The head of Internet backbone provider Cogent said Comcast forced Netflix into an interconnection deal by refusing upgrades to fix congestion, a claim a Comcast executive told Congress was "wholly inaccurate."
The executives spoke at a House Judiciary Committee hearing Thursday on the proposed $45.2 billion merger of Comcast with Time Warner Cable, which would join the top two cable providers in the US and concentrate the number of homes with broadband Internet service under one corporation.
That degree of broadband consolidation has caused critics of the merger -- including Netflix -- to raise worries about fees Comcast could demand due to increased market power. That raises the specter of higher prices for consumers, as those fees are presumably passed along to them. Comcast, however, has said that the merger will not affect the business dynamics of interconnection, where prices continue to fall.
Thursday, Cogent Chief Executive Dave Schaeffer said Comcast has been "very clever" to avoid interfering with traffic on its own network by instead interfering with traffic before it enters its network. Ports -- or connections between Cogent's network and Comcast's -- became full when Cogent tried to deliver Netflix traffic Comcast customers were requesting, he said, adding that Comcast refused when Cogent and other backbone providers asked the company to upgrade. That congestion forced Netflix into an interconnection deal, he said.
"They forced Netflix to have to go and directly enter into a contract with Comcast paying a higher price for a less robust product. That's not a free market, that's an abuse of market power," Shaeffer said.
Such a description of the Netflix deal was "wholly inaccurate," David L. Cohen, Comcast's executive vice president who handles government and regulatory affairs, said at the hearing.
"We did not force Netflix to enter into an interconnection deal with us. That was Netflix's idea," he said. "It was their desire given the size of their traffic to cut out the middle man, their words -- the middle man happened to be Cogent, by the way -- and to deal directly with us."
Separately, Comcast said in a statement that backbone and transit markets are very competitive and the TWC merger won't alter them, adding that Cogent's accusations Thursday are "no different from the business disputes they've had with ISPs and others for over a decade."
"Comcast has always been willing to enter into industry standard and commercially reasonable agreements with Cogent and similarly situated companies," the company said.
Shaeffer's comments echo those from another backbone provider, Level 3, earlier this week about a handful of Internet service providers degrading delivery by refusing upgrades in order to win interconnection deals. They also are part of a long back-and-forth series of complaints among many transit providers and ISPs going back years.
For its part, Netflix didn't comment directly on Thursday's testimony, but it discussed the matter recently in a letter (PDF) to Sen. Al Franken (D-Minn.), another critic of the merger. "Prior to our agreement to interconnect directly with Comcast, Netflix purchased all available transit capacity into Comcast's networks from multiple transit providers. Every single one of those transit links to Comcast was congested (even though the transit providers requested extra capacity), resulting in poor video quality for our members," the letter said. Comcast has contested those claims as well.
Comcast shares Thursday closed down 64 cents, or 1.2 percent, to 51.10. Netflix shares closed up $1.12, or less than 1 percent, at $321.66.
The House hearing Thursday -- which stretched to four hours of testimony and questions that touched on matters of antitrust, programming for diverse audiences and carriage of independent TV networks -- follows a similar one in the Senate last month, but neither hearing has any direct effect on the fate of the Comcast/TWC deal. Most experts believe Comcast's deal will eventually be approved because of a lack of direct competition between the two companies in any geographic market. The uncertainty around the deal is what conditions the Federal Communications Commission or Justice Department will impose on the cable giants to grant approval.