Netflix officially aired its strong opposition against Comcast's pending bid to buy Time Warner Cable for $45 billion, claiming that the merger could give the company too much control over high-speed Internet delivery in the United States.
"If the Comcast and Time Warner Cable merger is approved, the combined company's footprint will pass over 60 percent of U.S. broadband households after the proposed divestiture, with most of those homes having Comcast as the only option for truly high-speed broadband," said[PDF] Netflix CEO Reed Hastings in a first-quarter letter to its shareholders.
Netflix is the first major Internet company to publicly speak [video] against the merger of the two largest cable and Internet service providers in the US. If approved, the alliance could corner the market with 30 million subscribers across the country.
This comes only two months after Netflix agreed to pay Comcast an undisclosed amount to ensure a direct connection to the ISP's network and provide smooth delivery of high-definition streaming video to Netflix customers.
"Comcast is already dominant enough to be able to capture unprecedented fees from transit providers and services such as Netflix. The combined company could possess even more anti-competitive leverage to charge arbitrary interconnection tolls for access to their customers," said Hastings.
Netflix has been shifting towards opposition in the last month. Its first major jab at the merger is a blog post written by Hastings slamming Comcast for failing to support strong net neutrality.
"Without strong net neutrality, big ISPs can demand potentially escalating fees for the interconnection required to deliver high-quality service. The big ISPs can make these demands - driving up costs and prices for everyone else - because of their market position," he wrote, referring to Comcast.
Comcast is quick to fire back, arguing that Netflix is not as concerned about net neutrality as it is about its bottom line.
"Netflix's opposition to our Time Warner Cable transaction is based on inaccurate claims and arguments. There has been no company that has had a stronger commitment to openness of the Internet than Comcast," said Jennifer Khoury, senior vice president and spokeswoman of Comcast.
"Netflix should be transparent that its opinion is not about protecting the consumer or about net neutrality. Rather, it's about improving Netflix's business model by shifting costs that it has always borne to all users of the Internet and not just to Netflix customers," Khoury added.
She further stated that Netflix approached Comcast, arguing that it was Netflix "exercising its market power to extract a more favorable arrangement directly from Comcast than what Netflix had been paying through third-party providers."