goes ahead with it, to at least put
some significant merger agreements, settlements in there,"
Netflix Chief Executive Officer Reed Hastings said in a webcast
following the company's quarterly results.
Netflix added in a quarterly letter to shareholders that
Comcast would control access to broadband in a majority of U.S.
homes while also having "anticompetitive leverage" to charge
arbitrary fees on companies that rely on its Internet service.
Until now, the only vocal advocates calling for an outright
rejection of Comcast-Time Warner Cable merger had been public
interest and consumer groups such as Public Knowledge and the
Consumers Union, as well as Senator Al Franken, a Minnesota
Democrat who has often opposed media concentration.
Netflix has tussled with the cable operator in recent months
over the speed Comcast delivers the online streaming service to
its cable customers. In February, Netflix struck a deal to pay
Comcast for faster online delivery of its movies and TV shows
through a practice known as interconnection, after customers
complained about slow service.
While Netflix and Comcast announced the news in a joint
statement that sounded friendly at the time, just a month later,
Netflix's Hastings blasted Comcast for charging these
interconnection fees in a blog post.
In an interview with Reuters on Monday, the Netflix
executive said he favors the federal government imposing "some
enduring form of no-fee interconnect" if the merger is approved
Comcast quickly responded with a lengthy statement.
"Netflix's opposition to our Time Warner Cable transaction is
based on inaccurate claims and arguments," the cable operator
said. "There has been no company that has had a stronger
commitment to openness of the Internet than Comcast."
The cable operator noted that, as part of its 2011
acquisition of NBC Universal, it is the only Internet provider
that is legally bound to follow the U.S. Federal Communications
Commission' net neutrality rules.
Comcast charged that Netflix is using the interconnection
argument to "shift its costs from its customers to all Internet
customers, regardless of whether they subscribe to Netflix or
A DEAL HURDLE?
Netflix's decision to publicly oppose Comcast's plan to
merge with Time Warner Cable may give the company headaches when
it makes its case to the Justice Department that their deal is
legal under antitrust law, said Allen Grunes, an antitrust
expert with Geyer Gorey LLP law firm.
"The significance here is that we know from the (2011)
Comcast NBCU deal that DOJ (Justice Department) was worried
about Netflix," said Grunes. "I suspect that Netflix has a whole
bunch of information and concerns that could support DOJ
bringing a case because this is the person whose business is
placed at risk."
Critics of the merger say that a bigger, more powerful
Comcast would have the power to throttle Internet traffic.
Since announcing its bid for Time Warner Cable in February,
Comcast has underscored that the merger combines two companies
that do not directly compete in any markets, meaning no consumer
would lose a choice of an Internet or cable provider.
It has argued that Time Warner Cable's customers would see a
boost in quality of their services and Internet speeds.
(Reporting by Liana B. Baker; additional reporting by Diane
Bartz and Lisa Richwine; Editing by Ronald Grover, Bernard Orr)