Comcast Accuses Time Warner Cable Deal Opponents of "Extortion"

Brian Roberts Comcast CEO  Close Up - H 2014
AP Photo/Jacquelyn Martin

Brian Roberts Comcast CEO  Close Up - H 2014

In a filing, the cable giant criticizes Netflix, Discovery Communications and other big industry players

On Wednesday, Comcast, led by chairman and CEO Brian Roberts, sharply criticized Netflix, Discovery Communications, Dish Network and other companies that have opposed its planned $45 billion takeover of Time Warner Cable, speaking of attempted "extortion."

The largest U.S. cable company made the comments in a response to comments filed by critics of the deal.

"In our reply comments, we specifically and comprehensively address claims that have been made by organizations purporting to represent the public interest, programmers, competitors and others," Comcast executive vp David Cohen said in a blog post on Wednesday. "Many of these commenters have raised issues that are not transaction-specific and/or are best addressed separately in industry-wide proceedings."

Read more Comcast CEO "Cautiously Optimistic" on Approval for Time Warner Cable Acquisition

He added: "Some commenters seek to leverage the transaction for individual company financial interests, while asserting arguments that we have demonstrated consistently don’t have any merit. For example, our comments specifically expose the pretense of several commenters, including Netflix (which originally embraced and celebrated our interconnection agreement as a middle of the road compromise that worked for Netflix and for Comcast) and Discovery (which asked to renegotiate its affiliation agreement with Comcast early in exchange for support or non-opposition of the transactions)."

In its filing, Comcast said that among the concessions asked of it in return for support for the deal were requests to share Comcast advertising technology, programming renewal date changes, renegotiated carriage deals and "many requests to agree to carry networks that do not even exist yet."

The Comcast filing said that "investment, innovation, and competition are continuing — and, in fact, flourishing" in the industry. "Every morning we wake up to an Internet that is better in every respect than the one we had the night before. Yet, every step of the way, we continue to hear cries of alarm about “bottlenecks” and “chokepoints” not only on the Internet, but also in the programming and video distribution marketplace, as well as the program buyers’ marketplace."

After arguing that all these segments are more competitive today than they have "ever been before," Comcast addressed concerns raised by critics, saying their combined demands and related proposed conditions "would cost Comcast upwards of $5 billion above any reasonable estimate of what its programming costs might be over the next several years, which would translate into increased costs for Comcast customers of more than $4 per month by 2019 and in perpetuity."

Read more Discovery CEO on "Studying" Comcast-Time Warner Cable Deal, Targeting Middle America

Comcast said that "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."

The Comcast filing then focused on Netflix's arguments against the deal. "Netflix recycles prior claims about its interconnection agreement with Comcast — something that is plainly not transaction-specific since it predates this proceeding by months," it said. "What its comments and trumped-up economic theories here show is that Netflix will use any proceeding, in any context, 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."

Comcast also highlighted that Netflix has 35 million U.S. subscribers, more than Comcast would have after the deal.

The Comcast filing then turned its attention to Discovery Communications, saying: "Discovery, like many other programmers, is improperly using this proceeding to promote its own financial interests. In fact, Discovery demanded unwarranted business concessions from Comcast as a condition of Discovery’s non-opposition to the transaction. Such extortionate demands are patently improper. As the self-proclaimed '#1 pay-TV programmer in the world,' Discovery does not need additional regulatory help to succeed in the marketplace. Its claims are baseless and should be rejected."

Read more Shareholders to Vote on Comcast-TWC Merger

Discovery, whose CEO David Zaslav has raised concerns about the cable deal, in a statement shot back at Comcast, saying: "As one of the few remaining independent programmers in the country, Discovery has a nearly 30-year history of being one of the most fair, rational and reasonable actors within the industry. We are always talking to our distribution partners about realizing fair value for our content across all consumer platforms, and it is very unfortunate that Comcast is trying to divert attention away from the real issue."

It added: "Comcast chooses to not talk about the substantial program discounts they currently get or what they would do post-merger to demand extreme discounts from cable programmers or block the launch of new networks and brands. Discovery has 13 networks in the U.S. that strive to serve all ethnic and demographic groups with high quality, family-friendly programming. 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. 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."

Netflix said in a response: "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. … If the merger were to proceed, this one company, Comcast, would have control over high-speed residential Internet in a majority of American homes and that is clearly not 'great' for consumers."

Sept. 24, 8:59 a.m. Updated with Netflix comment.

Twitter: @georgszalai