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Comcast Accuses Time Warner Cable Deal Opponents of “Extortion”

Netflix and other opponents sought special favors to support the deal, the cable giant says.

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Netflix, Discovery Communications and other companies opposing Comcast’s $45 billion deal to acquire Time Warner Cable are doing so after they failed in “extortion” attempts to get special favors, Comcast told federal regulators Wednesday.

Comcast* made the accusations in response to comments filed over the summer by a variety of companies, including Dish Network, Netflix and Discovery, in opposition to the deal.

The cable giant’s latest salvo uses unusually strong language to attack its opponents, who are mostly upholding a long tradition of requesting that self-serving conditions be attached to a merger approval. It’s also ironic, given that Comcast, in an effort to win support for the deal, voluntarily agreed to a host of conditions for competitors just three years ago when it acquired NBCUniversal.

Comcast told regulators Wednesday that complaints from companies and other parties opposing the deal “are even more unfounded here because many of them are being made only because Comcast refused to grant various self-interested requests” made soon after the Time Warner Cable deal was announced. The requests “almost always [came] with an express or at least an implicit offer to support the transaction (or stand down, at minimum) if the requester’s demands were met,” Comcast said.

Among the requests, Comcast said, were free backbone interconnection, appeals to share Comcast advertising technology, wholesale arrangements, programming renewal date changes, renegotiated program carriage agreements and “many requests to agree to carry networks that do not even exist yet.”

“The significance of this extortion lies in not just the sheer audacity of some of the demands, but also the fact that each of the entities making the ‘ask’ has all but conceded that if its individual business interests are met, then it has no concern whatsoever about the state of the industry, supposed market power going forward, or harm to consumers, competitors, or new entrants.

Instead, many petitioners press nothing more than a host of individualized business interests and disputes — from the reasonableness of commercially negotiated agreements (e.g., Netflix, Cogent), to self-interested program carriage demands (e.g., Discovery, TheBlaze, Back9, RFD-TV, Veria Living, Herring Broadcasting, Weather Nation, etc.), to concerns over how enhanced competition might affect a particular firm (e.g., COMPTEL, Dish, RCN et al.), and to other issues that have no bearing on the license transfer applications (e.g., CenturyLink, Viamedia). Other petitioners raise industry-wide issues, such as open Internet policies, interconnection practices, and similar matters of general interest that are properly addressed (and largely being addressed) in other Commission proceedings (e.g., Netflix, Cogent, Dish).”

(Update: In a statement, Discovery dismissed Comcast’s complaints as a diversionary tactic. “We stand by our concerns that Comcast could use its enhanced leverage from the proposed merger to impose onerous terms that jeopardize the ability of independent programmers like Discovery to continue investing in a diverse portfolio of content and brands,” said David Leavy, a Discovery spokesman in a statement. “Comcast’s silence on the details of key issues like program discounts, and instead, its continued strategy of intimidating voices that are not fully supportive of its position, is troubling.”)

(Update: Netflix also denied Comcast’s extortion charges. “It is not extortion to demand that Comcast provide its own customers the broadband speeds they’ve paid for so they can enjoy Netflix. It is extortion when Comcast fails to provide its own customers the broadband speed they’ve paid for unless Netflix also pays a ransom,” the company said in a statement. “Netflix grudgingly paid to improve performance for our mutual customers, a precedent that remains damaging for consumers (who ultimately pay higher costs) and for other innovative businesses (that can be held over the barrel by Comcast to do the same).”)

Comcast singled out Netflix, in particular, for regulators who are currently reviewing the deal and have expressed concerns about the streaming video giant’s complaints.

Comcast accused Netflix (which has complained loudly about the cable giant in recent months) of using “trumped-up economic theories” to “try to shift the costs for carrying its content onto the backs of others — a great business result for Netflix but one that would increase prices to consumers and disserve the public interest.”

After reaching a deal with Comcast to end subscribers’ buffering problems, Netflix CEO Reed Hastings told Comcast, “We found middle ground on our issues that worked well for both of us for the long term, and works great for consumers,” according to the cable giant.

Netflix’s subsequent opposition to Comcast’s deal and continued complaints about interconnection charges are clear “evidence that Netflix’s expedient change of heart reflects nothing more than a base attempt to gain additional commercial advantages over Comcast through a regulatory condition that is unjustified and would be anything but ‘great’ for consumers,” Comcast said.

Meanwhile, Discovery “demanded unwarranted business concessions from Comcast as a condition of Discovery’s non-opposition to the transaction,” Comcast said. “Such extortionate demands are patently improper.”

The complaints came after Comcast spent almost the first 12 pages of its filing praising (and quoting) nonprofit organizations, politicians and companies that are supporting its deal. At least some of those elected officials or groups have received financial contributions from Comcast in the past, as several news organizations and campaign finance watchdog groups have noted.

Update: Another company called out by Comcast in its filing, Veria Living, denied the cable giant’s assertions Wednesday. “All we have ever asked for is a level playing field for all programmers and a chance for all networks to get their messages to consumers,” said Eric Sherman, CEO of Veria Living, a health and wellness channel, in a statement. “For a giant like Comcast – which is about to control 28 of the nation’s top 30 markets – to accuse us of extortion is absurd.”

* Comcast owns NBCUniversal, which is a minority investor in Revere Digital, Re/code’s parent company.

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