Netflix has called on the Federal Communications Commission (FCC) to reject AT&T’s $48.5 billion acquisition of DirecTV on grounds that the combined company would harm video streaming providers.
In a letter sent to the U.S. regulator, Netflix said that Comcast’s decision not to buy Time Warner Cable (TWC) means AT&T will become the nation’s largest multichannel video programming distributor, and could also become the largest ISP, if it merges with DirecTV.
"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 (online video distributors) to prevent or delay cord-cutting and cord-shaving," argued Netflix counsel Markham Erickson, in the letter sent on Monday.
He pointed out that AT&T has previously throttled Netflix traffic on its network and has "shown an interest" in usage-based pricing methods which he claims AT&T can apply discriminatorily to the advantage of its own services.
In its defence, AT&T argued that it is not in its interests to throttle Netflix because customers who had a bad Netflix experience would blame the network operator not the content provider, and could become a churn risk.
Erickson countered this claim, pointing out that when AT&T was throttling Netflix traffic in 2013 and 2014, it did not provide any churn data that supported this argument.
"Switching ISPs is notoriously difficult, costly, and time consuming," he said, adding that AT&T would have to degrade all OTT video providers to engender a customer backlash.
"Netflix urges the Commission to reject the merger as currently proposed," he concluded.
