News July 25, 2015

Why Netflix is getting behind a huge cable merger

Originally appeared in Washington Post
By: Brian Fung
July 15, 2015

This is huge. Charter just attracted a really important ally in its attempt to purchase Time Warner Cable, making it that much more likely that federal regulators will approve the $55 billion mega-deal.

Netflix is endorsing the Charter-TWC acquisition after meeting with the cable company to discuss how it will preserve competition online. In a regulatory filing, Netflix says the Charter deal could offer “substantial public interest benefit” ā€” if it follows through on a new promise.

What does that promise look like, and what has Netflix singing Charter’s praises after it so strenuously opposed Comcast’s bid for TWC? Well, Charter is offering not to charge Netflix and other content companies any fees in exchange for accepting their traffic and carrying it to end users like you and me.

You may remember that this issue, known as “interconnection,” caused a big dispute between Netflix and Internet providers such as Comcast. When a surge of Netflix video began arriving at those companies’ doorsteps, they argued that Netflix should cover the cost of expanding the pipes to let that data in. Netflix strongly opposed the practice but wound up signing commercial deals with those companies anyway. And Netflix was among the Comcast-TWC merger’s biggest critics.

Now Charter is saying it won’t do what Comcast did. Although Charter doesn’t currently charge companies fees for interconnection, the point is that Charter is promising not to do so going forward. If the overall merger is approved, Charter says, it’ll abide by the condition until the end of 2018.

Charter’s new promise actually fits a pattern: The company has been extra-careful to ensure that this deal isn’t mistaken for a repeat of Comcast-TWC ā€” even going so far as hiring a leading net neutrality activist.

The Comcast-TWC merger got blocked by the Federal Communications Commission over concerns that Comcast would use its bigger size to shut out new, streaming video providers. But now with Netflix’s blessing, Charter’s case for its own deal just got much stronger.

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