Netflix Bolsters Al Franken’s Arguments Against Comcast-TWC Merger

Al Franken
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Sen. Al Franken (D-Minn.), so far the most visible Capitol Hill lawmaker to oppose Comcast’s merger with Time Warner Cable, is pointing to Netflix’s experience as an example of why the transaction should be blocked.

Netflix earlier this week announced its opposition to the merger, citing the greater leverage that it will give Comcast, particularly over providing content companies with access to its broadband customers.

On Thursday, Franken released a letter he got from Netflix after asking the company’s CEO, Reed Hastings, for his opinion of the merger and its affect on competition.

“Netflix has seen firsthand how Comcast can leverage its existing market power to extract arbitrary tolls to reach consumers, particularly from Internet video companies like Netflix that pose a competitive threat to Comcast’s own video services,” Netflix VP Christopher Libertelli wrote to Franken.

Libertelli then went on to cite the issue of the connection of one broadband network with another. In February, Netflix reached an “interconnection” agreement with Comcast to provide the capacity to deliver its video signal to Comcast subscribers.

Netflix says that in the past, such connections have been made with no fee. But with video quality degraded on Comcast, Netflix contends, it was forced to pay for improved delivery.

“That is where Comcast is able to leverage its market power most effectively,” Libertelli wrote. “It can restrict transit capacity into its network to force content providers into paying for uncongested interconnection.”

Franken said that Netflix’s experience “appears to illustrate the point” that the merger would “give Comcast too much leverage over everyone else on the Internet, resulting in higher prices and worse service for consumers.”

In a statement issued Thursday, Comcast’s Jennifer Khoury said that “Netflix’s argument is a House of Cards.”

As we and other industry observers have already noted, Netflix’s decision to reroute its Internet traffic was all about improving Netflix’s business model,” she said in a statement. “While it’s understandable for Netflix to try to make all Internet users pay for its costs of doing business (as opposed to just their customers), the company should at least be honest about its cost-shifting strategy.”

She noted that Comcast has many other agreements like the one with Netflix, as have other Internet providers. “And 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,” she said.