Netflix's CEO has a warning for AT&T and Time Warner -- but generally favours the merger

Reed hastings, netflix, sv100 2015Michael Kovac/GettyNetflix Founder and CEO Reed Hastings

Netflix CEO Reed Hastings is fine with AT&T buying Time Warner, as long as it doesn’t end up hurting Netflix in an “unfair” way.

“We want to make sure it doesn’t give an unfair advantage to HBO,” Hastings said at the WSJ Live conference on Monday. “If it’s open competition, we love that.”

The main concern for Hastings is that AT&T might make the data run faster for channels and services it owns. Hastings wants “HBO’s bits” and “Netflix’s bits” to be treated the same. In other words, he wants net neutrality, a concept that is seen by many as central to maintaining a free and open internet.

“[Net neutrality] hasn’t been AT&T’s favourite topic,” he said. “If they got there … good things might happen.”

In net neutrality, all pieces of data running across a network like AT&T’s are treated as equal, and therefore move at the same speed. Netflix benefits from net neutrality, since it doesn’t have to pay companies like AT&T to move its data into a “fast lane.” That is unlikely to change any time soon.

But where an AT&T-Time Warner merger could hurt Netflix is in “zero rating.” Zero rating is when certain services, like Netflix or HBO, don’t count toward a user’s data cap. This makes those services relatively more attractive, since people aren’t hit with huge overage fees (video eats up a lot of data). And as long as AT&T’s policy is consistent, it can charge companies a fee to be zero rated. That could be a relative advantage for AT&T-Time Warner. For instance, in the case of HBO, that fee would simply be moving from one side of the conglomerate to the other. For Netflix, on the other hand, that would be money lost.

Beyond net neutrality, Hastings thinks the merger could affect Netflix in a few ways. “There’s a lot of AT&T investment in content, that could make things tougher,” Hastings told CNBC. “On the other hand it’s probably going to get easier for us to recruit Time Warner executives, which are a very talented bunch.”

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