[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
AN EXAMINATION OF THE PROPOSED COMBINATION OF COMCAST AND NBC UNIVERSAL
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY, AND THE INTERNET
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 4, 2010
__________
Serial No. 111-94
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
_____
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COMMITTEE ON ENERGY AND COMMERCE
HENRY A. WAXMAN, California
Chairman
JOHN D. DINGELL, Michigan JOE BARTON, Texas
Chairman Emeritus Ranking Member
EDWARD J. MARKEY, Massachusetts RALPH M. HALL, Texas
RICK BOUCHER, Virginia FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey CLIFF STEARNS, Florida
BART GORDON, Tennessee NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois ED WHITFIELD, Kentucky
ANNA G. ESHOO, California JOHN SHIMKUS, Illinois
BART STUPAK, Michigan JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York ROY BLUNT, Missouri
GENE GREEN, Texas STEVE BUYER, Indiana
DIANA DeGETTE, Colorado GEORGE RADANOVICH, California
Vice Chairman JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania GREG WALDEN, Oregon
JANE HARMAN, California LEE TERRY, Nebraska
TOM ALLEN, Maine MIKE ROGERS, Michigan
JANICE D. SCHAKOWSKY, Illinois SUE WILKINS MYRICK, North Carolina
HILDA L. SOLIS, California JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas TIM MURPHY, Pennsylvania
JAY INSLEE, Washington MICHAEL C. BURGESS, Texas
TAMMY BALDWIN, Wisconsin MARSHA BLACKBURN, Tennessee
MIKE ROSS, Arkansas PHIL GINGREY, Georgia
ANTHONY D. WEINER, New York STEVE SCALISE, Louisiana
JIM MATHESON, Utah
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA M. CHRISTENSEN, Virgin Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE L. BRALEY, Iowa
PETER WELCH, Vermont
(ii)
Subcommittee on Communications, Technology, and the Internet
RICK BOUCHER, Virginia
Chairman
EDWARD J. MARKEY, Massachusetts FRED UPTON, Michigan
BART GORDON, Tennessee Ranking Member
BOBBY L. RUSH, Illinois CLIFF STEARNS, Florida
ANNA G. ESHOO, California NATHAN DEAL, Georgia
BART STUPAK, Michigan JOHN SHIMKUS, Illinois
DIANA DeGETTE, Colorado GEORGE RADANOVICH, California
MICHAEL F. DOYLE, Pennsylvania MARY BONO MACK, California
JAY INSLEE, Washington GREG WALDEN, Oregon
ANTHONY D. WEINER, New York LEE TERRY, Nebraska
G.K. BUTTERFIELD, North Carolina MIKE FERGUSON, New Jersey
CHARLIE MELANCON, Louisiana
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA M. CHRISTENSEN, Virgin
Islands
KATHY CASTOR, Florida
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
PETER WELCH, Vermont
JOHN D. DINGELL, Michigan (ex officio)
C O N T E N T S
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Page
Hon. Rick Boucher, a Representative in Congress from the
Commonwealth of Virginia, opening statement.................... 1
Hon. Cliff Stearns, a Representative in Congress from the State
of Florida, opening statement.................................. 3
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 4
Hon. Roy Blunt, a Representative in Congress from the State of
Missouri, opening statement.................................... 6
Hon. Edward J. Markey, a Representative in Congress from the
Commonwealth of Massachusetts, opening statement............... 6
Hon. John Shimkus, a Representative in Congress from the State of
Illinois, opening statement.................................... 7
Hon. Anna G. Eshoo, a Representative in Congress from the State
of California, opening statement............................... 8
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 9
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 10
Hon. Jay Inslee, a Representative in Congress from the State of
Washington, opening statement.................................. 11
Hon. Mary Bono Mack, a Representative in Congress from the State
of California, opening statement............................... 12
Hon. Doris O. Matsui, a Representative in Congress from the State
of California, opening statement............................... 13
Hon. Marsha Blackburn, a Representative in Congress from the
State of Tennessee, opening statement.......................... 14
Hon. Christopher S. Murphy, a Representative in Congress from the
State of Connecticut, opening statement........................ 14
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 15
Hon. Kathy Castor, a Representative in Congress from the State of
Florida, prepared statement.................................... 17
Hon. G.K. Butterfield, a Representative in Congress from the
State of North Carolina, opening statement..................... 19
Hon. John B. Shadegg, a Representative in Congress from the State
of Arizona, opening statement.................................. 20
Hon. Bobby L. Rush, a Representative in Congress from the State
of Illinois, opening statement................................. 21
Hon. Peter Welch, a Representative in Congress from the State of
Vermont, opening statement..................................... 22
Witnesses
Brian Roberts, Chairman and CEO, Comcast Corporation............. 23
Prepared statement........................................... 26
Answers to submitted questions............................... 112
Jeff Zucker, President and CEO, NBC Universal.................... 39
Prepared statement........................................... 26
Answers to submitted questions............................... 168
Colleen Abdoulah, President and CEO of WOW!, Wide Open West
Internet, Cable and Telephone.................................. 40
Prepared statement........................................... 43
Michael Fiorile, Chairman, NBC Affiliates Board, and President
and CEO, Dispatch Printing Company............................. 52
Prepared statement........................................... 54
Dr. Mark Cooper, Director of Research, Consumer Federation of
America........................................................ 65
Prepared statement........................................... 67
Adam Thierer, President, Progress and Freedom Foundation......... 76
Prepared statement........................................... 78
Submitted Material
Letter of January 29, 2010, from the City of Pittsburgh to Mr.
Doyle.......................................................... 110
Letter of January 29, 2010, from the Pittsburgh City Council to
Mr. Doyle...................................................... 111
AN EXAMINATION OF THE PROPOSED COMBINATION OF COMCAST AND NBC UNIVERSAL
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THURSDAY, FEBRUARY 4, 2010
House of Representatives,
Subcommittee on Communications, Technology,
and the Internet,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:34 a.m., in
Room 2123, Rayburn House Office Building, Hon. Rick Boucher
[chairman of the subcommittee] presiding.
Present: Representatives Boucher, Markey, Gordon, Rush,
Eshoo, Stupak, DeGette, Doyle, Inslee, Weiner, Butterfield,
Melancon, Matsui, Christensen, Castor, Murphy, Space, McNerney,
Welch, Dingell, Waxman (ex officio), Stearns, Upton, Shimkus,
Shadegg, Blunt, Buyer, Bono Mack, Terry, Rogers, Blackburn and
Barton (ex officio).
Staff Present: Roger Sherman, Chief Counsel; Pat Delgado,
Chief of Staff; Tim Powderly, Counsel; Amy Levine, Counsel;
Shawn Chang, Counsel; Greg Guice, Counsel; Sarah Fisher,
Special Assistant; Michiel Perry, Intern; Neil Fried, Minority
Counsel; Will Carty, Minority Professional Staff; Garrett
Golding, Minority Legislative Analyst.
OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF VIRGINIA
Mr. Boucher. The subcommittee will come to order. Today the
subcommittee convenes to consider the proposed combination of
two of our Nation's largest media and entertainment companies,
Comcast and NBC Universal. I will note at the outset that it is
my intent to urge the FCC and the Department of Justice to move
expeditiously concerning their review and approval of this
matter. I am not saying that the agency should not impose
conditions on the transaction, but the companies deserve an
answer in a timely manner.
The key to evaluating any merger or joint venture is to ask
how it will affect consumers. Some combinations may benefit
consumers by enabling the deployment of new and better products
and services; others may harm consumers by limiting the choices
that are available to them. Sometimes these harms can be
limited or completely eliminated through the imposition of
conditions, and other times they cannot. So we will inquire
this morning about whether synergies will arise from the merger
that will confer benefits on consumers, whether there is the
potential for consumer harm through lessened access to
programming that is available today on NBC Universal, and, if
there is the potential for consumer harm, whether the merger
should be conditioned so as to guard against it.
Comcast is the Nation's largest multichannel video
programming distributor, the largest residential broadband
provider and third largest home telephone service provider, as
well as the owner of a number of cable channels and regional
sports networks. As measured by annual revenue, NBC Universal
is the Nation's fourth largest media and entertainment company.
It owns the NBC and Telemundo television networks, television
broadcast stations and many of our Nation's largest television
markets, cable channels and a movie studio, as well as an
interest in the online video programming provider Hulu.com.
As these facts revealed, the merger, if approved, will
substantially transform the media and entertainment
marketplace, and it requires very careful scrutiny. That
scrutiny boils down, I think, to three basic questions. First,
assuming the combination is approved, what benefits will
consumers see a year after the merger that they do not enjoy
today? Secondly, what, if anything, are consumers receiving
today that they will not continue to receive a year after the
merger is consummated? And finally, are there conditions that
regulatories should consider imposing on approval of the merger
to ensure that it serves consumers; and if so, what are those
conditions?
I want to thank our panel of distinguished witnesses for
their appearance here this morning and for their testimony
enlightening our deliberations. I also want to remind the
members of our subcommittee that several of our witnesses are
scheduled to testify this afternoon in the other body, and we
want to make sure that we do not detain them from their
appointed rounds. So I would ask that Members adhere very
closely to our time limitations on opening statements and also
during the question period. And I hope that this brief opening
statement has set something of an example.
I am pleased at this time to recognize the Ranking
Republican Member of our subcommittee, the gentleman from
Florida, Mr. Stearns.
Mr. Stearns. Good morning. And thank you, Mr. Chairman. I
just want to yield to the Ranking Member of the veterans
committee who has to leave, Mr. Buyer, for a quick statement.
Mr. Buyer. I thank the gentleman for yielding to me. I am
going to have to waive my opening statement. I want to thank
you and the Chairman. When I asked for this hearing, I think it
is extremely important for all the views to be aired, and I
want to thank you for that.
I am going to take off and receive the VA Secretary's
testimony, and I plan to return.
Mr. Stearns. Very good. I look forward to it.
OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA
Mr. Stearns. Mr. Chairman, obviously this is a very
important hearing. The merger between Comcast and NBC Universal
is indeed a major transaction that could possibly fundamentally
alter the media and entertainment landscape in the United
States. It deserves close examination by this subcommittee, our
jurisdiction, as well as the Justice Department and the FCC. I
am glad that the CEOs of both Comcast and NBC and Universal are
here this morning. I look forward to their testimony and the
testimony to the rest of the panel.
Comcast, as all of us know, is the Nation's largest video
programming distributor, and NBC is the Nation's fourth largest
media and entertainment company. Nevertheless there is, in my
opinion, little to suggest that a Comcast/NBCU combination
would seriously threaten competition in the media entertainment
industries. We all know this is a highly competitive segment of
the economy, and ultimately consumers stand to benefit. Since
NBCU and Comcast do not compete in most segments of the market,
this deal will not bring about consolidation, so to speak.
Comcast has interest in only five wholly owned and six
partially owned national cable networks. So together these
networks only represent about 3 percent of national cable
network advertising and affiliate revenue. NBC's network
represent approximately 9 percent of national cable networks'
advertising and affiliate revenue, giving the combined entity a
total of 12 percent, which would place it behind Disney, ABC,
Time Warner and Viacom. That is the same position NBC occupies
today before the deal, and approximately six out of every seven
networks Comcast carries will remain unaffiliated with Comcast
or NBC.
Now, the idea that Comcast/NBCU combination will harm
competition is something we are looking at today. I don't think
it is a--founded under the data that I have looked at. In fact,
such vertical integration will lead to greater innovation and
drive more competition in this already competitive market.
Moreover, under the prevailing economic view, a firm that does
not have market power in either the video distribution or
programming markets is no more capable of exerting market power
simply because it is vertically integrated.
As mentioned before, the combined Comcast/NBCU will control
content representing only 12 percent of the national cable
programming market. Were the new venture to unreasonably
withhold any of this programming, the combined entity would
likely just lose programming revenue as distributors and
viewers turn to other alternatives. Indeed, in many cases,
viewers might be able to find the identical content from
another distributor and perhaps even for free, over the air or
over the Internet. And while there is debate whether the
program access rules are even needed, if not harm--even need if
not harmful in light of the level of competition, Section 628
would also limit the combined entities' conduct.
Furthermore, and, my colleagues, in order to demonstrate
the public's interests, benefits that will come from this deal,
Comcast and NBCU have made a number of voluntary commitments in
their filings. Among the commitments, they have pledged to
continue offering NBC and Telemundo network programming free
over the air; to make more local news, public affairs,
children's ethnic and other public interest programs available
over the air on cable channels, on demand and on line; and to
continue the position of the NBC News ombudsman to ensure
journalistic independence from each of the owners. They should
be commended for these voluntary commitments.
And lastly, Mr. Chairman, I would like to offer a word of
caution to those who may want to add perhaps unrelated
conditions to this merger. For example, proponents of Internet
regulation may seek network-neutrality mandates on the Comcast/
NBCU deal. I think this would be inappropriate. Not to get
ahead of ourselves, but it appears that Comcast is in court and
is near victory on net neutrality in the sense that the U.S.
Court of Appeals for the District of Columbia heard the case,
heard our oral arguments last month, and the court, in fact,
seemed skeptical that the FCC even had legal authority to
impose these mandates. One of the judges asked the FCC counsel,
quote, whether he wanted to lose on process or jurisdiction,
end quote.
Unless a condition is narrowly tailored to a transaction-
specific harm to competition, it does not belong in this
negotiation. Since this deal will not materially increase
concentration in either the distribution of programming
markets, demonstrating such harm will be difficult, especially
in light of the robust competition in the video sector.
Mr. Chairman, thank you for holding this hearing. If
Comcast and NBCU are right that this deal creates a stronger
entity that can better serve viewers, I think it will succeed.
If they are wrong, it will fail, just as the AOL/Time Warner
merger failed ultimately. As competitive as this market is,
regulatory intervention is not only unnecessary, but it will
hurt competition and consumers.
Thank you, Mr. Chairman.
Mr. Boucher. Thank you very much, Mr. Stearns.
The Chairman of the full Energy and Commerce Committee, the
gentleman from California, Mr. Waxman is recognized for 5
minutes.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you very much, Mr. Chairman.
When the proposed combination of Comcast and NBC was
announced last year, I said that this transaction had the
potential to shape and reshape the media marketplace and raise
fundamental questions regarding diversity, competition and the
future of the production and distribution of video content. I
urged the FCC and the Department of Justice to assess
rigorously whether this transaction is in the public interest.
Well, 2 months have passed since this transaction was
announced, and after additional review I am now even more
certain that this new joint venture, if approved, could trigger
dramatic changes in the way consumers access video programming,
in the way independent programmers distribute their works, and
also in the way all video distributors compete for customers.
Given the significance of the proposed joint venture, the
committee should examine its implications carefully and
dispassionately. We should ask hard questions, but we should
also keep an open mind. There could be benefits that flow from
this transaction, and I look forward to hearing Mr. Roberts and
Mr. Zucker expand on the positive aspects of this deal. For
example, will Comcast be a better long-term steward of NBC News
than the current owner? Will Comcast be more committed to
developing the quality original programming? Will Comcast
invest necessary resources to promote localism and diversity
and support free over-the-air broadcasting.
One important issue is whether Comcast, as the Nation's
largest residential broadband provider and a potential owner of
NBC's valuable content, will help protect the intellectual
property. The theft of content on line is a serious issue for
the creative community. It is unlawful, and it is a serious
drain on our economy. This problem deserves more attention and
better efforts by broadband providers. We also need to know
what Comcast will do to ensure that independent writers,
directors and producers won't be harmed.
There are many other essential questions, the move to
online video and the TV Everywhere model could shape the future
of how all customers access the programming. Perhaps sooner
rather than later almost everything we do and see on our
television will be just another application riding over a
broadband connection. We should ask how Comcast, the Nation's
largest video programming distributor, will deal with its
customers and its competitors as this transition progresses.
I believe that the best way to protect consumers is through
competition, but will competition be sustainable with the
largest video and broadband provider controlling huge
quantities of content? There may be plenty of content outside
Comcast/NBC, but will consumers have the same ability and
opportunities to access that content both on and off Comcast's
distribution platforms as they will content from Comcast?
The future of free over-the-air broadcast television is
also tested by this transaction. Many are concerned that this
transaction could result in the best of NBC's programming being
transitioned to pay TV service. Might the Olympics or the Super
Bowl one day be available only to paying customers? Will the
Comcast/NBC joint venture affect local affiliates and the
network affiliate model? We must consider how this transaction
will impact the coverage of local news and events as well as
major televised events of interest to all Americans.
There are other issues to examine as well, including
Comcast's treatment of pay channels, how this transaction will
affect the diversity of voices in the marketplace, and how
independent programmers will be impaired. We need to weigh all
these topics as this process moves forward and the subcommittee
considers related matters.
Ultimately this transaction must be scrutinized with regard
to its impact on consumers, the choices they will have in the
market, and the bills they will pay. This is the highest
consideration required by the public interest review mandated
under the Communications Act.
In closing, I want to thank Chairman Boucher for convening
this hearing so quickly, and I look forward to hearing from our
distinguished panel, and I thank them for their participation.
Mr. Boucher. Thank you very much, Chairman Waxman.
The gentleman from Nebraska Mr. Terry is recognized for 2
minutes.
Mr. Terry. Thank you, Mr. Chairman, for holding this
hearing, and I would like to waive and reserve.
Mr. Boucher. Thank you very much, Mr. Terry.
The gentleman from Missouri, Mr. Blunt is recognized for 2
minutes.
OPENING STATEMENT OF HON. ROY BLUNT, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MISSOURI
Mr. Blunt. Thank you, Mr. Chairman. Thank you and our
Ranking Member Mr. Stearns for holding this hearing.
I have a slightly longer statement for the record, but I
would just like to say it is often the case in our economy when
you are going through a period of repositioning and shakeups--
and certainly this new joint venture between Comcast and NBC
Universal would seem to be another evidence of what is
happening generally in the economy--I actually understand and I
support the necessity of businesses constantly needing to
evaluate their market position, constantly figuring out how
they reposition themselves to provide the best service and to
do the best thing for the business they are in.
At the same time, as this hearing progresses this morning,
I am very interested in gaining a better understanding of how
Comcast and Comcast/NBC, this new entity, will affect the
competitive forces in the television marketplace. This joint
venture between Comcast and NBC may be as far-reaching as it is
intricate, and I look forward to hearing about the various
issues like competitive imbalance and market power that
something on this level can bring with it.
The Chairman's points were points of interest to all of us,
the full committee Chairman's points that he just expressed.
So I thank you again, Mr. Chairman, for holding this
hearing this morning, and I yield back my time.
Mr. Boucher. Thank you very much, Mr. Blunt.
The gentleman from Massachusetts Mr. Markey is recognized
for 2 minutes.
OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS
Mr. Markey. Thank you, Mr. Chairman, very much.
There are significant questions about how consumer choice
and competition, innovation and investment in the media
marketplace would be affected by this planned joint venture.
There will be discussion this morning and further scrutiny in
the months to come of important ramifications of this proposed
transaction, including the exercise of market power, higher
barriers to entry, and the consequences of vertical integration
associated with this proposed transaction, as there should be.
Essentially, though, for our constituents, for our
consumers across America, the issue really boils down to the
seven Cs: Will the combination of communications colossi
curtail competition and cost consumers? That is the question
that must be answered as this process moves forward.
While Comcast and NBC Universal have determined that this
transaction advances their business interests, it is essential
that the public interest also be served. As the author of the
Internet Freedom Preservation Act to ensure network neutrality,
along with Chairman Waxman and Congresswoman Anna Eshoo, I want
to ensure that the combination of a major network operator and
a large content owner does not enable the creation of
discriminatory fast lanes and slow lanes on the Internet to the
detriment of consumers.
I am also concerned about how this proposed joint venture
would impact the emerging online video marketplace now and in
the future. As consumers increasingly utilize their broadband
connections to access online video content, control of both the
content itself and the conduit through which it is delivered
raises important issues with respect to competition, choice,
diversity and innovation. Today's hearing is an important
opportunity to raise and hopefully answer these questions.
I thank you, Mr. Chairman, for calling this hearing.
Mr. Boucher. Thank you, Mr. Markey.
The gentleman from Illinois Mr. Shimkus is recognized for 2
minutes.
OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Shimkus. Thank you, Mr. Chairman. And I want to thank
the witnesses. I know it is difficult to get here, especially
during the proceedings and all the machinations that are going
on in the merger, but we appreciate it.
There are many different issues that we will be dealing
with today, and I just want to make it pretty clear I do not
want the Department of Justice enacting policy, legislative
policy. That is our job, and I would be careful if Members find
another way of giving up our responsibilities on telecom policy
by enacting processes and procedures and using this and the
Department of Justice to do that. So that is kind of where I
stand.
A profitable NBC Universal is good for all of our
constituents, and I hope that this venture between Comcast and
NBC will facilitate the creation of more popular programming
choices for all Americans. One of the great exports our country
has is our media. American films and television shows are one
of the ways we reach cultures throughout the word. And I also--
I am not sure that is necessarily a good reach of culture, and
I do question some of the things our consumers like to watch
and what we do sell abroad, and I do think it sometimes does
not put the best focus on us as a culture and the greatness of
our country. But having said that, I do believe that the market
rules, and the market does have a place for that. It is a great
export.
I appreciate you all being here. I know it is tough in
challenging times. I look forward to working with you all in
the future.
I yield back my time, Mr. Chairman.
Mr. Boucher. Thank you very much, Mr. Shimkus.
The gentlelady from California Ms. Eshoo is recognized for
2 minutes.
OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Eshoo. Good morning, Mr. Chairman, and thank you for
scheduling this hearing at the onset of the merger review
process so we can gauge the potential effects of this
transaction and weigh in with our concerns before the agencies
begin their analyses.
The Comcast/NBC Universal merger will affect millions of
people, many of them, obviously, in my own district. Comcast
has 24 million cable subscribers and 16 million broadband
subscribers nationwide. NBC Universal produces and distributes
broad swaths of entertainment programming. Like any merger,
this transaction could produce beneficial synergies.
Comcast's FCC filings spell out a sincere commitment to the
public interest, but having a philosophical commitment to
protect consumers is far different than having a legal
obligation to do so. Telecommunications megamergers, as well as
those in other industry sectors, have the potential to create
monopolistic titans. The Department of Justice will ensure that
this merger doesn't violate our antitrust laws.
But the FCC has a special burden; it must also ensure that
this merger protects the public interest. The Comcast/NBC
Universal merger is not just about the purchase and sale of
private businesses; it involves the transfer of public
property, broadcast licenses to operate on America's spectrum.
Just as importantly, if left unchecked, this merger has the
potential to place a choke hold on the transfer of information
on the Internet to consumers today and well into the future. If
anything, this proposed merger, I think, demonstrates why we
need net neutrality across the board.
So thank you, Mr. Chairman, for holding this important
hearing for us to weigh in before the other agencies do, and I
look forward to hearing the diverse viewpoints of the witnesses
here today. I would especially like to welcome the
representatives from Comcast, whose father established the
company some 47 years ago. I think it is 47 years ago. It is
really an amazing American story that in four-plus decades,
that a company that was born with a great idea is what it is
today. And so I congratulate you, and I look forward to the
testimony. Thank you.
Mr. Boucher. Thank you very much, Ms. Eshoo.
The gentleman from Michigan Mr. Rogers is recognized for 2
minutes.
Mr. Rogers. Thank you, Mr. Chairman. I appreciate you
having this hearing.
And thank you for your testimony today. I think it is an
incredibly important issue, and as the proposed merger, I hope,
is fully reviewed and done diligently by the FCC and Department
of Justice, the one concern that I have, Mr. Chairman, is that
there is no time lines for either approval or rejection. So it
is my hope, given the amount of expense and I think what is at
stake, that they will not only be diligent, but they will be
quick in their decision as they move forward in the merger. And
I am sure they can accomplish both. I just hope they know that
what is at stake for a long time line. I think that is probably
not helpful to anybody either, whatever their outcome is.
The other issue I hope that we get discussed at some length
is the retransmission consent agreements. The law and
regulations governing them were created nearly 20 years ago,
and this committee should take a look to see if there is any
changes that need to be made. There is so much, again, at stake
in this when you talk about market power and content and who
controls what in a spectrum. Lots at stake for the American
public. So I hope we will have that opportunity to discuss it.
And to my friends at NBC, I have an opening for a
constituent humorist specialist. If Conan would call my office,
we could probably arrange to help you all out in any way we
could possibly do that.
I yield back, Mr. Chairman.
Mr. Boucher. Thank you very much, Mr. Rogers.
The gentleman from Michigan Mr. Dingell, Chairman Emeritus
of the full committee, is recognized for 5 minutes.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Dingell. Mr. Chairman, I thank you for your courtesy,
and I commend you for having this hearing. I believe it is
important that we should go into these matters with a great
deal of care, and I am hopeful we will get the answers for
which we have need.
I also would suggest if we may not have quite enough time
this morning to hear from all of our witnesses to get the
answers that this committee needs. I would also observe that it
may be necessary for us to hear from the regulatory agencies,
which I believe we can do in a way that would not constitute a
problem or a potential violation to the Pillsbury rule.
I do extend a warm welcome to our witnesses today,
especially my old friends Brian and Ralph Roberts, as well as
Colleen Abdoulah, whose companies provide cable service in my
district. I also want to thank Comcast for its cooperation in
the recent resolution of the PEG issue in Dearborn, Michigan,
and I want you to know my appreciation in that matter.
The competitive incentives behind the proposed venture
between Comcast and NBC Universal are quite unambiguous. In a
world of fragmented viewing audiences created by proliferation
of video service providers, Comcast and NBC Universal's
proposed partnership does make quite a lot of sense.
Consolidated control of content and distribution will help
Comcast to become a more competitive player in the multichannel
video marketplace.
At the same time, by virtue of the magnitude of the
transaction, the Comcast/NBCU proposed joint venture raises
legitimate concerns about the new entity's leverage vis-a-vis
existing competitors and consumers, control of content and its
distribution, and the general media consolidation. We will be
interested in how this will impact on government, the industry
and also on the consuming public.
Moreover, as I have heard a lot about Internet video and
how it may well be the future in television, I look forward to
hearing from the witnesses about online video, how they see it
developing, and whether this deal would impact it and how.
To summarize, while I understand the motivation behind the
joint venture proposal pending the committee's consideration, I
have concerns about its effect on the public interest. In
particular, I am going to be asking witnesses to respond to
questions about commitments from Comcast and NBC Universal to
ensure the following in the future: editorial neutrality on
network news--this is something which we have some small
problems with in this country; local access to free over-the-
air broadcast television, a matter of great concern to me over
the many years; fair access for content distributors and
consumers to programming provided via online video services;
and collective bargaining rights of employees. This is by no
means a complete list of concern, but I think it is a good
place to start.
I would add also my desire to hear from the Federal
regulatory about this matter, and I believe we need to have
their input in order to have a proper understanding of the
circumstances. While I understand they cannot comment on the
pending merger, their input on facts and the general principles
would be most helpful in helping us and the public to
understand the situation before us.
In closing, I look forward to a frank discussion with our
witnesses today. Mr. Chairman, I commend you for this hearing,
and I thank you for your courtesy, and I yield back the balance
of my time.
Mr. Boucher. Thank you very much, Chairman Dingell.
The Ranking Member of the full committee, the gentleman
from Texas, Mr. Barton is recognized for 5 minutes.
OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Barton. Well, thank you, Mr. Chairman.
I want to welcome back two of my colleagues from the
committee. They are sitting side by side out in the audience. I
hope you are on the same side. You may be on opposite sides on
this. We are glad to have my two good friends back.
I am glad to have all of our friends at the witness table,
and as far as I am concerned, it is good to see NBC and Comcast
sitting side by side. That doesn't break my heart.
I think it is important and appropriate that we hold this
hearing, Mr. Chairman. This type of a merger should be examined
by this committee and subcommittee and should be reviewed by
the people of the United States. Having said that, I hope
today's hearing is level-headed and really focused on the
issues and the details of the merger, and not on some ``what
if'' discussion about what might happen if this and that were
to occur.
As we all know, back in December, Comcast and General
Electric announced this merger or this, I guess you would say,
sale to combine the broadcasting, cable programming, movie
studio, theme park and online content businesses of NBC
Universal with the cable programming and certain online content
of Comcast. As I understand, Comcast is going to purchase 51
percent of NBC Universal; General Electric will still retain 49
percent.
Since the merger or since the sale has been announced, we
have heard some of the usual predictions that this is the end
of the media world as we know it. Put me down as skeptical on
that. I don't think that is going to happen. I hope good things
happen for the viewers and the folks that provide the content
to the media. But let us let the market make those decisions.
We should allow companies to take risks. We should allow
companies to seek out niche markets. We should allow companies
to use their natural and competitive advantages to serve up
material for the marketplace of various interests. It is a
testament to our system that even in these uncertain economic
times, there are people, some of them are at this table, that
are willing to take such market risks.
There are some analysts that have expressed doubts about
the economic case for the Comcast/NBC deal precisely because
they don't see that a competitive advantage will materialize
from this combination. So instead of condemning such an effort,
we should stand back and watch it and hopefully be willing to
applaud if, in fact, good things happen for the markets that
both NBC and Comcast serve at the current time.
There don't appear to be any major overlaps in the markets.
There do appear to be some synergies from the two companies
coming together. There are certainly no antitrust implications
in the classic sense, because it is my understanding that the
Justice Department is not going to review it for antitrust
under the classic antitrust review.
To the extent that concerns exist, Comcast has said that it
will make a number of voluntary commitments to help assuage
these anxieties. They plan to honor and extend the current
program access rules. They will continue to offer NBC and
Telemundo programming free over the air, rather than turn them
into cable networks. And they also plan to add new,
independently owned channels to their cable lineup.
Furthermore, more local news, local public affairs, children,
ethnics, and other public-interest programming is planned to be
made available over the air on cable channels through on demand
service and on online.
And so, again, Mr. Chairman, thank you for holding the
hearing. I thank all of our witnesses. I look forward to an
interesting exchange today.
Mr. Boucher. Thank you very much, Mr. Barton.
The gentleman from Tennessee Mr. Gordon is recognized for 2
minutes. He is no longer with us.
The gentleman from Washington State Mr. Inslee is
recognized for 2 minutes.
OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WASHINGTON
Mr. Inslee. Thank you, Mr. Chair.
We are here to talk about control of America's most
precious asset and that, of course, is Tina Fey. And that is
one of the reasons we are so interested in this issue.
I do want to suggest something as we look through these
issues, the potential upsides for consumers and the potential
concerns for consumers, and I think they are both those
potentials. I would suggest that we need to look at it a little
bit through the lens of democracy, not just commercial
activity, and I just throw in a little Jefferson who said,
where the press is free and every man able to read, all is
safe. And I think in today's electronic world, the modern
corollary is that where content is freely available, and every
man and woman able to watch, all is safe. And I think there is
a democracy issue here that ought to be considered, and I will
look forward to everyone giving us their views in that regard.
In that regard, I think there are three fundamental
questions I hope the witnesses will address. One, in the new
world where we are developing Internet-based systems, such as
Hulu and iTunes, networks like Comedy Central, where people are
going on line, where we do not have programming rules, how do
we intend to ensure access to Americans in that sort of
Jeffersonian ideal?
We know that the cable industry is realizing the market
dynamic in this, as evidenced by the recent announcement of TV
Everywhere, and I would hope the witnesses will tell us how can
we assure that access to important content in that new system.
Although this merger is only between two companies, I would
ask the witnesses to tell us if they think we ought to look at
our transmission access rules in general on how they are
working or not working. Are there ways that we can make them
more usable to both parties to try to determine how to make it
work for both parties in a way that is not so costly and gives
consumers more credibility or more confidence in the system?
And third is cost, which is an obvious one. Rates have gone up,
I am told, three times the rate of inflation. Consumers are
going to have obvious concerns about that. I hope obviously you
will address that.
We look forward to this hearing from all parties. Thanks
very much.
Mr. Boucher. Thank you, Mr. Inslee.
The gentlelady from California Mrs. Bono Mack is recognized
for 2 minutes.
OPENING STATEMENT OF HON. MARY BONO MACK, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mrs. Bono Mack. Thank you, Mr. Chairman. I would like to
thank you and Ranking Member Stearns and the distinguished
panel for being here today. I think this is an important
hearing as well.
As I see it, the proposed transaction between Comcast and
NBC is an example of vertical integration within the media
marketplace. The proposal is a marriage of upstream and
downstream companies that do not significantly compete against
one another.
Now, I am sure we will hear opinions that attempt to label
this transaction as horizontal integration. While I respect the
right of everyone to have their own opinion, we are not
entitled to our own set of facts. And in that vein, I remain
unconvinced how the combination of two entities where one
concentrates on the distribution of content and the other
concentrates on the development of content can be determined to
be anything other than a case of vertical integration.
I will admit there are certain aspects of the transaction
that are of particular interest to me. For instance, I would
like to hear how independent programmers are going to be
impacted by this deal. I am sure others have certain questions
as well, and they are entitled. However, if we use this hearing
as an opportunity to cast blame and air grievances about every
problem we perceive in the communications or media marketplace,
we will have wasted everyone's time.
Additionally, and perhaps more importantly, this
transaction should not be used as a vehicle to advance a
specific policy agenda that is unrelated to the matter at hand
and cannot be implemented on the industry as a whole. It is my
hope that these types of regulatory shenanigans have no place
at the new FCC. At the moment, I have no reason to associate
that type of behavior with this Chairman or Commission.
With that, I yield back my time, and I thank you again, Mr.
Chairman.
Mr. Boucher. Thank you, Mrs. Bono Mack.
The gentlelady from California Ms. Matsui is recognized for
2 minutes.
OPENING STATEMENT OF HON. DORIS O. MATSUI, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Matsui. Thank you very much, Mr. Chairman. And thank
you, witnesses, for being here today.
Like other major mergers or joint ventures, there will be a
real impact on consumers and the marketplace, and this one is
really no different. Comcast is a dominant cable provider in my
hometown of Sacramento, providing service to over 200,000
households. This joint venture will only enlarge the footprint
in Sacramento.
Over the last few days, I received numerous e-mails from my
constituents wanting to know what this deal would mean for
them. They want to know if it means higher cable rates. They
want to know if they will be able to continue to receive the
independent programming they are used to without any
unwarranted interference or preference. They want to know what
it would mean for the distribution of online video, and they
want to ensure it continues to be open to all and is preserved
so that they can view their favorite programs when they choose.
They want to know the ramifications of this joint venture and
what it may cause within the industry. Will there be a domino
effect whereby Comcast competitors are likely to combine or
merge with others in order to compete in the marketplace,
creating a media and entertainment environment where only a few
will be heard? Additionally, the people of Sacramento rely on
local affiliate stations for local news and information. Would
this merger put local NBC affiliates not currently owned by NBC
itself at a competitive disadvantage from a programming
standpoint?
I recognize that Comcast has made a series of proactive
commitments on some of these subjects. I look forward to
further exploration of these and other concerns today and in
the weeks and months ahead. Ultimately I believe that this
proposed merger should not leave consumers with less choice,
lower quality, less diversity and higher programming costs. As
the FCC and Department of Justice review the proposed merger,
it is my hope that they consider every aspect, particularly its
impact on consumers, competition and innovation.
I thank you, Mr. Chairman, for calling this hearing today.
I yield back the balance of my time.
Mr. Boucher. Thank you very much, Ms. Matsui.
The gentlelady from Tennessee Mrs. Blackburn is recognized
for 2 minutes.
OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TENNESSEE
Mrs. Blackburn. Thank you, Mr. Chairman.
I want to welcome all of our guests today, and I certainly
am looking forward to a discussion with you as we move through
the day. I have read through your statements, and I will tell
you it is absolutely puzzling and amusing to me that such
intelligent people, when given the same set of statistics and
the same information and the same data, can arrive at such
vastly different opinions and such conclusions as to how this
union would affect telecommunications moving forward. So I
think we are going to have a rather robust discussion today,
and I am truly looking forward to it.
I will tell you at first glance that my reaction is that if
this deal results in no additional market power and content and
no additional market power and distribution, then why are there
such concerns about antitrust violations? And that is the point
I want to discuss with all of you. And if this deal does not
increase any market share, then I cannot accept the suggestions
that we need to put conditions on it. So let us discuss that as
we move forward.
We want to make certain that we are doing things that are
good for consumers, and being from Tennessee, and having the
number of content--independent content producers that we have
there, we are very concerned about what this would do to access
and to content. And for those of you that hold an opposing view
on the antitrust violations, I want to hear from you as to how
you have read the same set of material and data and arrived at
other outcomes from that.
So looking forward to the discussion. Thank you for being
here.
I yield back.
Mr. Boucher. Thank you, Mrs. Blackburn.
The gentleman from Connecticut Mr. Murphy is recognized for
2 minutes.
OPENING STATEMENT OF HON. CHRISTOPHER S. MURPHY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF CONNECTICUT
Mr. Murphy. Thank you, Mr. Chairman. Thank you for holding
this hearing, and I agree with Mrs. Blackburn that we are going
to have a lively debate.
I hope that the panel will spend some time addressing one
issue that Chairman Waxman raised, and that is the issue of
content protection and how this transaction may affect how we
deal with protecting the copyrights of content innovators. We
know the statistics. Each year our Nation's content industry is
losing hundreds of millions, if not billions, of dollars to
online piracy. And up until now, however, the largest
distributors of that content and the largest providers of that
content have largely been separate entities, and this new
relationship between Comcast and NBC Universal is going to
change that dynamic fundamentally if approved.
As mentioned before, this deal represents the Nation's
largest broadband provider combining with the Nation's fourth
largest entertainment company. The problem is that historically
too often content providers and content distributors just
aren't on the same page with respect to a strategy for
combating online piracy, and often this lack of cooperation has
simply to do with the disparate economic goals of all the
parties involved.
However, the ramifications of this issue are too great to
ignore, and I think the current events surrounding us today,
namely the FCC's open Internet rulemaking and today's
examination of this new business relationship, provide us with
an opportunity to explore what steps need to be taken to ensure
that we continue to deal with the theft of content that is
hurting some of our Nation's most innovative job creators.
I look forward to this hearing today, and I look forward to
hearing a discussion about how the combination of these two new
entities may change Comcast's approach to dealing with the
unlawful content flowing across its network.
Thank you, Mr. Chairman. I yield back the balance of my
time.
Mr. Boucher. Thank you, Mr. Murphy.
The gentleman from Michigan Mr. Upton is recognized for 2
minutes.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Thank you, Mr. Chairman.
And I want to welcome all of our witnesses, but
particularly to a good friend who is sitting behind Brian, and
that is his dad Ralph, who I see here in this audience. It is
good to see you, and I appreciate all that you have done.
Today we are examining the proposed merger of Comcast and
NBC, and I am encouraged by the many voluntary commitments
being made by Comcast as a part of this merger. And I welcome
the evaluation of the merger and the potential impact on the
video programming in the broadband marketplace. However, I hope
and expect a quick review and approval. All parties involved
will be best served if this is a prompt process.
I believe that the merger is in the public interest and
should bring greater competition to the programming and
distribution markets. One of the most interesting points about
the deal is that Comcast and NBC have very little overlap. The
combined entity will be a more diverse company; it will be in a
better position to succeed during these very difficult economic
times, and that would not necessarily be the case if another
entity purchased NBC from GE.
I would like to stress that the merger shouldn't be used as
an opportunity to push unrelated policy agendas or extend
unnecessary regulations that do not extend to the broader
market. For example, I would strongly oppose any efforts to
impose network neutrality conditions as a part of the deal.
Doing so would be highly inappropriate.
I yield back the balance of my time, Mr. Chairman.
Mr. Boucher. Thank you very much, Mr. Upton.
The gentlelady from Florida Ms. Castor for 2 minutes.
Ms. Castor. Good morning. And thank you, Chairman Boucher,
for calling the hearing. I will waive my opening statement so I
have more time for questions.
Mr. Boucher. Thank you very much, Ms. Castor.
[The prepared statement of Ms. Castor follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Boucher. The gentleman from California Mr. McNerney is
recognized for 2 minutes.
Mr. McNerney. Thank you, Mr. Chairman.
I would like to say the biggest concerns about the merger I
think were well articulated by the Chairman of the full
committee and others. So given that, the questions of the
proposed venture come down to a couple of things: Will the
merger enhance or will it impede competition? Will it enhance
or will it impede access? Will it enhance or impede diversity
of programming? And finally, how will it impact the cost on the
consumer?
Hopefully we can begin to answer these questions this
morning, and I look forward to the testimony.
Mr. Boucher. Thank you, Mr. McNerney.
The gentleman from Louisiana Mr. Melancon is recognized for
2 minutes.
Mr. Melancon. Thank you, Mr. Chairman. I will waive my
opening statement.
Mr. Boucher. Thank you, Mr. Melancon.
The gentleman from Ohio Mr. Space is recognized for 2
minutes.
Mr. Space. Thank you, Mr. Chairman. And thank you for
convening this hearing today. I believe this is the first kind
of our subcommittee in this Congress, and we will be discussing
some critical issues that may influence the future of video
programming and distribution for some time to come.
I represent a very rural district in southeastern Ohio. It
is part of five broadcasting markets, and many of my
constituents, in fact much more than the national average, rely
upon free over-the-air broadcasting for emergency information,
for news, for weather, sports. And with the national broadband
plan set to come out next month and the debate about spectrum
on everyone's minds, there are certainly many challenges facing
the free over-the-air broadcast model. But a strong vibrant
broadcast television industry is important to my constituents,
so I am very interested to hear what our witnesses have to say
today regarding the future of free over-the-air television.
I am also interested in learning more about how the joint
venture will impact the continued expansion in the deployment
of broadband, which is an issue of high priority for me
personally and certainly for my constituents as well.
So I would like to welcome our witnesses and thank them for
their testimony, and again, thank you, Mr. Chairman.
Mr. Boucher. Thank you, Mr. Space.
The gentleman from North Carolina Mr. Butterfield is
recognized for 2 minutes.
OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NORTH CAROLINA
Mr. Butterfield. Thank you, Mr. Chairman, for holding this
very important hearing. I thank the witnesses for their
testimony today.
Mr. Chairman, this historic coming together of two unique
media powerhouses presents the potential for expanded
entertainment opportunities and an increase in choice for our
television viewers. The proposed joint venture between these
two companies creates a new NBCU, a leading communications and
entertainment company. This is a transaction that should
receive a fair, but intensely thorough review by the Justice
Department and the FCC. I am hopeful that both DOJ and the FCC
will see that the vertical integration of Comcast and NBC
Universal will ultimately prove to be in the public interest
whereby competition and innovation will be fostered.
It is vitally important for NBC to maintain their editorial
independence. We have heard other Members speak to that today
with respect to how they report the news as well as other
content that will be viewed by millions of Americans. I am
confident that NBC will continue to operate with the same
neutrality that we see today. It is in the best interest of
Comcast and NBC to report the news with objectivity, because,
as we all know, if people do not like what they are watching,
they can simply change the channel.
As was the case with the XM/Sirius merger, I remain
committed to ensuring minority programming has a home and a
voice. And I am pleased to see the commitment to increasing the
diversity of programming across the spectrum of audiences and
viewpoints and across all media platforms. Comcast already has
a strong record in program diversity--I thank you for that--
having entered into a venture with Radio One to create TV One.
But continued recognition of the value of diverse programming
is always welcome. I also believe that Comcast's approach of
leveraging diverse content across multiple media platforms to
increase the programming's reach and its prospect for success
have proven effective.
Finally, I would like to commend these two companies for
their proactive outreach to Members of this body. Thank you for
the visit that you had with my office recently.
With that, my time has expired and I yield back.
Mr. Boucher. Thank you, Mr. Butterfield.
The gentleman from Arizona Mr. Shadegg is recognized for 2
minutes.
OPENING STATEMENT OF HON. JOHN B. SHADEGG, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ARIZONA
Mr. Shadegg. Thank you, Mr. Chairman. And thank you for
holding this hearing. I would also like to thank the witnesses
for spending time with us this morning.
As a supporter of the free market and competition, I also
support this joint venture. I support the right of two
companies, big or small, to enter into a contract and to
negotiate a deal that has the potential to inspire innovation
and benefit consumers, although the authority to approve this
joint venture lies within the hands of the FCC and the
Department of Justice. By having this hearing, we are opening
up the debate of this merger to the public. I applaud this form
of transparency.
In addition, I believe our discussion and the investigation
by the FCC and DOJ should be thorough and complete. However, it
is critical that opponents to this joint venture do not
deliberately slow the process down as that will prove to be
costly and unfair to the parties involved. It would be a
disservice to all consumers if lengthy investigations and
unfair treatment deterred business from entering into
negotiations. The purpose of antimonopoly laws is to ensure
that one company does not dominate a market by unfair
practices, not to discourage companies from making advances to
get ahead.
When this joint venture is complete, NBCU will be 100
percent an American-owned company. We should not discourage
this. Although there are some concerns that this merger will
eliminate competition, I think otherwise. I believe it will
inspire competition. This is innovation that our country needs,
and it will create the jobs our country needs.
I would like to thank NBC and Comcast for their many
voluntary public interest commitments in the course of this
process. These commitments show that not only are they not
attempting to take advantage of their competitors, but instead
respect many of the long-standing agreements that are in place.
These commitments, along with the fact that Comcast will not
have a large market share by joining forces with NBC--a larger
market share by joining forces with NBC, is evidence that this
joint venture will not hinder competition, but will benefit
consumers.
I look forward to hearing from all the witnesses today and
playing an active role in the debate surrounding this merger.
And I thank you, Mr. Chairman, for holding this hearing.
Mr. Boucher. Thank you very much, Mr. Shadegg.
The gentleman from Illinois Mr. Rush is recognized for 2
minutes.
OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Rush. Thank you, Mr. Chairman, for convening today's
hearing to consider this matter that is before us.
Comcast and GE, these parties have argued in recent filings
with the FCC and presumably with the Department of Justice that
their union is a classic model of vertical integration. They
contend the proposed combination will also advance key
commercial policy goals of diversity, localism, innovation and
competition. To underscore their claims, Comcast and NBC are
offering up a number of voluntary commitments. They say these
commitments will expand consumer choice, ensure over-the-air
broadcasting, enhance programming opportunities, ensure
competition on multiple-content delivery platforms, and
maintains NBC's journalistic independence as a provider of
news.
Unfortunately, Mr. Chairman, what they have not said, what
they have not committed to, and what is not making news is how
this deal will promote meaningful opportunities for minorities
to become FCC licensees and owners of communications and
programming as such. How will minority viewers and existing
minority licenses and programs be affected by this combination?
How will minority suppliers and advertisers be integrated into
the joint ventures procurement and purchasing challenge? And
what will these two Fortune 100 companies do to ensure greater
diversity in hiring, training and retaining minority employees
at both management and nonmanagement levels of the proposed
joint venture?
These are types of integration and diversity to which I
hope Comcast and GE will pay more attention to and make further
commitments. Although the potential rewards for the public are
significant, the collective risk to minority inclusion and
diversity as this transaction is currently structured are just
as important.
As we continue to discuss the merger and the effects of
this proposed combination in the coming months, you can be
assured these will be my key areas of focus. I look forward to
the hearing and perspective of our witnesses, and I want to
welcome each and every one of the witnesses, and I thank you
for participating this morning.
Mr. Chairman, with that I yield back the balance of my
time.
Mr. Boucher. Thank you, Mr. Rush.
The gentleman from Michigan Mr. Stupak is recognized for 2
minutes.
Mr. Stupak. Mr. Chairman, I will waive and ask for extra
time for questions.
Mr. Boucher. Thank you very much, Mr. Stupak.
And the gentleman from Vermont Mr. Welch is recognized for
2 minutes.
OPENING STATEMENT OF HON. PETER WELCH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF VERMONT
Mr. Welch. Thank you, Mr. Chairman.
Being from Vermont, a rural State, at the end of the line
are customers who are primarily going to be concerned about
their bill and about their access and about what programs they
get. And the question that I will be very eager to get
commentary upon, particularly from Comcast, what will be the
relationships that the larger provider has with the smaller
carriers?
And there seems to be a bit of an internal conflict,
because on the one hand, the large carrier--and this is not
precipitated just by this merger, there are other questions
there, but it raises the issue there is a bit of conflict where
the larger carrier is dependent on the local carriers to
provide that content to the customers. On the one hand, it is
in the interest of the larger carrier, whether it is Comcast or
anyone else, to get the best price possible.
It is in the interest of the consumer to pay the lowest
price possible, and the local carrier--and we have these in
Vermont--is caught in between. And my concern is that there be
mechanisms that provide for fair negotiation and interaction
between the smaller carrier and then the larger carrier as
well, because at the end of the day it is the customer who gets
whacked on this, and it is a very serious issue, obviously, for
the customer but also for the media companies that are
involved. And that needs more attention that it has been
getting. It is not specifically related to the merger, but it
is a moment of opportunity for us to examine this. And it is
very important to individual Vermonters and individual
Americans who really do need the services that are being
provided by all of you. So, thank you.
Mr. Boucher. Thank you very much, Mr. Welch. And thanks to
all members for their statements. We have a series of recorded
votes pending on the floor of the House, five of them in total,
which will take us somewhere between one half hour and 45
minutes, we would estimate, to complete. And so pending the
completion of these votes, the subcommittee stands in recess. I
would ask our witnesses to remain close at hand, and as soon as
we can return we shall do so and proceed with your opening
statements.
[Recess.]
Mr. Boucher. The subcommittee will reconvene, and our
apologies for the lengthy delay. It is a matter over which we
have little control.
I am pleased now to welcome our panel of witnesses and I
will say a brief word of introduction about each. Mr. Brian
Roberts is the Chairman and Chief Executive Officer of the
Comcast Corporation. Mr. Jeff Zucker is the President and Chief
Executive Officer of NBC Universal. Ms. Colleen Abdoulah is the
President and CEO of WOW, or Wide Open West Internet, Cable &
Telephone. Mr. Michael Fiorile is the Chairman of the NBC
Affiliates Board; he is also the President and Chief Operating
Officer of the Dispatch Printing Company. Dr. Mark Cooper is
the Director of Research at the Consumer Federation of America.
And Mr. Adam Thierer is the President of the Progress and
Freedom Foundation.
We welcome each of you this morning, thank you for your
testimony. Without objection, your prepared written statement
will be made a part of our record and we would welcome your
oral summary and ask that you keep your oral summary to
approximately 5 minutes.
STATEMENTS OF BRIAN ROBERTS, CHAIRMAN AND CEO, COMCAST
CORPORATION; JEFF ZUCKER, PRESIDENT AND CEO, NBC UNIVERSAL;
COLLEEN ABDOULAH, PRESIDENT AND CEO OF WOW, WIDE OPEN WEST
INTERNET, CABLE AND TELEPHONE; MICHAEL FIORILE, CHAIRMAN, NBC
AFFILIATES BOARD, AND PRESIDENT AND CEO, DISPATCH PRINTING
COMPANY; DR. MARK COOPER, DIRECTOR OF RESEARCH, CONSUMER
FEDERATION OF AMERICA; AND ADAM THIERER, PRESIDENT, PROGRESS
AND FREEDOM FOUNDATION
Mr. Boucher. Mr. Roberts, we will be pleased to begin with
you.
STATEMENT OF BRIAN ROBERTS
Mr. Roberts. Thank you, Mr. Chairman.
Mr. Boucher. And you need to turn your microphone on and
pull it as close as you can so that we can hear you well.
Mr. Roberts. Thank you, Mr. Chairman. Is that OK?
Mr. Boucher. Yes.
Mr. Roberts. It is a privilege to come here today to talk
about Comcast's planned joint venture with GE regarding NBC
Universal. As has been mentioned, my father, Ralph, is sitting
just behind me. He started the company almost a half century
ago. And Ralph built the company from a single small cable
system in Tupelo, Mississippi to where we are today. And with
this combination we are taking the next step in our improbable
journey. This is indeed an important moment in our history.
Let me briefly summarize the transaction. Under our
agreement, Comcast will become majority owner of NBC Universal.
We will create a new venture that combines NBCU's broadcast TV,
cable programming, movie studio, and theme park businesses with
Comcast's limited video programming channel. Comcast will hold
51 percent of the venture and we will manage it, while 49
percent will remain with GE.
The transaction puts two Great American communications
companies under one roof. It will help to preserve traditional
broadcast television, a business that faces serious challenges.
And it will also help to accelerate a truly amazing digital
future for consumers' commerce. Together, Comcast and NBCU can
help deliver the anytime/anywhere multiplatform video
experience that Americans want.
In combination we will be a more creative and innovative
company that will meet customer demands, and our success will
stimulate our competitors to be more innovative too. So this
joint venture should be good for consumers, good for innovation
and competition. To leave no doubt about the benefits of the
new NBCU, we have made a series of public interest commitments
detailing how we will bring viewers more local programming,
more children's programming, more diverse programming on more
platforms.
We have also made commitments to reassure our competitors
that we will compete fairly in the marketplace. Let me offer
two examples.
First, the program access rules have never applied to
retransmission consent negotiations, but we volunteer to have
the key components of these rules apply to our retransmission
negotiations for NBC stations.
Second, we want independent programmers with quality
content to know that we are determined to help them reach an
audience, so we have committed to add at least two new
independently owned cable channels to our systems every year
beginning in 2011.
The combination of NBC and Comcast will have no significant
overlap between the assets of the companies. It is primarily
vertical which generally poses fewer antitrust concerns. That
also means no massive layoffs, no closures of facilities,
nothing to produce hundreds of millions of dollars of
``synergies.'' That is why some on Wall Street may not have
initially loved this deal; but this same lack of overlap is why
Washington can, because we will grow these great American
businesses over the long term and make them more successful,
not cut them.
Congress has recognized the benefits of vertical
integration before and adopted rules in 1992 to address
potential risks. At that time there was almost no competition
to cable, and more than half of the channels were owned by
cable companies. So Congress created program access and program
carriage rules to ensure that a company which owns both, cable
content and distribution, cannot treat competitors unfairly.
Those rules have worked in the past and will continue to work.
In the last week, some have suggested that our prior legal
challenge to certain portions of the program access rules is
inconsistent with our commitments in connection with this
transaction. But while we have argued and believe that today's
marketplace is sufficiently competitive to do away with the
program access rules, we didn't pursue this transaction with
the intention of not following those rules, and we don't intend
to behave any differently. So we are willing to discuss, with
the FCC, making the program access rules binding on us, even if
they were to be overturned by the courts.
In the past decade Comcast has come to Washington twice to
seek much merger approvals--when we acquired cable systems from
AT&T and Adelphia. Each time we explained how consumers would
benefit, and in each case I believe we have delivered. We spent
billions of dollars upgrading cable systems to make them state-
of-the-art. We created Video on Demand, which our customers
have used 14 billion times, and from a standing start 4 years
ago, we now give millions of Americans their first real phone
choice.
Once again we have described how consumers will benefit,
and I want to assure you that we will deliver.
Mr. Chairman, we are asking for the opportunity to make one
of the great icons of American broadcasting and communications
part of the Comcast family. We promise to be reliable stewards
of the national treasures of NBC and NBC News. It is a
breathtaking and humbling moment in our history and we hope we
have your support. Thank you.
Mr. Boucher. Thank you very much, Mr. Roberts.
[The prepared statement of Mr. Roberts and Mr. Zucker
follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Boucher. Mr. Zucker.
STATEMENT OF JEFF ZUCKER
Mr. Zucker. Mr. Chairman, members of the subcommittee,
thank you for the opportunity to testify here today. As the
President and CEO of NBC Universal, I am proud to lead an
iconic media company shaped by two great American brands. NBC
and Universal. I am grateful for the opportunity to tell you
how the proposed venture between Comcast and GE will help NBC
Universal thrive and also benefit our local communities, our
employees, and the American consumers who enjoy our content.
In today's intensely competitive, unpredictable and dynamic
media markets, this deal is critical to realizing these
benefits. The marketplace that I live in is a mediawide free-
for-all, a media donnybrook, whether you look at the overall
media marketplace, the cable channels, broadcast networks or
the Internet. There will be more change in our space in the
next 5 years than there has been in the last 50. This deal will
not change the fundamental competitive dynamic or the
extraordinary rate of technological change, but it will help
NBC Universal compete in the new media world.
Why is this transaction good for NBC Universal, for the
U.S. economy, and the consumers we serve? My answer can be
captured in two words, investment and innovation, both of which
I believe are essential if we are to remain a vigorous
competitor in the 21st century media market and a growing
source of high-wage jobs in an economy starved for employment.
First, investment. The creative programming that lies at
the heart of our business is neither easy nor inexpensive to
produce. The entertainment programming on our broadcasting and
cable networks will require an investment this year of nearly
$4\1/2\ billion. Every year we invest another billion dollars
in news gathering and news production. An investment of half a
billion dollars annually makes Telemundo the leading U.S.
producer of Spanish language programming. In a highly
competitive, unpredictable and dynamic media marketplace,
Comcast desires to expand our business and investing in
programming will benefit NBC Universal, the American consumer,
and the U.S. economy.
Also with regards to investment, Comcast's written
commitment to over-the-air broadcasting has been widely
underappreciated. In addition, Comcast has expressed a
willingness to play a constructive role in the business
negotiations between broadcast stations and MVPDs. Those two
positions could play a pivotal role in finding the sustainable
new business model for the struggling broadcast business.
Second, innovation. We believe Comcast's history of
delivery, innovation, and technological vision will help us
better serve the 21st century consumer. We must find the
sustainable business model to meet consumer demands for access
to programming anytime, anywhere. We need to be more nimble in
taking advantage of new digital distribution capabilities, on
demand, on line, mobile and beyond.
This venture with Comcast positions NBCU to be a leading
innovator in delivering content to consumers where they want
it, when they want it, and how they want it.
In this extraordinarily competitive industry, sustained
investment and innovation will be the keys to remaining a
vigorous competitor. This is not your father's media market.
Less than 40 years ago, three companies enjoyed 90 percent of
all television viewing. Oh, how simple it was. Today the world
could not be more different. Each of the five largest media
companies in America now only account for between 5 and 10
percent of all viewing, and a multitude of smaller competitors
actually account for half of all television viewing. The new
NBCU's cable channel business, where we will add Comcast
networks, will account for just 7 percent of total viewing and
be fourth by revenue among owners of national cable networks.
Television is also a shrinking proportion of the media
market. People today choose not only between broadcast and
cable television but increasingly the Internet, Xbox, iPhone
and PlayStation and so many other new platforms and
technologies for their media choices. Very simply, this
transaction will not change the tidal wave of competition
inundating today's media market. The big winner here is the
consumer. More investment leads to more and better content,
more innovation leads to more access anytime, anywhere.
Let me close by saying how grateful I am for GE's excellent
stewardship of NBC Universal. GE has invested more than $22
billion since 2000 and built NBC Universal into the diversified
and vibrant broadcast, cable, film, cable programing and media
company that we are today. With this deal, GE will have
billions of dollars to invest in new technologies and jobs in
its core business.
I could not be more excited about the future of this
company. This deal will give us the resources and the tools to
innovate and adapt in an unpredictable media world and meet the
needs of 21st century consumers.
Thank you for the opportunity to testify, and I look
forward to answering any questions that this subcommittee may
have.
Mr. Boucher. Thank you very much, Mr. Zucker.
Ms. Abdoulah.
STATEMENT OF COLLEEN ABDOULAH
Ms. Abdoulah. Hi. I am very proud to be here. Oh, is this
on? Hi, I am very proud to represent WOW and the American Cable
Association. We are a broadband competitor in five markets in
the Midwest. One million of the households that we pass
directly compete with Comcast in Michigan and Illinois. I know
customers appreciate having competitive choice. They do not
choose WOW because we are the low-cost provider, they chose us
because we differentiate ourselves based on the service
experience that we provide.
Customers recognize this. We have received 10 JDPower
awards for service. Just recently they awarded us the First
Place Provider of Internet, phone and cable in Consumer
Reports. I don't tell you about this recognition to brag, but
to illustrate that when we have direct influence and control
over our operations, we can be very customer-centric and focus
on what the customer needs and wants.
Yet as a buyer of content of both cable and online, we face
a different set of challenges. We buy most of our content from
a handful of large-content providers who have significant
market power and leverage. The prospect of having Comcast NBCU
as the largest vertical integrator of content as my direct
competitor does concern me, and it concerns me because the
combined company will have power, full ability, and incentives
to possibly hurt a competitor like us and increase our costs. I
have these concerns because of current behaviors and
experiences that we have today.
Now, the reality is that whether the distribution medium is
broadcast cable, online or mobile, video content is key. So
content negotiations are critical for us. The behaviors we
experience today during those negotiations are things like
price value. Not all content is created equal, yet content
providers come--who have large market power--come to the table
with their network offerings packaged in a take-it-all, or
take-it-or-leave-it kind of fashion. Meaning that low-value
networks, not highly viewed or wanted by customers, are
associated with or packaged with the high-value networks that
we need to buy in order to compete. And the issues with this
are several. One, we end up using channel space for networks
customers don't want and aren't viewing, channel space we could
give to independent networks. And it consumes our valuable
bandwidth that we would rather allocate to advance services
that we know customers want, HD, Video on Demand, interactive,
and especially faster online speeds.
Then there is carriage availability. Content providers with
large, significant market power can withhold or delay launch
timing by slow-rolling the negotiations. One example of this is
for online content. The concept of TV Everywhere, which
basically involves packaging cable networks and allowing them
to be viewed by your broadband customers, I think Comcast
brands their XFINITY. We went to Comcast, we went to the other
networks, and we asked for rights to access that programming
for our broadband customers. To date we have been denied that
access.
A cable example. We were negotiating with a network that
Comcast has a significant investment in. During that
negotiation, the networks refused to include the rights to
their advanced programming that they were developing. And the
bottom line is this: We are not here to whine or ask for
special advantages because we are the smaller guy.
I believe in competition. As my peers here have said, it
breeds creativity, innovation, and especially a clear focus on
the customer. And I think our JDPower and Consumer Report
ratings validate that.
We simply ask for a thorough and thoughtful consideration
of specific conditions that may be imposed so that we can
continue to preserve and promote the competitive choice that we
provide and that Congress sought in the 1992 and 1996 acts.
The types of conditions we would ask for are the following:
the terms and conditions for access for content, whether it is
cable, online, or otherwise, should be the same terms and
conditions that are available to Comcast.
And then, business is business. If there is a time when
discriminatory behavior occurs and market power is--and
leverage is exerted inappropriately, I really ask for a remedy
structure that is meaningful and accessible for companies like
WOW.
The current retransmission consent and program access
complaint procedures do not help us. An outside arbitration
process does not help us. And the reasons are they are time-
consuming, they are very costly, they don't ensure continued
carriage while you are in dispute, and especially they place
the burden of proof on the complainant who doesn't have the
access to the data, since there is absolutely no pricing
transparency. So to protect the competition and consumers from
this combination, regulators must impose different and better
remedies for us, and we look forward to participating in that
process.
Thanks for having me.
Mr. Boucher. That you very much, Ms. Abdoulah.
[The prepared statement of Ms. Abdoulah follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Boucher. Mr. Fiorile.
STATEMENT OF MICHAEL FIORILE
Mr. Fiorile. Chairman Boucher and members of the
subcommittee, my name is Michael Fiorile. I speak to you today
as Chair of the NBC Television Affiliates Board, representing
some 200 independently owned local television stations. For
more than 60 years now, the affiliates and NBC have worked
together as partners. The result has been free and universally
available local and national news, weather, sports, emergency
information, and some of the highest quality programming.
The question today is whether or not the benefits of this
partnership produces for local viewers in your districts will
thrive if and when Comcast owns NBC. The NBC Affiliates Board
has been very pleased to hear Comcast's response to this key
question. Steve Burke, the Chief Operating Officer at Comcast,
has assured us on more than one occasion that the company's
intent is to grow our partnership, providing free and over-the-
air television service through the affiliates. In fact, also,
Comcast's desire to retain NBC's 10 owned and operated
television stations in some of our country's largest cities is
very important to us, and we support that. Ownership of these
stations will provide Comcast with a direct stake in serving
local television viewers just as the affiliates have.
This is a very positive start, but at this point it is in
fact just a start; the fact that never before has a major cable
operator controlled one the four major broadcast networks is
here. The stakes for free local television service and for
viewers are too high to leave the statements alone.
In the weeks ahead, the Affiliates Board and Comcast have
work to do. Together we hope to design and agree upon clear,
specific, and enforceable conditions defining what it means in
practice for Comcast to deliver on its promise to uphold the
network affiliate partnership for free, local television
service that has served viewers so well for so long.
We have Comcast's word on these principles and we look
forward to getting to specifics such as those that had been
proposed in the application. First, there must be protections
in place to prevent the erosion of the NBC Network through
migration of popular NBC news, sport and entertainment content
and talent to cable channels or to other pay services. For
example, consider the prospect, if you will, of NFL football
games, currently broadcast for free by NBC affiliates,
migrating to a Comcast sports channel. Or consider NBC Nightly
News moving to a pay channel. That would be an immediate and a
significant loss to affiliates and to all of our viewers. The
public and the affiliates also need assurances that Comcast
will continue to invest in new and compelling sports news and
entertainment programming for the NBC Network.
Secondly, Comcast must not interfere with NBC's affiliates'
right to serve our local communities as the first point of
availability of network programming. This longstanding
principle serves the network, serves the affiliates and
consumers by maintaining the broadcast medium with its unique
reach and accessibility to viewers as a strong and economically
viable platform provided free to all Americans.
And thirdly, this transaction raises questions about
retransmission consent. As you know, thanks to this committee
and others in Congress, retransmission consent is a market-
based mechanism that clearly works. It supports stations'
investment in local and national programming. The Comcast-NBC
transaction could threaten this essential economic foundation
of NBC affiliates' localized services. It puts the station's
supplier of network programming and their single largest
distributor under one roof. Simply put, Comcast should not use
its control of the NBC Network to undermine the market for
retransmission consent of affiliate signals on Comcast systems.
One way to address this concern is to keep network
affiliation negotiations with the NBC Network and to keep
retransmission consent negotiations with Comcast Cable separate
in the future, as they are today. We are also considering other
ways to preserve retransmission consent because of its vital
role in the underpinning of local service that we provide to
communities.
So you have heard briefly about three principal areas of
concerns to the affiliates. Given your oversight role, we would
hope and we would encourage you to encourage the FCC to adopt
the necessary conditions to protect consumers' continued access
to free quality local television. Like the commitments Comcast
has volunteered in its application, these conditions need to
become part of the FCC's order and need to be binding.
Comcast and the affiliates are off to a very promising
start in fleshing out the principles which both of us consider
very important. With concrete and enforceable safeguards and
conditions, we believe this transaction can actually strengthen
the ability of affiliates and NBC to serve our communities for
many, many years to come, and we know from discussions with
Comcast that Comcast shares these goals.
And I thank you for the opportunity to be here today.
Mr. Boucher. Thank you, Mr. Fiorile.
[The prepared statement of Mr. Fiorile follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Boucher. Dr. Cooper.
STATEMENT OF DR. MARK COOPER
Dr. Cooper. Thank you, Mr. Chairman and members of the
committee, for the opportunity to offer a public interest
analysis of a merger that is unique in the history of the video
market and will go a long way toward determining whether or not
the future of the video viewing in America is more competitive
and consumer-friendly than the past.
There is another side to this story. Comcast straddles the
dominant video distribution platform of the 20th century as the
Nation's largest cable operator and the emerging video
distribution platform of the 21st century as the Nation's
largest broadband Internet service provider. In its cable
franchise service territories, the market share of Comcast in
these two vital distribution platforms exceeds 50 percent.
Allowing it to acquire one of the Nation's premiere content
producers will radically alter the structure of the video
marketplace, triggering a bevy of anticompetitive effects that
will result in higher prices and fewer choices for consumers.
Allowing Comcast to acquire NBC will increase the likelihood
that the ugly business model of the cable cartel will be
strengthened and extended to the Internet.
There are huge horizontal problems with this merger.
Broadcasters and cable companies have a natural competitive
rivalry, witnessed every day. They argue about their price,
channel location, and carriage of content. The rivalry is so
intense that each side has attempted to enter the rival's
market in an effort to diminish their market power. They are
known as disruptive entrants in each other's market.
This merger would eliminate that primary line of conflict
between two of the most important of these potential entrants.
These two companies compete for audiences and advertise in a
dozen of the Nation's most important local markets, serving
about a fifth of the Nation's population. There are more people
in the markets where Comcast and NBC compete head to head
through NBC O&Os than there are where O&Os own stations and
Comcast is not present. There is more population that they
compete for directly than they do not.
These two companies compete in the video programming
market, where Comcast original sports and news production
compete with NBC's news and sports production. Three-quarters
of the regional sports networks that Comcast has rolled out are
located in the markets where they compete directly with NBC for
eyeballs and advertiser dollars. If that ain't competition,
there is no such thing as competition. That is horizontal
competition.
These two companies compete in cyberspace where NBC has
funded an alternative distribution, platform Hulu, as well as
numerous Web sites for its media properties. Comcast has
launched its own video portal and has big plans to expand that
competition. That is head-to-head competition in cyberspace;
that is horizontal competition.
By combining its distribution market power, that 50 percent
market share, that 24 percent national share of cable viewers,
with a huge portfolio of content, the merger would dramatically
increase the incentive and ability of Comcast to raise prices,
discriminate in carriage, foreclose and block competitive
entry, and force larger programming bundles on to other
systems. Those strategies raise prices and reduce choices, as
you have heard from Ms. Abdoulah.
The merger has so many anticompetitive and anticonsumer
effects that it just can't be fixed, they can't be unraveled.
The claim that there is enough other competition to prevent
these anticompetitive effects is based on the denial of the
existence of a well-recognized $80 billion multichannel video
market. That is a marketplace that we recognize and we can
evaluate. The likely response in that market to the creation of
a giant that has both massive content and massive distribution
is to get the other members of the market to bulk up in the
same way. We will lose more choices in that market.
They claim that FCC oversight under current law or Comcast
promises to obey the law for a change will protect the public
is absurd. The FCC rules have failed to undermine, eliminate,
prevent the stranglehold of the cable operators to date. And
there is no reason to believe that they will be better able to
tame the video giant that will result from this merger.
Comcast public interest promises do not even acknowledge
the existence of these horizontal competition problems, not to
mention offer serious remedies. Their temporary Band-Aids that
have been offered cannot cure the long-term structural injuries
that will result from this merger.
For decades Congress has labored to bring consumers price
competition in the video market by opening the door to
different business models and different technologies, but in
every instance, key policy mistakes were made that allowed the
cable industry to preserve and extend its market power. This is
the first big policy test for the Internet as the alternative
video platform that can compete with cable. If policymakers
allow this merger to go forward, the prospects for a more
competition-friendly, consumer-friendly, multichannel video
market will be dealt a setback.
Thank you, Mr. Chairman.
Mr. Boucher. Thank you very much, Dr. Cooper.
[The prepared statement of Dr. Cooper follows:]
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Mr. Boucher. Mr. Thierer.
STATEMENT OF ADAM THIERER
Mr. Thierer. Thank you, Mr. Chairman and members of the
committee, for inviting me here today to testify. My name is
Adam Thierer. I am the president of the Progress and Freedom
Foundation here in Washington.
Although we are still early in this process, there has
already been a great deal of hand-wringing and even some dire
predictions about the pending merger of Comcast and NBC
Universal. I hope to put this proposed marriage in some
historical content and explain why the deal certainly wouldn't
have the detrimental impact that some critics fear, and also
try to explain why it might even be one potential model for how
to sustain traditional media going forward.
First, let's remember that we have been here before.
Paranoid predictions of a media merger apocalypse have
accompanied the announcements of many previous deals from AOL-
Time Warner to News Corp.-DirecTV to XM-Sirius. In these cases
and most others, the sky-is-falling claims are typically proved
to be greatly overstated. The only harm that one could
reasonably claim came from most of those mergers was not to
consumers or content providers, but to the merging firms
themselves and their shareholders. That is because many mergers
simply failed to create the sort of synergies and benefits
originally hoped for, and consequently die of natural causes
over time. Other firms, however, have found ways to make deals
work and deliver some important news services that previously
were unimaginable or simply too expensive to offer alone.
Regardless, the point here is we will never know what works
unless we permit marketplace experimentation with new and
innovative business models.
Second, the fear that Comcast-NBCU will act as a gatekeeper
over video content is also largely overblown, especially in
light of preemptive concessions that they have already made on
program access and carriage. It is important to realize that
the merger will only marginally affect vertical integration in
the cable marketplace. Currently the percentage of cable
channels owned by individual distributors is in the single
digits. And even after this merger, it will only be in the
teens. Stated differently, the vast majority of cable channels
will be independent of Comcast-NBCU control.
More importantly, it is hard to believe that the new firms
would restrict its content to just Comcast's own distribution
networks, since they would be losing eyeballs, advertisers, and
revenues that accompany the carriage of their content on other
platforms. Likewise, it would make little sense for the firm to
block newer competing channels on their own platform, since
they would incur the wrath of programmers and the viewing
public alike. And those channels will likely find a home
elsewhere which could incentivize subscribers to switch video
service providers.
The really great thing about the modern media marketplace
is that there is always another place for consumers to turn to
find what they want. Comcast faces increasing robust
competition in the video programing market place from satellite
and telco providers as well as from a variety of Internet-based
video providers. And NBC Universal's stable of programming,
while quite impressive, is a mere trickle in the ocean of
content that consumers can choose from.
Meanwhile cutting the cable cord altogether and instead
getting the video they want from a bewildering array on online
video services today. Netflix, Julu, Joost, Roku, Apple, the
Sony PlayStation Store, the MicroSoft Xbox store, and many
other online sites such as YouTube and Vimeo, and Justin.TV
offer a mix of professional and amateur content.
In sum, there has never been so much competition for our
eyes and ears, and audiences and advertising dollars have
become increasingly fragmented as a result.
Finally, we need to realize that the ongoing digital
revolution is upending many traditional business models--
especially advertising supported over-the-air broadcasting--and
that alliances like Comcast-NBCU may be one blueprint for how
traditional media operators can involve and compete going
forward. With both the FCC and FTC currently investigating
whether journalism is in trouble and what it might take to save
the news, many media economists and industry analysts seem to
agree that at least some degree of consolidation or
collaboration might be necessary.
Consider last week's news that NBC Universal saw quarterly
profits plunge by a whopping 30 percent in the first quarter of
2009. This is indicative of the general downturn the entire
media sector has been experiencing as of late. Why not then
allow Comcast to try to help NBC out and try to get back on
track, instead of forcing them to make it on their own in such
a radically and uncertain future? It goes without saying that
Comcast might be in a better position to protect NBC
Universal's copyrighted content from digital piracy, at least
over their own pipes.
So those who are concerned about the future of broadcasting
and local news should remember that news and local news--and
broadcast news in particular--isn't cheap. Unless we want to
embark on massive government subsidization to bail out
traditional media providers, Congress and regulatory officials
must be willing to grant private media operators the
flexibility to restructure their business affairs so they can
continue to provide important public needs while also turning a
profit. That can't happen unless we allow media markets to
evolve and let operators experiment with new business models
and ownership structures.
Although there are no guarantees, deals like Comcast-NBC
Universal may be one model that helps firms create and extend
and monetize their media content going forward. But, again,
regulatory flexibility is crucial so we can figure out what
works and what doesn't.
Thank you again for inviting me here today.
Mr. Boucher. Thank you very much, Mr. Thierer.
[The prepared statement of Mr. Thierer follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Boucher. And we express our appreciation to all of the
witnesses for thoughtful and well-presented comments this
morning.
I am going to recognize myself for an opening round of
questions. Increasingly, the viewing of television programs
over the Internet has become a useful and attractive
alternative to viewing those programs over cable television.
Concerns have been raised, including some this morning, about
the fact that the Comcast-NBC combination would place Comcast
in a position to inhibit the online viewing of television
programs for a very large amount of television content. That
concern is heightened by the TV Everywhere model that Comcast
and Time Warner Cable have now launched, through which the
online TV programs are made available only to the subscribers
to the cable television service itself.
With regard to TV Everywhere, smaller cable companies,
including Ms. Abdoulah's, as she just indicated, have in
instances been denied access to the content that is being made
available on TV Everywhere. And there are questions about
whether programs that are offered over the air today and made
available through the nbc.com Web site for online viewing might
in the future migrate into TV Everywhere, a very real concern a
number of people have expressed.
The concern about the Comcast position enabling it to
potentially inhibit the availability of TV fare over the
Internet is also heightened by the fact that, for at least some
period of time last year, users of Boxee--which is a software
application that enables people to see online television
programs on their television sets, not just on computers but
actually on their TV sets--are giving them a very seamless
experience, similar to what they would get from cable TV. But
the Boxee users were apparently blocked from being able to view
the Hulu-delivered programs on their TV sets. And presumably
that blocking came from Hulu. And I would note that NBC
Universal is a part owner and one of the founders of Hulu.
And so, Mr. Roberts and Mr. Zucker, my question to you is
this. What response do you have to those concerns and what
assurance can you give us that, when this combination takes
place, there will not be an inhibition put in place that would
limit the amount of online video content that viewers can see?
Mr. Roberts, would you like to start?
Mr. Roberts. Thank you. Thank you, Mr. Chairman, and I
appreciate the opportunity to talk about some of those issues.
First of all, as has been mentioned previously, we have helped
create the broadband experience that consumers enjoy today,
some of the work out of cable labs going back a decade was one
of the first to create high speed broadband. It is the fastest
growing part of Comcast, is our broadband business.
In fact, we are in the process of completing nearly a
billion-dollar upgrade to create wideband. And if you say what
do you do with wideband right now, at 50 megabits a second I
trust there are great entrepreneurs to come up with the
answers, and we want to be a company on the leading edge. So we
think this is absolutely one of the most exciting areas.
And I have said consistently for several years that we
believe video over the Internet is one of those applications
that requires more speed and justifies the investments that we
are making in wideband and broadband. So we think it is a
friend, not a foe.
That position is demonstrated by the surge of usage and the
amount of bits that consumers continue to consume each month,
and it is growing at a very fast rate. So in this transaction,
if you look at the facts, there were 30 billion views of video
Internet last month. NBC was less than 1 percent of that. Hulu,
of which NBC is one of four partners, I, think is around 4
percent. Comcast is less than half a percent of any of our
video-owned content assets being viewed on the Internet.
Mr. Boucher. Mr. Roberts, my time is running out rapidly
here. Let me pinpoint a couple of key concerns. Ms. Abdoulah
has said that she has been denied access to the content
available on TV Everywhere. What is your response to that?
Mr. Roberts. I am not aware exactly what she is referring
to----
Mr. Boucher. Do you agree she ought to be able to get
access to it on reasonable terms?
Mr. Roberts. Yes. And I believe she can by going to--the
biggest proponent of TV Everywhere is----
Mr. Boucher. Let me just accept the ``yes.''
Mr. Roberts. OK, fair enough.
Mr. Boucher. The second key question that I have is this:
What about Boxee? Mr. Zucker, you probably are in a better
position to answer that. Did Hulu block the Boxee users from
access to the Hulu programs?
Mr. Zucker. Well, this was a decision made by the Hulu
management to--what Boxee was doing was illegally taking the
content that was on Hulu without any business deal and, you
know, all--we have several distributors, actually many
distributors of the Hulu content that we have legal
distribution deals with. So we don't preclude distribution
deals. What we preclude are those who illegally take that
content.
Mr. Boucher. Would you have negotiations with Boxee?
Mr. Zucker. We have always said we are open to
negotiations.
Mr. Boucher. All right. One further question and my time
has expired. Can the two of you offer to us assurance that the
programs that are delivered over the air by NBC today and are
then available on the nbc.com Web site for online viewing will
not migrate into the TV Everywhere format so that they then
would be available only to people who have a cable
subscription? Can you give us that assurance?
Mr. Roberts. Yes.
Mr. Boucher. Thank you very much. I appreciate your answers
to those questions.
The gentleman from Florida, Mr. Stearns, is recognized for
5 minutes.
Mr. Stearns. Thank you, Mr. Chairman.
Dr. Cooper, you have testified before our committee before
many times, and I thank you for coming. Ms. Abdoulah, we sort
of all are on your side; you are the small person in this big
room here, so we are sympathetic to you. As I understand it,
you don't oppose a merger, you just want conditions in place;
would that be an ample way to say your opinion?
Ms. Abdoulah. That is a fair statement.
Mr. Stearns. Dr. Cooper, you are against this merger; is
that fair? Yes or no?
Dr. Cooper. I believe--I am against the merger, I don't
think you can unravel the anticompetitive----
Mr. Stearns. You have been here before and I know you
testified against other mergers, so I am going to ask you
succinctly if you can tell us that--I mean, you say control
over the production and distribution of information has
critical implication for society and democracy. We all agree
with--no one disagrees with that. The problem is that the
proposed deal before us doesn't speak to all the production and
all distribution. So when you make that statement, you know,
Comcast-NBC, it is not all of production, all of distribution.
I mean, you and I we both agree there is diversity of news and
entertainment from all kinds of different things. I don't have
to go in and enumerate them.
But how could Comcast in your opinion, very succinctly, now
control production and distribution, to go back to your
statement overall? I mean in one or two sentences.
Dr. Cooper. I am not worried about overall. I am worried
about in specific local markets where they have market power.
So in 12 of this Nation's markets, Comcast and NBC compete head
to head for eyeballs, for advertisers. In many of those markets
they produce programming, new programming and sports
programming, marquis programming.
Mr. Stearns. In those 12 markets, what will happen if this
merger comes? Tell me worst-case scenario.
Dr. Cooper. Worst-case scenario, one of those entities
abandons the market and ceases to try to win eyeballs. Today
they both vigorously try to win eyeballs; tomorrow I have lost
a competitor.
Mr. Stearns. And which one of those markets, or those 12,
you think is most likely in your opinion?
Dr. Cooper. They are all good candidates. They are all
important markets.
Mr. Stearns. Come on, just one of those 12 that we can
highlight.
Dr. Cooper. Well, the premiere one is, of course,
Philadelphia.
Mr. Stearns. OK, Philadelphia, that is a market. It is
going to happen in 2 years, 5 years, 2 days, 1? What?
Dr. Cooper. These are long-term structural changes.
Mr. Stearns. Five to 10 years?
Dr. Cooper. In those markets we have a record of Comcast
making it difficult for competitors to enter. You have heard
from those people.
Mr. Stearns. Yes, yes.
Dr. Cooper. They have withheld their sports programming.
Mr. Stearns. I got it.
Dr. Cooper. Slowed down, driven hard bargains, and raised
their prices.
Mr. Stearns. Ms. Abdoulah, do you agree with him? Do you
think that is true, that in these 12 markets we are going to
lose Comcast will dominate and we will lose competition? He is
buttressing your argument in a way, so he is on your side even
though you wanted the conditions.
Ms. Abdoulah. Well, I think we are speaking of different
things. He is speaking of the 15 markets and the O&Os.
Mr. Stearns. And you are speaking of your own?
Ms. Abdoulah. And I am speaking as a competitor in markets.
Mr. Stearns. Mr. Thierer, what would you say to Dr.
Cooper's comment?
Mr. Thierer. I think the problem with this story is that
right now you see Comcast actually losing share in those
markets.
Mr. Stearns. In those 12 markets?
Mr. Thierer. In some of them; I can't speak for all of
them. We know that telco operators have taken away a lot of
that market share; satellite operators are still highly
competitive. I hear a lot of concern about advertisers and
viewer options from Mark. I am sure the advertisers will be
pleased to hear Mark is so concerned about their welfare. They
are actually doing all right.
I have some data I present in my testimony showing just how
many different avenues advertisers can take their dollars to.
In terms of viewers, they are shifting their eyeballs and ears
all around these days. So it is hard for me to believe this
will be some sort of nightmare Chicken Little scenario where
the sky is going to fall in these markets.
Mr. Stearns. Ms. Abdoulah, I am coming back to you; you are
sort of the person here. Given that Comcast would not be
gaining any new cable properties to compete with your company,
what advantage would this company gain from withholding content
from you or your customers?
Ms. Abdoulah. What advantage? I can't offer the same
content. If I don't have access to the content where does my
customer go? To my competitor, to Comcast.
Mr. Stearns. Mr. Roberts, you might want to comment on
either her comment or Dr. Cooper's.
Mr. Roberts. I go back to the principle, first of all, the
content that is going to be made available to our competitors
is available today. In the last 2 years Comcast has lost
nationally over about a million and a half customers, while
phone, satellite, and Wide Open West of the country, have added
over 7 million. In fact, the second and third largest
distributors of multichannel video in the country today are two
satellite companies. So there is a very competitive market.
One of the reasons we want to get more invested in content
is we see the value of that content growing. I think the
premise of the way you phrased the question I agree with, which
is we will be well-served to make that content available to all
the growing players in the marketplace. So I think this will
ultimately lead to more innovation, more content creation. We
see it as a growing business.
I am sure somewhere we will talk about the intellectual
property and how to protect it. We are very much focused on
that same issue. And I think we recognize that this is a very
competitive video distribution marketplace, and this is an
opportunity to participate in the growing part. And as the
Internet grows, as the Chairman asked, we want to see the
content available and growing for the consumer, because that is
where the consumer wants to be.
Ms. Abdoulah. May I respond?
Mr. Boucher. Very quickly, Ms. Abdoulah.
Ms. Abdoulah. It is not just about withholding content. It
is also about putting restrictions and conditions on how we
offer that content. Those are two things that we need to
consider here because that happens as well.
Mr. Boucher. Thank you very much, Mr. Stearns.
The gentleman from California, Mr. Waxman, is recognized
for 5 minutes.
Mr. Waxman. Thank you very much, Mr. Chairman.
Mr. Roberts, NBC has been a long-time proponent of vigorous
protection for the intellectual property rights of content
creators and owners. Mr. Zucker and I have had opportunity to
discuss the need for more robust action by broadband providers
and protecting content available on line. On-line content theft
is a serious problem. It is a drain on our economy and one that
I am committed to addressing.
If your transaction is approved and you find that you own
NBC's valuable content catalogue, can you tell us what actions
you are considering to reduce content theft on line?
And secondly, will you ask other broadband providers that
seek access to NBC content to adopt measures to reduce content
theft?
Mr. Roberts. I think we absolutely recognize the vital
nature of protecting the licensed, legitimate, non-theft model
is what has propelled NBC Universal to what it is today, and
every other owner of content. In the distribution business we
also rely on licensed content to be the successful part of our
business. So I think we now have doubly the incentive or double
the incentive to figure this issue out better than it is
figured out today.
Specifically, I think there have been technological
advancements in the last couple years. They are going to make
it more likely that we can cooperate.
And to your very specific question, would we encourage the
rest of the other broadband providers and distributors to try
to find solutions here, the answer is yes. We will now be an
active member of NCTA, MPAA, and other industry trade groups
that are focused on these questions.
I think it is vital that we have cooperative solutions. We
obviously, on one hand, have privacy concerns, and copyright
protection concerns on the other hand. We want--by having such
a--33,000 employees at NBC Universal that I have to worry
about, and 100,0000 employees at Comcast cable, it is in my
interest and I think the consumer's interest to continue the
licensed model and find solutions that are acceptable.
Mr. Waxman. I appreciate that. On this issue about fair
competition, the Communications Act prohibits cable companies
from requiring a financial interest in any program service as
condition for carriage, or forcing a programmer to grant an
exclusive to the cable provider as a condition of carriage. The
idea behind this prohibition is to protect independent
programers from being forced to accept unfair terms as the
price for being distributed and seen by viewers. Do you agree
that this kind of prohibition make sense?
Mr. Roberts. I do. And we have abided by that prohibition
since 1992.
Mr. Waxman. There was a statement by Steve Burke during a
program carriage dispute between Comcast and the NFL. And Mr.
Burke, who was Comcast chief operating officer, stated that
Comcast treats its own programming services as siblings, as
opposed to strangers. Do you agree with Mr. Burke's statement?
Does Comcast treat its own programming services differently
than those outside of the Comcast family?
Mr. Roberts. I am not familiar with the context of that
remark, so I if may, Mr. Burke----
Mr. Waxman. Put his statement aside. Do you treat your
programming service differently than those outside of the
Comcast family?
Mr. Roberts. I think that what he may have been referring
to is, as employees of the company and just how--as chief
operating officer he is concerned with both parts, the company
and the welfare of the assets and the people. But specifically
to--we have six out of every seven channels that Comcast
carries, we do not have any financial interest in. The
competitiveness of DirectTV, WOW, Dish Network, Verizon Fios,
AT&T U-Verse requires us to have the most compelling product,
as fairly and exciting presented to the consumer as possible.
Mr. Waxman. You are going to treat your content and other
content not produced by your----
Mr. Roberts. We have to get the best content, otherwise
people are not going to want our product. I think that is what
is driving us, from a competitive standpoint, as to how to have
the best offerings possible.
Mr. Waxman. Let me ask Mr. Zucker. As a programmer
interested in bringing NBC's programming to as many people as
possible, are you expecting Comcast to look out for its own?
And if so, would you expect such a preference to be good for
NBC?
Mr. Zucker. The fact is that we would like our content to
be as widely seen as possible. So our relationship with every
distributor is the same, that we would like them, though they
don't always, to carry all of our networks and all of our
content. And we have those conversations all the time with all
distributors.
Mr. Waxman. Mr. Chairman, I know my time has expired, but I
want to point out that companies, like people, naturally have
an interest in taking care of special family members. But in
looking at this transaction, I think the FCC needs to analyze
carefully what such potential favoritism might mean for
competition from independent programmers and ultimately a
consumer choice.
Mr. Boucher. Thank you very much, Mr. Waxman.
The gentleman from Indiana, Mr. Buyer, is recognized for 7
minutes.
Mr. Buyer. Thank you very much.
I have worked hard to do my due diligence, to examine this
from all sides.
Mr. Roberts, what I am going to ask of you, if you can grab
your pen, I have six questions that I am going to ask. And you
don't have to give very long answers, because you and I have
had very good discussions with regard to the word trust. You
can't beat up broadcasters for your entire career of Comcast
and, all of the sudden, you become one without giving
assurances or commitments.
So let us go ahead and go down the line. With regard to
your testimony on program access rules, you have now given the
assurance that you will abide by them regardless of what the
court may do. Does that commitment apply even after the rule
sunsets? That is my first question.
The second question is that, as I speak with the
affiliates, it seems to me that you could fairly easily even
get around the rule, even though there is a commitment. For
example, a local NBC affiliate could significantly raise the
price for all Comcast video competitors in that market for
retransmission of a station's signal, but for Comcast, this
would be basically an accounting charge from one corporate
affiliate to another.
What can you do to assure that Comcast will not use its
control of the NBCU to raise the rates for all its competitors
to pay for this valuable must have programming? That is my
second question, please, also recognizing that if in fact that
local market becomes--you upset the market rates, that it does
have an impact upon smaller cable operators likewise. That is
my second.
My third is with regard to the issue on price. It does
appear that you have the potential to gain a significant amount
of leverage with your video distribution competitors for the
price of access to these channels. Now, you might offer them
access to programming, but at what price that effectively
forecloses them from access or raises the providers' cost
structure so they can't compete. Will you commit, at least with
respect to the vast NBCU programming that you now control, that
you will control, to maintain for some period of years the
programming prices in the current deals? After all, these were
negotiated arm's length before the vertical integration, so
they should reflect the market rates.
Secondly on my third question, will you agree to so-called
most-favored-nations status for similarly situated purchases
that are now in integrated programming? That is, will you
commit all similarly situated video competitors of yours will
automatically get the best price that you will make available
to them?
My fourth question with regard to the NBCU vast array of
films in the film library, what commitments will you make about
competitor access to valuable programming, which is essential
for video-on-demand services?
The next issue is on advertising. I understand Comcast does
not currently allow its video competitors to advertise their
services on Comcast's--on your cable channels. Do you intend to
extend this policy to all NBCU networks and programs after the
deal? And if you do-- well, let's just hear what your
commitment is going to be on that, because you understand what
this could do.
The last is with regard to--I am not aware of any
commitments that Comcast has made regarding the availability of
Comcast and NBCU programming for distribution online. The
ability of consumers to enjoy their favorite programming online
or to take it with them on various devices is the frontier that
you and I spoke about. Will Comcast make a commitment that it
will not deny its video distribution rivals access to the NBCU
broadcast or cable programming for online distribution?
Assuming that the competitor is willing to pay a fair market
rate, will Comcast commit not to give its online properties
preferential treatment, for example, by making a really hot
show available to a competitor for online distribution after
Comcast customers have already enjoyed it first? I await your
reply.
Mr. Roberts. OK. I am going to do my very best, and I hope
you will bear with me. There were a lot of questions there, and
I appreciate that you have covered a lot of ground. I think
what we said in my opening statement, which you may have caught
some of or maybe not all of, is that we are prepared to discuss
with the FCC either the sunsetting or the--any litigation that
exists on the program assets rules and program carriage rules,
having them remain in place after this transaction is
completed. So I think we will continue to abide and have lived
with, and it is not a motivation for this deal, is to see a
massive change in that oversight that the FCC has on our
conduct of behavior.
Again, I want to stress the point it underscore that it is
not the motivation for this deal to suddenly take a CNBC off of
Direct TV or in some way try to change that relationship
because, frankly, those are the second and third largest
distributors. They are the fastest-growing distributors of the
telcos, and the fact is that that is part of the growth in Mr.
Zucker's business.
Mr. Buyer. Number two.
Mr. Roberts. Rates for retransmissions and smaller MSOs. I
am not totally sure I understood all of the implications of
that question. Could you perhaps just talk about that a little
bit?
Mr. Buyer. We are a little worried about, in our office
when you talked about, well, the NBC affiliates are going to
feel good about what we do. They may get better rates. Well,
when you do that, you are going to change what happens in that
local market, and there could potentially be cost shifting. And
what type of assurances?
And not only that, but also, some of the affiliates I have
spoken to, it is this corporate accounting.
Mr. Roberts. So, first of all, I hope you, as I was,
encouraged by the head of the NBC Affiliates Board statements
that we are off to an encouraging start in terms of trying to
address some of the fundamental issues in a troubled business,
because of audience share declines, technological change;
broadcast television is going through a lot of change.
We heard about retransmission consent, which I think is the
axis of this question. By being at the end of this deal, about
80 percent a cable content and about 20 percent a content
company, we are still going to have a large concern about cable
rates, and what is the right model and the right answer?
Sitting here today, I don't have the perfect answer to the
dynamic changes that are going through the industry. But the
question I think in its essence, are we prepared to try to play
a constructive role in the future of broadcast television and
recognize its vital importance? We are making a huge bet by
buying NBC. At the same time, there has been--there are the
opportunities to revisit, what is the right answer there? And I
hope by being in both sides, we can truly play a role in
helping make that happen.
Mr. Buyer. But my time is running out. If you can hit these
commitments fairly quickly. Go to three.
Mr. Roberts. Program prices in the current deals. I can
assure you that all the existing contracts that NBC has, which
I have not had access to see, we don't intend to abrogate any
agreements or attempt to do so.
Mr. Buyer. OK, number four.
Mr. Roberts. Films, competitors' access. Again, I don't
know. I have just met the Universal folks. But again, it is not
the motivation. I am sure we are going to try to figure out how
to make the best movies. You have many partners when you make a
film, all the actors and the writers and the talent and the
creative folks. And you are going to try to maximize the
revenues as a fiduciary of that film. And if other folks want
access to it, we are certainly in favor of that.
Mr. Boucher. Mr. Buyer and Mr. Roberts, let me suggest
that, Mr. Roberts, you submit the balance of those answers in
writing. We are going to be submitting some additional
questions to you in writing anyway, and we have such a number
of members still to ask questions and limited time. I think we
will move on.
. Thank you very much, Mr. Buyer.
The gentleman from Michigan, Mr. Dingell, is recognized for
5 minutes.
Mr. Dingell. Thank you, Mr. Chairman.
Gentlemen and ladies, I am going to request a lot of these
questions be answered yes or no. It doesn't indicate any lack
of respect, but it indicates a very important need to conserve
time under the very limited process as we proceed.
To Mr. Roberts, will Comcast commit not to tie together
retransmission consent payments with payments for network
programming provider under an affiliation agreement? Yes or no?
Mr. Roberts. Could you repeat the question? I am sorry.
Mr. Dingell. Will Comcast commit not to tie together
retransmission consent payments with payments for network
programming provider under an affiliation agreement? Yes or no?
Mr. Roberts. We will not do what you said, I believe. I am
sorry. There are a couple of----
Mr. Dingell. I will ask that the record be kept open. You
can give us a more finished answer to that at the appropriate
time.
Mr. Roberts. I appreciate that.
Mr. Dingell. And I hope you don't regard that I am trying
to take advantage of you.
Now, again, Mr. Roberts, will Comcast commit not to force
network affiliates to accept unfavorable affiliation agreement
provisions to obtain market-based retransmission consent
payments? Yes or no?
Mr. Roberts. We will not force them to take unfair deals.
Mr. Dingell. Again, I will ask that the record be kept open
so that you can amplify on that.
Again, Mr. Roberts, does Comcast's public interest filing
with FCC include proper assurances that Comcast will not
migrate critical network programming away from free over-the-
air broadcasting to Comcast's cable properties? Again, yes or
no?
Mr. Roberts. We will not--that is not the motivation. And I
believe our filing does address that, yes.
Mr. Dingell. And I want to be clear, these questions are
all asked with all respect and affection.
Mr. Roberts, again, upon approval of Comcast's joint
venture with NBC Universal, will Comcast commit to respecting
collective bargaining agreements for its employees and the
process by which they are reached? Yes or no?
Mr. Roberts. Yes.
Mr. Dingell. Again, Mr. Roberts, further, will Comcast put
up roadblocks to first or initial contract negotiations with
the unions? Yes or no?
Mr. Roberts. No.
Mr. Dingell. Mr. Roberts, finally, how will Comcast view
arbitration of first contract negotiations should they break
down between Comcast and employees seeking to form a union?
Will Comcast support or oppose such actions?
Mr. Roberts. In terms of mediation or some third party?
Mr. Dingell. I am talking about arbitration. You can use
the word mediation interchangeably with it.
Mr. Roberts. If there is a contract breakdown, if there are
creative ways to find solutions--we don't want to have a
breakdown. So if that is a helpful way to go, that is something
we will consider, sure.
Mr. Dingell. Now, these questions to Ms. Abdoulah and Dr.
Cooper.
In 25 words or less, how do you see the proposed joint
venture between Comcast and NBC Universal as affecting the
online video market?
Starting with Dr. Cooper.
Dr. Cooper. Frankly, we see it as an effort to extend the
market division agreement that has existed between cable
operators and physical space into cyberspace. That is the
explicit intention of TV Everywhere.
The statement that they will not use NBC properties to
reinforce that does not answer our concern, because NBC will
stop developing alternative platforms.
Mr. Dingell. I am going to request Ms. Abdoulah give us her
comments.
Ms. Abdoulah. I am concerned, sir, for two reasons. One, we
have had a recent experience where we have not been granted the
rights for online product. That is number one. And number two,
I am concerned that the current video model where it is a take
it or leave it, here is the high price you are going to pay,
gets extended to the online broadband customer base as well.
Mr. Dingell. Mr. Roberts, you had a comment; 25 words or
less.
Mr. Roberts. I think that the internet is a nascent market.
I think that TV Everywhere, just to be really clear, is meant
to say if you are subscribing--the way it was presented to us
from HBO and Time Warner--if you can get the--if you are a
customer of, say, HBO on television and you now want to watch
it on the PC, this enables that to happen. And I don't believe
there is any impediments to Ms. Abdoulah being able to have the
same access from Time Warner. Those are the principles that
were publicly stated and that we thought made a lot of sense.
Mr. Dingell. Thank you.
Now, this goes again to Mr. Roberts. Dr. Cooper asserts
that a lack of competitive pressure has failed to produce any
appreciable downward pressure on cable rates since 1983. In
addition, Comcast will arguably be incentivized by virtue of
vertical integration to charge competitors more for must-have
content, thereby raising cable rates for consumers. What
commitments does Comcast intend to make to prevent such abuses?
Mr. Roberts. Well, I think that, as I said, we are still 80
percent a cable company. So our eye is very much still in that
perspective, Mr. Dingell.
Number two, I don't think the deal changes anything in that
regard. NBC has great content and charges the best price that
it can get from its customers, and I am not sure that our
incentive is any different given the two companies coming
together.
I think that the quality of the content and the technology
that has changed in the last several years is part of the
answer, but I think it is a broader industry question, not
necessarily specific to this deal.
Mr. Dingell. Thank you.
Mr. Chairman, I know my time is up, but I think mercy
requires that Ms. Abdoulah and Dr. Cooper be able to comment.
Starting with Ms. Abdoulah, do you have a comment on that?
Ms. Abdoulah. I have a comment on the previous comment that
we have not been denied access. Comcast--it is not about Time
Warner only. Comcast provides networks on their TV Everywhere
platform. We asked Comcast specifically for the rights and
they--we got sort of excuses like, it is not ready for launch,
even though has been launched to 14 million of their
households. We were told there are technical issues. We are
technically able of authenticating it. So there are issues of
content being withheld today.
Mr. Dingell. Thank you.
Dr. Cooper, very quickly.
Dr. Cooper. Comcast's sob story about losing cable
subscribers is a dog that doesn't hunt. In the past few years,
they have shifted to Triple Play, increased the total number of
subscribers they have across their items, increased the price
of cable, increased the margin on their cable customers. That
is inconsistent with a market that is forcing them to lower
prices. They are counting the wrong thing, the thing they are
not really interested in anymore.
Mr. Dingell. Thank you.
My time is up.
Mr. Boucher. Thank you very much, Chairman Dingell.
The gentleman from Massachusetts, Mr. Markey, is recognized
for 5 minutes.
Mr. Markey. Thank you, Mr. Chairman, very much.
I think we have to just continue this conversation. It is
obviously at the center of what this merger represents. So, as
you know, I have introduced network neutrality legislation, and
clearly the concern here is that, when a company that has the
wire going into the home merges with a company that has all of
NBC Universal's content, that there could be a temptation to
discriminate against others.
And again, going out in the future, we are concerned about
the proverbial kid in the garage that has got that great idea.
We have got a concern about the kid that thinks up the idea of
Avatar.com TV. It could be an big concept right now, huh? And
it is not owned by Comcast or NBC. And so we have to make sure
that it doesn't get discriminated against because it is not an
NBC idea; it is not a Comcast idea.
So how can we enshrine these principles of
nondiscrimination against those great new ideas from having
access to the pipes that go into people's homes that are
controlled by Comcast, Mr. Roberts? And that goes to the
question of network neutrality, and what kind of guarantees can
we get that those other ideas are going to be protected?
Mr. Roberts. As you know, Mr. Markey, there is a procedure
taking place at the FCC right now on this very question of net
neutrality, and as you have said, you have got potential
legislation in this committee and in the Congress.
So I would, first, want to point out that I think, whatever
you do, if you are really trying to make that protection or
achieve that goal, it is going to have to apply across the
board. And whether that is to all providers, what levels of the
Internet, what about wireless; the world is changing and
converging and evolving very, very quickly. So, again, I
believe that this particular transaction doesn't really have
the potential, in my opinion, to change that kid in the garage
or that AvatarTV.com or whatever the example one wants to pick,
because let's just say Google today is over 50 percent of all
the video views of the 30 billion views that took place last
month----
Mr. Markey. Will you commit, will you commit to not
creating a different standard for access by Avatar TV with the
Comcast platform? Will you accept the principles of
nondiscrimination?
Mr. Roberts. We have accepted and voluntarily--we may have
a disagreement on whether there should be a law and what that
does specifically, how it is interpreted down the road and what
that does to investment.
Here we are investing in DOCSIS 3.0 wideband without any
applications. We are counting on that kid in the garage. We had
the same questions many years ago; what about video gaming over
the Internet? Are you going to support it or not? It is a huge
part of what drives broadband, are all these new applications.
And so, yes, I believe that it is not in our business interest.
Mr. Markey. Do you believe that there should be any
conditions which are attached to this merger at all?
Mr. Roberts. Yes. We have said that we have identified, I
don't know, at least 10 commitments that get involved with
independence of NBC news to program access applying to
retransmission consent. What I testified this morning earlier
was that, if for some reason the rules of program access are
struck down by the court, we would continue--want to have a
conversation, have a commitment with the FCC to have them
continued because that is not a plan we plan to change. We have
talked about children's programming, free over-the-air
broadcasting.
Mr. Markey. My greatest concern going forward is that the
Internet is this incredibly chaotic generator of creativity and
new jobs in our society. That is who we have to be in the 21st
century, as a Nation. And it is very important that there be no
disincentives to that young creative person, the thousands of
them across the country, the tens of thousands that can create
that new product, to get it into the homes of the American
people, to feel that there was a barrier, there was a blocked,
that they couldn't get in. That there was one standard for NBC
Universal, Comcast programming, and another standard perhaps
for other powerful content providers, but for that smaller
creative person that really has to make the breakthrough, that
they won't be able to do it.
And I think, in the end, that that would hurt our economic
competitiveness because broadband, to a very large extent, is a
proxy, as a word, for 21st century American competitiveness for
the 3 percent of the population of the world that we represent.
And we have to make sure that all of that creativity gets
unleashed because that is something we have to brand globally.
So that is the conversation I think we have to have going
forward, and this agreement that you have really should be a
model to ensure that that becomes who we think of ourselves as
a Nation.
So we thank all of you for being here today.
And I thank you, Mr. Chairman, for your indulgence and
giving me extra time.
Mr. Boucher. Thank you very much, Mr. Markey.
Gentleman from Washington State, Mr. Inslee, is recognized
for 5 minutes.
Mr. Inslee. Thank you. Mr. Roberts, I am told that, in May
of 2007, Comcast obtained the broadcast rights for the Portland
Trailblazers, and at the time, the public was told that they
would be available through competitors.
Instead the Blazer broadcasting rights was used to run ads
extorting satellite subscribers to switch to Comcast because it
offered Blazer telecasts and the satellite providers did not.
It has now been 2 and a half years and still there is no deal
to allow the conveyance of those rights.
This leads me to suggest we ought to think about spiffing
up our rules on how to deal with those access rights. And there
is an arbitration procedure now that some have suggested is not
adequate to the task of today and has not worked.
I wanted to ask you and Ms. Abdoulah if we should consider
bringing those access procedures up to speed, for instance, by
requiring continuation of coverage during the arbitration
process, or having limits on the period of time it takes to
reach a resolution, and/or changing the burden of proof and
giving parties discovery of in fact the contractual relations
with others?
Mr. Roberts and Ms. Abdoulah, could you address that
consideration?
Mr. Roberts. Do you want me to go first?
First of all, my understanding of Portland is we would love
to have satellite carry that channel. We don't have an ability
to begin an arbitration process to ask them to carry it. They
are not bound by those rules. It is the other way around.
And so I don't believe they have availed themselves because
I am not sure that they have wanted to do that. I don't know
what their motivation would be. So any change that you might
have to the program access rules in general I am not sure would
affect that particular situation.
But just for the record, we have tried on numerous
occasions to get that content carried by satellite and would
welcome any way we can get that worked out.
As to the program access rules in general, I just want to
start--they were written in 1992. They were at a time when I
think probably over 50 percent of all the programming channels
were owned by cable companies, and cable at that time did not
have satellite competition or Telco competition or Wide Open
West type competition. It did not exist.
Today, according to the FCC, about 15 percent of the
channels are owned by vertically integrated companies. So there
is a big change in the market over the last 18 years or so. But
I think any revisiting should again go across the whole
industry, and we would welcome that. I am not sure it is
specific to this deal. But it is probably something that the
FCC from time to time or Congress from time to time should look
at; that is part of the question of whether the rules are still
necessary, given where the market is, what is happening with
other forms of distribution.
But I think that we have no problem with--you know, the FCC
has said it wants to review how it timely resolves some of
these matters, and the new chairman I think has sort of said
the institution needs to look at how it processes things
differently than past FCCs. And we welcome that kind of
institutional review and want to be a constructive part of that
process.
Mr. Inslee. Thank you.
Ms. Abdoulah.
Ms. Abdoulah. I cannot obviously comment on why Dish has
not--or satellite has not been able to get a deal for the
sports. I can assume it is because of the price.
And the reason I assume that is because we recently went
through a negotiation in Chicago for a Comcast regional sports
network. When we came to the table to negotiate, we had a high
single-digit increase. They had a high double-digit increase.
We were about $2 million apart, getting nowhere in the
negotiation.
So we said, we will go to arbitration, thinking that was a
remedy for us. We quickly found out that it is not. It was
going to cost about a million dollars just to get the ball
rolling. It could go on for months, up to 18 months. During
that time period, there was no requirement that the service
continue during the dispute.
And the burden of proof was going to be placed on us to
show that we are not getting a fair and equitable rate. Well,
we can't do that because there is no price transparency. There
is no market rationalization for the prices that we pay.
So, yes, do I think it needs to be absolutely reviewed and
reformed and restructured so that there are time limits, the
cost is not egregious and out of the reach of smaller
operators; that the burden of proof goes on the programmer, the
content provider, who is setting the price, for them to prove
that it is decent and it is fair and it is market based. And
the timing, that there is a set timing for the arbitration
process.
Otherwise, we have no remedy. We have no place to go if we
hit loggerheads, and we can't come to an agreement. And we
absolutely need that to be fair and competitive.
Mr. Boucher. Thank you very much, Mr. Inslee and Ms.
Abdoulah.
We are facing a bit of a time problem now. We are scheduled
between 1:00 and 1:15 to have another series of four votes, and
then this subcommittee will have to vacate this room because,
at 2:00, there will be a hearing involving Secretary Sebelius
on these premises.
So I am going to ask members if they will voluntarily keep
their questions to about 3 minutes. And that way, we can get as
far through the list of members still to ask questions as
possible.
The gentlelady from Tennessee, Mrs. Blackburn, is
recognized for such time as she may consume, hopefully no more
than 3 minutes.
Mrs. Blackburn. Well, I will tell you what I will do, Mr.
Chairman, why don't I lay my questions out and then allow you
all to respond to me in writing. And that will save some time
and allow others to get their questions in and on the record.
Mr. Roberts and Mr. Zucker, I am going to start with you
because when we talk about mergers or deals or unions, things
of that nature, whether it is large or small, we talk about how
it is going to affect the consumer. And I mentioned this in my
opening statement, and what I would like to hear from you, from
each of you, is a statement as to why this is a good deal for
my constituents, whether they are a consumer or a member of the
content production community. And that articulation would be
wonderful, and it would be helpful to me.
Mr. Thierer, to you, you had in your testimony that it
would make no sense for the new firm to block new or competing
channels and that Comcast faces robust competition in the video
programming marketplace from satellite and telecom providers as
well as from Internet-based video providers. So, given the
robust competition in the video programming marketplace, do you
believe that government should impose network neutrality
standards on this union? And what would some of the
consequences for consumers and innovation be if that
intervention took place?
Mr. Zucker, you have been associated with NBC for at least
a decade and CEO of NBCU for 2 years, and do you think the
prognosis is for freestanding broadcast companies in this
dynamic? What is the environment? What do you think it is going
to be the prognosis there? And I am now out of time, it looks
like.
If I can get one more, I had a question, and this would be
actually for all of you. Looking at what--what impact this deal
would have on efforts by broadcast to develop additional
revenue streams. As I have talked to broadcasters and broadcast
companies, they are talking about looking at other streams. And
I would like to hear from you all kind of where are you
planning to move with this? What do we anticipate being the
next move for you?
Mr. Boucher. Mrs. Blackburn, is that sufficient, do you
think?
Mrs. Blackburn. Yes, sir. That is enough. Thank you all. I
yield back.
Mr. Boucher. And we will ask those to whom those questions
were propounded to respond in writing.
Let me also say that other members of the subcommittee will
be submitting questions to the witnesses. We would appreciate
your prompt answers to those, and the record will remain open
for such period of time as is necessary to receive those
answers.
The gentlelady from California, Ms. Matsui, is recognized
for 5 minutes, hopefully less.
Ms. Matsui. Thank you very much, Mr. Chairman.
There are about 200 independently-owned local TV stations
affiliated with NBC network throughout the country. One of
those happens to be in my district, KCRA, which is the region's
local NBC station. Many of my constituents--it is a very highly
rated station--rely upon KCRA for local news, programming and
information. And I want to ensure that KCRA is not put at a
competitive disadvantage to NBC-owned stations.
Question for Mr. Fiorile. In your testimony, you speak
about the potential need for a strong set of structural
separation requirements for the subsidies of Comcast. Can you
briefly elaborate on this point? And what safeguards or
conditions, if any, do you envision to ensure independently-
owned NBC affiliates are not put at a competitive disadvantage?
Mr. Fiorile. Thank you for the question.
The concern that I articulate is such that we currently
negotiated with NBC for renewal of our affiliation agreement.
And separate and aside from that, we negotiated with a cable
carrier for retransmission consent. The potential exists to
reach a standstill in negotiations with the cable carrier over
retransmission consent and then to have that same company
withhold an affiliation renewal from the network.
So what we would hope is that there would be some kind of
separation between the two, and in particular, a remedy that
that cable carrier could find, if we were at a standstill in
negotiations or retransmission consent, is the network could be
brought in around the local affiliates, circumventing the
retransmission consent process.
Ms. Matsui. Mr. Zucker, do you agree with the assertion
that structural separation may be necessary?
Mr. Zucker. I don't think it is necessary. I think that we
have always been able to, in the course of these conversations
with the affiliates, work this out. There has never been any
issue with regard to that, and I don't foresee any need for it
going forward.
Ms. Matsui. You don't foresee any need at all.
As I mentioned in my statement, there are concerns that
this joint venture may cause a domino affect in industry, and
some critics of the proposed joint venture fear that this deal
will create competitive pressure that will result in further
joint ventures between content and distribution companies.
Dr. Cooper, in your opinion, if this joint venture goes
through, how would the media and entertainment landscape change
over the long run? I think you have to quickly address that.
Dr. Cooper. As I said in my testimony, the great fear is
that you create a merger wave where all of the other entities
look at the advantage that Comcast has gained, one of which is
described by Mr. Fiorile, and say, I have to get as much of a
similar advantage as I possibly can, particularly because there
is this market division between cable operators, so the cable
operator elsewhere will say, I have got to have the same deal.
And you will create a situation in which every one is seeking
to gain maximum leverage through that sort of integration.
Ms. Matsui. OK. I have other questions to submit. I will
just yield back my time right now.
Mr. Boucher. Thank you very much.
Ms. Matsui, I would suggest you submit them in writing.
Ms. Castor, you are recognized for 7 minutes, hopefully
less.
Ms. Castor. Thank you, Mr. Chairman. Mine is kind of a
follow on to Congresswoman Matsui's question.
Under the FCC public interest test, you will be asked to
determine, is this transaction in the public interest, and is
it convenient to--does it promote convenience and necessity?
What about customers who don't have Comcast, who are not
served in that area? For example, in the Tampa Bay area, which
is the largest media market in the State of Florida, it has the
flagship NBC affiliate. It is probably the most successful,
highest rated in the entire area. What does this mean for those
customers? We are not served. Comcast cable is a very minor
share of the market. Verizon has a much larger share. But what
is the impact? How does this promote the public interest for
the customers there that will not have access to Comcast in the
near future and maybe won't be able to achieve a larger market
share in the future?
Mr. Zucker. May I take that question? I think that--I
believe it is WFLA in Tampa, which is an affiliate that we are
incredibly proud to be associated with.
I think what is terrific about this proposed joint venture
is that Comcast is committing to free over-the-air television,
and the future of broadcasting, and I have to say that, before
this joint venture was proposed, I was concerned about the
future of broadcasting. It has been under a tremendous amount
of duress, especially with the economic woes that we have all
suffered.
I think Comcast's willingness to commit to the future of
over-the-air broadcasting, to step up and say that they are
willing and hope that they will be able to play a constructive
role in retrans conversations; all of these give me greater
comfort in thinking about the future of broadcasting. And I
think that is good for the viewers of WFLA and your
constituents in Tampa.
Ms. Castor. Mr. Fiorile, you heard his answer and you also
heard his answer on the separation condition. What is your
reaction to that?
Mr. Fiorile. I guess I would look for more on the previous
question. I would look for a stronger condition and for more
separation and some clarity on non-integration of both the
network affiliation negotiations and retransmission consent
negotiations. The capacity for Comcast to bring benefits to the
over-the-air NBC affiliate family, I think there is a real
possibility of that.
Dr. Cooper. May I offer an alternative view?
In point of fact, Comcast will be in a stronger position to
demand bigger bundles at higher prices from your local cable
operator who is not Comcast. They will have a--be in a stronger
position to demand higher retrans where they are than OandO. So
those two things will have a negative effect on consumers
because they have a stronger bargaining position as a larger
integrated entity.
Mr. Zucker. I would just add that the program access rules
that we have been talking about actually haven't applied to
NBCU because we haven't been owned by a distributor. In fact,
going forward, they will apply, and actually, we will now be
subject to those rules. So I actually think there is a greater
benefit as a result of that and less protection for us.
Ms. Abdoulah. And hence why the rules need to be reviewed.
Mr. Boucher. Ms. Castor, thank you very much.
The gentleman from Illinois, Mr. Rush, is recognized for
his questions.
Mr. Rush. Thank you, Mr. Chairman.
And, Mr. Chairman, I do know that we are operating with
some severe time restraints.
I am going to ask Mr. Roberts and Mr. Zucker if you could
listen to a question and maybe we could get an answer from each
one of you. Have your respective companies done all that they
reasonably can to foster minority ownership of communications
properties, improve business relationships with the existing
minority business owners, and recruiting and retention of
minority employees?
And to the extent that you can, will you divulge to us what
and when was the last large transaction that you personally or
your executive team struck with a minority-owned firm, and what
was their value in terms of dollars and duration?
Mr. Roberts. Well, I think it is--one of my goals
personally is to see our company continually improve in
diversity; diversity in how we purchase our goods and services,
how our employees are made up and reflect the customers that we
serve. And I would say I would never give us a perfect
scorecard, and I think it is something that we are constantly
striving to improve on. And it is a major priority for the
company.
In terms of media-owned assets, the last deal that I can
think of was the New York Times company a decade ago sold their
cable systems, maybe a little longer than that, to a minority-
owned group that we participated in with Bruce Llewellyn called
Garden State Cable. And eventually Mr. Llewellyn and the group
that we partnered with sold their shares after more than half a
decade.
We built the cable system in Philadelphia. We also wanted
to have local ownership by minority and women businesses. And
so we had a separate public company that are Comcast
Philadelphia, was owned with and shares were available to
Philadelphia residents who were women and minorities.
Eventually that got bought up. Everyone made a lot of money; 10
times their money or more.
So as we have, from time to time, had to dispose of certain
assets, we have always looked for ways to find creative
opportunities with minority entrepreneurs. We do the same for
purchasing of vehicles and other hard goods. We spend about $5
billion a year on capital spending. So there is great
opportunity to support businesses with smaller ownership than
just the large owners.
Mr. Boucher. Mr. Rush, can we move on?
Thank you very much.
The gentleman from Vermont, Mr. Welch, is recognized for
hopefully one or two questions.
Mr. Welch. Thank you very much.
Mr. Roberts, my understanding is, you want to be treated
the same on net neutrality. And if there were any conditions
that were imposed as part of this arrangement, you would want
them imposed on everyone else. Is that more or less right?
Mr. Roberts. I think--I am not sure there should be--that
there has been proof that the Internet isn't growing fast
enough or that there should be rules. But if there are new
rules that want to be put forth, I think it should not be a
competitive differentiator that would apply to some and not to
all.
Mr. Welch. Well, if in the course of this, there were rules
that applied to net neutrality, would you be supportive of them
as long as they were applied across the board to everyone else?
Mr. Roberts. I think it depends on the rule. But
conceptually, we are participating right now with the FCC. We
have put in comments, and we think there is a constructive
dialogue led by Chairman Genachowski.
Mr. Welch. We are going to have to go quick because we are
going to vote. But I want to ask you about the availability of
nonaffiliated content on TV Everywhere. Are you going to be
asking, you Comcast, asking independent programmers to sign
exclusivity deals with you or with your TV Everywhere partners?
Mr. Roberts. Absolutely not.
Mr. Welch. You won't be doing it. That is good.
Again, I go back to this concern about the bundling of
services and whether there are mechanisms to work out payment
disputes. Right now, I understand arbitration is theoretically
available. For instance, if you and a smaller programmer, like
the WOW! Network, had a dispute about pay, arbitration is
theoretically available; is that right?
Mr. Roberts. There is a dispute resolution mechanism at the
FCC, yes.
Mr. Welch. Ms. Abdoulah, does that work as a practical
matter? What is involved if you have a dispute with a larger
distributor? And we don't have to single out Comcast here. But
how does arbitration work as a practical remedy to resolve the
dispute?
Ms. Abdoulah. You would file a complaint, and then there is
the depositions and all the data gathering. And you asked, is
it effective? No. It is a long process.
The worst part about it is, two things, you do not get
guarantee that the programmer will keep that service on while
you are in dispute. That is huge because customers then lose
the signal, and now it is a problem for your consumers, your
paying consumers who lose a signal. That is a big issue. And
secondarily, I would have to be the one that would prove that
the pricing is not right, and I don't have exposure to market
pricing or data. That is huge.
Mr. Welch. Let me ask, Dr. Cooper, is there a suggestion
you would have to provide fairness, and I mean to the two,
whether it is, in this case, Comcast and WOW! that would
resolve this dispute in a reasonable way so that both of their
interests were respected?
Dr. Cooper. Frankly, if you listen to the lists of promises
that people have tried to extract of conditions that people
have talked about, there are 15 or 16. They can't be enforced
effectively to preserve competition in the marketplace. The
last decade has proven that the FCC is incapable of enforcing
these conditions. So, on this merger, the answer is, it should
not go forward, and Congress needs to revisit all of these
other problems as a general proposition.
Mr. Boucher. Mr. Welch, if it is oK with you, so that other
members can ask at least one question.
Mr. Welch. Sorry. I yield back.
Thank you, Mr. Chairman.
Mr. Boucher. Mrs. Christensen from the Virgin Islands is
recognized for 5 minutes.
Mrs. Christensen. Thank you, Mr. Chairman.
And since some of my questions on whether the regulations
are strong enough I think have at least been alluded to, and
the diversity issue has been partially addressed.
Let me ask just one question. The unions, especially the
CWA, have concerns based on what they say has been a difficult
history, and this is to Mr. Roberts and Mr.--Mr. Roberts
particularly, and Mr. Zucker may answer--the history with
Comcast. But also on the possibility of what might happen to
jobs at a time when this country is focused on expanding jobs.
So what do you plan or foresee the impact of this proposed
merger would be on jobs?
Mr. Roberts. Thank you for that question, because it is
something I am very proud of.
Comcast today has over 100,000 employees and when we
started the company, Ralph, what was it 12, in Tupelo; 12 in
1963. I think we have a one-way track record of creating jobs
in this country.
And now with NBC Universal having another 33,000 employees,
the thing that I am most excited about this deal is the hardest
thing to convince investors, which is that there is not going
to be massive job cuts as part of this coming together. We
don't own a news channel, a broadcast network, a movie studio.
So there isn't the overlap that typically you see in horizontal
deals where then the first benefit is firing people. The great
ideas of this country, Google, what Apple is doing, are adding,
not by subtracting.
So this deal is a risk. We have been talking about the
uncertainty of the future and what is happening in technology.
It is not clear that it is a sure thing. What is happening to
broadcast, what is happening in the Internet, and there is an
investment and a passion that has to come with how you operate
a company of this nature. And I think it starts with having a
great relationship with your employees. And if they are in a
union, respecting that. And if they are not, it is their right
to choose one. And hopefully, either way, we create a fabulous
work environment that ultimately we create great products that
consumers will want.
Mr. Boucher. Thank you very much, Mrs. Christensen.
The gentleman from Pennsylvania, Mr. Doyle, is recognized.
Mr. Doyle. Thank you. And I will be brief, Mr. Chairman.
Even though Comcast is from that other city in
Pennsylvania, they have been solid citizens in Pittsburgh since
their entry into the market in 2002. And I would like to enter
into the record a letter from our Mayor Luke Ravenstahl and
Councilman Doug Shields in support of the Comcast merger.
Mr. Boucher. Without objection.
[The information appears at the conclusion of the hearing.]
Mr. Doyle. Just a quick question. I also want to say that,
in Pittsburgh, Comcast workers are unionized, and we appreciate
that. And Comcast has worked with the unions in Pittsburgh and
have a good relationship, and I want to state that for the
record.
Very quickly, Mr. Roberts, there has been many news
articles about how some in the copyright businesses have been
pressuring ISPs to disconnect their users if they have been
alleged to have illegally downloaded copyrighted materials. It
has been called the three strikes program or the graduated
response. I checked with your staff, and I am told that Comcast
does not currently disconnect users. And I want to say that I
appreciate that policy, because our concern is there are no
avenues for the users to have a due process. And we have seen
many instances where people have been accused of doing
something illegal, and it turns out they hadn't. And I just
want to make sure that Congress, hopefully, will not be passing
an explicit mandate for three strikes. So absent one, will
Comcast continue to commit not cut off their customers from the
Internet without some sort of due process procedure?
Mr. Roberts. Well, first of all, thank you for the
introduction. What I said earlier and if I might--and we maybe
can submit some comments, as the chairman has allowed, for
specifically that rule and that test.
We think that by having made multibillions of dollars of
investment here in content and still being 80 percent a
distributor, we can play a constructive role in figuring out
what is the right technological answer that protects the
consumer and protects the copyright, so that what is going over
is legal and is protected and keeps these businesses viable.
We have seen in other industries where that has gotten so
bad that the viability of the industry has been jeopardized.
Exactly what the right answer is, I am not prepared today to
say that I know. Obviously, many smart minds are there. But I
am going to spend a lot of time and energy at this, more than I
have in the past because of the fact that we have such a large
stake now in content if this deal happens. How best to do that,
I don't know right now.
I don't know, Jeff, if you have a point of view on that.
But some have said we should go to that three strikes and we
are trying to figure that out as we speak. We were going to try
to use both industries to talk to each other through the trade
associations in a more cooperative way than has ever happened
before.
Mr. Doyle. I just hope it is not based strictly on the
people making accusations without some sort of due process on
the other end. Thank you very much.
Thank you, Mr. Chairman.
Mr. Boucher. Thank you very much, Mr. Doyle.
And thanks to all of the members for their expeditious
questions here, at least during the last half hour, and thanks
to all of our panel members for informing us as thoroughly as
you have on this matter of public interest.
We will be submitting some additional questions in writing,
and the record will remain open for such period of time as is
needed to receive your responses.
The gentleman from Michigan, Mr. Dingell.
Mr. Dingell. Mr. Chairman, I want to thank you for that. I
was getting ready to ask that question.
Mr. Chairman, I would also urge that the committee call the
FCC and the Department of Justice before us. There are a number
of questions that appear here to be in need of answering. I
recognize there are matters there before those two agencies,
but I think we could craft a proper hearing to get their proper
input without intruding into the Pillsbury rule.
Mr. Boucher. Thanks very much, Mr. Dingell, for that
constructive suggestion.
And we are going to adjourn this hearing. We now have to
respond to the recorded votes on the floor, and the clock
stands at zero. So we will be sprinting over there. So thanks
so much to the witnesses today for your attendance and your
answers to our questions.
[Whereupon, at 1:13 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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