News July 15, 2015

Netflix backs Charter Communications takeover of 2 cable companies

Originally appeared in The New York Times
By: Emily Steel
July 15, 2015

Netflix said Wednesday that it would support Charter Communications’ proposed deals for Time Warner Cable and Bright House Networks, which, if approved, would create the country’s second-largest cable operator behind Comcast.

The support for the deals, worth a combined $67.1 billion, is contingent upon Charter’s new Internet interconnection policy, which would cover the company’s new larger footprint and extend through 2018. As part of that policy, Charter pledged not to charge access fees to online content providers, such as Netflix, Amazon and Hulu, regardless of how much traffic those companies created for the network.

“Netflix believes that this new policy and the commitment to apply it across the ‘New Charter’ footprint is a substantial public interest benefit and will support scaling the Internet to meet consumers’ growing demand for online services and help foster continued innovation across the Internet ecosystem,” Christopher D. Libertelli, Netflix’s vice president for global public policy, said in a letter to the Federal Communications Commission.

In contrast, Netflix pays access tolls to other Internet service providers: Comcast, Time Warner Cable, Verizon and AT&T. Charter does not charge access fees because it is a smaller player with less clout, but industry executives said it would have the market power to start extracting those payments after its proposed combination with Time Warner Cable and Bright House Networks.

The vote of confidence from Netflix comes as federal regulators review whether Charter’s deal would be in the public interest and competitive. “Charter is doing everything it can to get this deal done,” said Richard Greenfield, a media analyst at BTIG Research.

Netflix has proved to be an influential voice in debates over the transformation of the communications industry. It was a vocal opponent of Comcast’s takeover of Time Warner Cable, which was aborted this year after intense regulatory scrutiny. Netflix warned federal regulators that a Comcast-Time Warner Cable combination would have the power to hinder online competition.

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