Netflix wants to discriminate in price

The article from the WSJ reports that Netflix is planning to increase price for new users and only new users. Is the difference in price consistent with 3rd-degree price discrimination?

The article is also a good introduction to vertical relations, antitrust, and net neutrality.

SUMMARY: Netflix said it plans to increase its U.S. prices for new members by a dollar or two. The company also came out in opposition to Comcast's proposed acquisition of Time Warner Cable. With regard to relationship between Netflix and cable providers, the company has a lot of choices about how it sends content to customers, but at some point, its content must realistically pass through the systems of cable providers. Netflix chief executive told analysts that Netflix had "no choice" when it recently agreed to start paying Comcast to interconnect Netflix servers directly to Comcast's cable systems as a way of ensuring good quality video streaming. Netflix has argued operators should strike such interconnection deals without levying fees. Netflix also came out in opposition to Comcast Corp.'s proposed $45 billion acquisition of Time Warner Cable warning that the combined company would have "anticompetitive leverage" because its systems would pass 60% of homes that take broadband Internet-access.

CLASSROOM APPLICATION: Students can analyze whether Netflix should increase its prices. Some analysts have argued that Netflix can charge more for its service because the company has the opportunity to close a gap in how much its customers spend for content compared with traditional competitors. Instructors can also present the issue of whether Comcast can use its market power in cable service provision to increase prices on content providers like Netflix. One interesting issue is about the effect of a Comcast-Timer Warner Cable merger on the market power of the merged company when dealing with content providers.

QUESTIONS: 
1. (Advanced) Why is Netflix increasing the price it charges new customers? Why only new customers?

2. (Advanced) Why would Netflix be harmed by a Comcast-Time Warner Cable merger? Keep in mind that Comcast and Time Warner do not compete for customers in any geographic areas.

3. (Introductory) Why do most Netflix subscribers connect to the service using cable connections and not cellular wireless connections?