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Comcast Adds 24,000 Video Subs, Fires Back at Netflix

22 Apr, 2014 By: Erik Gruenwedel

Cabler responds to Netflix’s assertion that its proposed merger with Time Warner Cable is anti-competitive

Comcast April 22 said it added more than 24,000 video subscribers in the first quarter (ended March 31) — the second consecutive quarterly gain.

The No. 1 cabler ended the period with 22.6 million video subs, which was down from 22.8 million subs during the previous-year period.

The net additions of video subs marks an apparent turnaround for Comcast, which heretofore had seen steady declines for six years — a trend that underscored growing concern in the pay TV industry regarding cord-cutting, over-the-top video services and bundled channel pricing.

Meanwhile, Comcast added 383,000 high-speed Internet subscribers to a base of more than 21 million, underscoring its growing clout as a major ISP player.

Indeed, Comcast’s growing influence as an ISP is at the heart of Netflix’s opposition to the cabler’s proposed $45 billion acquisition of Time Warner Cable. Netflix CEO Reed Hastings says such a union would consolidate 60% of the nation’s Internet distribution in the hands of one company.

Of course Hastings is still smarting after agreeing to pay Comcast an incremental fee (interconnection deal) to ensure smoother streaming speeds its subscribers who use Comcast. A scenario the CEO believes the SVOD service shouldn't have to pay for, and which he contends should move the federal government to enact stronger — not weaker — net neutrality provisions.

In its letter to investors, Netflix said a Comcast, TWC marriage would enable Comcast to “possess even more anticompetitive leverage to charge arbitrary interconnection tolls.”

In response, Comcast issued a “here are the facts” presser outlining what it contends is Netflix’s desire to portray itself as victim.

Comcast said its interconnection deal with Netflix has nothing to do with net neutrality, and instead is based economics.

“There is nothing unprecedented about our agreement with Netflix. It’s very similar to agreements that companies like Akamai, Yahoo, Limelight, and Google have with companies like Verizon, AT&T, Level 3, Sprint, and Comcast. Comcast alone has thousands of these transit relationships,” Comcast said in the statement.

The cabler again reiterated that it was Netflix’s idea to strike an interconnection deal so it could eliminate the middlemen it was currently paying.

“There was and is no need for Netflix or any other Internet content provider to work directly with us or any other specific ISP,” Comcast wrote.

It appears there is little love lost between the cabler and SVOD service. During Comcast's analyst call, executives were asked if a Netflix app would be included in its Xfinity X1 broadband platform, similar to Pandora, Facebook and Twitter.

Without mentioning Netflix directly, Neil Smit, CEO of Comcast Cable, said third party apps on X1 are based whether they are mutually beneficial.

'Where there is real win-win relationship and a win for the consumer, we’re certainly open to the possibilities," Smit said.

Frost & Sullivan tech analyst Dan Rayburn agrees Netflix’s verbiage regarding Comcast is nothing more than histrionics in an effort to sway public opinion towards its own self interests. He said Netflix’s deal with Comcast is no different than what other CDNs such as Akamai deal with.

“This is simply about what's best for Netflix's business, nothing else,” Rayburn wrote in a blog post.

The analyst doubled down on Netflix’s assertion (in the investor letter) that AT&T (another major ISP) has inferior broadband streaming speed than some slower DSL operators. Netflix said AT&T U-verse could get faster Mbps if it opted to use Netflix’s Open Connect CDN. 

Rayburn said Netflix’s disparaging comments toward AT&T again have more to do with business and lower costs than fairness and technology. He said Akamai made a business decision to pay for entry into AT&T’s network. Netflix could do the same.

“You don't see Akamai, the largest commercial CDN on the planet, [which] handles 20% of the world's total Web traffic, out in the media complaining about costs associated with running [its] business,” Rayburn wrote. “For Netflix to imply anything else is simply wrong, and it can't be argued with.”


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