Netflix Prevails with Invisible Hand in Policy and Mergers

By Stewart, James B | International New York Times, May 30, 2015 | Go to article overview

Netflix Prevails with Invisible Hand in Policy and Mergers


Stewart, James B, International New York Times


The invisible hand of Netflix has been at work influencing policy and proposed mergers in the cable, broadband and media businesses.

Whatever the outcome of the latest proposed mergers and acquisitions in the media industry, a clear winner has already emerged, and it's not even a party to any of the deals: Netflix, the streaming television pioneer.

To many in the cable and broadband businesses, the invisible hand of Netflix has been apparent in the failed Comcast-Time Warner Cable combination; in likely restrictions on the merger between AT&T and DirecTV; and in the Obama administration's embrace of net neutrality -- to cite just three prominent examples.

Indeed, the corporate philosophy of Netflix, which was once thought to be outgunned in Washington by the East Coast media conglomerates and their vast lobbying forces, now seems so pervasive that the Federal Communications Commission is being referred to by some media executives -- half-jokingly and half-enviously -- as the "N.C.C."

But Netflix is hardly the only corporate beneficiary. To varying degrees, an array of Silicon Valley powerhouses -- including Apple, Amazon, Facebook and Google -- gain from an open Internet and net neutrality, the notion that broadband service providers should treat all data equally, no matter its content, source or volume. That these views have prevailed over long-entrenched telecommunication and cable interests is yet further evidence of the technology industry's growing political clout inside the White House and on Capitol Hill.

Netflix hasn't yet taken a position on Charter Communications' $67.1 billion purchases of Time Warner Cable and Bright House Networks, which were announced this past week. But if Charter's chief executive, Thomas M. Rutledge, wants to avoid the fate of Brian Roberts, Comcast's chairman, he'd better get on the phone with Netflix's chief executive, Reed Hastings, before it's too late.

"Netflix has raised some very legitimate issues, and they've done an excellent job of presenting their vision of the market," said Gene Kimmelman, who dealt with Netflix while he was chief counsel at the antitrust division and now runs Public Knowledge, which supports an open Internet.

At the same time, he said, the influence of any one voice shouldn't be exaggerated. "Their story just happened to fit perfectly into a broader narrative of the potential for harm to consumers," Mr. Kimmelman said. But "Netflix's role is definitely an important piece of the puzzle."

From Netflix's point of view, the fact that its views have gained traction with regulators is merely a recognition that its corporate philosophy, which it says has always been to put consumer interests first, coincides with sound public policy.

Netflix points out that its competitors also benefit from an unfettered Internet. So do other streaming services like Hulu and Amazon, as well as industry stalwarts like HBO and CBS that have started their own so-called over-the-top offerings.

But Netflix, for better or worse, has become the symbol for net neutrality, which has become a key issue in how regulators analyze proposed cable and telecom mergers.

Of course, government antitrust and communications policy is supposed to benefit consumers, not any individual company or group of companies. "It's fair to say Netflix has gotten something of a free pass," said Scott Hemphill, visiting professor of antitrust and intellectual property at New York University School of Law. …

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