Comcast Accuses Netflix of Extortion

The video site and others allegedly made various "self-interested" demands.

Comcast lashed out at the critics of its merger with Time Warner Cable on Wednesday, accusing them of "extortion."

In a regulatory filing, Comcast claimed that after it first announced the deal in February, Netflix and other opponents quietly approached the cable giant with various "self-interested" demands. Their explicit or implicit offer was to support the deal (or at least not oppose it) if the demands were met, Comcast said.

"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," Comcast wrote in the filing to the Federal Communications Commission.

Comcast singled out Netflix, Dish Network, Discovery Communications, Cogent, and Viamedia for their "egregious" abuses of the regulatory process.

On a conference call with reporters, Comcast Executive Vice President David Cohen clarified that he wasn't accusing any company of legal wrongdoing. But he did say the companies are trying to cloak their attempts at financial gain as protecting the public interest.

Netflix wants to be able to deliver its video traffic directly to Comcast's network for free, but the cable giant (and some other large broadband providers) have been demanding fees from Netflix. If Netflix refuses to pay the fees, the quality of its videos plummets. The video site has accused the broadband providers of abusing their market power and harming Internet freedom by demanding "tolls" for the network connections.

In its filing, Comcast urged the FCC to reject Netflix's "base attempt to gain additional commercial advantages over Comcast."

Netflix fired back at Comcast with a statement Wednesday, saying it's 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," Netflix said.

The video company said it only "grudgingly" agreed to pay Comcast for direct access to its network, and warned that if the Time Warner Cable deal is approved, other businesses could "be held over the barrel by Comcast to do the same."

In its regulatory filing, Comcast also accused Discovery of trying to use the transaction as an opportunity to squeeze more money out of Comcast for the right to carry its channels.

In a statement, David Leavy, a Discovery spokesman, said the company is "always talking to our distribution partners about realizing fair value for our content." He warned that Comcast would "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."

The FCC and Justice Department are reviewing Comcast's $45 billion bid for Time Warner Cable, which would unite the nation's two largest cable providers.

Opponents warn the deal would create a behemoth with control over the TV and Internet industries. In addition to the corporate critics, consumer groups such as Free Press, Consumers Union, and Public Knowledge warn that Comcast would be able to kill off innovative new services that threaten its current business model.

Comcast dismissed the consumer groups' concerns as typical "doom and gloom" warnings that have never turned out to be true.

Comcast notes that its network doesn't overlap with Time Warner Cable's and the merger would therefore not reduce any choices for consumers. The deal will mean faster Internet and better video technologies, the company claims.