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Comcast's Cohen Calls Hastings Peering Arguments 'Hogwash'

Cable Firm EVP Takes Issue With Netflix CEO Comments 3/27/2014 8:15 PM Eastern

Comcast executive vice president David Cohen says that Netflix CEO Reed Hasting's criticisms of the companies' recent peering deal are "essentially hogwash."

In an interview for C-SPAN's The Communicators, Cohen said that when the history of that deal is written, it will say that Netflix was the motivated force behind it, and that Netflix essentially wanted to cut out the wholesalers and deal directly with Comcast. The show with Cohen will air on Friday, March 28 and Saturday, March 29.

"I have a huge amount of respect for him," Cohen said of Hastings. "He's built an amazing business. He's a great partner of Comcast. And, by the way, I think he would say Comcast is a great partner of his because, if it wasn't for Comcast and the cable industry and the investments we've made in broadband, Netflix would not be as successful as it is, and Netflix has clearly enabled us to sell more broadband subscriptions."

Then came the hogwash part. He said peering agreements are nothing new, were how the Internet was built, and have nothing to do with net neutrality or the "stronger" rules Hastings was calling for.

After the peering deal was struck, Hastings wrote a blog saying that it was something of a shotgun marriage with Comcast on the business end. He said "stronger" network-neutrality rules were needed, and that ISPs should be prevented from charging an arbitrary interconnection tax.

According to at least one analyst, Netflix paid a lot less than Comcast's asked, in part because the cable operator has to be careful as it navigates its proposed Time Warder Cable merger through the regulatory gauntlet.

In defending the proposed TWC deal, which Cohen is responsible for getting successfully through that regulatory oversight process, he echoed arguments Comcast has been making in D.C. as it prepares to submit the $45 billion meld for FCC review: It is not a vertical merger and combined will have under 30% of the market.

The proposed Time Warner Cable deal is "a lot less scary, a lot less large and a lot less complicated than people like to make it," he said.

He was asked what the biggest hurdle would be, and did say that if there was anything "appropriate to discuss" it would be on the broadband side. But he said he thought there was a very good story there as well, and not a scary story in terms of broadband market share.

While he conceded the enlarged Comcast would be about 40% of wireline broadband, he said when you factor in wireless -- which he said was becoming a competitor and substitute for many uses of broadband -- that market share drops to as low as 20%. He said 20% isn't scary, but also said neither was 40% because the relevant figure is not national, but the choices where people live.

He also said he was not sure what national share meant. "The issue is local share, and in no local market will there be any less choice after the transaction that there is before.”

It is not a single-choice market, he said. Comcast said that criticisms of broadband prices missed the point that when promotions were factored in, the price has been "amazingly stable." Add in the speed and capacity improvements that went along with the less-than-sticker price, and Comcast customers are paying 92% less per megabit downstream to the home than they did a decade go, which he called "sharply declining" effective prices."

Cohen said the plan is to do Hart-Scott-Rodino and FCC public-interest filings at Justice and at the FCC in early April, likely the second week.

Cohen said it was safe to say that the opposition to telecom mergers tends to come from the same people, who argue that anytime there is a media merger in the telecom marketplace the sky will fall and the world end as we know it.

Those dire predictions have been disproved in numerous transactions, he argued. "I think they are equally untrue today."

He said he had been struck by the absence of rational, knowledgeable voices in this space opposing or even seriously questioning the deal.

Communications Daily's Howard Buskirk offered that some of the criticism centered on whether Comcast was just getting too big.

Cohen said sometimes big is bad, but "sometimes it is really important, really necessary and really good." That, he says, would be in high capital industries: cable operators spend billions on network upgrades and new services--where companies have to spend a lot to keep pace.

Comcast execs, including chairman Brian Roberts, have been making the point that Comcast needs scale to compete with national distribution platforms like satellite and over-the-top (Netflix). Cohen echoed that.

Cohen also owned that, saying that Comcast is going to get bigger to expand in investment and R&D. "I'm not walking away from that."

Scale should not be scary, he said, and won't be to "knowledgeable people.” He suggested that will include the five members of the FCC. He reiterated that the deal will not give Comcast even 30% share of cable subscribers -- it has said it will spin off up to 3 million TWC customers -- which is an FCC benchmark that has been discredited by the courts.

What conditions would Comcast accept to get the deal done? Cohen said it would extend all the NBCU conditions, but said he didn't think there was a need for additional conditions.

He said he would be the Comcast witness at the April 9 Senate Judiciary Committee hearing on the Comcast/TWC deal, and was looking forward to making the case there, too.

 

September