Netflix Warns Of Threat Posed By AT&T-DirecTV Merger

Days after Comcast called off its $46 billion merger with Time Warner Cable, Netflix met with the Federal Communications Commission to voice concerns about another large deal in the works -- AT&T's $48 billion merger with DirecTV.

Netflix, which vocally opposed Comcast's acquisition of Time Warner, is now telling FCC officials that AT&T's merger with DirecTV could pose a threat to online video distributors.

“Comcast’s withdrawal of its merger application means that, if approved, AT&T would become the nation’s largest multichannel video programming distributor,” Netflix said in a new filing summarizing arguments it presented to FCC officials in an April meeting.

“After AT&T’s projected broadband investments, it could become the largest ISP as well,” Netflix added. “These two dynamics create a powerful incentive for AT&T to protect its investment in DirecTV’s bundled programming by using its ability to ... prevent or delay cord-cutting and cordshaving.”

A Netflix spokesperson told Reuters today that the company isn't trying to kill the deal altogether, but wants conditions put on the merger.

The move comes shortly after The Wall Street Journalreported that regulators were inclined to approve the deal because it could improve rural Americans' broadband access. AT&T promised regulators to expand broadband service to 15 million locations if the merger is approved. The company recently added in a Federal Communications Commission filing that the merger will enable the expansion of the ultrafast Gigabit fiber service to at least two million new locations.

Netflix's recent filing outlines some specific ways that AT&T could harm online video distributors. One strategy involves imposing data caps or pay-per-byte pricing, which could discourage customers from consuming video online.

Netflix, which says that AT&T has already shown an interest in this business model, warns that the company could apply the pricing in a way that benefits its own services.

Comcast famously faced similar accusations when it rolled out a service that enabled Xfinity users to watch TV on demand on their Xbox 360 consoles. Comcast didn't count any data streamed to the Xbox through that program against users' monthly data caps -- which were 250 GB when the service launched. (The company now is experimenting in some markets with data caps of 300 GB a month and overages of $10 for 50 GB.)

Netflix also reminded the FCC that (like some other broadband providers) degraded customers' access to Netflix in 2013 and 2014.

The company ultimately resolved that issue by agreeing pay AT&T (as well as Comcast, Time Warner and Verizon) extra fees in order to interconnect directly with the network.

But Netflix was never thrilled with those deals. “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 in Wired last year.

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