April 22, 2014
Netflix announced on Monday that it plans to raise the price of its streaming video service for new members by a dollar or two per month. The service, which now has more than 34 million paid U.S. subscribers, is justifying the rate increase based on its continued investment in original programs, including series such as “House of Cards” and “Orange Is the New Black.” In addition to its first-quarter earnings report yesterday, Netflix announced opposition to Comcast’s proposed acquisition of Time Warner Cable.
“Netflix has committed to spend billions of dollars in programming in the past few years as it has grown to become the biggest stand-alone subscription programming service in the U.S., passing some long-standing traditional TV outlets like HBO in terms of subscribers,” reports The Wall Street Journal. “At its relatively low price, Netflix has emerged as a symbol of cheap online video services that some see as enabling consumers to disconnect from pay TV.”
“I don’t know that we want anybody to control half of the U.S. Internet,” Netflix CEO Reed Hastings said yesterday in regards to the proposed Comcast-TWC deal.
“Hastings told analysts that Netflix had ‘no choice’ when it recently agreed to start paying Comcast to interconnect Netflix servers directly to Comcast’s cable systems as a way of ensuring good quality video streaming,” notes WSJ. “Netflix has argued operators should strike such interconnection deals without levying fees.”
Jennifer Khoury, SVP corporate and digital communications for Comcast, said Netflix’s opposition to the transaction “is based on inaccurate claims and arguments.” In her post on the Comcast Voices site, Khoury counters that Comcast is “the only ISP in the country that is currently legally bound by the FCC’s vacated Net Neutrality rules.”
Some of her key points include:
- Internet interconnection has nothing to do with net neutrality; it’s all about Netflix wanting to unfairly shift its costs from its customers to all Internet customers.
- 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.
- Transit is a highly competitive marketplace and Netflix and other Internet content providers have many choices. In the last 15 years, this transit market has been so competitive that pricing has declined by over 99 percent.
- Netflix’s opposition to our transaction with Time Warner Cable is also unfounded because the issues raised by Netflix apply to the industry as a whole, which is why the FCC has said that it will look at interconnection issues. Netflix’s arguments are not transaction specific.