Cogent Communications has asked federal regulators to reject AT&T's (NYSE: T) pending acquisition of DirecTV (NASDAQ: DTV) if it does not put restrictions on the new company to ensure it does not charge large fees for exchanging Web traffic.
One of the key concerns Cogent has about the $48.5 billion acquisition is the potential issues it could cause in the online video market. This issue was brought up in its opposition to Comcast's now failed deal for Time Warner Cable (NYSE: TWC).
Craig Moffett, an analyst at MoffettNathanson, who expects the deal to close, told Bloomberg that Cogent and Netflix's plea for conditions may signal that it could be "good news" for AT&T.
"The broad consensus is that Netflix played a central role in scuttling the Comcast deal," Moffett said. Now, he said, "two of the most ardent opponents are tacitly blessing the idea of the merger as long as there are appropriate conditions."
Both companies said in FCC filings that a combined AT&T/DirecTV that has no restrictions will have a bigger incentive to stymie streaming entertainment.
In its filing with the FCC, Cogent pointed out how AT&T allowed its interconnection points with Cogent to become congested after it began running large amounts of Netflix (NASDAQ: NFLX) traffic.
"Despite having sufficient capacity—as did Cogent—and despite having sold customers a service that promised the ability to access Netflix or other OVD content of their choosing, AT&T opted to allow its interconnection points with Cogent to become congested," wrote Cogent in its filing. "That this occurred only after Cogent began carrying large amounts of Netflix content is noteworthy, as is the fact that the congestion could have been remedied at a modest cost."
Cogent added that while the congestion did not occur when it had access to the millions of new customers, the problem could worsen if the deal were to go through without provisions to prevent similar problems.
"Once it has those customers, and as OVD options multiply and diversify, AT&T's incentives for engaging in similar behavior will be augmented," Cogent wrote. "Further, those incentives will be paired with its already demonstrated ability to degrade access to online content."
While Cogent's filing is focused on the AT&T/DirecTV merger, it also plays into the net neutrality concepts related to network interconnection. With the FCC's net neutrality rules set to formally debut on June 12, Cogent and Level 3 Communications recently signed separate interconnection agreements with Verizon (NYSE: VZ). However, neither Cogent nor Level 3 has signed a similar deal with AT&T related to network interconnection yet.
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