Netflix wants the Federal Communications Commission to reject AT&T's proposed acquisition of DirecTV, or at least impose conditions that would prevent AT&T from abusing market power to harm online video services.

"Netflix urges the Commission to reject the merger as currently proposed," the streaming video provider said in a filing yesterday.

Further Reading AT&T/DirecTV merger likely to be approved

With DirecTV on board, AT&T would become the country's largest pay-TV provider, Netflix counsel Markham Erickson wrote. AT&T could also become the nation's biggest Internet service provider, ahead of Comcast, if it goes through with broadband investments that are contingent on merger approval, he wrote.

"Such market power creates new incentives and abilities to harm entities that AT&T perceives as competitive threats, and will exacerbate the anticompetitive behavior in which AT&T has already engaged," he wrote.

Netflix pointed to its own interconnection dispute with AT&T that resulted in poor video quality until Netflix paid AT&T for a direct network connection.

"AT&T already has a demonstrated ability to harm OVDs [online video distributors] by leveraging its control over interconnection to degrade its own customers’ access to Netflix’s service," Netflix wrote. "AT&T also has shown an interest in using data caps and usage-based pricing methods, which it can apply discriminatorily to advantage its own services. If AT&T is able to slow the development of the OVD industry, either by foreclosing access to broadband customers or imposing discriminatory data caps, AT&T would be able to preserve its market advantage by slowing or even reversing the shift toward competitive online video offering and away from bundled video/broadband offerings."

AT&T declined to comment when contacted by Ars.

Netflix released a statement today pointing out that it would not oppose the merger if it is approved with certain conditions. "While we are participating in the government's review, we are not opposing the merger," Netflix said. "We've been highlighting concerns about AT&T's broadband practices and the need for appropriate remedies since last September."

This week's filing proposed no such appropriate remedies, but Netflix described the conditions it wants imposed upon the merger in a submission last September. In addition to a permanent net neutrality commitment, Netflix asked the FCC to prevent a combined AT&T/DirecTV from charging interconnection fees to Netflix and other content providers. Moreover, "the combined entity should be prohibited from excepting its own affiliated services from any data cap applicable to any of its services (whether fixed or mobile)," Netflix wrote.

AT&T isn't likely to agree to all of Netflix's proposed conditions. The company has argued that large online content providers like Netflix should have to pay if they seek direct connections to AT&T's network. AT&T is also suing the FCC over its latest net neutrality rules (though it was satisfied with weaker rules issued by the FCC in 2010).

While the FCC prevented Comcast from buying Time Warner Cable, it's not yet clear how the commission will treat AT&T's attempted merger. AT&T has tried to distinguish its merger from Comcast's by pointing out that it is not acquiring any additional broadband subscribers and "has no significant video programming interests to protect."

But Netflix argued in this week's filing that "This is beside the point. AT&T’s investment in a business model that profits by selling bundled programming packages will result in a powerful incentive to protect that model."

AT&T has argued that it would not degrade online traffic because this would harm its broadband business, leading to falling sales. But Netflix says AT&T has degraded traffic anyway.

"AT&T’s degradation of its customers’ access to Netflix in 2013 and 2014 provides a natural experiment to test this proposition," Netflix wrote. "During this time, Netflix’s members using AT&T’s DSL and U-verse network declined to 1.0Mbps and 1.5Mbps, respectively, at their lowest points. Netflix recommends at least 3Mbps for DVD quality video and 1.5Mbps for VHS quality. A drop below 1.5Mbps can cause service interruptions... Moreover, during the congestion episode, AT&T publicly blamed Netflix for the degradation of Netflix’s service, leaving consumers in doubt as to the cause of the problem."