The potential merger between US cable firms Comcast and Time Warner Cable has been criticised by both video on demand service provider Netflix and the Writer’s Guild of America, East (WGAE).

Dawinderpal Sahota

April 23, 2014

3 Min Read
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The potential merger between US cable firms Comcast and Time Warner Cable has been criticised by both video on demand service provider Netflix and the Writer’s Guild of America, East (WGAE).

Comcast announced it had agreed a $45.2bn deal to acquire Time Warner Cable outright in February, claiming that the merger would generate around $1.5bn in operating efficiencies. However, the deal is yet to gain regulatory and competition approval and now two organisations have spoken out against the impact such a merger could have on the market.

The WGAE represents thousands of movie, television, radio and digital services writers based on the East side of the US. It has written to telecoms regulator the FCC complaining that the merger would create “an enormous vertically and horizontally integrated media mega-corporation with far too much power in the marketplace and in the workplace”.

It added that its fundamental problem with the proposed merger is that it would tilt the playing field even more sharply against its members.

OTT services player Netflix also raised its own concerns in a letter to shareholders this week. The firm criticised the nation’s larger ISPs for charging “potentially escalating fees” to OTT service providers to ensure quality of service on access networks last month and now added that the proposed merger would wield even more power over Netflix and competing VoD services.

“If the Comcast and Time Warner Cable merger is approved, the combined company’s footprint will pass over 60 per cent of US broadband households, after the proposed divestiture, with most of those homes having Comcast as the only option for truly high-speed broadband (>10Mbps),” the firm said in its letter.

It added that as DSL services decline as preference for cable based internet services increases, Comcast could find itself in a position where it controls high-speed broadband to the majority of American homes.

“Comcast is already dominant enough to be able to capture unprecedented fees from transit providers such as Netflix. The combined company would possess even more anti-competitive leverage to charge arbitrary interconnection tolls for access to their customers,” the firm added.

However, Comcast dismissed Netflix’s concerns, branding its complaints inaccurate. The cable provider claimed that it has been the strongest US firm to commit to the openness of the internet and that it is the country’s only ISP that is still legally bound by the FCC’s vacated net neutrality rules.

“In fact, one of the many benefits of our proposed transaction with Time Warner Cable will be the extension of Net Neutrality protections to millions of additional Americans,” the firm added.

The cable provider added that its deal with Netflix is not unprecedented, noting similar agreements signed by internet video service providers such as Akamai, Yahoo, Limelight and Google have with many of the nation’s ISPs.

“In fact, Netflix approached us for this direct connection between Netflix and Comcast, cutting out the wholesalers with whom Netflix had traditionally contracted and paid for transit,” the firm added. “This arrangement was thus about Netflix exercising its market power to extract a more favourable arrangement directly from Comcast than what Netflix had been paying for through third party providers.”

Comcast added that according to the latest FCC data, 97 per cent of US homes have access to three or more fixed or mobile providers who offer broadband services consistent with the FCC definition of broadband, a speed that Netflix has said is sufficient to deliver Netflix streaming video services to the consumer.

Furthermore, under the terms of the merger, Comcast has already said it is prepared to divest systems serving approximately three million managed subscribers in order to reduce competitive concerns. It added that following the transaction, its share of managed subscribers will remain below 30 per cent of the total number of multichannel video programming distributor subscribers (MVPD) in the US.

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