Netflix in Favor of Charter-TWC Merger, With Caveat

Netflix on Wednesday expressed its support for Charter Communications’ acquisition of Time Warner Cable (TWC) so long as Charter is bound by a merger condition to offer peering arrangements.

Netflix’s support for the merger is tied to its interest in limiting the number of commercial arrangements in which it has to pay to exchange traffic with Internet service providers. Last year, in opposing Comcast’s planned acquisition of TWC, Netflix said the combined company would wield too much power to charge arbitrary interconnection fees. The deal would have combined the nation’s two largest cable television companies, but the merger collapsed due to opposition from the FCC and U.S. Justice Department.

“Charter’s new policy is a welcome and significant departure from the efforts of some ISPs to collect access tolls on the Internet,” Christopher Libertelli, a former FCC official and Netflix’s vice president global public policy, wrote Wednesday in an FCC filing. “Charter’s policy will promote efficient interconnection with online content providers and with the transit and content delivery services that smaller online content providers rely on to reach their consumers.”

Netflix, which streams movies and television shows, is riding high with a base of 65 million members, including 42 million U.S. customers, after wooing 3.3 million streaming members in the second quarter.

In a letter Wednesday to shareholders commenting on the company’s second-quarter results, Netflix executives noted that Charter had committed to “open and free interconnection” across the Charter and TWC networks.

Under Charter’s policy, consumers “will receive the fast connection speeds they expect,” Netflix CEO Reed Hastings and CFO David Wells wrote in the letter. The merger, with the peering condition, “would deliver significant public interest benefits to broadband consumers, and we urge its timely approval.”

Charter in May announced an agreement valued at $78.7 billion to acquire Time Warner Cable. Charter also has amended an agreement to acquire Bright House Networks for $10.4 billion. If the deals close, Charter will serve 23.9 million customers in 41 states.

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