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Comcast-Time Warner Deal Sparks Sharp Criticism From Netflix

April 22, 2014

Enid Burns for redOrbit.com – Your Universe Online

While the proposed Comcast-Time Warner merger is still under regulatory review, Netflix has joined the ranks of those opposed to the deal. In its first-quarter letter to shareholders, Netflix’s CEO said the merged company would give the cable providers too much power.

In the letter to shareholders, Netflix chief executive Reed Hastings and chief financial officer David Wells expressed concern that a combined Comcast and Time Warner would have a monopoly in some areas.

In some markets, Comcast-Time Warner will be the only choice, USA Today reports. Once the merger is complete, the company will reach an estimated 30 percent of America, which amounts to 35 million subscribers. The next largest competitor is Cox Communications, which serves 5 million customers.

Netflix played nice with Comcast earlier this year. In February the two companies inked a deal to speed up content delivery.

At the time of the deal in February, industry analyst Jeff Kagan spoke about the challenges both companies face.

“This problem is one of many that is challenging the online world. Companies like Netflix need fast download speeds for their customers to download movies and television shows. Yet companies like Netflix or Google don’t provide bandwidth. They require customers get Internet connectivity from other companies like cable television or telephone companies,” said Kagan. “This problem is one of many that is challenging the online world. Companies like Netflix need fast download speeds for their customers to download movies and television shows. Yet companies like Netflix or Google don’t provide bandwidth. They require customers get Internet connectivity from other companies like cable television or telephone companies,” said Kagan.

The turnaround for Netflix is that it has to pay fees in addition to what consumers pay for Internet service, in order to stream at acceptable rates. “Comcast is already dominant enough to be able to capture unprecedented fees from transit providers and services such as Netflix. The combined company would possess even more anti-competitive leverage to charge arbitrary interconnection tolls for access to their customers. For this reason, Netflix opposes this merger,” the letter stated.

The letter further calls for restrictions if the merger should be approved.

“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,” Hastings said in a webcast following the company’s quarterly results.

Netflix had more to discuss in its earnings than the Comcast-Time Warner merger.

The OTT provider of content said it plans to raise monthly subscription fees by $1 to $2 for new members, while keeping existing subscribers grandfathered in. The strategy behind holding rates for existing subscribers is to decrease churn. Consumers will be less likely to subscribe long enough to binge watch a season of House of Cards and then cancel, only to renew next season, if they are not eligible for the lower subscription rates when they renew their subscription.


Source: Enid Burns for redOrbit.com - Your Universe Online



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