Comcast pushes back on Netflix; touts benefits of TW Cable deal

Netflix has emerged as one of the biggest foes of Comcast’s proposed merger with Time Warner Cable.

Despite a recent agreement in which the digital programmer agreed to pay the cable and broadband giant for a direct connection to its 20 million high-speed Internet customers to improve the speeds and quality of its video streams, the two companies are publicly trading shots at each other.

On Monday, Netflix said it was opposed to Comcast acquiring Time Warner Cable, a deal that would give Comcast an estimated 40% share of the U.S. broadband market. It would also make the company the biggest provider in many big cities including New York, Los Angeles, Chicago and Philadelphia.

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“Comcast is already dominant enough to capture unprecedented fees from transit providers and services such as Netflix,” the online video company said. “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.”

Netflix is the only major entertainment company to come out publicly against the Comcast/Time Warner Cable deal. While some small independent television programmers have expressed worry about the deal, the majority of the major media companies that either compete or have relationships with with Comcast and Time Warner Cable have kept quiet.

Another critic of the Comcast/Time Warner Cable combination, Sen. Al Franken (D-Minn.) last week wrote Netflix Chief Executive Reed Hastings encouraging him to express any concerns about the sale.

Comcast wasted no time firing back at Netflix saying Monday that the opposition was based on “inaccurate claims and arguments.”

“Netflix is free to express its opinions. But they should be factually based,” Comcast Senior Vice President Jennifer Khoury said in a statement.

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Comcast said its deal with Netflix is a Internet connection business transaction, which has nothing to do with controversial net-neutrality rules that require Internet service providers to treat all Internet traffic equally.

The company added that Netflix was unfairly trying to paint Comcast as an Internet bully when Comcast continues to comply with the government’s net neutrality regulations even though a federal judge tossed out those rules. Comcast complies with the rules as a condition to its 2011 takeover of NBCUniversal and said it would abide by those net neutrality rules through 2017.

“Netflix should be transparent that its opinion is not about protecting the consumer or about net neutrality,” Khoury said. “Rather, it’s about improving Netflix’s business model by shifting costs that it has always born to all users of the Internet and not just to Netflix customers.”

Comcast is stepping up its campaign to win approval of its acquisition of Time Warner Cable, promising benefits to consumers and pushing back against complaints raised by media watchdogs that a bulked-up Comcast would become too big and powerful.

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Tuesday morning, Comcast Chief Executive Brian Roberts described the planned acquisition of Time Warner Cable, the nation’s second largest cable company, as an “exciting and unique opportunity.”
Roberts made his remarks during a conference call to discuss Comcast’s first quarter earnings, which surpassed analysts’ forecasts. For the quarter ended March 31, Comcast’s revenue grew 13% and profit soared more than 30%.

The company said it had a net increase of 24,000 cable TV homes during the first quarter. Comcast also added 383,000 high-speed Internet customers, which increasingly is an important and high-margin part of the company’s overall business.

“The more we get into the planning efforts on our side, the more confident we are about the potential and about potential synergies,” Roberts said.

“We see significant benefit for consumers in our ability to offer our innovative and industry leading products to a larger residential footprint as well as opportunities in business services and advertising,” Roberts said.

Time Warner Cable investors will receive 23% of the combined entity, the larger Comcast Corp. Shareholders of Comcast and Time Warner Cable must ratify the deal, which also must be approved by the Federal Communications Commission.

The U.S. Department of Justice also is scrutinizing the proposed merger to make sure it doesn’t violate federal anti-trust laws.

Comcast shares were up about 3% in Tuesday morning trading to more than $51.30 a share.

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