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Netflix Doesn’t Like the AT&T/DirecTV Merger

If AT&T’s proposed merger of DirecTV is approved, it would create the largest pay-TV provider in the country. And according to Netflix, the merger in its current form is bad for everyone. T...
Netflix Doesn’t Like the AT&T/DirecTV Merger
Written by Josh Wolford
  • If AT&T’s proposed merger of DirecTV is approved, it would create the largest pay-TV provider in the country.

    And according to Netflix, the merger in its current form is bad for everyone.

    The streaming company has written a letter to the Federal Communications Commission, urging it to reject the merger “as currently proposed.”

    “The proposed merger would make AT&T the largest MVPD in the country, and potentially lead to its becoming the largest ISP in the country as well. Such market power creates new incentives and abilities to harm entities that AT&T perceives as competitive threats, and will exacerbate the anticompetitive behavior in which AT&T has already engaged. Netflix urges the Commission to reject the merger as currently proposed,” said Netflix counsel Markham Erickson in the letter.

    “If approved by the Commission, this merger would result in a combined entity with increased incentive and ability to harm online video distributors (“OVDs”) and other edge-based Internet content that Applicants view as a threat to their broadband and video programming businesses. Comcast’s withdrawal of its merger application means that, if approved, AT&T would become the nation’s largest multichannel video programming distributor (“MVPD”). After AT&T’s projected broadband investments, it could become the largest ISP as well. These two dynamics create a powerful incentive for AT&T to protect its investment in DIRECTV’s bundled programming by using its ability to harm OVDs to prevent or delay cord-cutting and cord-shaving.”

    Netflix argues that AT&T has already shows what this looks like.

    “AT&T already has a demonstrated ability to harm OVDs by leveraging its control over interconnection to degrade its own customers’ access to Netflix’s service. AT&T also has shown an interest in using data caps and usage-based pricing methods, which it can apply discriminatorily to advantage its own services. If AT&T is able to slow the development of the
    OVD industry, either by foreclosing access to broadband customers or imposing discriminatory data caps, AT&T would be able to preserve its market advantage by slowing or even reversing the shift toward competitive online video offering and away from bundled video/broadband offerings.”

    So, Netflix isn’t a fan of the merger in its current form – but what would make it happy?

    According to Ars Technica, “Netflix described the conditions it wants imposed upon the merger in a submission last September. In addition to a permanent net neutrality commitment, Netflix asked the FCC to prevent a combined AT&T/DirecTV from charging interconnection fees to Netflix and other content providers. Moreover, ‘the combined entity should be prohibited from excepting its own affiliated services from any data cap applicable to any of its services (whether fixed or mobile), Netflix wrote.”

    The FCC just got done killing Comcast’s proposed Time Warner Cable takeover. Netflix and other streaming services like it played a big part in why the FCC hated that deal.

    “Today, an online video market is emerging that offers new business models and greater consumer choice. The proposed merger would have posed an unacceptable risk to competition and innovation especially given the growing importance of high-speed broadband to online video and innovative new services,” said FCC chairman Tom Wheeler of the Comcast/TWC merger.

    AT&T and DirecTV agreed to a $48.5 billion deal last May.

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