Comcast: Netflix’s Idea to Strike ISP Deal

10 Apr, 2014 By: Erik Gruenwedel

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EVP David Cohen tells Senate Judiciary Committee Netflix sought agreement to eliminate need for third-party CDNs

Netflix approached Comcast about securing a deal to ensure smoother streaming speeds for its subscribers and eliminate the need for middlemen, an executive for the No. 1 cabler said at a U.S. Senate hearing.

David Cohen, EVP of Comcast Corp., April 9 told members of the Senate Judiciary Committee hearing regarding the cabler’s planned $45.2 acquisition of Time Warner Cable that it had no intention of stifling third-party subscription streaming services.

Senators questioned Cohen about the peering agreement Netflix signed earlier this year to curtail slowing streaming speeds for its subscribers that use Comcast.

Sen. Amy Klobuchar (D-Minn.) wondered if such a deal didn’t amount to an “indirect tax” for Netflix and its subscribers.

"Why charge both Netflix and your consumers for this [ISP] service?" Klobuchar asked. “What will happen to the next Netflix that today is just a dream in a garage?”

Gene Kimmelman with Public Knowledge, a non-profit Washington, D.C.-based public interest group, said Netflix CEO Reed Hastings didn’t appear too happy with the deal when he openly complained about it on the service’s blog.

Cohen shot back that Netflix already paid third-party CDNs such as Level 3, Cogent and Akamai to deliver its video streams. He characterizing Hastings’ public outburst as disingenuous.

“I hate to say this. It was Netflix’s idea … They said, 'why don’t we cut out the middleman?'” Cohen said.

The Senate hearing was primarily for show as the legislative branch doesn’t have any say in approving the deal. The Justice Department and the Federal Communications Commission make the final call.

During the hearing Comcast portrayed itself as an advocate for consumers. Cohen told senators the cabler had no intention of using the purchase as a means of raising bundled channel subscription prices or thwarting competition, including subscription streaming services such as Netflix or rival cable networks.

Antitrust advocates say a Comcast/TWC merger would allocate too much power to one pay-TV operator, with a combined subscriber base exceeding 33 million and control of 40% of the nation’s broadband access.

Cohen said Comcast has rolled out 1 million wireless “hotspots” throughout the country for subscribers, in addition to increasing streaming speeds 13 times over the past 12 years.

He said Comcast would not use the acquisition as leverage to raise prices to consumers. Instead he said that the majority of price hikes are due to increases in programming costs, which Cohen said have appreciated 98% over the past 10 years.

“We have made it a point of significant discussion about our need to continue to invest to compete better with national and global competitors,” he said.

 

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