Comcast, Netflix Spar Over Meaning of AT&T-MediaOne Merger

By Josh Long Comments
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**Editor's Note: Please click here for a recap of the biggest communications mergers in Q2 2014.**

In 2000, AT&T agreed to divest its interest in Road Runner, then the nation’s second-largest broadband provider, to allay antitrust concerns over AT&T’s merger with MediaOne Group, Inc.

The U.S. Justice Department said AT&T’s interest in Excite@Home – then the largest provider of broadband Internet access – and MediaOne’s interest in Road Runner would substantially decrease competition in the aggregation, distribution and promotion of broadband content. At the time, Excite@Home and Road Runner served approximately 75 percent of cable-modem subscribers.

“Through its control of Excite@Home and substantial influence or control of Road Runner," the Justice Department said in a May 25, 2000, competitive impact statement filed in federal court, “AT&T would have substantially increased leverage in dealing with broadband content providers, which it could use to extract more favorable terms for such services."

The combined entity reportedly would have controlled nearly 40 percent of broadband homes.

Fourteen years later, as Comcast and Time Warner Cable seek regulatory approval to merge, the nation’s two largest cable companies have failed to account for the precedent laid down in the AT&T/MediaOne merger, according to Netflix in a 256-page filing this week with the Federal Communications Commission.

Netflix, whose worldwide base of online video customers exceeds 50 million, has asked the FCC to quash Comcast’s pending acquisition of Time Warner Cable.

Just as in the AT&T-MediaOne merger, the union between Comcast and Time Warner Cable would lead to substantial broadband consolidation on a national level, said Netflix, which noted the companies would pass nearly two two-thirds of U.S. homes or 81 million residences. Netflix claims a bigger Comcast would have the incentive and power to unfairly hurt rivals such as online video distributors (OVDs) by charging access fees at interconnection points.

“With its expanded national footprint, the combined entity can more easily manipulate access to its high-speed broadband service than can each company standing alone, thereby harming OVDs and diminishing competition in the online video market," Netflix wrote.

The FCC never analyzed in the AT&T-MediaOne merger whether there was a distinct broadband Internet access market, and Netflix has ignored several transactions since then, including the FCC’s observations in 2002 that Comcast and AT&T Broadband largely competed in separate markets, said Joelle Terry, a Comcast spokesperson. AT&T’s broadband unit and Comcast merged 12 years ago, creating a cable operator valued at $60 billion.

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