Netflix Urges FCC To Reject Comcast's Merger With Time Warner

Online video company Netflix is asking the Federal Communications Commission to put the kibosh on Comcast's proposed $45 billion merger with Time Warner Cable. The proposed deal "would set up an ecosystem that calls into question what we to date have taken for granted: that a customer who pays for connectivity to the Internet will be able to get the content she requests,” Netflix says this week in a 256-page filing with the FCC.

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 warns.

Of course, Netflix isn't an unbiased observer. The video rental company has had very public fights with Comcast over data caps, as well as paid peering deals. Paid peering arrangements generally call for Netflix to pay extra fees to broadband providers in order to connect directly with their servers, as opposed to sending data through an intermediary like Cogent or Level 3.

Earlier this year, Netflix entered into those types of deals with Comcast, AT&T, Verizon and Time Warner, in hopes of improving the quality of notoriously choppy video streams. But the video provider has made clear that it isn't thrilled about the arrangements. 

“We'll never realize broadband's potential if large ISPs erect a pay-to-play system that charges both the sender and receiver for the same content,” CEO Reed Hastings wrote recently in Wired.

This week, Netflix took its complaints about its peering deal with Comcast straight to the FCC. “At the same time Comcast engaged in strategies to degrade its own customers' ability to watch Netflix's video, Comcast sold customers who wanted access to high-quality Netflix video a more expensive broadband package even as it knew that a higher-speed broadband plan would do nothing to address the quality of Netflix's video,” the company says.

Netflix adds that allowing Comcast and Time Warner to merge would give the cable giant even more leverage over companies that rely on the Web to delivery content. “The combined entity's control over its interconnection arrangements, coupled with such an increase in size, would allow it to insert itself into the heart of all Internet commerce, disrupting innovation ... and foreclosing compelling services from ever reaching the light of day,” Netflix argues.

Netflix also takes issue with Comcast's data caps, arguing that they “provided Comcast with a means of pushing users to substitute its own affiliated content for [online video] content by exempting their affiliated content and services from the data cap.”

Netflix specifically referred to Comcast's 2012 rollout of a service that allowed some subscribers to watch TV on demand on Xbox 360 consoles. Comcast said at the time that data streamed to the Xbox through this program wouldn't count against users' monthly data caps. Comcast later moved forward with a new pricing model that involves data caps ranging from 300 GB to 600 GB, depending on the subscription package.

“With its own content exempted, Comcast is able to use data caps to shape the viewing habits of consumers away from non-affiliated services and toward its own,” Netflix says.

Regulators seem concerned by at least some of the issues that the company is raising. Late last week the FCC asked Comcast to provide specific information about data caps as well as its peering agreement with Netflix.

But whether the FCC believes that these issues warrant killing the deal -- or even imposing conditions on the cable giant -- remains to be seen.

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