Netflix Inc. (NFLX:US), stepping up its criticism of Internet service providers, called out AT&T Inc. (T:US) for offering video-streaming speeds that trail even those of phone companies with inferior technology.
AT&T, the biggest landline phone company in the U.S., provided an average speed in March of 1.73 megabits a second for Netflix’s service on fiber-based connections, trailing CenturyLink Inc. and Windstream Holdings Inc., which use older DSL lines, Netflix said. AT&T could improve its speeds by using a free interconnection with Netflix, the video company said.
“AT&T customers expect a good quality Netflix experience given how much they pay AT&T for their Internet service,” Netflix said yesterday in its earnings report.
The salvo from Netflix intensifies a debate between the Los Gatos, California-based company and Internet providers over who should pay for the network improvements needed to handle surging consumer demand for online video. While Netflix agreed in February to pay Comcast Corp. (CMCSA:US) millions of dollars a year for more direct connections, it has asked regulators to eliminate such charges.
AT&T announced plans today to spend more than $500 million with partner Chernin Group to buy or build video-streaming services, setting it up to compete with Netflix.
“We are investing money to go head-to-head with them,” said John Stankey, AT&T’s chief strategy officer.
That means AT&T will have to strike its own deals with other Internet service providers to ensure its customers get a good viewing experience, Stankey said in an interview today.
“If we are able to do that, I’m sure Netflix will be able to figure out how to do that,” he said. “Obviously Netflix was able to get an agreement with Comcast, and I’m certain they could do the same with us if they elected to do so.”
AT&T remains in discussions with Netflix, Stankey said.
Netflix also said yesterday that it opposes Comcast’s plan to acquire Time Warner Cable Inc. because it would give the combined cable carrier even more leverage to extract charges from Internet companies to ensure their services run smoothly for users.
Netflix’s opposition to such charges has nothing to do with the transaction, Comcast said in a statement. The Philadelphia-based cable provider said it already abides by U.S. net-neutrality regulations, which prohibit it from discriminating among different types of Internet traffic.
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