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What Comcast Had to Say About Netflix

NEW YORK (TheStreet) - A squabble between Netflix (NFLX) and Comcast (CMCSA) is heating up, as the cable giant quickly reacted to Netflix's very public opposition last night of its pending $45-billion takeover of Time Warner Cable (TWC).

"Netflix is free to express its opinions. But they should be factually based. And Netflix should be transparent that its opinion is not about protecting the consumer or about Net Neutrality. Rather, it's about improving Netflix's business model by shifting costs that it has always borne to all users of the Internet and not just to Netflix customers," Jennifer Khoury, Comcast's senior vice president of corporate and digital communications, wrote in a blog post on Monday evening.

Included in the release of Netflix's first-quarter earnings last night, CEO Reed Hastings expressed his disapproval of the Comcast-Time Warner Cable pending merger in a quarterly letter to shareholders, saying that essentially that the combination is anti-competitive.

"If the Comcast and Time Warner Cable merger is approved, the combined company's footprint will pass over 60 percent of U.S. broadband households, after the proposed divestiture, with most of those homes having Comcast as the only option for truly high-speed broadband (>10Mbps)," he writes in the letter. "As DSL fades in favor of cable Internet, Comcast could control high-speed broadband to the majority of American homes.

"Comcast is already dominant enough to be able to capture unprecedented fees from transit providers and services such as Netflix. The combined company would possess even more anticompetitive leverage to charge arbitrary interconnection tolls for access to their customers. For this reason, Netflix opposes this merger," Hastings wrote.

Netflix is pointing its finger at Comcast even with an agreement the two companies made in February regarding interconnection. The agreement all but guarantees Comcast U.S. broadband customers with high-quality Netflix video for years.

"Internet interconnection has nothing to do with net neutrality; it's all about Netflix wanting to unfairly shift its costs from its customers to all Internet customers, regardless of whether they subscribe to Netflix or not," Comcast's Khoury said.

She added that: "If Netflix did not like the terms of our agreement, or if they do not like the terms Comcast provides at any time in the future, Netflix can work with any of the multiplicity of partners that connect with Comcast. There was and is no need for Netflix or any other Internet content provider to work directly with us or any other specific ISP."

The response came just hours before Comcast released first-quarter earnings on Tuesday morning. Comcast posted first-quarter adjusted earnings of 68 cents a share, ahead of forecasts of 64 cents. Revenue rose 14% to $17.41 billion.

--Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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