Netflix: “We Had to Pay Comcast Because We Were Losing Customers”

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( — August 30, 2014)  — “Netflix speeds became so slow in December 2013 and January 2014 that customers grew irate”, Netflix said in its petition, filed to the Federal Communications Commission this week in opposition to Comcast’s proposed mega-merger with Time Warner Cable.

Calls made to Netflix’s customer support center about slow-loading videos more than quadrupled during those months. Netflix hand-delivered 256 pages document to the US government this week arguing that Comcast shouldn’t be allowed to acquire Time Warner Cable.”

Netflix and its CEO, Reed Hastings, have become outspoken critics of those direct-connect deals, accusing the Internet service providers of shakedown tactics.

“The last few months have been difficult for shareholders, employees, and most unfortunately, many members of Netflix,” Hastings wrote in a letter to shareholders. “We’ve hurt our hard-earned reputation, and stalled our domestic growth”.

If Time Warner Cable’s (TWC) Internet infrastructure, the routers, switches and other physical stuff which help get Internet traffic into and out of your home, are added to Comcast’s, the size or resulting network would be among the largest seen so far. Meaning that, if millions of post-merger subscribers are on the Comcast network and a catastrophic Wednesday-like failure happens, millions more people would potentially be affected than would otherwise be the case.

There is another issue customers raised since Comcast TWC merger was announced – who is paying for the bandwidth when a Comcast customer chooses to watch Netflix? Is the customer going to be charged for the extra load, or should Netflix step in and cover the costs?

Customers said that the only way they see this barely making a sense is if Comcast upgraded the areas around the Netflix servers (or where they connect to the Comcast network) as they currently can’t handle customers with low bandwidth.

Furthermore, as mentioned on other comments, Netflix has offered to pay for upgrades in the form of OpenConnect appliances. Netflix is willing to pay to solve Comcast’s claimed problem, but Comcast won’t take the offer.

However, not as many subscribers are loyal to Netflix either. In the first quarter of 2012, 76 percent of SVOD subscribers didn’t use anything other than Netflix. But, in 2013, that number fell to 67 percent.
10 percent of subscribers used Amazon Prime to supplement their video options, and 8 percent used Hulu on top of Netflix.