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Netflix: Net neutrality order creates a new climate

Netflix CEO Reed Hastings, Title II’s biggest fan, said the FCC’s net neutrality order creates a new climate for Netflix’s business and gives the government a solid reason to block Comcast’s acquisition of Time Warner Cable.

“We are encouraged by the consumer and political perspective that broadband access is so important that it is a utility,” Hastings said during the company’s first quarter earnings call Wednesday. “It is the architecture of the future. Anything around treating broadband as a utility is great for us and it’s great for the consumers.”

Netflix was one of the biggest advocates of the FCC regulating Internet service as a common carrier. The company quickly adopted the position soon after it signed a connection deal with Comcast.

Now that the order is set to go into effect, Netflix was asked to address whether or not the order would lead to lower interconnection prices in the future.

“It’s hard to tell,” said Hastings, who added that the company already has a number of contracts in place. “There is no immediate action there,” he said.

Netflix has long been on record opposing the Comcast-Time Warner Cable merger, suggesting that the FCC shouldn’t approve the merger without conditions. With the net neutrality order in place, Hastings believes the government has more ammunition to oppose the merger, rather than impose price controls on Comcast as a condition of a merger.

“It’s clear broadband is a necessary utility. No one is a fan of price controls, so we think the government should block Comcast,” Hastings said. “The [merged] company would have over 50 percent of Internet homes and frankly that is too much in one company.”

Netflix has a couple of hot properties–Orange Is the New Black and House of Cards– that make the service a prime target for pirates.

“Piracy remains a considerable long-term threat, mostly outside the United States,” said Hastings and CFO David Welles in the company’s shareholder letter.

The company’s solution: keep the prices low.

“Piracy is a governor in our pricing in high piracy markets outside the U.S.  So wouldn’t want to come out with a high price,” said Wells. “We have to compete with that.”

Netflix ended the quarter with 59.6 million paid subscribers worldwide, an increase of 5.1 million over a year ago.