Formally joining the chorus of critics to Comcast's proposed takeover of Time Warner Cable, Netflix is loudly calling on the FCC to reject the deal out of hand.
In a 256-page petition filed with the Federal Communications Commission (FCC) late Monday, Netflix Inc. (Nasdaq: NFLX) urged the Commission to block the $45 billion merger of the two largest US MSOs because of the power that the combined company would have over interconnections and the US broadband market.
The filing warns that the proposed new Comcast Corp. (Nasdaq: CMCSA, CMCSK), with control of nearly 40% of the nation's broadband households, would have an even greater ability to block online video rivals and degrade rivals' content than it already has.
"Unsurprisingly, given their dominance in the cable television marketplace, the proposed merger would give applicants the ability to turn a consumer's Internet experience into something that more closely resembles cable television," Netflix argues in the petition. "The combined entity would have the incentive and ability -- through access fees charged at interconnection points and by other means -- to harm Internet companies, such as online video distributors (OVDs), which applicants view as competitors."
In the FCC filing, Netflix also reiterates its oft-stated complaint that both Comcast and Time Warner Cable Inc. (NYSE: TWC) have already shown their broadband market power to degrade online video content and obtain paid peering payments from a reluctant Netflix. The filing notes that Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T), the other two US broadband providers that have struck pay-for-peering pacts with Netflix, have demonstrated the same market power. (See Netflix, TWC Sign Pay-to-Peer Deal.)
"In Netflix's experience, there are four ISPs that have the market power to engage in degradation strategies to harm OVDs," the filing states. "Two of those four propose to merge in this transaction. Consequently, the proposed merger would significantly strengthen the harms to consumers and to Internet content distributors, such as OVDs."
Looking back 14 years for a policy precedent, Netflix notes that the US government intervened in 2000 when the two largest MSOs -- then AT&T Broadband and MediaOne -- sought to strike a similar merger deal. With those two companies then controlling nearly 40% of the nation's broadband households through separate entities, the filing says, federal regulators forced the applicants to divest one of the two broadband businesses before they could combine.
With its filing, Netflix joins such other staunch critics as Dish Network, Consumers Union, Common Cause and the National Organization for Women. New York City Mayor Bill de Blasio is also seeking to block the merger. In all, more than 60 groups are urging the FCC to either halt the proposed $45 billion deal or impose major conditions and restrictions on the new entity.
In a lengthy corporate blog earlier this week, Comcast EVP David Cohen pointed to the support the merger has received from more than 200 groups and brushed aside "negative comments" by deal critics as "the same discredited arguments that we've demonstrated consistently don't have any merit." He reiterated that Comcast "remains committed to a free and open Internet and supports the FCC putting in place strong, legally enforceable open Internet rules" that would "apply to all companies."
— Alan Breznick, Cable/Video Practice Leader, Light Reading