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Comcast Lashes Out at ‘Extortionists’

WASHINGTON — It was like Godzilla vs. King Kong vs. Mothra last week, with Comcast, the biggest cable operator and Internet service provider, battling back against the attacks of cable programming giant Discovery Communications and over-the-top video behemoth Netflix.

The venue was the Federal Communications Commission’s vetting of Comcast’s proposed merger with Time Warner Cable, specifically Comcast’s nearly 1,000 pages of reply comments.

The kinder, gentler side of big media companies is often the one they show Washington while trying to make the case that they should be able to get bigger. Witness AT&T’s decision to carry rural-interest network RFD-TV on U-verse TV, which pleased rural legislators and converted a noisy critic, RFD-TV founder and chairman Patrick Gottsch, into a fan.

But like Peter Finch’s character in the 1976 film Network, Comcast signaled it was sick and tired of many of its critics’ charges and was not going to take it anymore.

NETS HAVE HAND OUT

Comcast branded a number of its programmer critics as extortionists in public-interest clothing, while dismissing some public-advocacy groups as Chicken Littles parroting shopworn arguments or raising issues that had nothing to do with the transaction at hand.

Some Comcast deal critics were suggesting the Philadelphia- based MSO had taken off the gloves because of fears that the pendulum might be swinging toward more conditions on the deal, particularly those related to broadband Internet service.

“Its defensive reaction to the thorough evidence that has been put before the FCC show that it’s a company that realizes this merger is far from a done deal,” Public Knowledge senior staff attorney John Bergmayer said of Comcast’s response to the FCC.

Comcast executive vice president David Cohen, who is responsible for getting the deal done, said he was not expecting any onerous conditions.

Last week, he said he wasn’t surprised programmers and others were trying to extort business advantages out of the deal.

He said, though, that deal opponents should not pretend they are really concerned about competition and consumers, because they had signaled that if Comcast did give into their demands, they would support — or at least not oppose — the merger of the No. 1 and No. 2 U.S. cable operators, which would create a 30 million- subscriber pay TV powerhouse. The $69 billion merger is expected to close early next year.

Cohen told reporters on a conference call last week that Comcast wasn’t picking on Discovery Communications, saying he was even a fan of the programming. But that didn’t stop him from hammering the programmer.

He called Discovery, the Silver Spring, Md.-based parent of such networks as Discovery Channel, TLC and Animal Planet, the “poster child” for inappropriate complaints being made by programmers. Cohen said Discovery sought to renew its carriage deal now, even though the deal does not expire until the middle of 2015, and said it asked for additional carriage for a number of channels and higher rates.

Comcast has an old-fashioned view that a contract is a contract, Cohen said, and that deals should be renewed as they are about to expire. “Just because we have announced we are engaging in a transaction, that doesn’t mean it is open season on renegotiating our contracts,” Cohen said.

He conceded that demands such as those made by Discovery in its deal comments are common, but said it did not make them transaction-specific arguments. Cohen also pointed to Discovery’s $25 billion market capitalization, 47 cable networks and big-name board members and investors. “Discovery does not need additional regulatory help to succeed in the marketplace,” Cohen said.

David Leavy, Discovery’s chief communications officer, said that as one of the few remaining independent programmers — Cohen disputed the characterization — it was a fair and reasonable actor and was “always talking to our distribution partners about realizing fair value for our content across all consumer platforms.”

Leavy said Comcast was trying to divert attention from the real issue, which was what Comcast might do to programmers after the merger: demand “extreme” program discounts or attempt to block the launch of new networks.

“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,” he said.

Netflix was another critic that Comcast said didn’t need the government’s help to run its business.

Cohen was just as clear on where he thought Netflix was coming from in criticizing the deal and the issue of online traffic exchanges over Internet backbone. Netflix has complained about a paid-peering deal it struck with Comcast. Comcast has branded that criticism as an attempt to dump traffic and slow its users’ online experience to shift interconnection costs from itself to customers.

“This was a business dispute,” Cohen said last week. “This was part of a strategy by Netflix, and maybe by Netflix and Cogent, to create a problem in the backbone in order to make a broader point that had nothing to do with the consumer interest.”

The point? “[I]t was better for them to have free interconnection,” Cohen said.

NETFLIX WANTS SPEED

Netflix framed its response in terms of promised broadband speeds, something FCC chairman Tom Wheeler has made an issue of with Internet-service providers.

“It is not extortion to demand that Comcast provide its own customers the broadband speeds they’ve paid for so they can enjoy Netflix,” a spokesperson for the Los Gatos, Calif.-based company said last week. “It is extortion when Comcast fails to provide its own customers the broadband speed they’ve paid for unless Netflix also pays a ransom.”

At press time last Friday (Sept. 26), Comcast was still hearing it from critics.

“If this is how Comcast acts before receiving merger approval, just think how the company will act in the market if the merger with Time Warner Cable is approved without adequate remedies and its market power is allowed to grow even larger,” Matthew Polka, president of the American Cable Association, the trade group representing smaller, independent cable operators, said.

Common Cause, the Washington, D.C.-based nonprofit liberal advocacy organization, demanded an apology for being called an extortionist, but a Comcast spokesperson said it was not including the group in that characterization, which it was reserving for companies “with their hand out.”