Roughly a month after lambasting unspecified big ISPs for plans for "potentially escalating fees for the interconnection required to deliver high quality service," Netflix has jumped face first into the Comcast merger debate. In yesterday's letter to investors, the company lashes out at both Comcast and AT&T for what the company calls "arbitrary interconnection tolls" now being imposed on content companies.
Netflix specifically singles out AT&T by name, noting that Netflix streaming performance over the AT&T U-Verse network is now worse than most lower-speed telco DSL providers. The unspoken presumption is that like Verizon, AT&T is letting peering arrangements with Internet middlemen degrade to force direct interconnection deals (at higher and higher rates) with last-mile ISPs. Hastings argues that consumers aren't having it:
quote:
The surprising news is that AT&T fiber-based U-verse has lower performance than many DSL ISPs, such as Frontier, CenturyLink & Windstream. This reinforces our view that connectivity to the broader Internet is critical to the quality of experience consumers receive. The 249 customer comments on AT&T’s anti-Netflix blog post indicate that AT&T customers expect a good quality Netflix experience given how much they pay AT&T for their Internet service.
Netflix also for the first time comes out directly against the Comcast merger, arguing that Comcast's larger size gives them the perfect opportunity to impose higher and higher interconnection rates against content companies:
quote:
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 (>10Mbps). As DSL fades in favor of cable Internet, Comcast could control high-speed broadband to the majority of American homes. Comcast is already dominant enough to be able to capture unprecedented fees from transit providers and services such as Netflix. The combined company would possess even more anti-competitive leverage to charge arbitrary interconnection tolls for access to their customers. For this reason, Netflix opposes this merger.
Comcast was quick to issue their
own press statement denying that interconnection has anything to do with network neutrality, and claiming it was Netflix that approached Comcast about the deal:
quote:
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. This arrangement was thus about Netflix exercising its market power to extract a more favorable arrangement directly from Comcast than what Netflix had been paying for through third party providers.
Granted Netflix may have approached Comcast because (as the running theory du jour has it ) Comcast, like AT&T, Verizon and AT&T -- are intentionally letting peering points to companies like Cogent saturate because they
want content companies to approach them for direct interconnection deals. Comcast just happened to strike a deal that's rumored to be on par with what Netflix was already paying Cogent. AT&T and Verizon apparently
aren't being as hospitable on rate negotiation, and Netflix clearly feels that neither will Comcast down the road when not concerned about the watchful eye of antitrust regulators.