Netflix told shareholders Monday that the company opposes the merger of Comcast and Time Warner Cable because it would give the combined company too much power over broadband Internet access.
The company's position, laid out in its first quarter letter to shareholders, is not all that surprising, given a recent blog post by CEO Reed Hastings where he slammed the deal Netflix cut with Comcast for direct access to its network.
Netflix ended the first quarter with more than 48 million global subscribers. Earnings per share for the quarter grew from 5 cents a year ago to 86 cents. The company also posted substantial year-over-year revenue and profit growth. Net income rose from $3 million to $53 million, while revenue for the quarter grew from $781 million to $1.066 billion.
Renewing his call for strong net neutrality, Hastings said in his shareholder letter that if the Comcast-Time Warner Cable merger were approved, the combined company's footprint would pass more than 60 percent of U.S. broadband households, leaving many consumers with only one choice for high-speed broadband.
"The Internet faces a long-term threat from the largest ISPs driving up profits for themselves and costs for everyone else," Hastings wrote. "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."
The regulatory review of the $45 billion transaction is just getting started; Comcast filed with Department of Justice and the Federal Communications Commission earlier this month, a day before the Senate judiciary committee held its first hearing on the merger. The House judiciary committee will hold a hearing on the merger May 8.
While plenty of consumer groups have come out against the merger, only Sen. Al Franken (D-Minn.), who opposed Comcast's acquisition of NBCUniversal three years ago, has made the Comcast-Time Warner Cable marriage a personal crusade. As part of his mission to try and persuade regulators to block the deal, Franken wrote to Hastings last week to enlist him in the opposition. As it turns out, he didn't need to be given Hastings' shareholder letter.
Not long after Netflix concluded its quarterly call, Comcast was out with a statement, accusing Netflix of ignoring facts and pointing out that it was Netflix that approached Comcast for the direct connection between Netflix and Comcast, "cutting out the wholesalers with whom Netflix had traditionally contracted and paid for transit. ... If Netflix did not like the terms of our agreement, or if they do not like the terms Comcast provides at any time in the future, Netflix can work with any of the multiplicity of partners that connect with Comcast," Jennifer Khoury, Comcast's svp of corporate and digital communications said in a statement.
"Internet connection has nothing to do with net neutrality," Khoury said. "It's all about Netflix wanting to unfairly shift its costs from its customers to all Internet customers, regardless of whether they subscribe to Netflix or not."