Netflix: Comcast lying about Internet 'tolls'

Netflix is accusing Comcast of misrepresenting a deal between the two companies to boost video streaming.

The company said Comcast has falsely stated in testimony to Congress that the deal was Netflix's idea, the online video streaming company told Sen. Al Franken (D-Minn.) in a letter Thursday.

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Last week, Franken asked Netflix to weigh in on a proposed merger between Comcast and Time Warner Cable. Franken has vocally opposed the merger, which would combine two of the country's largest cable and Internet companies.

In the company's response, Netflix Vice President of Global Public Policy Chris Libertelli repeated the company's call for the Obama administration to block the merger and pointed to the recent "interconnection" deal it struck with Comcast.

That deal — which Netflix has publicly decried for weeks as an "arbitrary toll" — allows Netflix to directly connect to Comcast's servers rather than connecting through a third party.

While Comcast has said the deal was Netflix's idea and benefits both companies' customers, Netflix said it was pressured into the arrangement by declining video streaming quality on Comcast's networks, Libertelli said.

"Netflix is committed to providing our users with great video quality whenever they chose to watch Netflix," but "Comcast appears willing to sacrifice the quality of its own subscribers’ broadband experience to extract fees from the content providers," he wrote.

"The fact that Netflix paid to protect our consumers is evidence of Comcast’s power," Libertelli wrote. "Acquiring Time Warner Cable will only increase this leverage."

The letter also pushed back on Comcast's claims that its deal with Netflix is similar to the interconnection deals frequently found in the industry.

Traditional interconnection deals allow Netflix to send their video over long distances and multiple networks, but the deal with Comcast was just to reach Comcast subscribers, Libertelli wrote.

"Our agreement with Comcast is the first time that Netflix was forced to pay an [Internet provider] for what amounts to access to their subscribers."

In repeating its opposition to the Comcast, Time Warner Cable merger, Netflix said it "is committed to sharing facts with policymakers to increase their understanding of this issue."

Comcast pushed back on Netflix's allegations, calling the company's argument "a House of Cards," referencing Netflix's popular original show.

"As we and other industry observers have already noted, Netflix’s decision to reroute its Internet traffic was all about improving Netflix’s business mode," a spokeswoman said in a statement, accusing Netflix of trying to shift delivery costs of its bandwidth-heavy video content to "all Internet users."

The spokeswoman defended the industry's interconnection deals, citing "a multiplicity of other agreements just like the one Netflix approached us to negotiate."

"And those agreements have not harmed consumers or increased costs for content providers — if anything, they have decreased the costs those providers would have paid to others," she said.

The public feud between Comcast and Netflix is taking place as Federal Communications Commission Chairman Tom Wheeler moves forward with plans to rewrite the agency's net neutrality rules.

Before they were struck down by a federal court earlier this year, those rules prevented Internet providers from blocking or slowing access to websites, but they did not address interconnection deals like the one between Comcast and Netflix.

On Thursday, Wheeler proposed a new set of net neutrality rules that would require Internet providers to supply content companies like Netflix with a basic level of access to subscribers but would allow Internet providers to charge more for better access.

Netflix came out against Wheeler's plans. 

"Netflix is not interested in a fast lane; we're interested in safeguarding an Open Internet for our members," a spokesman said.