[Senate Hearing 111-949]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-949

 CONSUMERS, COMPETITION, AND CONSOLIDATION IN THE VIDEO AND BROADBAND 
                                 MARKET

=======================================================================

                                HEARING

                               before the

      SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY, AND THE INTERNET

                                 of the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 11, 2010

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation



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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

            JOHN D. ROCKEFELLER IV, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii             KAY BAILEY HUTCHISON, Texas, 
JOHN F. KERRY, Massachusetts             Ranking
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
BARBARA BOXER, California            JOHN ENSIGN, Nevada
BILL NELSON, Florida                 JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           JOHN THUNE, South Dakota
FRANK R. LAUTENBERG, New Jersey      ROGER F. WICKER, Mississippi
MARK PRYOR, Arkansas                 GEOGE S. LeMIEUX, Florida
CLAIRE McCASKILL, Missouri           JOHNNY ISAKSON, Georgia
AMY KLOBUCHAR, Minnesota             DAVID VITTER, Louisiana
TOM UDALL, New Mexico                SAM BROWNBACK, Kansas
MARK WARNER, Virginia                MIKE JOHANNS, Nebraska
MARK BEGICH, Alaska
                    Ellen L. Doneski, Staff Director
                   James Reid, Deputy Staff Director
                   Bruce H. Andrews, General Counsel
                 Ann Begeman, Republican Staff Director
             Brian M. Hendricks, Republican General Counsel
                  Nick Rossi, Republican Chief Counsel
                                 ------                                

      SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY, AND THE INTERNET

JOHN F. KERRY, Massachusetts,        JOHN ENSIGN, Nevada, Ranking
    Chairman                         OLYMPIA J. SNOWE, Maine
DANIEL K. INOUYE, Hawaii             JIM DeMINT, South Carolina
BYRON L. DORGAN, North Dakota        JOHN THUNE, South Dakota
BILL NELSON, Florida                 ROGER F. WICKER, Mississippi
MARIA CANTWELL, Washington           GEORGE S. LeMIEUX, Florida
FRANK R. LAUTENBERG, New Jersey      JOHNNY ISAKSON, Georgia
MARK PRYOR, Arkansas                 DAVID VITTER, Louisiana
CLAIRE McCASKILL, Missouri           SAM BROWNBACK, Kansas
AMY KLOBUCHAR, Minnesota             MIKE JOHANNS, Nebraska
TOM UDALL, New Mexico
MARK WARNER, Virginia
MARK BEGICH, Alaska
















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 11, 2010...................................     1
Statement of Senator Rockefeller.................................     1
Statement of Senator Inouye......................................     2
Statement of Senator Hutchison...................................     3
    Prepared statement...........................................     4
Statement of Senator Dorgan......................................     6
Statement of Senator Kerry.......................................    18
Statement of Senator Ensign......................................    20
    Letter, dated March 9, 2010 to Hon. John D. Rockefeller IV 
      and Hon. Kay Bailey Hutchison, from Charles Segars, Chief 
      Executive Officer, Ovation.................................    29
    Letter, dated March 10, 2010 to Hon. Jay D. Rockefeller IV 
      and Hon. Kay Bailey Hutchison, from Roger L. Werner, 
      President and Chief Executive Officer, Outdoor Channel.....    30
    Letter, dated March 10, 2010 to Hon. Jay D. Rockefeller IV 
      and Hon. Kay Bailey Hutchison, from Stanley E. Hubbard, 
      President and CEO, REELZCHANNEL............................    32
Statement of Senator Cantwell....................................    22
Statement of Senator Snowe.......................................    23
Statement of Senator Thune.......................................    25
Statement of Senator Begich......................................    27
Statement of Senator Johanns.....................................    97
Statement of Senator Klobuchar...................................    99
Statement of Senator LeMieux.....................................   104
Statement of Senator Wicker......................................   107
Statement of Senator McCaskill...................................   109
Statement of Senator Lautenberg..................................   111

                               Witnesses

Hon. Julius Genachowski, Chairman, Federal Communications 
  Commission.....................................................     6
    Prepared statement...........................................     8
Hon. Christine A. Varney, Assistant Attorney General, Antitrust 
  Division, U.S. Department of Justice...........................    10
    Prepared statement...........................................    11
Brian L. Roberts, Chairman and Chief Executive Officer, Comcast 
  Corporation....................................................    34
    Prepared statement...........................................    36
John Wells, President, Writers Guild of America, West............    54
    Prepared statement...........................................    57
Dr. Mark Cooper, Director of Research, Consumer Federation of 
  America on behalf of Consumer Federation of America, Free 
  Press, and Consumers Union.....................................    60
    Prepared statement...........................................    61
Colleen Abdoulah, President and Chief Executive Officer, WOW!; 
  Board Member, American Cable Association.......................    72
    Prepared statement...........................................    74
Christopher S. Yoo, Professor of Law and Communication, and 
  Founding Director, Center for Technology, Innovation, and 
  Competition, University of Pennsylvania........................    81
    Prepared statement...........................................    83

                                Appendix

Gregory Babyak, Head, Government Relations, Bloomberg TV, 
  prepared statement.............................................   123
Response to written questions submitted to Hon. Julius 
  Genachowski by:
    Hon. John D. Rockefeller IV..................................   125
    Hon. Daniel K. Inouye........................................   125
    Hon. Frank R. Lautenberg.....................................   126
    Hon. Mark Warner.............................................   126
    Hon. Mark Begich.............................................   128
    Hon. Jim DeMint..............................................   129
    Hon. David Vitter............................................   130
    Hon. Sam Brownback...........................................   130
    Hon. George S. Lemieux.......................................   131
Response to written question submitted to Hon. Christine A. 
  Varney by:
    Hon. Jim DeMint..............................................   132
    Hon. David Vitter............................................   132
Response to written questions submitted to Brian L. Roberts by:
    Hon. John Ensign.............................................   133
    Hon. Sam Brownback...........................................   133
    Hon. George S. LeMieux.......................................   135
Response to written questions submitted to Dr. Mark Cooper by:
    Hon. Jim DeMint..............................................   139
    Hon. David Vitter............................................   139
    Hon. George S. LeMieux.......................................   139
    Hon. John Ensign.............................................   140
Response to written questions submitted to Colleen Abdoulah by:
    Hon. Mark Begich.............................................   140
    Hon. John Ensign.............................................   142
Response to written questions submitted to Christopher S. Yoo by:
    Hon. John Ensign.............................................   143
    Hon. George S. LeMieux.......................................   145
Letter, dated March 24, 2010, to Hon. John D. Rockefeller IV from 
  Mark C. Ellison, Esq., Patton Boggs LLP, for the FACT Coalition   146
Letter, dated March 25, 2010, to Hon. John D. (Jay) Rockefeller 
  IV and Hon. Kay Bailey Hutchison, from Jose Luis Rodriguez, 
  President and CEO, HITN........................................   153

 
                        CONSUMERS, COMPETITION,
                     AND CONSOLIDATION IN THE VIDEO
                          AND BROADBAND MARKET

                              ----------                              


                        THURSDAY, MARCH 11, 2010

                               U.S. Senate,
Subcommittee on Communications, Technology, and the 
                                          Internet,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:02 a.m. in 
room SR-253, Russell Senate Office Building, Hon. John D. 
Rockefeller IV, presiding.

       OPENING STATEMENT OF HON. JOHN D. ROCKEFELLER IV, 
                U.S. SENATOR FROM WEST VIRGINIA

    The Chairman. Good morning. This hearing will come to 
order. And we welcome all. I notice there are a few people in 
the room.
    We are here today to discuss consumers--They are the good 
guys, right? The people we try to protect--and competition and 
consolidation in the video and broadband markets. These are 
services that are vital to our democracy, in fact. What kind of 
content do they get? How much do they have to pay for it? Can 
they get it in all cases?
    They shape the way we communicate. They shape the way we 
share news and information. They shape the way we entertain 
ourselves or dumb down ourselves, whichever you look at it, and 
the way we spend our free time.
    When consolidation occurs in these markets, we need to pay 
attention, therefore. We need to pay attention. When companies 
swell to include both content and distribution, we need to pay 
attention because it is vitally important that when we have 
mergers in these markets, consumers cannot be left with lesser 
programming and higher rates.
    So, today, we are going to talk about these issues. This 
hearing is an opportunity to have a serious discussion about 
consumers, how consolidation affects their lives directly and 
what we can do to make sure that they are absolutely protected.
    We begin our first panel with authorities from the Federal 
Communications Commission and the Department of Justice, two 
top-of-the-line people in our country, much less the Federal 
Government.
    We know they take their jobs seriously. So we respect that 
while the Comcast-NBC merger as a concept is pending, they are 
limited to what they can discuss, and that is only the process 
rather than the substance of the merger. Otherwise--I am not a 
lawyer, but they would be doing something bad.
    But we look to frame our discussion, which we will continue 
with the private sector witnesses on our second panel. And I 
need to apologize because we are doing the FAA bill on the 
floor, and Byron Dorgan, who is a committee member, is managing 
it for an hour. Then I have to go down at 11 o'clock. So I 
apologize for that.
    So I thank you all very much, and we shall get started.
    Senator Hutchison is not here. So I will call upon Senator 
Inouye.

              STATEMENT OF HON. DANIEL K. INOUYE, 
                    U.S. SENATOR FROM HAWAII

    Senator Inouye. Thank you very much.
    There is no question that a proposed merger between 
Comcast, the Nation's largest video programming distributor, 
which also happens to be the Nation's largest residential 
broadband provider, and NBC Universal, the fourth-largest media 
and entertainment company, deserves our scrutiny, vigorous 
scrutiny.
    However, size alone should not be the basis for approving 
or disapproving mergers. If that is the standard, then many 
previously approved mergers should have been denied. The key 
factor is how the merger will impact the quality and 
affordability of services available to consumers and whether 
the merger will be in the public interest.
    Today's hearing will hopefully provide the members of this 
committee with a better understanding of the impacts of this 
proposal based upon the facts. Further, the merits of the 
proposed joint venture should not be judged based on extraneous 
issues, such as personality or parties.
    I have known Mr. Brian Roberts and his father, Ralph 
Roberts, the founder of Comcast, for many years. And both of 
the men are of unquestionable integrity, and under their 
leadership and guidance, I have no doubt that Comcast will live 
up to the commitments it made as part of the proposed joint 
venture with NBC Universal.
    The question before us is whether, even with the 
commitments that have been made, this is a good deal for 
consumers. There have been significant changes in the 
communications and entertainment marketplace. It is in this 
context that the proposed merger must be evaluated with the 
public interest at heart. The changing marketplace should also 
serve as the basis for reviewing policies that may need 
updating due to developments.
    For example, as one of the authors of the 1992 statute that 
established retransmission consent, I believe the time is ripe 
for the Federal Communications Commission to exercise its 
oversight responsibilities on matters of this nature that 
impact consumers and the general well-being of the Nation.
    While I believe the FCC has the necessary authority to 
resolve retransmission consent disputes, I will be interested 
to hear from the Chairman whether there are any additional 
tools that would be helpful in the FCC's oversight efforts. So 
I look forward to working with my colleagues on the Committee 
and the FCC on these important issues. And I thank you very 
much, Mr. Chairman.
    And I, too, will have to leave early. And I have a couple 
of questions for the FCC, if you will submit them for me?
    The Chairman. Of course.
    Senator Inouye. Thank you, Mr. Chairman.
    The Chairman. The Honorable Kay Bailey Hutchison with the 
great State of Texas.

            STATEMENT OF HON. KAY BAILEY HUTCHISON, 
                    U.S. SENATOR FROM TEXAS

    Senator Hutchison. Well, thank you very much, Mr. Chairman.
    Welcome to our distinguished FCC panel. And I am pleased 
that we are holding this hearing.
    We are going to have to grapple with evolving technology 
and the convergence between traditionally distinct businesses 
like telecommunications and video program distribution. We want 
to look at this type of consolidation's impact on consumers and 
competitors, but we also want to make sure that policy 
determinations about this deal do not impact innovation and 
investment in this rapidly moving area.
    In my judgment, the FCC's review of this transaction should 
be limited to the transfer of the relevant licenses between the 
parties and whether that is consistent with the public 
interest. Merger reviews at the Commission have not always 
stayed as narrow as I believe they should.
    Frequently, parties have used merger review proceedings as 
a proxy policymaking forum to pursue conditions that reach well 
beyond the merger itself. In a number of cases, previous FCCs 
have imposed some of these conditions.
    While I hope that the current Commission will thoughtfully 
conduct its public interest analysis, I also hope they avoid 
imposing conditions that will require a significant ongoing 
involvement of the Government in monitoring and policing the 
market.
    In that context, Mr. Chairman, I would like to note that we 
have seen some recent disputes between programmers, 
broadcasters, and cable providers about the terms for 
retransmission of signals on cable systems, mainly in the 
sports arena, and that has led some to suggest that we need 
more Government involvement in these marketplace negotiations, 
such as through FCC-managed arbitration.
    Again, I think Congress and the regulators need to tread 
very carefully and make sure that the policies we discuss take 
account of the evolving nature of the marketplace, the 
competition between providers, and the growing number of 
choices consumers have to access content. What we do not want 
to do is intervene in private market negotiations in a way that 
disrupts what is going on in the marketplace or leads to 
advantages for one stakeholder or technology.
    With respect to the Comcast-NBC transaction, Mr. Chairman, 
I do have a number of questions, particularly how a combined 
entity would deal with independently-owned broadcast stations. 
In a number of cases, non-NBC owned stations will have to 
negotiate the terms for retransmission of their broadcast 
signal with the very same company that provides its 
programming. How Comcast will deal with those stations from a 
transparency perspective is important for us to understand how 
this transaction could impact one segment of the industry.
    Texas has 14 Telemundo stations, 3 of which Comcast will 
own and operate. We also have 21 NBC stations, 1 of which will 
be owned and operated by Comcast. Consumers in Texas want to 
know how programming and availability of all these stations 
will be impacted, but they particularly want to know whether 
Comcast will continue to invest in and develop programming for 
the stations, and that NBC and Telemundo will remain available 
as free over-the-air stations.
    Now I understand that the Chairman of Comcast has made 
commitments in this area, which I think are very positive. 
Preserving free over-the-air stations is an essential component 
of this transaction, in my opinion.
    Transparency will be important in this area, but it will 
also be critical to assessing how Comcast will deal with 
competitors who want access to NBC programming, as well as 
affiliated programming developed by Comcast, such as its sports 
programming.
    I have heard from a number of smaller cable systems 
representing primarily rural areas of my state. Although 
bundling or ``tying'' arrangements are prohibited, there are 
concerns that the combined company may wish, through pricing 
arrangements, to strongly encourage the smaller systems to 
accept multiple streams of programming. I will be interested in 
hearing Mr. Roberts's thoughts on how Comcast will address 
those concerns.
    I am also interested to hear how he and other witnesses 
view the 16 voluntary commitments that Comcast has made, some 
of which I have heard personally, and whether those conditions 
adequately ensure transparency and availability of content to 
consumers and competitors.
    So, Mr. Chairman, thank you for holding this hearing. Thank 
you for appearing. I think it is important that we look at all 
of this, and I just hope that we don't overdo it, but that we 
do just the right amount of regulatory and Congressional 
action.
    Thank you very much.
    [The prepared statement of Senator Hutchison follows:]

  Prepared Statement of Hon. Kay Bailey Hutchison, U.S. Senator from 
                                 Texas
    Mr. Chairman, thank you for holding this hearing today. The pending 
transaction between Comcast Corporation and NBC Universal is a 
significant development in the programming and video distribution 
markets.
    The scale of the transaction, the changing technology landscape, 
will make it challenging to Members of Congress and regulators to fully 
understand and appreciate all of the implications of this deal.
    We will need to grapple with evolving technology and convergence 
between traditionally distinct businesses like telecommunications and 
video program distribution, and appreciate that there are shifting 
business models and evolving demands by consumers for choices in 
content and ways to access that content.
    Viewing this deal in context, and working to make sure that it 
satisfies the public interest, will require us to challenge some of the 
assumptions and regulatory models of the past and to look forward.
    That type of forward-looking analysis is not a common occurrence in 
Washington, but I believe it is essential as we discuss this deal and 
the future marketplace. We want to make sure the deal does not pose 
dangers to consumers and competitors, but we also want to make sure 
that policy determinations about this deal do not impact innovation and 
investment in this rapidly moving area.
    In my judgment, the Federal Communications Commission's review of 
this transaction should be limited to the transfer of the relevant 
licenses between the parties and whether that is consistent with the 
public interest. Merger reviews at the Commission have not always 
stayed as narrow as they should, however.
    Frequently, parties have used merger review proceedings as a proxy 
policy-making forum to pursue conditions that reach well beyond the 
merger itself. In a number of cases, previous FCC's have imposed some 
of those conditions.
    While I hope that the current Commission will thoughtfully conduct 
its public interest analysis, I also hope that they avoid imposing 
conditions that will require a significant ongoing involvement of the 
government in monitoring and policing the market.
    In that context Mr. Chairman, I would like to note that we have 
seen some recent disputes between programmers, broadcasters, and cable 
providers about the terms for retransmission of signals on cable 
systems. That has led some to suggest that we need more government 
involvement in these marketplace negotiations such as through FCC 
managed arbitration.
    Again, I think Congress and the regulators need to tread very 
carefully and make sure that the policies we discuss take account of 
the evolving nature of the marketplace, the competition between 
providers, and the growing number of choices consumers have to access 
content. What we do not want to do is intervene in private market 
negotiations in a way that disrupts what's going on in the marketplace 
or leads to advantages for one stakeholder or technology.
    With respect to the Comcast/NBC deal, Mr. Chairman, I do have a 
number of questions, particularly how a combined entity would deal with 
independently owned broadcast stations. In a number of cases, non-NBC 
owned stations will have to negotiate the terms for retransmission of 
their broadcast signal with the very same company that provides its 
programming.
    How Comcast will deal with those stations, from a transparency 
perspective is important for us to understand how this transaction 
could impact one segment of the industry.
    Texas has 14 Telemundo stations, three of which Comcast will own 
and operate. We also have 21 NBC stations, one of which (Dallas/Fort 
Worth) will be owned and operated by Comcast. Consumers in Texas want 
to know how programming and availability of all of these stations will 
be impacted, but they particularly want to know whether Comcast will 
continue to invest and develop programming for the stations, and that 
NBC and Telemundo will remain available as free over-the-air stations.
    Transparency will be important in this area, but it will also be 
critical to assessing how Comcast will deal with competitors who want 
access to NBC programming, as well as affiliated programming developed 
by Comcast such as its sports programming.
    I have heard from a number of smaller cable systems representing 
primarily rural areas of my state. Although bundling or ``tying'' 
arrangements are prohibited, there are concerns that the combined 
company may wish, through pricing arrangements, to strongly encourage 
the smaller systems to accept multiple streams of programming. I am 
interested to hear Mr. Roberts' thoughts on how Comcast will address 
those concerns and the thoughts of our other witnesses.
    I am also interested to hear how Mr. Roberts and our other 
witnesses view the 16 voluntary commitments Comcast has made to date, 
and whether those conditions adequately ensure transparency and the 
availability of content to consumers and competitors.
    Mr. Chairman, I want to thank you again for having this hearing. I 
look forward to hearing from our witnesses.

    The Chairman. Thank you, Senator Hutchison.
    Senator Hutchison, like myself, has to go do the FAA thing, 
but that is not for a while. Senator Dorgan will be taking my 
place for a while, and he is also going to chair the second 
panel, which I won't be able to because I will be on the floor. 
And so, you can give your statement then, or you can give it 
now.

              STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Dorgan. Mr. Chairman, I will go to the floor when 
we start the FAA reauthorization discussion over there. Then I 
will come back and be happy to chair for the second panel. I 
will be glad to make a statement at that point in time if you 
want to go to the witnesses now.
    The Chairman. I thank you very much.
    So, as I said, we really have two of the most important 
people in Government and two of the smartest people in 
Government and anywhere, and I really mean that. This is a 
perfect first panel. And Julius Genachowski, of course, is head 
of this little agency called the Federal Communications 
Commission, and Christine Varney does antitrust at a very high 
level for the Department of Justice.
    So, Mr. Genachowski, we turn to you, sir.

    STATEMENT OF HON. JULIUS GENACHOWSKI, CHAIRMAN, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Chairman Genachowski. Thank you, Mr. Chairman and members 
of the Committee.
    Thank you for the opportunity to address the role of the 
FCC in reviewing proposed mergers in the communications 
industry, including the contemplated transaction involving 
Comcast and NBC.
    The Commission approaches these matters mindful that 
maintaining a vibrant, innovative, consumer-friendly, and 
competitive communications sector is essential for our economy, 
our society, and our democracy. Communications policy affects 
the lives of all Americans and is becoming ever more important. 
Communications represents a major sector of our economy and 
plays a vital role in addressing many of the challenges our 
Nation faces.
    Congress has set the basic framework for our review of 
mergers and transactions. Sections 214 and 310 of the 
Communications Act require that before FCC licenses or 
authorizations may be transferred from one holder to another, 
the FCC must find affirmatively that the transfer is in the 
public interest. This is a statutory requirement to protect and 
promote the interests of all Americans.
    In exercising our statutory responsibilities in the context 
of reviewing transactions, the Commission is focused on several 
important and interrelated principles. These include protecting 
and advancing the interests of consumers, as well as those of 
children and families; ensuring effective competition; 
promoting innovation; and encouraging investment in the broad 
and rapid deployment of broadband and other advanced services 
throughout the United States.
    Specifically with respect to television programming, the 
Commission's goals include a vibrant and healthy marketplace, 
guided by the well-settled Communications Act values of 
competition, diversity, localism, and a deep respect for the 
First Amendment. In the review of any particular transaction, 
some of these considerations may be more centrally at issue 
than others. Additional factors, such as spectrum, universal 
service, or foreign ownership, or national security may also be 
important in specific cases.
    The law further requires that the Commission analyze these 
issues through an open process. The Administrative Procedures 
Act provides for a record-based agency review, with a full 
opportunity for all interested persons to file their facts and 
arguments and, ultimately, a decision supported by the 
evidence.
    In my written comments, I describe in more detail the 
Commission process, including our coordination with our 
colleagues at the Department of Justice. The Commission's 
review of communications transactions fills a unique role that 
complements the important role played by the Department of 
Justice.
    Of course, the FCC's review of transactions must be 
thorough, efficient, timely, and transparent. It must have the 
appearance as well as the reality of objectivity, fairness, and 
reliance on the best available data and analysis. In the past, 
some have expressed some concerns about FCC reviews of 
transactions. I am committed to working with my fellow 
Commissioners to ensure that the agency's review meets the 
highest standards of openness, transparency, rigor, and 
fairness, that it minimize costs and delay while fully 
protecting the public interest.
    In general, the FCC begins its transaction review process 
once a complete and compliant transfer application has been 
received from the parties. At that point, we ask for public 
comment.
    In the Comcast-NBC proceeding, the companies filed an 
initial application in late January, and at the request of the 
parties, the Commission awaited the filing of a supplemental 
economic report, which we received last Friday. The Commission 
now will soon issue a notice that begins the public comment 
period.
    To promote a thorough and efficient process, a dedicated 
team at the FCC has already begun work on staff-level review of 
the proposed transaction. Reflecting the scope of the 
transaction, the team members come from a number of the 
agency's bureaus and offices and bring to bear years of 
expertise.
    I have directed the team to learn from experience--to 
examine past similar transactions and see, with the benefits of 
hindsight, what the FCC did right and where the agency could 
have done better. Our staff has also begun the process of 
consultation and cooperation with our colleagues at the Justice 
Department.
    As you indicated, Mr. Chairman, the legal requirements of 
record-based decisionmaking prevent me from commenting in any 
way on the merits of pending transactions, including the 
Comcast-NBC transaction. Our decisions on mergers are made only 
after we compile and review a full record. The FCC will, of 
course, thoroughly consider all of the important issues that 
have been raised or will be raised in the context of the 
transaction.
    As the Committee is aware, the communications and media 
landscape is rapidly evolving. New media and new communications 
technologies are an increasingly important part of the 
landscape, even as millions of Americans continue to rely on 
traditional forms of media and communications. The landscape 
today is very different from 5 and 10 years ago and will be 
very different 5 and 10 years from now.
    While the changing landscape must, of course, inform the 
FCC's decisionmaking, certain core values remain constant. 
Robust and healthy competition is essential to producing 
consumer benefits, better services and lower prices. An 
important part of our responsibility at the Commission is to 
ensure that communications industry transactions do not enable 
firms to frustrate innovations or raise prices ultimately paid 
by consumers.
    We must ensure that American consumers enjoy all the 
benefits of competition and choice, in a vibrant and diverse 
communications and media landscape that upholds vital First 
Amendment values.
    Finally, investment, innovation, and employment are key 
objectives, as is the rapid and widespread deployment of 
advanced communications services. These and other traditional 
goals and values will inform our review of transactions.
    Thank you for the opportunity to appear before you today. 
And of course, I would be happy to address any questions.
    [The prepared statement of Chairman Genachowski follows:]

       Prepared Statement of Hon. Julius Genachowski, Chairman, 
                   Federal Communications Commission
    Mr. Chairman and members of the Committee, thank you for this 
opportunity to address the role of the Federal Communications 
Commission in reviewing proposed mergers in the communications 
industry, including the contemplated transaction involving Comcast and 
NBC Universal.
    The Commission approaches these matters mindful that maintaining a 
vibrant, innovative, consumer-friendly, and competitive communications 
sector is essential for our economy, our society, and our democracy. 
Communications policy affects the lives of all Americans--and is 
becoming ever more important. Communications represents a major sector 
of our economy and plays a vital role in addressing many of the 
challenges our Nation faces.
    Congress has set the basic framework for our review of mergers and 
transactions in the communications industry. Sections 214 and 310 of 
the Communications Act require that before FCC licenses or 
authorizations may be transferred from one holder to another, the FCC 
must find affirmatively that the transfer is in the public interest. 
This is a statutory requirement to protect and promote the interests of 
all Americans.
    In exercising our statutory responsibilities in the context of 
reviewing transactions, the Commission is focused on several important 
and interrelated principles. These include protecting and advancing the 
interests of consumers, as well as those of children, and families; 
ensuring effective competition; promoting innovation; and encouraging 
investment and the broad and rapid deployment of broadband and other 
advanced communications services throughout the United States. 
Specifically with respect to television programming, the Commission's 
goals include a vibrant and healthy marketplace, guided by the well-
settled Communications Act values of competition, diversity, localism, 
and a deep respect for the First Amendment.
    In the review of any particular transaction, some of these 
considerations may be more centrally at issue than others. Additional 
factors, such as spectrum, universal service, or foreign ownership and 
national security, may also be important in specific cases.
    The law further requires that the Commission analyze these issues 
through an open process. The Administrative Procedure Act provides for 
a record-based agency review, with a full opportunity for interested 
persons to file their facts and arguments, and a decision supported by 
the evidence. The Commission's staff reviews and analyzes the record, 
issues information requests when appropriate for additional necessary 
data, meets with the applicants, opponents, and others to understand 
and discuss positions on all sides, and reaches out to affected parties 
to obtain various perspectives on the proposed transaction. The staff 
then prepares a draft order addressing the record and reaching 
tentative conclusions. Ultimately the five-member Commission votes on 
whether to approve the transfer, with or without specific conditions, 
or to reject it. Our decision can be challenged in court, like any 
other administrative order.
    Consistently over many years, the FCC and the Federal antitrust 
agencies reviewing particular transactions have worked out procedures 
that allow the agencies to cooperate, taking advantage of the 
respective expertise of their staffs. This cooperation includes sharing 
information and analysis; identifying issues; avoiding conflict 
regarding any necessary remedies; and making the review process as 
efficient as possible for all concerned. At the same time, each 
reviewing agency must make its own decisions, under its own governing 
statutes and standards.
    The FCC's public interest standard and procedures are different 
from the ones the Department of Justice applies when it reviews 
transactions. Unlike the FCC's review standard, the Department of 
Justice determines whether the transaction may ``substantially lessen 
competition'' under the antitrust laws and, when appropriate, fashions 
antitrust remedies. The Department of Justice's investigations are not 
focused on issuance of an administrative order, but instead primarily 
on whether or not to challenge the transaction in court. The Hart-
Scott-Rodino Act, which is its governing statute, requires strict 
confidentiality concerning the investigative process, allowing public 
disclosure only under limited circumstances.
    In terms of remedies, in the Communications Act, Congress granted 
the FCC flexibility to address potential harms and reinforce promised 
benefits by using tailored remedies requiring or prohibiting particular 
conduct. Accordingly, the Commission's review of communications 
transactions fills a unique role that complements the role played by 
the Department of Justice.
    Especially given its unique function, the FCC's review of 
communications industry transactions must be thorough, efficient, 
timely, and transparent. It must have the appearance as well as the 
reality of objectivity, fairness, and reliance on the best available 
data and analysis. In the past, some have expressed concerns about 
whether FCC review of some transactions has taken longer than the 
circumstances warranted. Some have also questioned in particular cases 
whether the Commission's processes were sufficiently open and reflected 
a sufficiently thorough analysis of the relevant data and issues. I am 
committed to working with my fellow Commissioners to ensure that the 
agency's review procedures meet the highest standards of openness, 
transparency, rigor, and fairness, and minimize costs and delay while 
fully protecting the public interest.
    In general, the FCC begins its transaction-review process once a 
complete and compliant transfer application has been received from the 
parties. At that point, we ask for public comment.
    In the Comcast/NBC Universal proceeding, for example, the companies 
filed an initial Application and Public Interest Statement on January 
28, 2010. At the request of the applicants, the Commission awaited the 
filing of a supplemental economic report, which we received last 
Friday, March 5. The Commission will soon issue a notice that begins 
the public comment period and informs interested persons how they can 
address the applicants' submissions and participate in the FCC 
proceeding.
    To promote a thorough and efficient process, a dedicated team has 
already begun work on staff-level review of the proposed transaction. 
Reflecting the scope of the transaction, the team members come from a 
number of the agency's bureaus and offices and bring to bear years of 
expertise. I have directed the team to learn from experience--to 
examine past similar transactions and see, with the benefit of 
hindsight, what the FCC did right, and where the agency could have done 
better. Our staff has also begun the process of consultation and 
cooperation with our colleagues at the Department of Justice.
    The legal requirements of record-based decision-making prevent me 
from commenting in any way on the merits of pending transactions, 
including the Comcast/NBC Universal transaction. Our decisions on 
mergers are made only after we compile and review a full record. The 
FCC will of course thoroughly consider all of the important issues that 
have been raised or will be raised in the context of the transaction.
    As the Committee is aware, the communications and media landscape 
is rapidly evolving. New media and new communications technologies are 
an increasingly important part of the landscape, even as millions of 
Americans continue to rely on traditional forms of media and 
communications. The landscape today is very different from 5 and 10 
years ago, and will be very different 5 and 10 years from now.
    While the changing landscape must of course inform the FCC's 
decision-making, certain core values remain constant. Robust and 
healthy competition is essential to producing consumer benefits--better 
services, and lower prices. An important part of our responsibility at 
the Commission is to ensure that communications industry transactions 
do not enable firms to frustrate innovation or raise prices ultimately 
paid by consumers. We must ensure that American consumers continue to 
enjoy all the benefits of competition and choice, in a vibrant and 
diverse communications and media environment that upholds vital First 
Amendment values.
    Investment, innovation, and employment are key objectives, as is 
the rapid and widespread deployment of advanced communications 
services. These and other traditional goals and values will inform our 
review of transactions.
    Thank you for the opportunity to appear before you today. I look 
forward to working with the Committee, and I would be happy to address 
any questions the Committee may have.

    The Chairman. Thank you, sir.
    Ms. Varney?

             STATEMENT OF HON. CHRISTINE A. VARNEY,

        ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION,

                   U.S. DEPARTMENT OF JUSTICE

    Ms. Varney. Good morning, Mr. Chairman and members of the 
Committee. I am delighted to be here today to talk with you and 
Chairman Genachowski about how the Justice Department analyzes 
mergers.
    Our Nation's antitrust laws play a vitally important role 
in ensuring U.S. markets remain vibrant and competitive. 
Marketplace competition benefits American businesses and 
consumers by assuring that the market provides price 
competition and product innovations that increase our standard 
of living. I take seriously the need for vigorous review of 
transactions and judicious enforcement of the antitrust laws.
    Over the course of many years and many investigations, the 
Antitrust Division has developed significant expertise in both 
the telecommunications and media industries. Both industries 
have seen dramatic technological innovation that has brought 
incredible benefits to our society. We look forward to bringing 
our expertise to the review of the proposed transaction between 
Comcast and NBC. We also look forward to working closely with 
the Federal Communications Commission during both our agencies' 
reviews of the transaction.
    Although the Justice Department and the FCC have different 
missions--ours is to protect competition while the FCC's is to 
promote the public interest--we share similar concerns and 
intend to collaborate effectively.
    I am precluded, as is the Chairman, from discussing the 
specifics of the proposed Comcast-NBC transaction because the 
matter is currently under investigation, and our authorizing 
statutes prohibit discussion of pending matters. I hope, 
however, that a review of some of the Antitrust Division's work 
over the past year will provide useful insight to you regarding 
our approach to antitrust enforcement.
    As the Assistant Attorney General for antitrust, I have 
sought to take a measured and responsible approach to 
enforcement, using well-established antitrust principles, 
evaluating each matter carefully, thoroughly, and in light of 
the particular facts of the transaction. Some matters involving 
large, significant companies have proceeded unchallenged 
because they were unlikely to result in anticompetitive harm.
    As Senator Inouye pointed out, size cannot be the 
determining factor in an antitrust evaluation. For instance, 
the Justice Department did not challenge either the combination 
of Oracle and Sun or the collaboration between Microsoft and 
Yahoo!.
    Some proposed mergers have been approved under conditions 
designed to protect competition. For instance, the combination 
of Ticketmaster and Live Nation, as well as that of Bemis and 
Rio Tinto, proceeded only after we obtained decrees resolving 
our competitive concerns.
    In Ticketmaster, for instance, we required divestiture of 
ticketing assets, licensing of ticketing software, and 
prohibited retaliation and anticompetitive bundling.
    We have also been ready to litigate when we need to. For 
instance, we are currently challenging a transaction involving 
Dean Foods, the Nation's largest dairy processor, because we 
believe the transaction harms competition and will inflate milk 
prices.
    Additionally, just this week, the parties to a proposed 
transaction involving the two largest health insurers in 
Lansing, Michigan, announced they were abandoning their merger 
after being informed by me that we intended to sue to stop 
their transaction because it would have harmed competition for 
health insurance.
    The Justice Department also uses its expertise to advocate 
on behalf of competition and consumers. For instance, we 
recently provided the FCC with a detailed market analysis of 
broadband competition as part of the Commission's ongoing 
preparation of a national broadband plan. We provide similar 
analyses to other agencies and policymakers, sharing our 
industry expertise and understanding of market dynamics in 
transportation, agriculture, finance, and many other sectors.
    In my prepared statement, I describe in some detail the 
procedural framework that governs the Justice Department's 
review of transactions such as Comcast and NBC. One point in 
that discussion worth emphasizing is that the Justice 
Department's review is confidential.
    Customers and industry participants with views about the 
transaction must know that the law places significant 
meaningful restrictions on our ability to disseminate 
information provided to us during our merger investigations. 
However, with appropriate waivers from the parties, we may 
share confidential information with the Commission.
    In the course of our review of the proposed Comcast-NBC 
merger, we will also use our analytical skills and tools to 
determine the competitive effects of the transaction. We will 
work closely with the Federal Communications Commission to 
ensure consistency in the Government's review of the 
transaction, to protect competition, and promote consumer 
welfare in a vibrant telecommunications and media market.
    Mr. Chairman, this concludes my remarks, and I look forward 
to your questions.
    [The prepared statement of Ms. Varney follows:]

            Prepared Statement of Hon. Christine A. Varney, 
  Assistant Attorney General, Antitrust Division, U.S. Department of 
                                Justice
    Good morning Mr. Chairman and members of the Committee. I am 
pleased to present this statement addressing how the Justice Department 
analyzes mergers in the telecommunications industry, a vitally 
important part of our economy.
    Mergers can allow businesses to grow in ways that help consumers. 
They can combine complementary assets and enable firms to get new and 
better products to consumers more quickly and more cheaply.
    On the other hand, mergers can harm consumers by, for example, 
eliminating competition that would have resulted in lower prices or 
product innovation. Those potential consumer harms have been a central 
concern of the Justice Department since the Sherman Act's enactment.
    Since its passage in 1976, the Justice Department has reviewed 
mergers within the framework of the Hart-Scott-Rodino Antitrust 
Improvements Act. Under that statute, parties to proposed transactions 
over a certain size must provide to us information regarding their 
businesses before consummating their transaction. If a transaction 
falls outside the statute's reporting thresholds, the Justice 
Department can still investigate under its Civil Investigative Demand 
authority, which allows us to review both pending and consummated 
transactions.
    Although our review of the vast majority of transactions subject to 
the Hart-Scott-Rodino Act's pre-merger filing requirement is 
accomplished within 30 days of the parties' initial filing, some 
transactions require a closer look for us to make an informed judgment 
about their likely competitive effects. In those instances, we issue 
what is called a second request, which is essentially a request for a 
more complete set of party documents and data. Until they comply with 
the second request and provide us time to review their materials, 
parties are not allowed to consummate their proposed deal.
    During the period of time when the parties are complying with a 
second request, we typically conduct interviews with customers and 
competitors, and often request documents and data from industry 
participants. Working together, the Antitrust Division's economists and 
lawyers examine the transaction's likely competitive effects based on 
the facts as they present themselves.
    An important point worth emphasizing is that the Justice 
Department's review during this second request phase is confidential. 
Under the law, even the fact that a company has filed a notification 
cannot be disclosed. Customers and industry participants with views 
about a transaction should know that the law places significant, 
meaningful restrictions on our ability to disseminate information 
provided to us during our merger investigations. I noted at the outset 
of this testimony that we cannot discuss the details of an active 
investigation. Indeed, absent an explicit waiver, we are even 
restricted in our ability to share confidential information with the 
Federal Communications Commission, which, as I will describe below, 
also reviews transactions in the telecommunications field.
    Turning back to the second request, we try to minimize costs and 
delay, recognizing that second requests can not only impose significant 
burdens on merging parties but also harm consumers by delaying a 
transaction, thus denying them the benefits of procompetitive mergers. 
At the same time, however, we often need to conduct a thorough inquiry 
to assess adequately how a proposed transaction will affect the 
consumers we are charged with protecting. That may necessitate a 
particularly detailed review in instances involving significant 
transactions that have the potential to transform markets because there 
is typically no going back once that transformation occurs.
    For those transactions requiring a second request, it often takes 
the parties several months to comply with our requests. At the end of 
our review, if we believe that the transaction is likely to violate the 
antitrust laws, the Department must file a lawsuit asking a court to 
enjoin the parties from completing their transaction. Courts adjudicate 
our merger challenges under the well-established standards of the 
Clayton Act, which is not specific to the telecommunications industry 
and prohibits transactions that result in a substantial lessening of 
competition.
    After learning that the Department intends to file suit to block a 
deal, parties frequently will seek to negotiate a settlement that will 
remedy the competitive harms of the transaction while simultaneously 
allowing the procompetitive aspects of the merger to go forward. 
Indeed, it has been the case for many years that the majority of the 
transactions challenged by the Justice Department have resulted in 
negotiated settlements. Accordingly, our investigations are conducted 
not only with an eye toward litigating, but also in light of the 
reality that we often obtain a solution that protects competition 
without resort to a contested litigation. Thus, the contours of any 
potential consent decree can be the subjects of our confidential 
discussions with industry participants during our investigation.
    In the telecommunications field, we conduct our merger reviews 
alongside the Federal Communications Commission. The FCC has 
jurisdiction to review transactions involving the transfer of FCC 
licenses, and it has the power to impose conditions on those transfers. 
Unlike the Justice Department's inquiry, which is conducted under the 
antitrust laws and thus focuses on competition, the FCC's review is 
typically conducted under the Communications Act of 1934 and that 
statute's mandate to protect the public interest. Unlike the Antitrust 
Division, which must persuade a court to enjoin a transaction, the FCC 
may condition license transfers under its own authority.
    Under the public-interest standard, the FCC focuses not only on 
competition concerns but also other considerations, including universal 
service, spectrum allocation, diversity of news and content, 
technological standards, and national security. Even though the 
standards are different, the Justice Department and the FCC often focus 
on similar issues and review similar facts, and both agencies seek to 
cooperate during their investigations. That cooperation allows us to 
share expertise about market structure and industry trends, and also to 
make sure that any necessary remedies are consistent.
    In terms of process, the Justice Department and FCC coordinate 
during investigations to minimize the parties' costs. For instance, 
merging parties typically grant waivers that permit the FCC and 
Antitrust Division to coordinate document productions, thereby 
minimizing party burdens. Another procedural point worth mentioning is 
that, unlike the typical merger reviewed by the Justice Department, 
where the parties are free to close their transaction 30 days after 
substantially complying with a second request, merging parties in the 
telecommunications field may be required to wait for the FCC to 
affirmatively approve the transfer of a license before closing, thus 
displacing, at least as a practical matter, the time constraints 
normally imposed by the Hart-Scott-Rodino Act. In all cases, however, 
we do our best to review transactions closely and, at the same time, 
not delay the closing of procompetitive transactions unnecessarily.
    A review of the Antitrust Division's general work over the past 
year will, I hope, provide useful insight into our priorities and 
approach to antitrust enforcement.
    In short, antitrust enforcement helps keep markets competitive, 
protecting consumers and spurring innovation. In the merger context, 
this approach means ensuring that we either go to court to block those 
mergers that will substantially reduce competition or negotiate a 
settlement agreement that simultaneously enables the procompetitive 
aspects of a deal to go forward yet also prevents mergers from having 
anticompetitive effects on consumers. Our review of likely competitive 
effects considers both vertical and horizontal issues, and we publicly 
set forth our enforcement standards in a number of ways, including 
competitive impact statements, litigation pleadings, closing 
statements, and other policy documents. When we investigate the 
unilateral conduct of a firm with market power or the coordinated 
conduct of firms, this approach means ensuring that firms do not engage 
in behavior that harms consumers and competition. In the criminal 
context, this approach means working to detect cartels and prosecuting 
the firms and individuals who fix prices.
    As Assistant Attorney General for Antitrust, I have sought to take 
a measured approach to enforcement using sound antitrust principles, 
evaluating each matter carefully, thoroughly, and in light of its 
particular facts. Some matters involving large, significant companies 
have proceeded unchallenged because they were unlikely to result in 
anticompetitive harm. For instance, the Justice Department did not 
challenge either the combination of Oracle and Sun or the collaboration 
between Microsoft and Yahoo!.
    Some proposed mergers have been altered through settlement 
agreements designed to ensure that competition would be preserved. For 
instance, the combination of Ticketmaster and Live Nation, as well as 
that of Bemis and Rio Tinto, proceeded only after we obtained decrees 
resolving our competitive concerns. Some aspects of our Ticketmaster 
decree are worth pointing out. The proposed settlement requires 
Ticketmaster to license its ticketing software and divest ticketing 
assets to two different companies, allowing both to compete head-to-
head with Ticketmaster in the provision of primary ticketing services. 
In addition, the proposed consent decree also subjects Ticketmaster to 
court-ordered behavioral restrictions including, among other things, 
provisions that preclude Ticketmaster from retaliating against any 
venue that chooses to use another company's ticketing services or 
another company's promotional services. As we explained in our 
competitive impact statement accompanying the proposed settlement, our 
conclusion that Live Nation was a ``disruptive entrant'' that was 
positioned potentially to challenge Ticketmaster's dominance in 
ticketing constituted the core of our competitive concerns regarding 
the merger and triggered our judgment that a strong remedy was 
necessary. By enabling the entry and repositioning of other 
competitors, the Division concluded that the agreed-upon remedies 
preserved the competition that would have existed but for the merger.
    We are ready to litigate when we need to. We are currently 
challenging a transaction involving Dean Foods, the Nation's largest 
dairy processor, in the United States District Court for the Eastern 
District of Wisconsin. We are seeking a court order requiring Dean to 
divest the milk processing plants it acquired from a close competitor 
in Wisconsin on the ground that the merger will increase the price of 
both the fluid milk bought in the grocery stores and other similar 
retail outlets and the school milk drunk by students in Wisconsin and 
the Upper Peninsula of Michigan.
    In addition to our work involving mergers, the other aspects of our 
civil-enforcement program are active. For instance, in a series of 
court filings and court appearances, the Justice Department articulated 
a number of concerns about the business arrangements negotiated, 
through the construct of a proposed class-action settlement, between 
Google and the Nation's largest book publishers. In the same vein, we 
have articulated to the United States Court of Appeals for the Second 
Circuit our competitive concerns about so-called reverse payments in 
the pharmaceutical arena, whereby firms agree to delay the entry of 
generic-drug competition through settlement of a patent dispute. 
Finally, we recently announced a proposed settlement resolving our 
concerns about anticompetitive conduct that thwarted regulatory 
incentives to lower electricity prices in New York City.
    On the criminal side, our cartel enforcement is very active. Our 
ongoing investigation of price fixing in the liquid-crystal-display and 
cathode-ray-tube industries continues to result in plea agreements and 
significant criminal fines and jail time. In October, a jury also 
returned the first indictment in our ongoing investigation of 
anticompetitive conduct in the municipal bond industry.
    The Justice Department has also taken an active role advocating on 
behalf of competition and consumers. For instance, in coordination with 
the National Telecommunications and Information Administration, we 
recently provided to the Federal Communications Commission a submission 
addressing broadband competition as part of the FCC's ongoing 
preparation of a national broadband plan as requested by the Congress. 
That submission was part of a broader effort to share our industry 
expertise and understanding of how competitive behavior affects 
consumers.
    Finally, I would like to conclude by mentioning a policy that has 
been of particular importance to me. Within the confines of our 
confidentiality obligations, the Antitrust Division seeks to be as 
transparent as possible regarding our enforcement intentions. I have 
made this point a policy priority, particularly in the international 
arena, because the burgeoning of antitrust enforcement around the world 
has the potential to harm U.S. business interests in those places where 
enforcement intentions are unclear. Transparency is good for business, 
and it is also good for consumers. Among other virtues, transparency 
enables businesses to better predict enforcement actions. From my prior 
work in private practice and service on corporate boards of directors, 
I know firsthand that predictability is of crucial importance to the 
business community.
    To sum up, with the Division's excellent career staff and my very 
experienced Front Office team, the Antitrust Division is proceeding in 
the direction that I outlined in my first public remarks as Assistant 
Attorney General: ``vigorous antitrust enforcement in this challenging 
era.'' In reviewing proposed transactions, we use our analytical skills 
and tools to determine the appropriate competitive analysis. In 
reviewing proposed mergers in the telecommunications industry, we work 
closely with the Federal Communications Commission to ensure that any 
antitrust remedy is synchronized with their public-interest analysis to 
yield the appropriate marketplace result that best promotes consumer 
welfare and a vibrant telecommunications market.
    Mr. Chairman, this concludes my prepared statement. I am happy to 
address any questions that you or the other members of the Committee 
may have.

    The Chairman. Thank you very much, and I will start with 
the questioning.
    You have both gone to great lengths to explain your 
separate roles and where you can, with waivers, talk to each 
other. And I want to sort of make that clear because the FCC 
assesses the ``public interest standard'' in the Communications 
Act, and the DOJ considers mergers under the Clayton Act, which 
is a different matter. They are looking for substantially 
lessened competition or a tendency to create monopoly.
    And frankly, I started thinking back after 9/11, the first 
bill that the Congress passed was allowing the CIA and the FBI 
to talk to each other. And it was embarrassing that we had to 
do that because it was embarrassing that they couldn't talk to 
each other. And just all of a sudden, everything changed.
    Can you explain how and why this works? How the overlap 
works and how it helps and how it hurts, how it is frustrating, 
or whatever? We are having a hearing. We are only going to be 
able to hear part of what we want to hear. And if you were CIA 
or FBI, you would just talk to us openly.
    Ms. Varney. I think we will both give some insight into 
that, Senator.
    Under the current framework, much of the information that 
the Department of Justice receives is confidential. So we like 
to protect the business proprietary information and the 
confidential information we need to do merger reviews. I think 
that the companies that come before us have very sensitive 
information that should not be publicly disclosed.
    However, what we can do and will likely do in any 
significant transaction that involves multiple agencies is we 
seek the party's waiver to provide the pertinent information to 
another reviewing agency. And generally, parties provide that 
waiver because they are interested in an expeditious Government 
review.
    So, within the framework of the confidentiality that we 
work in, we are actually able to work fairly collaboratively 
with our sister agencies throughout the Government. So, on the 
process side, I think we have a mechanism in place that 
generally works. I will let you know if that process ever does 
not work.
    On the substantive side, the Chairman will speak to it. But 
I think competition is a very important input into his broader 
analysis. And although they have great competition analysts at 
the FCC, we have a long history here, and I think we complement 
the piece of their review, which is the public interest based 
on competition, consumer welfare, investment, and innovation. 
Ours is more focused on the narrower competition question.
    Chairman Genachowski. I think I agree with that. We have 
just started to collaborate together, largely as a result of 
this transaction, and I think we are both committed to having a 
process that is efficient, that serves the public, and that has 
benefits for everyone involved.
    Our agencies have staffed with complementary expertise, and 
it is helpful to everyone involved in the process to have them 
speaking with each other, sharing data and information where it 
is appropriate, testing analysis on each other, and 
coordinating in a way that increases the chances of a better 
decision for the public and also reduce the costs on the 
parties by not duplicating where duplicating isn't necessary.
    So there are opportunities, as I said, for both improved 
decisionmaking and more efficient decisionmaking by effective 
collaboration, and that is something that we are both committed 
to.
    The Chairman. OK. Obviously, video markets are evolving. 
Consumers today have access to video content in more places 
than ever before. And I was arguing with my wife last night. 
She is in a different kind of television, superior television. 
And viewers can go, they can watch TV. They can watch the 
Internet screen.
    Now how do your analyses take into account--this is to both 
of you--the evolving nature of video markets, and does the 
Internet video really compete today with traditional cable 
programming?
    Chairman Genachowski. Let me field that first.
    The first thing that I would note is that at least since 
the early 1990s, the Cable Act of 1992 and the Telecom Act of 
1996, there has been a commitment on the part of Congress and 
the FCC to promote competition in this area as the best 
strategy to protect and empower consumers and to be very 
serious about it. And in fact, in the video marketplace, there 
have been, as you pointed out, many changes since the early 
1990s, a lot of good news and also some issues of concern.
    We have a satellite industry, a competitor that didn't 
exist before. We have telcos now providing multichannel video 
programming in some markets, hopefully more, that didn't exist 
before. Those are good news increases in competition.
    There are also issues of concern. We certainly hear from 
consumers regularly about their rates and concerns that 
whatever the competition is, it is not constraining rates. That 
is something we have to take very seriously. And we hear from 
consumers and also operators in rural areas saying that the 
competitive dynamics in smaller markets are very different and 
the FCC's policy should take those into account. And in fact, 
over time, both Congress and the FCC have taken into account 
the differences in rural areas.
    Now, with respect to the Internet, an evolving story, we 
are in the early chapters of it. There's a lot of hope that it 
leads to more competition, more innovation, more consumer 
benefits, and lower prices for consumers. But this story 
continues to play out, and there are issues of concern.
    I don't want to touch on items that will come up directly 
in the Comcast-NBC transaction, but there are issues that 
certainly we need to pay attention to with respect to 
competition in the overall broadband marketplace and with 
respect to developments on the Internet itself.
    But if I could say one more word, the enduring values to me 
remain what they were--promoting effective competition, 
protecting and empowering consumers, ensuring that there is 
innovation, promoting investment, and even as the technologies 
and the landscapes change, our focus will be on making sure 
that those values, those goals are achieved.
    The Chairman. Thank you, sir.
    Ms. Varney, my time is up. And I apologize for that, and I 
call upon Senator Hutchison.
    Senator Hutchison. In my previous life, I was general 
counsel of a bank holding company, and I have found that 
sometimes the regulators that had to approve mergers and 
acquisitions had no sense of timing. And a contract would 
expire and then be renegotiated at detriment to one party or 
the other.
    So I would ask you, since this is going on two tracks, are 
you talking about timing and process? Is it going to be going 
together at the same time that you would be having your public 
comment period at the FCC and you would be doing your due 
diligence? Is that an issue or a factor in the way you are 
going to proceed, or were you looking at one and then the 
other, which I think could really make a difference in just the 
real world of contracts and also business?
    I am sure when there is a limbo, that there probably is 
also a limbo in investment, and a limbo in decisions that 
probably ought to be made in the best interest of both 
companies. So I would just ask you what you are looking at?
    Chairman Genachowski. First of all, we have already started 
and our staffs have started talking about how to ensure there 
is a process that takes place that is as efficient as possible 
while tackling the important issues that any transaction 
raises. In some cases--we found this is true of both of our 
agencies--sometimes the delays in the process are due to 
understandable issues that the parties have in pulling together 
the information that is required.
    I mentioned that in our case we are just now able to put 
out our public notice really beginning the process because, for 
completely understandable reasons, it took the parties some 
time to assemble the information they need. But I would say 
that we have already spoken. We will continue to speak about 
how we can best, most efficiently run these processes in a way 
that delivers on our important responsibility as reviewing 
agencies but recognizes that needless delay doesn't do anyone 
any good, and we have an objective to move as quickly as we 
can.
    Ms. Varney. And Senator, they are parallel proceedings. One 
doesn't go first, one review and then the second. They go 
together at the same time. And that is why we are trying very 
hard to collaborate effectively. Our staffs are investigating 
innovative ways where they may be able to share documents in a 
manner consistent with the law and all the requirements, but 
that would be expeditious and would benefit both the review, 
the parties, the consumers, everyone.
    Senator Hutchison. Thank you.
    Let me just, in my final minute or so, ask you if you are 
of the opinion that I stated in my opening statement that--and 
everything you have said so far would indicate that you are. 
But, basically, do you believe you should stick to your 
Congressional responsibilities, as opposed to being creative 
and putting new issues in that maybe are not in your purview. 
How do you feel about that?
    Especially the FCC, which has been a little more creative.
    [Laughter.]
    Chairman Genachowski. Yes. The public interest standard is 
obviously broad. I mentioned in my opening statement a series 
of important values and factors that we will take into account 
in reviewing transactions. We also are obliged to be open to 
issues that are raised with us as part of our public process, 
to analyze those, to take those seriously. That is our mandate.
    Now, any decisions that we make in any transaction need to 
be tied to the issues that arise in that transaction. That is 
our focus. We have rulemaking processes to deal with broad 
issues of general applicability, but we also have very serious 
obligations to consider all the issues that arise. Any actions 
that the FCC would take, and I am sure the Assistant Attorney 
General will answer for herself, will be tied to issues raised 
in the transaction that are appropriate for decision and action 
in the transaction.
    Ms. Varney. Senator, the same standard applies to merger 
review at the Department of Justice. Every merger is considered 
on the merits of the transaction and that alone.
    We essentially on every merger have three courses of 
action. We can determine that the merger creates no 
anticompetitive effect, and we do nothing. We can determine 
that the merger is anticompetitive and cannot be remedied, and 
we would have to litigate that. So our view would be subject to 
judicial review. And finally, if we determine a transaction has 
anticompetitive effect but can be remedied, that remedy itself 
is subject to judicial review under the Tunney Act proceedings. 
So we stick to our knitting.
    Senator Hutchison. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator, very much.
    I am going to use my prerogative because telecommunications 
is a massive subcommittee. So, I am going to ask Senator Kerry 
and Senator Ensign, Chairman and Ranking Member, to ask their 
questions now.

               STATEMENT OF HON. JOHN F. KERRY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Kerry. Thank you, Mr. Chairman.
    Obviously, the proposed merger that we are discussing today 
would create an interesting and a unique company. I have 
confidence that the Chairman of the FCC and the Assistant 
Attorney General for antitrust are going to conduct a fair 
review and, if needed, impose sensible conditions on it.
    Let me say at the outset, though, that I have immense 
respect for Brian Roberts and for his father, Ralph. They have 
been terrific corporate citizens. I think that everybody in the 
industry would acknowledge that, and we begin sort of there as 
a starting point in this. They have taken a small cable company 
and turned it into a communications giant, and I think that 
kind of success is admirable.
    I have an open mind on this. I have met with Mr. Roberts. I 
have asked questions and listened to him explain some of the 
concerns that we might have about price increase, access, 
different things that obviously are on the table here. Clearly, 
your scrutiny is important to this, and I think they 
acknowledge that and welcome it.
    We all know that without that, big mergers can distort a 
market. They can reduce consumer choice, drive up prices. But 
they can also provide and promote efficiencies and innovation 
if they are done properly.
    My advocacy during the recent retransmission consent 
disputes, I think, has accented the fact that I try to focus on 
the consumers and encourage the market to maximize consumer 
access to content and to try to discourage prices from 
escalating without commensurate consumer benefits--I think that 
is sort of the principle that ought to guide us here--and have 
competition between cable, satellite, and television providers.
    I also am a big believer in localism, diversity in 
programming, and the continued growth of the Internet as a tool 
for communication. So these are the principles that guide me in 
thinking about this.
    And I would like to ask you, Mr. Chairman, if you would 
just comment quickly. I know you can't speak specifically to 
the case, but with respect to a merger of this scope, what are 
your considerations with respect to the retransmission consent 
negotiations and their impact on consumers as you have seen 
them?
    Chairman Genachowski. I shouldn't and can't speak 
specifically to this transaction, but certainly, the topic of 
retransmission consent has been a topic of active consideration 
at the FCC, at least since Christmas week and New Year's Day, 
when we all were on the cusp of some stations shutting down. We 
saw it again last week.
    There is a lot of consumer concern. A lot of consumers 
wonder why their lives should be affected because of business 
disputes between two different media companies. At the same 
time, media companies have a right to engage in transactions 
and determine the terms of those transactions. We have heard 
more increasingly recent arguments from various people who 
follow this closely, or are involved in it, that the framework 
that is in place, and that has been in place for a long time, 
may have lost pace with the changes in the marketplace, maybe 
changes in technology. And I think we are beginning the process 
of reviewing whether there are improvements to the framework 
that make sense.
    We look forward to working with you and the Committee on 
that. It is a statutory framework. But certainly, it is 
something that we will be looking into and that we would like 
to be a resource to the Committee as we look at retransmission 
consent and whether the framework continues to make sense or 
whether reforms are sensible.
    Senator Kerry. Fair enough. Ms. Varney, should we consider 
the Internet as a possible standalone alternative for 
multichannel television service delivery? And if so, how can 
standalone Internet video services be guaranteed access to the 
content that the other distributors have?
    Ms. Varney. Senator, I think, as the Chairman has pointed 
out, the Internet is still in its early chapters, and we don't 
know where it is going yet. We at the department are committed 
to preserving competition, whether it is potential competition 
or incipient competition. So we are in many transactions in 
telecommunications and media very concerned about the role that 
the Internet can play as an effective competitor to increase 
output, to bring more diverse quantity and quality to consumers 
at hopefully lower prices.
    So I am hesitant to say at this point what the Internet can 
and can't do to promote or inhibit competition. But in any 
transaction where there is an aspect of the Internet providing 
a competitive effect, it will be seriously evaluated.
    Senator Kerry. Which means, obviously, that is one of the 
things you will look at in the context of this?
    Ms. Varney. Without commenting on the specific merger, we 
will look at anything that is relevant in any transaction.
    Senator Kerry. And Mr. Chairman, how do we ensure that 
independent programmers who have competing content have some 
effective redress under the nondiscriminatory protections in 
the Cable Act? And perhaps you might share with us how many 
complaints have you resolved, and how many carriage complaints 
are currently pending?
    Chairman Genachowski. The issue of independent programmers 
having access to multichannel video providers, the issue of 
diversity of programming, independent voices has been a long-
standing issue for Congress and the FCC. And as you mentioned, 
there are provisions of the statute in the FCC rules that 
provides the mechanisms for enforcement.
    I can't tell you the specific number of complaints that we 
have had. We will get that to you separately. We have had some. 
We have also heard complaints that the existing framework can 
be improved to give independent programmers who believe they 
have a complaint under the statute a more efficient process to 
have those complaints resolved.
    But this is one of those areas where the values remain 
constant, and I think both the FCC and, I assume, the Committee 
will remain vigilant in thinking about how those values can be 
and should be applied in a changing marketplace and changing 
technology landscape.
    Senator Kerry. And can you share with me, just as a matter 
of principle, do you think that consumers should lose access to 
broadcast programming when the broadcasters and the cable 
providers fail to reach an agreement?
    Chairman Genachowski. I think that is certainly an issue. 
One of the things that concerns me the most in situations like 
that is when consumers are surprised. This was, I think, one of 
the biggest issues around the New Year's Day potential 
shutdown, the idea that a consumer could find out on December 
30 that they might lose their TV signal on January 1 and have 
to figure out their options so that they can just have 
constancy of viewing. It is hard to explain to a consumer why 
that makes sense.
    So without drawing a general rule about whether there are 
circumstances where----
    Senator Kerry. Do you have a perception of what mechanism, 
if any, might be used to resolve this? Obviously, some people 
are now pushing for some kind of arbitration thing or something 
else. Others, there is a lot floating around on this issue. Do 
you have any thoughts about it?
    Chairman Genachowski. The only thought I would say now is 
that I think the events of the last 2 or 3 months confirm that 
this is a subject that should be looked at seriously. All ideas 
should be looked at with the goal of coming up with a framework 
that works for consumers and that is fair for the parties 
involved, for the businesses involved.
    Senator Kerry. That was avoided with skill.
    [Laughter.]
    Chairman Genachowski. Thank you.
    Senator Kerry. Mr. Chairman?
    The Chairman. That is it? OK.
    Senator Ensign?

                STATEMENT OF HON. JOHN ENSIGN, 
                    U.S. SENATOR FROM NEVADA

    Senator Ensign. Thank you, Mr. Chairman.
    Chairman Genachowski, I appreciated earlier when you were 
talking about wanting the Government to continue promoting 
investment in the expansion of broadband and encouraging more 
competition, all of those good principles that I think that we 
all share. Sometimes we have disagreements on exactly the best 
way to get there, but I think that we certainly all agree on 
those kind of guiding principles, and I know we have talked 
about that.
    I want to turn just a little to deal with Title I, Title II 
issues--Title I being a much lighter regulatory touch, and 
Title II giving the FCC potentially much more heavy-handedness 
when it comes to regulation. So I would like to touch on that.
    We have heard recently that some groups have called on the 
FCC to regulate the Internet under Title II of the 
Communications Act. I believe that this would reverse the 
successful deregulation that has helped lead to explosive 
growth in the broadband age that we have seen over the last 
several years.
    Broadly speaking, we know that regulation has costs. At 
stake would be the tens of billions of dollars invested 
annually by the private sector in broadband. I would like to 
ask you, what would the impact on the private sector investment 
be if the FCC were to reclassify the Internet under Title II?
    Chairman Genachowski. The first thing I would say, Senator, 
is that job number one right now at the FCC, our focus is on 
developing the policies that will promote universal broadband 
in America, rural America and urban America, so that we can 
have a world-class infrastructure that is an engine for job 
creation, for ongoing investment, for innovation, for helping 
improve our education. This is, to me, a major issue of global 
competitiveness for the United States. And we are working very 
hard, as you know, looking at what are the policies we need to 
do to promote those interests, to protect and empower consumers 
with a 21st century world-class infrastructure.
    On the technical issue that you mentioned, as you know, the 
FCC has in the past relied on Title I as its authority to 
promote the interests of consumers, rural Americans, others, in 
and around broadband. Right now, we are arguing in court 
defending the position that Title I gives us the authority we 
need to do the right things for American communities, American 
businesses, American consumers.
    We will continue to assert that position, and we will hope 
that we get a favorable decision from the court that is looking 
at it right now. Until then, our focus is on the issues that I 
mentioned. If the court does something that requires us to 
assess, consider issues, we will do that. But right now, I 
think there is nothing more important that we could do than to 
make sure we move forward on a national broadband plan that 
drives forward U.S. global competitiveness on our 
communications infrastructure.
    Senator Ensign. Well, I appreciate that because, as I 
mentioned, I think that there is a real cost to heavier 
regulation, and we have to be so careful with this almost 
miracle of investment in the Internet that we have seen in 
America and across the world, that we want to continue to see 
that, that investment with 4G wireless broadband coming out, 
along with all of the other various exciting things that we are 
seeing. We know a lot of job creation and a lot of our 
economy's future lies in broadband investment.
    And I just think that whether you get the favorable court 
decision or not, if the FCC decides or considers moving 
broadband from Title I to Title II, I think it could be a 
major, major mistake. And I think that that is why this issue 
needs to be aired out and discussed so that we consider all the 
ramifications if that does happen.
    So I appreciate both of your service and both of you being 
here today, though.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Ensign.
    Unfortunately, I have to go to the floor to do the Federal 
Aviation Administration. Senator Kerry will chair, and Senator 
Cantwell is next up.

               STATEMENT OF HON. MARIA CANTWELL, 
                  U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. Thank you, Mr. Chairman.
    And thank you for your discussion this morning. It is 
challenging, because of your oversight review, to really get 
into some substance here.
    So I do have a question, but I guess I would like to say at 
this point in time, I can't support this merger. Now maybe you 
will provide some facts on oversight and some qualifications 
that will help with this. But from the Seattle perspective, I 
see a lot of consumer groups are already very concerned about 
this.
    And obviously, we like media diversity in the Northwest. If 
you have ever been there, you see that. We can turn out at less 
than 24 hours' notice for any FCC Chairman who ever wants to 
come there and discuss it.
    But my concern today is that we are talking about one of 
the largest carriers of both Internet provider and phone 
service and cable and the merger with content. And 
specifically, right now Seattle is very upset about what 
happened with the Olympics. The fact that access was not 
provided to the Canadian Broadcast System--or the CTV in this 
case, which would have always provided an alternative 
coverage--was a great frustration. And then there was a lot of 
criticism and critique that basically online access was also 
blocked by various authentication measures, making it difficult 
for people to gain access.
    And I know that my colleague Senator Kohl, who chairs the 
Antitrust Subcommittee, in his hearing said, ``I fear that this 
practice of locking up certain content only for pay TV 
subscribers may be a preview of what is to come in respect to 
TV programming on the Internet, particularly in the context of 
the proposed Comcast-NBC merger.''
    So, or as I think the Seattle Times said it in their 
opposition to this merger, ``It just leads to mischief.'' Now I 
am not sure we are going to be able to uncover all of the 
mischief that might happen and protect against it. That is my 
concern. How are we going to do that? But those two examples of 
how Seattle viewers were shortchanged on what is a digital age 
of content access is very frustrating.
    But my question is this. As it relates to Chairman 
Genachowski, it is my understanding that Comcast is challenging 
the FCC's most recent extension of its program access rules, 
and so I am interested in what parts they are challenging. And 
if Comcast prevails, wouldn't this mortally wound one of the 
protections that we have in place to say you have to meet these 
programming requirements? And if we get rid of that rule, then 
aren't we going to see even more mischief in this process?
    Chairman Genachowski. Senator, two things. On your first 
point, while I can't comment on the merits of the transaction 
and I shouldn't comment on the specifics that you mentioned, I 
can let you know that the interests of consumers will be heard 
in our review of this transaction. They have to be. That is our 
obligation. A core principle for us is to protect and empower 
consumers, and we will be looking at all issues relevant to 
consumers as we review the transaction.
    With respect to program access rules, certainly all the 
competitors in the video programming marketplace will tell you 
that over the last 10, 15, 20 years since those rules were 
adopted, they have been a force to promote competition in the 
marketplace, even though they may not have worked perfectly at 
times. And that has been our experience at the FCC as well.
    In fact, recently, we improved those rules by closing what 
is called a ``terrestrial loophole'' and providing a better 
mechanism for competitors to get access to regional sports 
programming. So we take the program access rules very 
seriously. It is in court, as you mentioned. I am optimistic, 
and I think if issues arise there out of the litigation that we 
have to work on together, I would look forward to that because 
we have seen that rules like that in this landscape can promote 
competition.
    Senator Cantwell. Well, wouldn't you have to take--say that 
Comcast won on that, wouldn't you have to take that into 
consideration on this merger?
    Chairman Genachowski. Well, we will take into 
consideration--I want to be careful, just given that it is a 
pending review. We will take into consideration in this merger 
all relevant issues, all issues that are raised by the parties 
in our proceeding. I imagine this issue will come up in the 
context of our proceeding, and you can be assured that we will 
review it very carefully.
    Senator Cantwell. Well, I think that we--I didn't agree 
with Mr. Martin on a lot of things. But I think this just begs 
the question for us to review a la carte because I just think 
we can't hold consumers hostage because we are building a 
vertical integration, and that is going to be my main concern 
about this.
    Thank you.
    Senator Kerry [presiding]. Thank you, Senator Cantwell.
    Senator Snowe?

              STATEMENT OF HON. OLYMPIA J. SNOWE, 
                    U.S. SENATOR FROM MAINE

    Senator Snowe. Thank you, Mr. Chairman.
    Chairman Genachowski and Ms. Varney, with respect to some 
of the procedures involved in what has occurred even since the 
last mergers that have been considered by both the Justice 
Department and the FCC, I was wondering whether or not there 
have been any internal changes in both agencies with respect to 
the merger review process? Obviously, there has been a 
perception in the past that some of these mergers have been 
rubberstamped among media-related mergers.
    If you are looking at some of the charts with respect to 
consolidation, which has been media consolidation, ownership, 
and cross-ownership issues, certainly they have been a central 
focus of this committee for an extended period of time, as 
these mergers have become more and more frequent.
    It speaks volumes that the number of independent radio 
owners have plunged in the last 11 years by more than 39 
percent, and between 1995 and 2003, ownership of the top 10 
largest television stations has increased their ownership of 
the stations from 104 to 299, more than 187 percent increase. 
So, obviously, it is a major source of our consideration.
    So, I would be interested in knowing with your respective 
agencies, what has changed in terms of the review process that 
you will apply, given the fact when you are seeing the number 
of corporations that now control the majority of broadcasters? 
And I have talked to Mr. Roberts, and he has made a number of 
commitments to the future because, obviously, it is going to be 
important, given this vertical integration that is going to 
occur between distribution and content.
    But the number of corporations that control, it has gone 
from 50 entities to relatively a few. So the Department of 
Justice didn't apply any conditions to the XM-Sirius or AT&T-
BellSouth. And the FCC provided nominal and temporary 
conditions on various mergers, XM-Sirius, Tribune-News Corp., 
and Dow Jones.
    So starting with you, Chairman Genachowski, can you tell us 
what is going to change? You mentioned in your statement, as I 
noticed, that some have questioned in particular cases whether 
the Commission's processes were sufficiently open and reflected 
a sufficiently thorough analysis of relevant data and issues.
    So what is going to counter that perception beyond that it 
is just a rubberstamp? Given the increasing consolidation that 
is occurring, it could affect diversity. It could affect 
competition. It could affect localism. It could affect 
independents, not negotiating fair deals for those who are not 
connected with Comcast.
    Chairman Genachowski. Let me speak first about the FCC and 
then about our coordination because they are all relevant to 
your question.
    At the FCC itself, we have set up an empowered cross-bureau 
team to make sure that we fully meet our mandate with respect 
to this merger and all other mergers. One of the first 
instructions that I gave the team was to go back and look at 
relevant transactions and do an honest assessment of what went 
right, what went wrong, what can we learn from what happened in 
the past so that we can do our job on behalf of the public and 
do it efficiently.
    We are also looking very hard at the issues of openness and 
transparency in the context of merger reviews at the FCC. In 
this case, we have very different ground rules. The DOJ has to 
stay confidential. Ours should be an on-the-record, open 
process, and we are exploring the best ways to conduct a 
process to do that.
    As you know, in other proceedings that we have managed over 
the last few months, we have revolutionized the way the FCC 
does business, over 50 public workshops around broadband. We 
are reforming our ex parte rules. So we take this very 
seriously.
    With respect to coordination, we have each empowered our 
staffs to start coordinating, start collaborating, to both 
honor and respect our separate missions, but to make sure that 
we are helping each other achieve the goals that in each case 
the relevant statute has given us.
    Senator Snowe. Ms. Varney?
    Ms. Varney. Senator, I can assure you there is no 
rubberstamp at the Department of Justice. I won't speak to the 
past, but I can tell you since I have been there, we have sued 
Dean Foods over its acquisition in Wisconsin, Illinois, and 
Michigan over milk consolidation. We are very troubled by that.
    We announced we were going to sue Blue Cross Blue Shield 
over its acquisition in Lansing, Michigan. They abandoned the 
transaction. We are on the record in the court in the Southern 
District of New York with our concerns about the proposed 
Google book settlement.
    We have approved some big transactions with conditions. We 
conditioned the Ticketmaster approval of Live Nation. We 
conditioned the voting machines acquisition, which has been in 
the press quite a bit lately. We conditioned the AT&T 
acquisition of Centennial, which is in the telecommunications 
space, and we put significant conditions on that. We have 
recently fined KeySpan, a major electric provider in New York 
for the way it was doing business.
    So we are very, very active. We view every transaction on 
the merits of the transaction, and you can be sure we will do 
the same here.
    Senator Snowe. I know that in the Department of Justice 
instance that you have to review this transaction based on 
substantially lessening competition. But yet we have seen--I 
mean, it is just increased consolidation. Obviously, we have to 
evaluate these trends that are occurring not just on the short 
term, but also on the long term and what is going to occur.
    Chairman Genachowski, one other question. On program access 
rules, what has changed in that regard?
    Chairman Genachowski. I am not sure what you are getting 
at, Senator. What has changed in terms of----
    Senator Snowe. Yes, is there anything that has changed in 
terms of program access rules?
    Chairman Genachowski. Well, the goal of program access 
rules, I believe, remains as important as it was. We have been 
reviewing the program access rules to make sure they are as 
effective as possible. A couple of months ago, we closed the 
so-called terrestrial loophole so that the rules could work 
more effectively for competitors, and we will continue to look 
at ways to make sure that rules designed to promote competition 
actually promote competition in practice.
    Senator Snowe. Yes. Because, obviously, in this instance, 
that will become even exponentially greater. I mean in terms of 
magnifying the problem in competition and making sure that 
there is fair competition and the incentive to negotiate fair 
deals or allowing their own programs that they have developed 
to be offered to nonaffiliated stations.
    Thank you.
    Senator Kerry. Thank you, Senator Snowe.
    Senator Thune?

                 STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Thank you, Mr. Chairman.
    I want to thank our panelists for being with us today. This 
is an important subject and one that we obviously want answers 
on.
    I know that you are limited in some of the things that you 
can say today, but I want to ask you, in South Dakota, we have 
a number of small, rural telecom companies that provide high-
quality multi-program video distribution. To the extent that 
you can comment, I would direct this to you, Mr. Genachowski, 
how might these entities be impacted by this merger? And how 
much will that be a factor in your deliberations as you 
evaluate this?
    Chairman Genachowski. Without addressing the specific 
transaction, I can tell you that the concerns and unique needs 
of rural multichannel video providers is something of real 
interest to the FCC. It has been to this committee for quite 
some time. Action has been taken in the past, for example, by 
enabling those companies to combine and by collectively trying 
to balance out the leverage as best as possible.
    I can't talk about it in the context of this transaction 
other than to say that promoting the kinds of interests that 
have been pursued by Congress and the FCC in this area 
concerning rural providers are the kinds of objectives, the 
kinds of principles that are appropriate for review in this 
transaction. And assuming they are raised in our record as part 
of the proceeding, it is something that we would take very 
seriously.
    Senator Thune. Good. When you say ``appropriate to 
review,'' my question gets at how much will that be a factor in 
your deliberations? Obviously, you have a public interest 
requirement that you have to look into, and I am trying to get 
at the issue with respect to this merger how the FCC might 
define the public interest standard. Would that include how 
this particular merger might impact the situation I just 
described in rural areas?
    Chairman Genachowski. Traditionally, the public interest 
standard has included those kinds of interests, and so, without 
commenting on this transaction, it is safe to assume that it 
will here. Exactly how much, if any, action the Commission 
would take, that would have to be based on the record that is 
built in the proceeding. We will encourage the broadest 
possible participation and the submission of real facts and 
data because our responsibility is to get our arms around the 
actual facts in the marketplace and then to review the 
transaction against those facts and data.
    Senator Thune. OK. Without beating a dead horse, how would 
you define a public interest standard? You talked about all the 
various things that would be appropriate to, as you said, 
review as part of the public interest standard. But could you 
perhaps shed a little bit more light on that?
    Chairman Genachowski. Our starting point is the core 
principles and objectives that the FCC has relied on in the 
past and that I have spoken about: promoting competition, 
protecting and empowering consumers, promoting investment and 
innovation, ensuring the widespread deployment of broadband and 
advanced communications, and to the extent it is a media 
transaction, promoting competition, localism, diversity, well-
established principles under the public interest standard at 
the FCC and in Congress.
    Senator Thune. In your testimony, you noted that the FCC 
has not made decisions on past mergers in a timely and 
transparent manner. What specific actions do you plan to take 
to remedy that observation?
    Chairman Genachowski. I noted that the FCC has been 
criticized for that, and we do have a staff at the FCC that 
works very hard, is very committed to this, and they are very 
expert.
    But I think an agency can always improve, and I have 
instructed the staff to identify the ways in which we can learn 
from past experiences, develop, improve processes that are 
efficient, that meet our obligations under the Communications 
Act, that maximize all appropriate coordination and cooperation 
with the Justice Department, and that specifically look at ways 
that we can have an open and transparent process that everyone 
understands, that is fair to everyone who has an interest in 
the transaction.
    Senator Thune. Let me ask you, because one of the things 
that critics argue is that the transaction is going to allow a 
single company to control the content that consumers receive 
and how they are permitted to access it. Do you agree with that 
statement, and are you concerned about that possibility?
    Chairman Genachowski. I wouldn't comment specifically on 
this transaction and what the results might be. I think 
promoting competition is, as I said, a core principle. And so, 
transactions that have any element of consolidation require us 
under the public interest standard to ask hard questions about 
what effect does this have on competition? What effect does it 
have on consumers in terms of the provision of services and 
prices and innovation?
    So those are exactly the kinds of questions we are obliged 
to ask in the context of reviews of this sort.
    Senator Thune. I am not trying to ignore you, Ms. Varney.
    Ms. Varney. I associate myself----
    [Laughter.]
    Senator Thune. If there is anything you would care to add 
to that, please do so.
    I thank you, Mr. Chairman. I appreciate it.
    Senator Kerry. Thank you very much, Senator Thune.
    Senator Begich, coming from Alaska, I know you are used to 
being far away.
    [Laughter.]
    Senator Kerry. This annex is taking it to a new extreme.

                STATEMENT OF HON. MARK BEGICH, 
                    U.S. SENATOR FROM ALASKA

    Senator Begich. I sometimes feel like a witness.
    [Laughter.]
    Ms. Varney. We can ask him questions.
    Senator Kerry. Actually, you are in the penalty box.
    [Laughter.]
    Senator Begich. That is right, the penalty box. This is 
what happens when you are new and you cause trouble.
    Let me--obviously, I am going to leave my questions really 
for the next panel. I just want to first say that my interests 
are going to be how local aspects are dealt with, how in the 
sense of intellectual rights and so forth are dealt with. The 
next panel is really going to be my Q&A.
    I have to be very frank with you. Many people have already 
asked the questions I was interested in. I have faith that you 
will go through a process. It is a new organization over there, 
new people, and that is what I am banking on.
    I wasn't here for the history of what has happened in the 
past with the organization. There have been some concerns over 
the past, but I have a feeling that the new folks, you guys 
included, are going to do the right thing over time and make 
sure consumers are heard. I have heard that over and over 
again.
    So I am really not going to ask you questions because the 
next panel is a big panel, and my worry, the way the system 
works here, is everyone will have opening statements and 
because I am at the tail end here, it may never get to me for 
my questions.
    So thank you all for being here.
    Senator Kerry. Well, Senator Begich, that won't happen 
because there are not very many of us here right now.
    [Laughter.]
    Senator Begich. I am banking that they won't know we are 
doing this, so they won't come back.
    Senator Kerry. In fact, I invite you to even move up, if 
you would like? Delusions of grandeur.
    [Laughter.]
    Senator Kerry. Mr. Chairman, thank you very much for coming 
and not commenting on any of the specifics.
    [Laughter.]
    Senator Kerry. We appreciate that. And the attorney general 
also. If I can just ask you quickly, can you give us a sense of 
timing? How long is this going to take?
    Chairman Genachowski. I think it is actually that we are 
just going to put out our public notice in the next few days, 
and I think we will know more about what realistic timing is 
once we see what kind of record comes in. We are committed to 
doing this as fast and as efficiently as possible, but also 
honoring our obligations under the Communications Act to be 
thorough and look at all the issues.
    Senator Kerry. Well, we want you to be thorough. We want 
you to do that, but I think many of us are frustrated by the 
length of time it takes to get business decisions out of 
Government. And I think that faster, more expeditiously we can 
do it, the better our reputation will be. So I hope you will do 
that.
    Thank you. We will welcome----
    Senator Ensign. Mr. Chairman?
    Senator Kerry. Yes?
    Senator Ensign. Could I--before you leave this panel, I 
have got some letters here from independent programmers that, 
if I could, I would like to submit for the record?
    Senator Kerry. Without objection, they will be put in the 
record.
    [The information referred to follows:]

                                                    Ovation
                                    Santa Monica, CA, March 9, 2010
Hon. John D. Rockefeller IV,
Washington, DC.

Hon. Kay Bailey Hutchison,
Washington, DC.

Dear Senators Rockefeller and Hutchison,

    At the heart of American democracy is our commitment to free speech 
and expression. Therefore it is vital to our freedom that Americans 
enjoy unrestricted access to that same free speech and expression.
    Since 1996, Ovation TV, a privately funded, independent cable 
television network, has dedicated itself to providing viewers the best 
in creative expression through arts and culture programming. Ovation is 
one of a kind. No other national network offers viewers this type of 
content day after day. And having provided over $5 million in cash and 
in-kind support over the past 3 years, Ovation is also a key partner of 
America's cultural institutions and arts education initiatives in 
cities and towns nationwide.
    Since acquiring and re-launching Ovation in 2007, the network has 
grown from 5 million to 38 million homes. Much of this success is in 
part due to our outstanding business relationship with Comcast Cable. 
Comcast has become an outstanding distributor of our unique 
programming, adding over 3 million homes to our distribution base. Most 
importantly, they have become a key partner in numerous local arts 
education initiatives; including assistance in providing access to free 
museum visits and building awareness of cultural events.
    While critics are fast to point out that these 3 million homes 
represent a small portion of the Comcast foot print, the relationship 
with the ``new'' Ovation is a young one. As we continue to deliver on 
our promise of providing a unique Arts service to their customers, we 
believe Comcast will continue to roll us out and make us available in 
all of their digital homes. We also believe that a NBCU/Comcast merger 
will not affect that rollout.
    It is has been our experience that Comcast pays competitive rates 
to independent programmers. Those rates enable us and other programmers 
to invest in even greater programming for their viewers and more 
marketing to reach them, all the while creating lasting jobs in a 
variety of communities. We are hopeful that an NBCU/Comcast merger will 
not affect the rates that Comcast pays to us nor to any other 
independent programmers.
    Comcast has a strong record of launching viable, independent 
channels. Viable is the key term here. Not everyone with an idea for a 
channel deserves carriage nor can Comcast be expected to accept every 
idea that comes through their door. As in the case of Ovation, Comcast 
has been responsive to those channels with solid plans to meet the 
interests of viewers not currently being served in the marketplace, the 
right team with proven expertise, solid financial backing and a 
compelling value proposition that includes fair and competitive rates.
    Comcast has also stated they will continue to create more 
opportunities for viable, independent programmers. They have committed, 
upon completing their digital migration companywide in 2011, to add two 
new independently owned and operated channels to their line up each 
year for the next 3 years under customary terms and conditions.
    Comcast has recognized Ovation's many attributes, including its 
service in the community, and has provided us with growing distribution 
on their platform at competitive rates. We enjoy a relationship that 
has required good faith negotiations and we are confident that 
relationship will continue to grow stronger after the merger.
    The issues facing independent programmers like Ovation relative to 
large distributors can be summarized in two words, carriage and rates. 
In our experience, Comcast has been a fair partner in both of these 
areas. Thank you for your commitment to supporting independent 
programmers and ensuring that our voices be heard.
            Sincerely,
                                            Charles Segars,
                                           Chief Executive Officer.
CC: Hon. John Kerry
Hon. John Ensign
                                 ______
                                 
                                            Outdoor Channel
                                       Temecula, CA, March 10, 2010
Jay D. Rockefeller IV,
Chairman,
Committee on Commerce, Science, and Transportation,
U.S. Senate,
Washington, DC.

Kay Bailey Hutchison,
Ranking Member,
Committee on Commerce, Science, and Transportation,
U.S. Senate,
Washington, DC.

Dear Chairman Rockefeller and Ranking Member Hutchison:

    I am writing as the President and Chief Executive Officer of 
Outdoor Channel, an independent cable network focused on hunting, 
fishing, and outdoor adventure. We appreciate the opportunity to share 
our perspective on the pending merger between Comcast and NBC 
Universal--and to tell you why we believe that Comcast has been a good 
partner--and why the dynamics of the video business, in our opinion, 
will encourage Comcast to continue to be a good partner following its 
merger.
    First, to give you some perspective on what it means to be an 
independent content provider in today's cable landscape, and some 
perspective on the audience we uniquely serve, let me provide you with 
some background on Outdoor Channel. Our network is the quintessential 
independent programmer. We were originally founded in 1994 by a family 
of outdoor enthusiasts as a programming service for other enthusiasts. 
In the last 16 years, we have grown into a profitable, financially 
stable publicly traded company (NASDAQ: OUTD) with annual revenue in 
excess of $75 million.
    Outdoor Channel features quality programming designed to educate 
and entertain outdoor enthusiasts of all skill levels. We promote the 
traditional outdoor activities that are a vital part of our national 
heritage including fishing, hunting, shooting sports and other outdoor 
adventures. Our programs are designed to appeal to enthusiasts of all 
ages with a focus on activities that the entire family can enjoy in the 
great outdoors. Outdoor Channel promotes the spirit of conservation in 
all of our programs, emphasizing responsible hunting, fishing and 
habitat maintenance. We also broadcast programs that highlight 
conservation and preservation initiatives, helping outdoor enthusiasts 
understand the importance of maintaining and improving our lands. 
According to Nielsen Media Research, we serve approximately 36 million 
cable, satellite and telco subscribers in both rural and urban 
communities around the country.
    It is important to emphasize that the key to our success as an 
independent network is that we have continued to invest heavily in our 
business. Our ongoing investments in compelling programming that 
includes the best and brightest celebrity talent, innovative formats 
like High Definition (HD) and Video on Demand (VOD) and building a 
robust digital presence has made our growth possible and enabled us to 
maintain our leadership position. We have also heavily invested in 
branding, marketing and research to support our sales and marketing 
efforts.
    Against that background, let me turn to Outdoor Channel's 
relationship with Comcast. Comcast has been an important partner for 
us, and our relationship has been mutually beneficial. Given my 
experience in the cable television industry, I can attest that with 
Comcast, our carriage negotiations, back office functions and day to 
day dealings have always been reasonable and forthright.
    Outdoor Channel relies on cable distributors like Comcast to 
provide household delivery in two ways. First, we look for Comcast to 
carry our network in the greatest number of cable systems possible. 
Comcast evaluates the fit for each network on a market specific basis 
and is under no obligation to carry Outdoor Channel in every market it 
serves. With that carriage flexibility in mind, we are pleased to be 
carried in most of Comcast's markets around the country. In the markets 
where Outdoor Channel is available on Comcast's channel line-up, 
Outdoor Channel reaches approximately 30 percent of the total potential 
subscribers.
    Second, Outdoor Channel provides Comcast the latitude to package 
Outdoor Channel in ways that best serve their markets and business 
objectives. Over the past 2 years, in recognition of Outdoor Channel's 
broad appeal and program quality improvements, Comcast has repackaged 
our network to more highly penetrated packages that reach substantially 
greater numbers of potential viewers.
    Comcast, like other distributors, has seen the value of Outdoor 
Channel increase over time. They have recognized that our network is 
more than a concept--it's a proven, sustainable entity. As we've grown 
our business, we've proven that we are filling a critical content void 
in the market, and we have staying power. Considering Outdoor Channel's 
growing base of viewers, high-quality programming and innovative 
formats like HD, Comcast has continued to give us additional 
opportunities to bring our network to new markets.
    We were particularly pleased to see the interest we were receiving 
for upgraded packaging at the local system level supported at Comcast's 
corporate office where these decisions are ultimately approved. We have 
invested in staffing a professional field sales force and we were 
gratified to see the benefit of this investment, coupled with our 
commitment to best in class programming, paying dividends in the form 
of increased subscriber growth. We are encouraged that continued 
investment in first-rate content, advanced technology such as HD, and 
innovative marketing partnerships will continue to be recognized with 
additional growth opportunities for our networks throughout Comcast's 
systems.
    Additionally, Outdoor Channel looks toward distributors like 
Comcast to be strong marketing partners. Each year, we run two network 
consumer promotions: Spring Fever and Gear Up & Go. The purpose of 
these sweepstakes-based promotions is to enhance our brand's awareness 
and increase viewership and consumer engagement. During these 
promotions, we partner with cable affiliates, asking them to run 
promotional television spots on their systems to increase sweepstakes 
enrollment and programming tune-in. Historically, Comcast systems have 
participated heavily in these promotions. For the 2009 Gear Up & Go 
promotion, Comcast systems representing over 4 million subscriber 
households participated. These Comcast systems ran promotional 
television spots valued in excess of $1.5 million which in turn helps 
us to increase viewing which drives our advertising sales business.
    In line with our belief in the compelling logic of thoughtful, 
sustainable independent programming, we have taken note of the 
``Commitments'' Comcast and NBCU have made in their testimony to 
legislators as guarantees of their post merger intentions. We are 
especially encouraged by Commitment #13--``Carriage for Independent 
Programmers.'' We applaud the concept behind that commitment of adding 
new independently owned and operated channels to Comcast's digital 
lineup. At the same time, as one of the few true independents operating 
today, we frankly would like to see that commitment modified to include 
granting broader distribution to proven independents whose programming 
capabilities and financial stability are already established.
    In closing, I would like to draw the Chairman's attention to 
another aspect of our relationship with Comcast that we believe speaks 
to a larger sense of that company's progressive attitude toward 
programmers and to its role as a supporter of the social responsibility 
initiatives that are dear to us and our viewers. Outdoor Channel 
participates in dozens of community initiatives each year. Together 
with our local distribution partners in markets across the country, we 
organize events to highlight and benefit conservation-related causes 
and mobilize outdoor enthusiasts to make a positive impact on their 
communities.
    Comcast has become a major partner for us in local markets as we 
develop, organize and participate in community campaigns in their 
systems' territories. One recent example was in Chattanooga, Tennessee 
where Outdoor Channel, Comcast Chattanooga and the Chattanooga Chapter 
of Safari Club International (SCI), teamed up with the Chattanooga 
Community Kitchen for the area's first annual ``Sportsmen Against 
Hunger'' event. This event was held this past October when local 
outdoor enthusiasts joined together to serve meals to the hungry. 
Together, we fed more than 300 people with donated food from local area 
residents. We can cite dozens of other similar local community 
examples, including our sponsorship with Comcast for the Eastern Sports 
& Outdoor Show, which attracted more than 800,000 outdoor enthusiasts 
and provided a significant economic boost for the host City of 
Harrisburg, Pennsylvania as well as the thousands of retailers 
associated with the event.
    With our long history working with Comcast, we have no doubts about 
its commitment to serving the public interest and working with 
independent programmers like Outdoor Channel. We've negotiated with 
Comcast for carriage in the past and expect that under this combined 
company, our carriage relationship will remain intact and unobstructed, 
and in no way impact any potential future negotiations. We expect the 
same as it relates to our community service initiatives and only hope 
that under a merged entity there will be additional new opportunities 
to develop and distribute Outdoor Channel content on Comcast Systems.
            Sincerely,
                                           Roger L. Werner,
                             President and Chief Executive Officer,
                                                       Outdoor Channel.
cc: Senator John F. Kerry, Chairman, Subcommittee on Communications and 
            Technology
Senator John Ensign, Ranking Member, Subcommittee on Communications and 
            Technology
                                 ______
                                 
                                               REELZCHANNEL
                                    Albuquerque, NM, March 10, 2010
Hon. Jay D. Rockefeller IV,
Chairman,
Committee on Commerce, Science, and Transportation,
U.S. Senate,
Washington, DC.
Hon. Kay Bailey Hutchison,
Ranking Member,
Committee on Commerce, Science, and Transportation,
U.S. Senate,
Washington, DC.

Re: Testimony of Stanley E. Hubbard Before the Commerce Committee of 
            the U.S. Senate

Dear Chairman Rockefeller and Ranking Member Hutchison:

    I appreciate this opportunity to share my perspective on the impact 
Comcast has had on independent cable and satellite networks attempting 
to gain acceptance and distribution in an increasingly crowded and 
competitive environment. Quite simply, without Comcast's support, 
REELZCHANNEL would probably never have been launched and would 
certainly not be approaching its fourth anniversary and the critical 50 
million subscriber mark.
    REELZCHANNEL is an independent cable and satellite network that is 
all about movies, the way Food Network, for example, is all about food. 
In fact, our tagline is TV ABOUT MOVIES* Hubbard Broadcasting, 
REELZCHANNEL's parent company, developed the channel's concept starting 
in 2000, refining the underlying idea, business premise and focus for 
more than a year before introducing the channel concept to the 
distribution marketplace, which includes cable and satellite.
    By way of background, Hubbard pioneered the Direct Broadcasting 
Satellite (DBS) industry in 1994, when it introduced the Digital 
Satellite System, in cooperation with DIRECTV, through its subsidiary 
U.S. Satellite Broadcasting (USSB). With USSB, we were a distributor of 
movie-driven services such as HBO and Showtime, and experienced first 
hand our subscribers' love affair with movies and the need for a 
service that would help viewers learn about and find more movies (in 
all windows of release) that would match their interests.
    Our business strategy with REELZCHANNEL was simple: we knew it was 
a difficult environment for new channels--especially independent 
channels not associated with large programming companies that have the 
ability to leverage their existing channels and business relationships 
into new channel launches of their own. We felt that, unlike other 
independents that had launched and failed over the years, it was 
important to get as many distribution agreements completed as possible 
PRIOR to committing to the massive expenditures required to launch and 
operate a national television network.
    To that end, in the summer of 2001, we first reached out to 
Comcast, then a recent and former competitor to our USSB, for an 
initial meeting with their top programming executives who welcomed us 
to their Philadelphia headquarters within weeks of our request. At that 
initial meeting, to a person, they were respectful of us as individuals 
and, in fact, enthusiastic about our ideas for REELZCHANNEL. They were 
also clear that since this was a first meeting it would take some time 
for us to prove our viability and to get to the point of entering into 
an actual distribution agreement, especially since we weren't launched 
yet and didn't yet have a target date for launch. But they did make 
specific suggestions on how to keep the process in forward motion: 
First, they encouraged us to present our ideas to some of their key 
people at systems and divisions in the field so that those folks could 
feed back their thoughts and ideas to the corporate programming 
department; and second, they asked us to keep them informed as we got 
closer to establishing an actual launch date, as well as our status in 
getting agreements done with other distributors around the country.
    We followed their advice, kept them informed of our progress toward 
launch, and did our diligence in the field. Over a period of 24 months 
we visited all of their key systems and divisions, and without 
exception we were met with helpful, interested people who encouraged us 
to press for a distribution agreement at the corporate level. Further, 
the Comcast people in the field provided detailed feedback to their 
corporate programming department about REELZCHANNEL.
    In 2004, Comcast programming executives orally agreed to enter into 
a distribution agreement with REELZCHANNEL and, over the following 
months, both sides negotiated in good faith, and executed a final 
agreement in September of 2005. Our agreement with Comcast was 
completed more than a year in advance of our actual launch, and proved 
to be a critical milestone for REELZCHANNEL because it demonstrated to 
the rest of the industry that Comcast was behind us and had vetted us 
as being viable. It is important to note that, as is the usual case, no 
specific commitments were made by Comcast in terms of distribution of 
our channel. Instead, we were granted what is known as a ``hunting 
license,'' essentially a ``right'' for us to approach their systems one 
by one, and, if those systems were truly interested, they could go 
ahead and launch us pending the approval of the division and corporate 
office that oversaw them.
    The Comcast agreement was also very important to the Hubbard 
Broadcasting board of directors in deciding whether to authorize the 
new business investment needed to launch REELZCHANNEL. Our financial 
model required distribution from both cable and satellite in order to 
be successful and an early distribution agreement with Comcast added 
significantly to our board's confidence in our ability to secure mass 
cable distribution as an important part of our business imperatives.
    Comcast has continued to play an important and straightforward role 
in REELZCHANNEL's development. The Comcast system in Minneapolis/Saint 
Paul became the first major metropolitan cable system to launch 
REELZCHANNEL coincidental with our launch in September, 2006. Today 
almost five million Comcast subscribers receive REELZCHANNEL as part of 
their subscription, including those located in large cities such as 
Chicago, Detroit, Boston, Atlanta, Houston and Miami, to name a few. We 
continue to work with Comcast's division and system management and are 
hopeful that in the next 12 to 24 months we will launch our service in 
systems in Seattle, Portland, Denver, Washington, D.C., and the San 
Francisco Bay area, among others. To date, in every instance of a local 
system wanting to launch REELZCHANNEL, Comcast corporate programming 
executives have approved the launch request.
    Comcast continues to support the independent REELZCHANNEL by adding 
us to more and more of their systems, even though the demands on 
bandwidth for both cable and satellite have continued to increase 
substantially since our initial meeting in 2001. The increasing demands 
on bandwidth are due to the rapid evolution of HDTV, high speed 
Internet services, telephony, expanded business services, the broadcast 
digital transition and more channels being introduced by large 
programming companies with the ability to leverage even the largest 
operators into launch commitments for their new channels. Comcast 
officials have always been clear on the realities of the changing 
environment and also clear on how we need to sharpen and shape our 
vision for our network so that REELZCHANNEL could become an even more 
compelling proposition. Accordingly, today, we are engaged in 
discussions with Comcast on a number of fronts. At their urging we have 
developed video-on-demand content for Comcast, and other distributors, 
that ties into and promotes our brand. They are also working with us on 
a 2010 roll-out of a high definition version of REELZCHANNEL and 
Comcast systems are enthusiastic participants in our big summer 
consumer promotion: The Guaranteed Movie Recommendation.
    In summary, we could not be more appreciative of the advice and 
support we have received from Comcast for the launch and development of 
our independent cable network, REELZCHANNEL. We have found the people 
at Comcast to be universally supportive of REELZCHANNEL ever since our 
initial conversations almost 9 years ago. Comcast personnel at the 
corporate headquarters and in the field across the Nation are 
consistently accessible, openly communicative to us and organized in a 
way that provides guidance, creative suggestions and committed follow-
up to help our business grow with them. We truly feel there is a 
commitment to our growth and economic well-being that is built on a 
sense of overall fairness and continuing mutual respect.
    The strength of our relationship is demonstrated by the steady 
stream of Comcast systems which continue to launch REELZCHANNEL. We 
believe that this relationship will remain strong in the future and we 
do not believe that the NBCU/Comcast merger will in any way affect that 
relationship or commitment to success of our independent network, 
REELZCHANNEL.
    Thank you for the opportunity to provide these insights. If you 
have any other questions, please contact me directly.
            Yours most respectfully,
                                        Stanley E. Hubbard,
                                                 President and CEO.

    Senator Kerry. And we thank you very much for coming today.
    We would like to have a seamless transition. If we could 
ask the next panel just to come up very quickly?
    We welcome Mr. Brian Roberts, Chairman, CEO of Comcast 
Corporation; Mr. John Wells, President of the Writers Guild of 
America, West; Dr. Mark Cooper, Director of Research, Consumer 
Federation of America; Ms. Colleen Abdoulah, President and CEO 
of WOW! Internet, Cable and Phone; and Mr. Christopher Yoo, 
Professor of Law and Communication at the University of 
Pennsylvania.
    Could we have order, please? And everybody take their seats 
rapidly.
    Senator Dorgan, or who is going to be--Senator Dorgan is 
going to chair.
    Senator Dorgan [presiding]. Why don't we begin? First of 
all, apologies to you. We have the FAA bill that this committee 
has written on the floor of the Senate, and so, a number of us 
are there and in other hearings as well. But I appreciate very 
much the witnesses on this panel coming to the Committee to 
testify.
    We have Mr. Brian Roberts, Chairman and CEO of Comcast 
Corporation. I believe that Senator Rockefeller has properly 
identified all of those on this panel. So I will not do that 
again.
    Why don't we begin, Mr. Roberts, with you? And as has been 
the case with all witnesses, the full statement will be made a 
part of the permanent record, and we would ask the witnesses to 
summarize.
    Mr. Roberts, you may proceed.

          STATEMENT OF BRIAN L. ROBERTS, CHAIRMAN AND 
          CHIEF EXECUTIVE OFFICER, COMCAST CORPORATION

    Mr. Roberts. Thank you, Mr. Chairman.
    It is a privilege to come here today and talk about 
Comcast's planned joint venture with GE regarding NBC 
Universal. My father, Ralph, seated behind me, started Comcast, 
as we heard, almost half a century ago with a single small 
cable system in Tupelo, Mississippi. And together, we have been 
able to build a national cable broadband and communications 
company, employing nearly 100,000 people.
    So in proposing to combine with NBC Universal, we are 
taking the next step in our improbable journey. I am proud of 
what we have been able to accomplish and especially pleased 
that my father is here with me today to share this important 
moment in Comcast history.
    Let me first briefly summarize the transaction. Under our 
agreement, Comcast will become the 51 percent owner and manager 
of NBC Universal. GE will still own 49 percent. We will create 
a new venture that combines NBCU's broadcast TV, cable 
programming, movie studio, and theme park businesses with 
Comcast limited video programming channels.
    The transaction puts two great American media and 
entertainment companies under one roof. It will help to deliver 
more diverse programming to millions of households, and it will 
also help to accelerate a truly amazing digital future for 
consumers.
    Together, Comcast and NBCU can help accelerate the delivery 
of anytime, anywhere multiplatform video experience Americans 
want. In combination, we will be a more creative and innovative 
company, and our success will stimulate our competitors to be 
more innovative, too. So this joint venture will be good for 
consumers, innovation, and competition.
    To leave no doubt about the benefits of the new NBCU, we 
have made a series of public interest commitments in writing, 
detailing how we will bring more local programming, more 
children's programming, and 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 quick examples.
    First, we volunteer to have the key components of the 
program access rules apply to our retransmission negotiations 
for NBC stations, even though those rules have never applied to 
retransmission consent negotiations.
    Second, we want independent programmers with quality and 
diverse content to know we are committed to help them reach an 
audience. So we have committed to add at least two new 
independently owned cable channels to our system every year 
beginning in 2011.
    Bringing NBCU and Comcast together is primarily a vertical 
combination. There is no significant overlap between the assets 
of the two companies. A vertical combination generally poses 
fewer competitive concerns. That also means no massive lay-
offs, no closure of facilities, nothing to produce hundreds of 
millions of dollars of ``synergies.''
    This is why some on Wall Street did not fall in love with 
this deal right away, but it is also why we believe 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. More than half 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 work in the 
future, and we are willing to discuss with the FCC having the 
program access rules bind us even if they were to be overturned 
by the courts.
    In the past decade, Comcast has come to Washington twice to 
seek 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 have spent billions of dollars upgrading cable systems 
to make them state-of-the-art. We created 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. We have created thousands of jobs and promoted 
diversity in our workforce. 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 
for the national treasures of NBC and NBC News. It is a 
breathtaking and humbling moment in our history, and we hope to 
have your support.
    Thank you very much.
    [The prepared statement of Mr. Roberts follows:]

           Prepared Statement of Brian L. Roberts, Chairman 
            and Chief Executive Officer, Comcast Corporation
    Mr. Chairman, and members of the Committee, I am pleased to appear 
before you today to discuss Comcast Corporation's (``Comcast'') planned 
joint venture with General Electric Company (``GE''), under which 
Comcast will acquire a majority interest in and management of NBC 
Universal (``NBCU''). The proposed transaction will combine in a new 
joint venture the broadcast, cable programming, movie studio, theme 
park, and online content businesses of NBCU with the cable programming 
and certain online content businesses of Comcast. This content-focused 
joint venture will retain the NBCU name. And I believe the new NBCU 
will benefit consumers and will encourage much-needed investment and 
innovation in the important media sector.
    How will it benefit consumers?
    First, the new venture will lead to increased investment in NBCU by 
putting these important content assets under the control of a company 
that is focused exclusively on the communication and entertainment 
industry. This will foster enhanced investment in both content 
development and delivery, enabling the new NBCU to become a more 
competitive and innovative player in the turbulent and ever-changing 
media world. Investment and innovation will also preserve and create 
sustainable media and technology jobs in the U.S.
    Second, the transaction will promote the innovation, content, and 
delivery that consumers want and demand. The parties have made 
significant commitments in the areas of local news and information 
programming, enhanced programming for diverse audiences, and more 
quality educational and other content for children and families.
    And finally, Comcast's commitment to preserve NBCU's journalistic 
independence and to sustain and invest in the NBC broadcast network 
will promote the quality news, sports, and diverse programming that 
have made this network great over the last 50 years. I discuss these 
specific and verifiable public interest commitments later in this 
testimony; for a summary of all voluntary commitments, see Attachment 
1.
    The new NBCU will advance key communications policy goals of 
Congress: diversity, localism, innovation, and competition. With 
Comcast's demonstrated commitment to investment and innovation in 
communications, entertainment, and information, the new NBCU will be 
able to increase the quantity, quality, diversity, and local focus of 
its content, and accelerate the arrival of the multiplatform, 
``anytime, anywhere'' future of video programming that Americans want. 
Given the intensely competitive markets in which Comcast and NBCU 
operate, as well as existing law and regulations, this essentially 
vertical transaction will benefit consumers and spur competition, and 
will not present any potential harm in any marketplace.
    NBCU, currently majority-owned and controlled by GE, is an American 
icon--a media, entertainment, and communications company with a storied 
past and a promising future. At the heart of NBCU's content production 
is the National Broadcasting Company (``NBC''), the Nation's first 
television broadcast network and home of one of the crown jewels of 
NBCU, NBC News. NBCU also has two highly regarded cable news networks, 
CNBC and MSNBC. In addition, NBCU owns Telemundo, the Nation's second-
largest Spanish-language broadcast network, with substantial Spanish-
language production facilities located in the U.S. NBCU's other assets 
include 26 local broadcast stations (10 NBC owned-and-operated stations 
(``O&Os''), 15 Telemundo O&Os, and one independent Spanish-language 
station), numerous national cable programming networks, a motion 
picture studio with a library of several thousand films, a TV 
production studio with a library of television series, and an 
international theme park business.
    Comcast, a leading provider of cable television, high-speed 
Internet, digital voice, and other communications services to millions 
of customers, is a pioneer in enabling consumers to watch what they 
want, when they want, where they want, and on the devices they want. 
Comcast is primarily a distributor, offering its customers multiple 
delivery platforms for content and services. Although Comcast owns and 
produces some cable programming channels and online content, Comcast 
owns relatively few national cable networks, none of which is among the 
30 most highly rated, and, even including its local and regional 
networks, Comcast accounts for a tiny percentage of the content 
industry. The majority of these content businesses will be contributed 
to the joint venture. The distribution side of Comcast (referred to as 
``Comcast Cable'') is not being contributed to the new NBCU and will 
remain under Comcast's ownership and control.
    The proposed transaction is primarily a vertical combination of 
NBCU's content with Comcast's multiple distribution platforms. 
Antitrust law, competition experts, and the FCC have long recognized 
that vertical combinations can produce significant benefits. They also 
have found that vertical combinations with limited horizontal overlaps 
generally do not threaten competition.
    The transaction takes place against the backdrop of a 
communications and entertainment marketplace that is highly dynamic and 
competitive, and becoming more so every day. NBCU--today and post-
transaction--faces competition from a large and growing roster of 
content providers. There are literally hundreds of national television 
networks and scores of regional networks. These cable networks compete 
for programming, for viewer attention, and for distribution on various 
video platforms, not only with each other but also with countless other 
video choices.
    In addition, content producers increasingly have alternative 
outlets available to distribute their works, free from any purported 
``gatekeeping'' networks or distributors. Today, NBCU has powerful 
marketplace incentives to purchase the best available programming, 
regardless of source. NBCU's programming schedule bears this out. Last 
week, third parties accounted for well over half of the 47 primetime 
(8-11pm) programs on NBC and its major cable channels (USA, Bravo, 
Oxygen, and SyFy). Post-transaction, the new NBCU will have the 
incentive and the financial resources to compete effectively with other 
leading content providers such as Disney/ABC, Time Warner, Viacom, and 
News Corp. by providing consumers the high-quality programming they 
want, and it will have no incentive--or ability--to restrict 
competition or otherwise harm the public interest.
    Competition is fierce among distributors as well. Today, consumers 
in every geographic area have multiple choices of multichannel video 
programming distributors (``MVPDs'') and can also obtain video content 
from many non-MVPDs. In addition to the local cable operator, consumers 
can choose from two MVPDs offering direct broadcast satellite (``DBS'') 
service--DirecTV and Dish Network--which are now the second and third 
largest MVPDs in America, respectively. Verizon and AT&T, along with 
other wireline overbuilders, are strong, credible competitors, offering 
a fourth MVPD choice to tens of millions of American households and a 
fifth choice to some. Indeed, as competition among MVPDs has grown, 
Comcast's nationwide share of MVPD subscribers has steadily decreased 
(it is now less than 25 percent, a share that the FCC has repeatedly 
said is insufficient to allow an MVPD to engage in anticompetitive 
conduct). Moreover, current market dynamics are more telling than 
static measures of market shares; over the past 2 years, Comcast lost 
more than 1.2 million net video subscribers while its competitors 
continued to add subscribers--DirecTV, Dish Network, AT&T, and Verizon 
added more than 7.6 million net video customers over the same time 
period.
    Consumers can also access high-quality video content from myriad 
other sources. Some households continue to receive their video through 
over-the-air broadcast signals, which have improved in quality and 
increased in quantity as a result of the broadcast digital television 
transition. Millions of households purchase or rent digital video discs 
(``DVDs'') from one of thousands of national, regional, or local retail 
outlets, including Walmart, Blockbuster, and Hollywood Video, as well 
as Netflix, MovieCrazy, Cafe DVD, and others who provide DVDs by mail. 
High-quality video content also is increasingly available from a 
rapidly growing number of online sources that include: Amazon, Apple 
TV, Blinkx, Blip.tv, Boxee, Clicker.com, Crackle, Eclectus, Hulu, 
iReel, iTunes, Netflix, Sezmi, SlashControl, Sling, Vevo, Vimeo, VUDU, 
Vuze, Xbox, YouTube--and many more. These sites offer consumers 
historically unprecedented quantities of professionally-produced 
content and user-generated content that can be accessed from a variety 
of devices, including computers, Internet-equipped televisions, 
videogame boxes, Blu-ray DVD players, and mobile devices. In addition, 
there is a huge supply of user-generated video content, including 
professional and quasi-professional content. YouTube, for example, 
which is by far the leader in the nascent online video distribution 
business, currently receives and stores virtually an entire day's worth 
of video content for its viewers every minute. And there are no 
significant barriers to entry to online video distribution. Thus, 
consumers have a staggering variety of sources of video content beyond 
Comcast and its rival MVPDs.
    The video marketplace truly has no gatekeepers. As the United 
States Court of Appeals for the D.C. Circuit observed last year, 
``[T]he record is replete with evidence of ever increasing competition 
among video providers: Satellite and fiber optic video providers have 
entered the market and grown in market share since the Congress passed 
the 1992 [Cable] Act, and particularly in recent years. Cable 
operators, therefore, no longer have the bottleneck power over 
programming that concerned the Congress in 1992. Second, over the same 
period there has been a dramatic increase both in the number of cable 
networks and in the programming available to subscribers.''
    The combination of NBCU and Comcast's content assets under the new 
NBCU--coupled with management of the new NBCU by Comcast, an 
experienced, committed distribution innovator--will enable the creation 
of new pathways for delivery of content to consumers on a wide range of 
screens and platforms. The companies' limited shares in all relevant 
markets, fierce competition at all levels of the distribution chain, 
and ease of entry for cable and online programming ensure that the risk 
of competitive harm is insignificant. Moreover, the FCC's rules 
governing program access, program carriage, and retransmission consent 
provide further safeguards for consumers, as do the additional public 
interest commitments the companies have made to the FCC.
    At the same time, the transaction's public interest benefits--
particularly for the public interest goals of diversity, localism, 
competition, and innovation--are substantial. Through expanded access 
to outlets, increased investment in outlets, and lower costs, the new 
venture will be able to increase the amount, quality, variety, and 
availability of content, thus promoting diversity. This includes 
content of specific interest to diverse audiences, children and 
families, women, and other key audience segments. While NBCU and 
Comcast both already have solid records in creating and distributing 
diverse programming, the transaction will enable the new NBCU to expand 
the amount, quality, variety, and availability of content more than 
either company could do on its own. The new venture will also be able 
to provide more and better local programming, including local news and 
information programming, thereby advancing localism. The new NBCU and 
Comcast will be more innovative and effective players in video 
programming and distribution, spurring other content producers and 
distributors to improve their own services, thus enhancing competition. 
Marrying NBCU's programming assets with Comcast's multiple distribution 
platforms will make it easier for the combined entity to experiment 
with new business models that will better serve consumers, thus 
promoting innovation.
    In addition, Comcast and NBCU have publicly affirmed their 
continuing commitment to free, over-the-air broadcasting. Despite a 
challenging business and technological environment, the proposed 
transaction has significant potential to invigorate NBCU's broadcasting 
business and expand the important public interest benefits it provides 
to consumers across this country. NBC, Telemundo, their local O&Os, and 
their local broadcast affiliates will benefit by having the full 
support of Comcast, a company that is focused entirely on 
entertainment, information, and communications and that has strong 
incentives--and the ability--to invest in and grow the broadcast 
businesses it is acquiring, in partnership with the local affiliates.
    Moreover, combining Comcast's expertise in multiplatform content 
distribution with NBCU's extensive content creation capabilities and 
video libraries will not only result in the creation of more and better 
programming, but will also encourage investment and innovation, 
accelerating the arrival of the multiplatform, ``anytime, anywhere'' 
future of video programming that Americans want. This is because the 
proposed transaction will remove negotiation friction that currently 
inhibits the ability of Comcast to implement its pro-consumer vision of 
multiplatform access to quality video programming. Post-transaction, 
Comcast will have access to more content that it can make available on 
a wider range of platforms, including the new NBCU's national and 
regional networks and Comcast's cable systems and video-on-demand 
(``VOD'') platform, and online. This increase in the value of services 
offered to consumers by the new company will stimulate competitors--
including non-affiliated networks, nonaffiliated MVPDs, and the large 
and growing roster of participants in the video marketplace--to improve 
what they offer to consumers.
    The past is prologue: Comcast sought for years to develop the VOD 
business, but it could not convince studio distributors--who were 
reluctant to permit their movies to be distributed on an emerging, 
unproven platform--to provide compelling content for VOD. This caution, 
though understandable in light of marketplace uncertainty, slowed the 
growth of an innovative and extremely consumer-friendly service. 
Comcast finally was able to overcome the contractual wrangling and 
other industry reluctance to participate in an innovative business 
model when it joined with Sony to acquire an ownership interest in 
Metro-Goldwyn-Mayer (``MGM''). This allowed Comcast to ``break the 
ice'' and obtain access to hundreds of studio movies that Comcast could 
offer for free on VOD. Thanks to Comcast's extensive efforts to foster 
the growth of this new technology, VOD has become very popular with 
consumers since it was invented in 2003--the same year Apple unveiled 
the iTunes Music Store. Comcast customers have now used Comcast's VOD 
service more than 14 billion times--that's over 40 percent more than 
the number of downloads that consumers have made from the iTunes Store 
since 2003. By championing the growth of VOD, Comcast has been able to 
benefit not only its customers but also program producers, and it has 
stimulated other MVPDs to embrace the VOD model.
    Similarly, there is every reason to believe that the transaction 
proposed here will create a pro-consumer impetus for making major 
motion pictures available sooner for in-home, on-demand viewing and for 
sustainable online video distribution--which, as the FCC has observed, 
will help to drive broadband adoption, another key Congressional goal.
    Comcast and the new NBCU will also be well positioned to help lead 
constructive efforts to develop consensus solutions to the problem of 
content piracy. NBCU has been a leading voice in the effort to reduce 
piracy in all its forms because it costs American jobs and trade 
opportunities. Comcast has consistently supported voluntary industry 
initiatives to deter piracy, educate consumers about copyright, and 
redirect them to legitimate sources of content. Together, the companies 
will redouble their efforts to persuade all stakeholders to work 
together on the problem, while ensuring that consumer privacy and due 
process are always respected.
    As noted above, the risk of competitive harm in this transaction is 
insignificant. Viewed from every angle, the transaction is pro-
competitive:
    First, combining Comcast's and NBCU's programming assets will give 
rise to no cognizable competitive harm. Even after the transaction, 
approximately six out of every seven channels carried by Comcast Cable 
will be unaffiliated with Comcast or the new NBCU. Comcast's national 
cable programming networks account for only about 3 percent of total 
national cable network advertising and affiliate revenues. While NBCU 
owns a larger number of networks, those assets account for only about 9 
percent of overall national cable network advertising and affiliate 
revenues. Therefore, in total, the new NBCU will account for only about 
12 percent of total national cable network advertising and affiliate 
revenues. The new NBCU will rank as the fourth largest owner of 
national cable networks (measured by total revenues), behind Disney/
ABC, Time Warner, and Viacom--which is the same rank that NBCU has 
today. Because both the cable programming market and the broader video 
programming market will remain highly competitive, the proposed 
transaction will not reduce competition or diversity, nor will it lead 
to higher programming prices to MVPDs, higher advertising prices to 
advertisers, or higher retail prices to consumers.
    Second, Comcast's management and ownership interests in NBCU's 
broadcast properties raise no regulatory or competitive concern. While 
Comcast will own both cable systems and a stake in NBC owned-and-
operated broadcast stations in a small number of Designated Market 
Areas (``DMAs''), the FCC's rules do not prohibit such cross-ownership, 
nor is there any policy rationale to disallow such relationships. 
Cross-ownership prohibitions that had been put in place decades ago 
have been repealed by actions of Congress, the courts, and the FCC. The 
case for any new prohibition, or any transaction-specific restriction, 
on cable/broadcast cross-ownership is even weaker today, given the 
increasingly competitive market for the distribution of video 
programming and robust competition in local advertising. And, 
importantly, each of the major DMAs in question has a significant 
number of media outlets, with at least seven non-NBCU over-the-air 
television stations in each DMA, as well as other media outlets, 
including radio. Thus, numerous diverse voices and a vibrantly 
competitive local advertising environment will remain following the 
combination of NBCU's broadcast stations and Comcast cable systems in 
each of the overlap DMAs. Indeed, as Professor Matthew Spitzer of the 
University of Southern California noted in expert testimony submitted 
to the FCC, ``[t]here is nothing in the fundamentally vertical 
structure of this transaction that would reduce the number of 
independent broadcast voices in any local market. After the 
transaction, all of NBCU's O&O broadcast stations will continue to 
operate and provide local news and other local programming. There is no 
consolidation of broadcast assets within any local markets as a 
consequence of this transaction.'' See Attachment 2, ``Expert 
Declaration of Matthew L. Spitzer Concerning Diversity and Localism 
Issues Associated with the Proposed Comcast-NBCU Transaction,'' January 
26, 2010, at 8.
    Third, the combination of Comcast's and NBCU's Internet properties 
similarly poses no threat to competition. There is abundant and growing 
competition for online video content. The dominant leader in online 
viewing (by far) is Google (through YouTube and other sites it has 
built or acquired), with nearly 55 percent of online video viewing. 
This puts Google well ahead of Microsoft, Viacom, and Hulu (a service 
in which NBCU holds a 32 percent, non-controlling interest), and even 
farther ahead of Fancast (operated by Comcast, and currently at well 
below one percent). All of these services competing with Google have 
low- or mid-single digits shares of online video viewing. There are 
countless other sites that provide robust competition and near-infinite 
consumer choice. Even if one restricts the analysis to ``professional'' 
online video content, the combined entity will still have a small share 
and face many competitors. On the Internet, content providers 
essentially control their own destinies since there are many third-
party portals as well as self-distribution options. Entry is easy. 
Thus, the transaction will not harm the marketplace for online video.
    Finally, a vertical combination cannot have anticompetitive effects 
unless the combined company has substantial market power in the 
upstream (programming) or downstream (distribution) market, and such 
circumstances do not exist here. As noted, the video programming, video 
distribution, and Internet businesses are fiercely competitive, and the 
proposed transaction does not reduce that competition. The recent 
history of technology demonstrates that distribution platforms are 
multiplying, diversifying, and increasingly rivalrous. Wired services 
have been challenged by both satellite and terrestrial wireless 
services. Cable has brought voice competition to the telephone 
companies; the telephone companies have added to the video competition 
that cable already faced; and both cable and phone companies are racing 
to deploy and improve broadband Internet. Static descriptions of 
markets have consistently failed to capture advances in distribution 
technologies. In this highly dynamic and increasingly competitive 
environment, speculative claims about theoretical problems arising from 
any particular combination should be subject to searching and skeptical 
scrutiny, given the accelerating power of technology to disrupt, 
continuously, all existing market structures.
    In any event, there is a comprehensive regulatory structure already 
in place, comprising the FCC's program access, program carriage, and 
retransmission consent rules, as well as an established body of 
antitrust law that provides further safeguards against any conceivable 
vertical harms that might be presented by this transaction. The program 
access and program carriage rules address different aspects of the 
relationship between networks and MVPDs, and the retransmission consent 
rules address aspects of the relationship between MVPDs and 
broadcasters.
    In a nutshell, the program access rules govern the process by which 
a satellite-delivered cable programming network that is affiliated with 
a cable operator sells its programming to MVPDs. These rules generally 
prohibit a cable operator from: (i) unreasonably influencing whether an 
affiliated network sells its programming to an unaffiliated MVPD (or 
the terms on which it does so), (ii) unreasonably discriminating in the 
prices, terms, and conditions of carriage arrangements among competing 
MVPDs, and (iii) establishing exclusive contracts between satellite-
delivered cable-affiliated programming networks and any cable operator.
    The program carriage rules apply to the process by which a cable 
operator--or any other MVPD--buys cable programming from unaffiliated 
programmers. These rules generally prohibit MVPDs from: (i) requiring 
an equity interest in a program network as a condition of carriage; 
(ii) coercing an unaffiliated program network to provide (or punishing 
an unaffiliated program network for not providing) exclusive rights as 
a condition of carriage; and (iii) unreasonably restraining the ability 
of an unaffiliated program network to compete fairly by discriminating 
on the basis of affiliation in the selection, terms, or conditions for 
carriage.
    The retransmission consent rules generally require that 
broadcasters and MVPDs bargain in good faith over retransmission 
consent (i.e., the right to retransmit a broadcaster's signal). Like 
the program access rules, the good-faith bargaining rules generally ban 
exclusivity and unreasonable discrimination.
    Although the competitive marketplace and regulatory safeguards 
protect against the risk of anticompetitive conduct, the companies have 
offered an unprecedented set of commitments to provide assurances that 
competition will remain vibrant. Comcast will commit voluntarily to 
extend the key components of the FCC's program access rules to 
negotiations with MVPDs for retransmission rights to the signals of NBC 
and Telemundo O&O broadcast stations for as long as the FCC's current 
program access rules remain in place (and Comcast has expressed a 
willingness to discuss with the FCC making the program access rules 
binding on it even if the rules were to be overturned by the 
courts).\1\ Of particular note, Comcast will be prohibited in 
retransmission consent negotiations from unduly or improperly 
influencing the NBC and Telemundo stations' decisions about whether to 
sell their programming, or the terms and conditions of sale, to non-
affiliated distributors. It would also shift to NBCU the burden of 
justifying any differential pricing between competing MVPDs. And the 
companies would accept the five-month ``shot clock'' that the 
Commission applies to program access adjudications that is intended to 
expedite resolution.
---------------------------------------------------------------------------
    \1\ In October 2007, the FCC released an Order extending for an 
additional 5 years the ban on exclusive contracts between vertically 
integrated programmers and cable operators--the one portion of the 
program access rules that Congress had slated to sunset in 2002. On 
appeal, Cablevision and Comcast have argued that the FCC applied an 
incorrect standard governing the circumstances under which the FCC may 
prevent the exclusivity rule from sunsetting automatically; and that 
the FCC was required to let the rule sunset, or at least narrow it. 
Comcast was motivated in large part by the inequity of applying an 
anti-exclusivity rule to cable, while our satellite competitors are 
able to use exclusive programming contracts against us. Oral argument 
was held on September 22, 2009. Contrary to the claims of some outside 
parties, Comcast has not challenged all of the features of the program 
access rules in this litigation or asserted that the exclusivity ban, 
or any other portion of the program access rules, is unconstitutional. 
Rather, we have challenged only the extension of the exclusivity ban, 
and have reminded the FCC and the courts that they must take the First 
Amendment into account when they make, review, or apply the program 
access rules.
---------------------------------------------------------------------------
    Moreover, the companies have offered concrete and verifiable 
commitments to ensure certain pro-consumer benefits of the transaction.
    In addition to the commitment to continue to provide free, over-
the-air broadcasting, mentioned previously, the companies have 
committed that following the transaction, the NBC O&O broadcast 
stations will maintain the same amount of local news and information 
programming they currently provide for 3 years following the closing of 
the transaction and will produce an additional 1,000 hours per year of 
local news and information programming for distribution on various 
platforms. The combined entity will maintain NBCU's tradition of 
independent news and public affairs programming and its commitment to 
promoting a diversity of viewpoints, maintaining the journalistic 
integrity and independence of NBCU's news operations.
    The companies also have committed that, within 12 months of closing 
the transaction, Telemundo will launch a new Spanish language digital 
broadcast channel drawing on programming from Telemundo's library. 
Additionally, Comcast will use its On Demand and On Demand Online 
platforms to increase programming choices available to children and 
families, as well as to audiences for Spanish-language programming. 
Within 3 years of closing the transaction, Comcast has committed to add 
1,500 additional programming choices appealing to children and families 
and 300 additional programming choices from Telemundo and mun2 to its 
VOD platforms. Comcast also will continue to provide free or at no 
additional charge the same number of VOD choices that it now provides, 
and will make available within 3 years of closing an additional 5,000 
VOD choices over the course of each month that are available free or at 
no additional charge.
    As Comcast makes rapid advances in video delivery technologies, 
more channel capacity will become available. So Comcast will commit 
that, once it has completed its digital migration company-wide 
(anticipated to be no later than 2011), it will add two new 
independently-owned and -operated channels to its digital line-up each 
year for the next 3 years on customary terms and conditions. 
Independent programmers would be defined as networks that: (i) are not 
currently carried by Comcast Cable, and (ii) are unaffiliated with 
Comcast, NBCU, or any of the top 15 owners of cable networks, as 
measured by revenues.
    With respect to public, educational, and governmental (``PEG'') 
channels, Comcast has affirmatively committed not to migrate PEG 
channels to digital delivery on any Comcast cable system until the 
system has converted to all-digital distribution, or until a community 
otherwise agrees to digital PEG channels, whichever comes first. 
Comcast has also committed to innovate in the delivery of PEG content 
On Demand and On Demand Online.
    The parties have proposed that these commitments be included in any 
FCC order approving the transaction and become binding on the parties 
upon completion of the transaction. A summary of the companies' 
commitments is attached to this testimony.
    In the end, the proposed transaction simply transfers ownership and 
control of NBCU from GE, a company with a very diverse portfolio of 
interests, to Comcast, a company with an exclusive focus on, and a 
commitment to investing its resources in, its communications, 
entertainment, and information assets. This transfer of control, along 
with the contribution of Comcast's complementary content assets, will 
enable the new NBCU to better serve consumers. The new NBCU will 
advance key public policy goals: diversity, localism, competition, and 
innovation. Competition, which is already pervasive in every one of the 
businesses in which the new NBCU--and Comcast Cable--will operate, 
provides abundant assurance that consumer welfare not just be 
safeguarded, but increased. Comcast and NBCU will succeed by competing 
vigorously and fairly.
    We intend to use the combined assets to accelerate and improve the 
range of choices that American consumers enjoy for entertainment, 
information, and communications. We would welcome your support.
                                 ______
                                 
                              Attachment 1
         Comcast/NBCU Transaction--Public Interest Commitments
    Comcast, GE, and NBC Universal take seriously their 
responsibilities as corporate citizens and share a commitment to 
operating the proposed venture in a way that serves the pubic interest. 
To demonstrate their commitment to consumers and to other media 
partners, the parties have made a set of specific, written commitments 
as part of their public interest filing with the Federal Communications 
Commission. Comcast, GE, and NBCU are committed to expanding consumer 
choice, ensuring the future of over-the-air broadcasting, enhancing 
programming opportunities, ensuring that today's highly competitive 
marketplace remains so, and maintaining journalistic independence for 
NBC's news properties. The parties' commitment to these principles will 
ensure that consumers are the ultimate beneficiaries of the proposed 
Comcast/NBCU transaction.
Applicants' Voluntary Public Interest Commitments
Local Programming
    Commitment #1. The combined entity remains committed to continuing 
to provide free over-the-air television through its O&O broadcast 
stations and through local broadcast affiliates across the Nation. As 
Comcast negotiates and renews agreements with its broadcast affiliates, 
Comcast will continue its cooperative dialogue with its affiliates 
toward a business model to sustain free over-the-air service that can 
be workable in the evolving economic and technological environment.
    Commitment #2. Comcast intends to preserve and enrich the output of 
local news, local public affairs and other public interest programming 
on NBC O&O stations. Through the use of Comcast's On Demand and On 
Demand Online platforms, time slots on cable channels, and use of 
certain windows on the O&O schedules, Comcast believes it can expand 
the availability of all types of local and public interest programming.

   For 3 years following the closing of the transaction, NBC's 
        O&O stations will maintain the same amount of local news and 
        information programming that they currently provide.

   NBC's O&O stations collectively will produce an additional 
        1,000 hours a year of local news and information programming. 
        This additional local content will be made available to 
        consumers using a combination of distribution platforms.
Children's Programming
    Commitment #3. Comcast will use its On Demand and On Demand Online 
platforms and a portion of the NBC O&Os' digital broadcast spectrum to 
speak to kids. Comcast intends to develop additional opportunities to 
feature children's content on all available platforms.

   Comcast will add 500 VOD programming choices appealing to 
        children and families to its central VOD storage facilities 
        within 12 months of closing and will add an additional 1,000 
        such VOD choices (for a total of 1,500 additional VOD choices) 
        within 3 years of closing. (The majority of Comcast's cable 
        systems will be connected to Comcast's central VOD storage 
        facilities within 12 months of closing and substantially all 
        will be connected within 3 years of closing.) Comcast will also 
        make these additional choices available online to authenticated 
        subscribers to the extent that Comcast has the requisite online 
        rights.

   For 3 years following closing, each of NBC's O&O stations 
        will provide one additional hour per week of children's 
        educational and informational programming utilizing one of the 
        station's multicast channels.

    Commitment #4. Comcast reaffirms its commitment to provide clear 
and understandable on-screen TV Ratings information for all covered 
programming across all networks (broadcast and cable) of the combined 
company, and to apply the cable industry's best-practice standards for 
providing on-screen ratings information in terms of size, frequency, 
and duration.

   NBCU will triple the time that program ratings remain on the 
        air after each commercial break (from 5 seconds to 15 seconds).

   NBCU will make program ratings information more visible to 
        viewers by using a larger format.

    Commitment #5. In an effort to constantly improve the tools and 
information available for parents, Comcast will expand its growing 
partnership with Common Sense Media (``CSM''), a highly respected 
organization offering enhanced information to help guide family viewing 
decisions. Comcast will work to creatively incorporate CSM information 
it its emerging On Demand and On Demand Online platforms and other 
advanced platforms, and will look for more opportunities for CSM to 
work with NBCU.

   Comcast currently gives CSM content prominent placement on 
        its VOD menus. Comcast and the new NBCU will work with CSM to 
        carry across their distribution platforms more extensive 
        programming information and parental tools as they are 
        developed by CSM. Comcast and NBCU will explore cooperative 
        efforts to develop digital literacy and media education 
        programs that will provide parents, teachers, and children with 
        the tools and information to help them become smart, safe, and 
        responsible users of broadband.

   Upon closing and pursuant to a plan to be developed with 
        CSM, Comcast will devote millions of dollars in media 
        distribution resources to support public awareness efforts over 
        the next 2 years to further CSM's digital literacy campaign. 
        The NBCU transaction will create the opportunity for CSM and 
        Comcast to work with NBCU's broadcast networks, local broadcast 
        stations, and cable networks to provide a targeted and 
        effective public education campaign on digital literacy, 
        targeting underserved areas, those with high concentrations of 
        low-income residents and communities of color, as well as 
        target Latino communities with specifically tailored Spanish-
        language materials.
Programming for Diverse Audiences
    Commitment #6. Comcast intends to expand the availability of over-
the-air programming to the Hispanic community utilizing a portion of 
the digital broadcast spectrum of Telemundo's O&Os (as well as offering 
it to Telemundo affiliates) to enhance the current programming of 
Telemundo and mun2.

   Within 12 months of closing the transaction, Telemundo will 
        launch a new Spanish language channel using programming from 
        Telemundo's library that has had limited exposure, to be 
        broadcast by each of the Telemundo O&O stations on one of their 
        multicast channels. The Telemundo network also will make this 
        new channel available to its affiliated broadcast stations on 
        reasonable commercial terms.

    Commitment #7. Comcast will use its On Demand and On Demand Online 
platforms to feature Telemundo programming.
    Commitment #8. Comcast intends to continue expanding the 
availability of mun2 on the Comcast Cable, On Demand, and On Demand 
Online platforms.

   Comcast will increase the number of VOD choices from 
        Telemundo and mun2 available on its central VOD storage 
        facilities from approximately 35 today, first to 100 choices 
        within 12 months of closing and then to a total of 300 
        additional choices within 3 years of closing. Comcast will also 
        make these additional choices available online to its 
        subscribers to the extent that it has the requisite online 
        rights.
Expanded Video On Demand Offerings At No Additional Charge
    Commitment #9. Comcast currently provides approximately 15,000 VOD 
programming choices free or at no additional charge over the course of 
a month. Comcast commits that it will continue to provide at least that 
number of VOD choices free or at no additional charge. In addition, 
within 3 years of closing the proposed transaction, Comcast will make 
available over the course of a month an additional 5,000 VOD choices 
via its central VOD storage facilities for free or at no additional 
charge.
    Commitment #10. NBCU broadcast content of the kind previously made 
available at a per-episode charge on Comcast's On Demand service and 
currently made available at no additional charge to the consumer will 
continue to be made available at no additional charge for the three-
year period after closing.
Public, Educational, and Governmental (``PEG'') Channels
    Commitment #11. With respect to PEG channels, Comcast will not 
migrate PEG channels to digital delivery on any Comcast cable system 
until the system has converted to all-digital distribution (i.e., until 
all analog channels have been eliminated), or until a community 
otherwise agrees to digital PEG channels, whichever comes first.
    Commitment #12. To enhance localism and strengthen educational and 
governmental access programming, Comcast will also develop a platform 
to host PEG content On Demand and On Demand Online within 3 years of 
closing.

   Comcast will select five locations in its service area to 
        test various approaches to placing PEG content on VOD and 
        online. Comcast will select these locations to ensure 
        geographic, economic and ethnic diversity, with a mix of rural 
        and urban communities, and will consult with community leaders 
        to determine which programming--public, educational and/or 
        governmental--would most benefit local residents by being 
        placed on VOD and online.

   Comcast will file annual reports to inform the Commission of 
        progress on the trial and implementation of this initiative.
Carriage for Independent Programmers
    Commitment #13. As Comcast makes rapid advances in video delivery 
technologies, more channel capacity will become available. So Comcast 
will commit that, once it has completed its digital migration company-
wide (anticipated to be no later than 2011), it will add two new 
independently-owned and -operated channels to its digital line-up each 
year for the next 3 years on customary terms and conditions.

   New channels are channels not currently carried on any 
        Comcast Cable system.

   Independent programmers are entities that are not affiliated 
        with Comcast, NBCU, or any of the top 15 owners of cable 
        networks (measured by revenue).
Expanded Application of the Program Access Rule Protections
    Commitment #14. Comcast will commit to voluntarily accept the 
application of program access rules to the high definition (HD) feeds 
of any network whose standard definition (SD) feed is subject to the 
program access rules for as long as the Commission's current program 
access rules remain in place.
    Commitment #15. Comcast will commit to voluntarily extend the key 
components of the FCC's program access rules to negotiations with MVPDs 
for retransmission rights to the signals of NBC and Telemundo O&O 
stations for as long as the Commission's current program access rules 
remain in place.

   Comcast will be prohibited in retransmission consent 
        negotiations from unduly or improperly influencing the NBC and 
        Telemundo O&O stations' decisions about the price or other 
        terms and conditions on which the stations make their 
        programming available to unaffiliated MVPDs.

   The ``burden shifting'' approach to proof of discriminatory 
        pricing in the program access rules will be applied to 
        complaints regarding retransmission consent negotiations 
        involving the NBC and Telemundo O&O stations.

   The five-month ``shot clock'' applied to program access 
        adjudications would apply to retransmission consent 
        negotiations involving the NBC and Telemundo O&O stations.
Journalistic Independence
    Commitment #16. The combined entity will continue the policy of 
journalistic independence with respect to the news programming 
organizations of all NBCU networks and stations, and will extend these 
policies to the potential influence of each of the owners. To ensure 
such independence, the combined entity will continue in effect the 
position and authority of the NBC News ombudsman to address any issues 
that may arise.
Labor-Management Relations
    Commitment #17. Comcast respects NBCU's existing labor-management 
relationships and expects them to continue following the closing of the 
transaction. Comcast plans to honor all of NBCU's collective bargaining 
agreements.
                                 ______
                                 
                              Attachment 2
                Expert Declaration of Matthew L. Spitzer
 Concerning Diversity and Localism Issues Associated with the Proposed 
               Comcast-NBCU Transaction--January 26, 2010
I. Introduction
    1. At the request of Comcast Corporation (``Comcast''), I have 
reviewed the proposed Comcast/General Electric (``GE'') transaction 
relating to NBC Universal (``NBCU'') with a focus on the core public 
interest concerns of diversity and localism that underlie the Federal 
Communications Commission's (the ``Commission'') broadcast ownership 
regulations.
    2. Some critical commentary already surrounds the proposed 
transaction, casting it as everything from a ``mega-merger'' \1\ to a 
``juggernaut'' \2\ to a ``train wreck.'' \3\ Such discourse rings 
hollow; familiar refrains and the automatic equation of ``big'' with 
``bad'' media provide little insight into the Commission's 
appropriately nuanced public interest inquiry. Instead, conceptualizing 
the proposed transaction in the modern media marketplace requires 
considered thought, and such an analysis shows that this transaction is 
not the type of transaction that implicates the Commission's core 
concern about a reduction in the diversity of voices. Thus, amidst 
alarmist claims that the proposed transaction ``poses a genuine threat 
to free expression and diversity of speech in our democratic society,'' 
\4\ I will calmly focus on the framework and core concerns of the 
Commission's traditional public interest inquiry.
---------------------------------------------------------------------------
    \1\ Press Release, Free Press, Comcast/NBC Universal Merger Bad for 
the Public Interest (Oct. 13, 2009).
    \2\ Id.
    \3\ Josh Silver, Too Big to Block? Why Obama Must Stop the Comcast-
NBC Merger, the Huffington Post, Nov. 13, 2009, http://
www.huffingtonpost.com/josh-silver/too-big-to-block-why-
obam_b_356826.html.
    \4\ The Editors, Should Consumers Fear the Comcast Deal?, N.Y. 
Times, Dec. 8, 2009 (quoting Andrew Jay Schwartzman, President, Media 
Access Project), http://roomfordebate.blogs.
nytimes.com/2009/12/08/should-consumers-fear-the-comcast-deal/
?pagemode=print.
---------------------------------------------------------------------------
    3. As discussed in detail below, I conclude that the proposed 
transaction, representing a fundamentally vertical combination of a 
content producer and a distributor, does not raise the traditional 
diversity and localism concerns regarding media consolidation and the 
reduction of local broadcast voices. As demonstrated herein, the 
Commission has been very concerned about mergers that reduce diversity 
of voices, such as the combination of two competing broadcast outlets, 
two cross-service broadcast outlets, or a newspaper and broadcaster in 
the same market.\5\ This is not that type of transaction.\6\
---------------------------------------------------------------------------
    \5\ See infra Part III.
    \6\ I base my analysis on information provided to me by Comcast and 
NBCU, from the Commission and other government agencies, and from 
academic, journalistic, and foundation sources. Where I rely on such 
information, I cite it here.
---------------------------------------------------------------------------
II. Qualifications
    4. I am a lawyer and an economist. I have a J.D. from the 
University of Southern California (``USC'') and a Ph.D. in Social 
Science from the California Institute of Technology (``Caltech''). I 
currently hold joint appointments at USC, where I am a Professor of 
Political Science and hold the Robert C. Packard Trustee Chair in Law, 
and at Caltech, where I am a Professor of Law and Social Science. 
Previously, from July 2000 through June 2006, I was Dean of the Gould 
School of Law at USC.
    5. Over the past 30 years, I have studied, taught, hosted 
conferences, and written about the Commission's regulation of 
broadcasting and cable television, including its regulation of media 
ownership and concentration. I was the founding director of the USC 
Center for Communication Law and Policy (http://cclp.usc.edu/) and in 
that capacity I created and hosted many conferences and roundtables on 
broadcasting and cable regulation. The topics ranged from a 
retrospective on the deregulation of cable television to an evaluation 
of sex and violence on television. In this capacity, I followed closely 
the Commission, Congress, and the broadcasting and cable industries, 
and categorized and evaluated the various arguments about media 
ownership.
    6. I currently teach Regulatory Policy and Administrative Law (at 
USC), Introduction to Law (at Caltech), and a graduate course in Law 
and Politics (at Caltech).
    Previously during my academic career, I have taught Broadcasting 
Regulation, Telecommunications Regulation, Antitrust Policy, Law and 
Economics, Torts, Property, and Administrative Law.
    7. I have published numerous books and articles on a variety of 
legal and economic issues associated with Broadcast and Cable 
Regulation.\7\ These include Public Policy Toward Cable Television 
(1997, AEI/MIT Press, with Thomas Hazlett) and ``Television Mergers and 
Diversity in Small Markets'' in the Journal of Competition Law and 
Economics (forthcoming 2010). Finally, I have attached my curriculum 
vitae, which includes a more formal list of my background, experience 
and publications.
---------------------------------------------------------------------------
    \7\ Seven Dirty Words and Six Other Stories: Controlling the 
Content of Print and Broadcast (1986). Public Policy Toward Cable 
Television (1997) (with Thomas Hazlett). Multicriteria Choice 
Processes: An Application of Public Choice Theory to Bakke, the FCC, 
and the Courts, 88 Yale L.J. 717 (1979). Radio Formats by 
Administrative Choice, 47 U. Chi. L. Rev. 647 (1980). Controlling the 
Content of Print and Broadcast, 58 S. Cal. L. Rev. 1349 (1985). 
Broadcasting and the First Amendment, in 1 New Directions IN 
Telecommunications Policy 155 (Paula R. Newberg ed., 1989). The 
Constitutionality of Licensing Broadcasters, 64 N.Y.U. L. Rev. 990 
(1989). Justifying Minority Preferences in Broadcasting, 64 S. Cal. L. 
Rev. 293 (1990). Testing Minority Preferences in Broadcasting, 68 S. 
CAL. L. REV. 841 (1995) (with Jeff Dubin). Dean Krattenmaker's Road Not 
Taken: The Political Economy of Broadcasting in the Telecommunications 
Act of 1996, 29 Conn. L. Rev. 353 (1996). An Introduction to the Law 
and Economics of the V-Chip, 15 Cardozo Arts & Ent. L.J. 429 (1997). A 
First Glance at the Constitutionality of the V-Chip Ratings System, in 
Television Violende and Public Policy [*page range*] (James T. Hamilton 
ed., 1998). Turner, Denver and Reno, in A Communications Cornucopia: 
Markle Foundation Essays on Information Policy 172-217 (Roger Noll & 
Monroe Price eds., 1998). Digital Television and the Quid Pro Quo, 2 
Bus. & Pol. 115 (2000) (with Thomas Hazlett). Advanced Wireless 
Technologies and Public Policy, 79 S. Cal. L. Rev. 595 (2006) (with 
Thomas W. Hazlett). Television Mergers and Diversity in Small Markets, 
J. Comp. L. & Econ. (forthcoming 2010).
---------------------------------------------------------------------------
III. Summary of Transaction Structure
    8. On December 3, 2009, Comcast and GE announced an agreement 
pursuant to which Comcast would acquire a majority interest in NBCU and 
its affiliated broadcast licensee companies from GE.\8\ The transaction 
will create a joint venture that combines, inter alia, NBCU's national 
broadcast networks (NBC and Telemundo), NBCU's owned and operated 
(``O&O'') broadcast television stations, cable programming networks, 
theme parks, and a motion picture studio (Universal), with Comcast's 
cable programming and regional sports networks, as well as certain 
online content businesses of Comcast. Upon closing, Comcast and GE will 
own 51-percent and 49-percent shares in the joint venture, 
respectively. Thus, the transaction is fundamentally a vertical 
integration of content (in the joint venture) with distribution 
(Comcast's cable systems held outside the joint venture).
---------------------------------------------------------------------------
    \8\ Comcast and GE to Create Leading Entertainment Company, Joint 
Announcement by Comcast Corporation and General Electric Company (Dec. 
3, 2009) available at http://www.genewscenter.com/content/
detaiLaspx?ReleaseID=9206&NewsAreaID=2.
    Accompanying the announcement, the applicants set forth certain 
voluntary Public Interest Commitments that build on their strengths and 
histories of service to the public, particularly in the areas of 
diversity and local programming. Of note, the applicants have committed 
to ``continuing to provide free over-the-air television through [NBCU's 
0&0] stations and through local broadcast affiliates across the 
nation,'' to ``using the combined resources of NBC and Comcast to 
strengthen localism,'' to ``ensuring that the content of NBC's news and 
public affairs programming [will] not be influenced by the non-media 
interests of [its corporate parents],'' to ``mak[ing] an expanded 
commitment to meeting the viewing needs of children, and the needs of 
parents to better control their family's viewing,'' and to 
``expand[ing] the availability of over-the-air programming to the 
Hispanic community.'' Letter from David L. Cohen, Executive Vice 
President, Comcast Corporation, Comcast/ GE Announcement Regarding NBC 
Universal (Dec. 3, 2009) (``December 3 Cohen Letter'').
---------------------------------------------------------------------------
    9. This transaction is not the sort of horizontal merger that has 
been at the core of the concerns about localism and diversity over the 
past several decades. The Commission has been very concerned about 
mergers that combine two or more broadcasters within the same service 
in the same market. The Commission has also been concerned about 
mergers of broadcasters in different services within the same 
market.\9\ These concerns, in fact, led the Commission decades ago to 
adopt numerous structural rules that control the ability of 
broadcasters to merge in the same market.\10\ These rules are founded 
on the concepts that having a healthy and robust marketplace of ideas 
requires independent voices, that the public benefits from having many 
types of programs from which to choose, and that a broadcaster must 
address the needs, interests, and issues of concern of the community 
that it is licensed to serve. And, of course, horizontal mergers 
between television stations and daily newspapers in the same market 
have generally been prohibited by structural ownership rules adopted in 
1975.\11\
---------------------------------------------------------------------------
    \9\ See, e.g., Rules and Policies Concerning Multiple Ownership of 
Radio Broadcast Stations in Local Markets, Notice of Proposed 
Rulemaking and Further Notice of Proposed Rulemaking, 16 FCC Rcd 19861, 
19863  6 (2001) (``In the early 1970s, the Commission briefly 
restricted local radio ownership further by prohibiting, with certain 
exceptions, common ownership of different service broadcast stations in 
the same market. These limits were designed to advance diversity by 
maximizing the number of independent owners of broadcast media in a 
market.'') (internal citation omitted).
    \10\ Id. at 19899 (``The effects of a proposed transaction on the 
diversity of voices and economic competition in a given market have 
long been core considerations in making this public interest 
determination. The Commission's concern for diversity and competition 
in broadcast markets has prompted us to adopt and maintain structural 
ownership rules intended to vindicate these interests.'').
    \11\ See 2006 Quadrennial Regulatory Review--Review of the 
Commissions Broadcast Ownership Rules and Other Rules Adopted Pursuant 
to Section 202 of the Telecommunications Act of 1996, 23 FCC Rcd 2010, 
2018-19 1111  13-14 (2008) (``2006 Quadrennial Review Order'') 
(adopting a presumption that ``certain limited combinations in the of 
newspaper and broadcast facilities in the largest markets are in the 
public interest''), appeal pending, Prometheus Radio Project v. FCC, 
Nos. 08-3078 et al., (3d. Cir. Apr. 14, 2009); See generally Chancellor 
Media/Shamrock Radio Licenses, L.L.C. and Cox Radio, Inc., 15 FCC Rcd 
17053, 17055 6 (2000) (``In adopting the 1975 rule that generally 
prohibited the common ownership of a newspaper and broadcast station 
serving the same community, the Commission made it clear that fostering 
diverse viewpoints from antagonistic sources is at the heart of our 
licensing responsibility.'').
---------------------------------------------------------------------------
    10. But this transaction has none of these elements. It is, from 
the standpoint of traditional Commission concerns, almost entirely a 
vertical transaction. Comcast does not have a broadcast network (or a 
daily newspaper) and has modest cable programming assets, and NBCU is 
bringing a pair of broadcast networks and a number of local 
broadcasting stations. Conversely, NBCU does not provide cable, high-
speed Internet, or digital voice services, which form the bulk of 
Comcast's business. Thus, in terms of traditional considerations, 
combining the NBCU content with Comcast distribution does not result in 
the sort of reduction in the number of local broadcast voices that has 
prompted Commission concern.\12\ Instead, at its core, it is much more 
a vertical combination, putting together a company which produces 
popular content (NBCU) with a company that distributes content over 
cable television systems (Comcast).
---------------------------------------------------------------------------
    \12\ There are some possible horizontal elements in the combination 
of cable networks, but these do not represent the traditional, core 
concerns of the Commission. Because the horizontal aspects of this 
merger involving cable networks are very unlikely to have any 
significant effect on over-the-air broadcast diversity and localism, I 
will not discuss them in this Declaration. In addition, there are 
vertical aspects of the transaction that will be examined, particularly 
under the competition prong of the public interest standard. Others 
will examine pricing issues within the vertical aspects of the 
transaction. In terms of diversity and localism, the vertical aspects 
of the transaction are extremely unlikely to be troublesome. Creation 
of a problem in diversity or localism in the broadcast markets, as a 
result of the vertical elements of this transaction, would require a 
very convoluted and improbable mechanism.
---------------------------------------------------------------------------
IV. Public Interest Concerns of Diversity and Localism
    11. The Commission must determine whether the proposed transaction 
would comply with the Communications Act of 1934 (``Communications 
Act''), other applicable statutes, and its own rules.\13\ As part of 
this inquiry, the Commission must determine whether the applicants for 
transfer or assignment of broadcast licenses have shown that the public 
interest, convenience, and necessity will be served by the proposed 
transaction.\14\
---------------------------------------------------------------------------
    \13\ See Clear Channel Communications, Inc., 23 FCC Rcd 1421, 1423 
 3 (2008); Citadel Broadcasting Corp. and The Walt Disney Co., 22 FCC 
Red 7083, 7104  50 (2007).
    \14\ 47 U.S.C.  310(d).
---------------------------------------------------------------------------
    12. There are a number of rules that control directly the ownership 
structure and market behavior of broadcasters, cable systems, and cable 
networks.\15\ The Commission's structural rules, notably its media 
ownership rules, include limitations on newspaper/broadcast cross-
ownership in a single market,\16\ radio/television cross-ownership in 
particular markets,\17\ ownership of multiple television stations in a 
single market,\18\ ownership of multiple radio stations in a single 
market,\19\ national reach of television stations owned by a single 
entity,\20\ and dual broadcast network rules.\21\ These media ownership 
rules are designed to foster the Commission's longstanding public 
interest policies of competition, diversity, and localism.\22\ And more 
specifically, as further described below, each of these rules is 
intended to protect against reduction in the number of independent 
broadcast voices in a local market. Indeed, with respect to 
transactions involving broadcast licenses, the Commission's central 
theory has been that maintaining a sufficient number of independent 
voices is crucial to supporting the core concerns of diversity and 
localism.\23\
---------------------------------------------------------------------------
    \15\ Also relevant to the proposed transaction is the lack of 
applicable rule. The DC Circuit vacated the once-extant cable/broadcast 
cross-ownership rule, opining ``that the Commission's diversity 
rationale for retaining the [Cable/Broadcast Cross-Ownership] Rule is 
woefully inadequate.'' Fox Television Stations, Inc. v. FCC, 280 F.3d 
1027 (D.C. Cir. 2002), rehearing granted, 293 F.3d 537 (D.C. Cir. 2002) 
(vacating cable-broadcast cross-ownership rule); 1998 Biennial 
Regulatory Review--Review of the Commission`s Broadcast Ownership Rules 
and Other Rules Adopted Pursuant to Section 202 of the 
Telecommunications Act of 1996, 18 FCC Rcd 3002 (2003) (repealing 
cable/broadcast cross-ownership rule)). The DC Circuit also has 
remanded the horizontal ownership rule adopted by the Commission for 
further consideration. The Commission's Cable Horizontal and Vertical 
Ownership Limits, Fourth Report & Order and Further Notice of Proposed 
Rulemaking, 23 FCC Rcd 2134, 2187-92  125-34 (2008) (``2008 Cable 
Ownership Order''), vacated Comcast Corp. v. FCC, 579 F.3d 1, 23 (D.C. 
Cir. 2009) (holding the [horizontal] 30 percent subscribership limit as 
arbitrary and capricious because ``the Commission failed adequately to 
take account of the substantial competition cable operators face from 
non-cable video programming distributors.'').
    \16\ 2006 Quadrennial Review Order, 23 FCC Rcd at 2018-57  13-79.
    \17\ Id. at 2057-60  80-86.
    \18\ Id. at 2060-69  87-109.
    \19\ Id. at 2069-82 IN 110-38.
    \20\ See id. at 2084  142 n.454 (noting that Section 6290) of the 
2004 Consolidated Appropriations Act ``amends Section 202(c) of the 
1996 Act to direct the Commission to modify the national television 
ownership limit, contained in section 73.3555 of the Commission's 
rules, to specify 39 percent as the maximum aggregate national audience 
reach of any single television station owner.'') (citing 47 U.S.C. 
202(c)(1)).
    \21\ Id. at 2082-84  139-41.
    \22\ 2006 Quadrennial Review Order, 23 FCC Rcd at 2016-17  9 
(``The media ownership rules are designed to foster the Commission's 
longstanding policies of competition, diversity, and localism. We set 
these policies out in detail in the 2002 Biennial Review Order, and we 
reaffirm those goals.'') (citing 2002 Biennial Regulatory Review--
Review of the Commission's Broadcast Ownership and Other Rules Adopted 
Pursuant to Section 202 of the Telecommunications Act of 1996, 18 FCC 
Rcd 13620, 13627-45  17-79 (2003) (``2002 Biennial Review Order''), 
aff'd in part and remanded in part, Prometheus Radio Project v. FCC, 
373 F.3d 372 (3d. Cir. 2004)).
    \23\ UTV of San Francisco Inc. et al, and Fox Television Stations, 
Inc., 16 FCC Rcd 14975, 14977  8 (2001) (``Where broadcast licenses 
are concerned, the effects of a proposed transaction on the diversity 
of voices and economic competition in a given market have long been 
core considerations in determining whether a transaction serves the 
public interest, convenience, and necessity.'').
---------------------------------------------------------------------------
    13. Throughout the last decade, the Commission has consistently 
applied a corresponding public interest framework to media 
transactions.\24\ In this Declaration, I will address the public 
interest concerns of diversity and localism as they relate to the 
proposed transaction.
---------------------------------------------------------------------------
    \24\ Applications for Consent to the Transfer of Control of 
Licenses from XM Satellite Radio Holdings Inc. to Sirius Satellite 
Radio Inc., 23 FCC Red 12348, 12364  30 (2008); News Corp. and DIRECTV 
Group, Inc. and Liberty Media Corp. for Authority to Transfer Control, 
23 FCC Rcd 3265, 3276-77  22 (2008); Applications for Consent of 
Assignment and/or Transfer of Control of Licenses from Adelphia 
Communications Corporation to Time Warner Cable Inc., and from Adelphia 
Communications Corporation to Comcast Corporation, 21 FCC Rcd 8203, 
8217-18  23 (2006); General Motors Corporation and Hughes Electronics 
Corporation, Transferors, and The News Corporation Limited, Transferee, 
19 FCC Rcd 473, 483  15 (2004); Applications for Consent to the 
Transfer of Control of Licenses from Comcast Corporation and AT&T 
Corp., Transferors, to AT&T Comcast Corporation, Transferee, 17 FCC Rcd 
23246, 23255  26 (2002).
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A. Diversity
    14. Diversity has long been considered by the Commission to be a 
guiding principle for its regulation of the media marketplace because 
it resonates with values implicit in the First Amendment.\25\ The two 
crucial aspects of diversity for purposes of evaluating this 
transaction are viewpoint diversity and program diversity.
---------------------------------------------------------------------------
    \25\ 2002 Biennial Regulatory Review--Review of the Commission's 
Broadcast Ownership Rules and Other Rules adopted Pursuant to Section 
202 of the Telecommunications Act of 1996, Cross-Ownership of Broadcast 
Stations and Newspapers, Rules and Policies Concerning Multiple 
Ownership of Radio Broadcast Stations in Local Markets, Definition of 
Radio Markets, 17 FCC Rcd 18503, 18516  33 (2002) (``2002 Biennial 
Review Notice'') (``It advances the values of the First Amendment, 
which, as the Supreme Court stated, `rests on the assumption that the 
widest possible dissemination of information from diverse and 
antagonistic sources is essential to the welfare of the public.''') 
(quoting Associated Press v. United States, 326 U.S. 1, 20 (1945)).
---------------------------------------------------------------------------
    15. Viewpoint diversity, defined as ``the availability of media 
content reflecting a variety of perspectives,'' \26\ is of central 
importance to the Commission. The Commission has stated that viewpoint 
diversity helps to ensure an informed citizenry in our democratic 
society.\27\ Accordingly, having independent voices in the media 
marketplace is needed for a healthy and robust marketplace of ideas, 
particularly with respect to news and public affairs.\28\ The basic 
idea is that if a single person were to gain control of a substantial 
amount or all of the media in a market, he or she could tilt the 
discussion of news and public affairs in a way that would mold public 
opinion to resemble his or her own, even if the facts and arguments 
would not support such a result. On the other hand, if there is a large 
number of independent voices in the media marketplace, any attempt to 
tilt coverage of news and public affairs will be counterbalanced by 
others, who can be counted on to point out the tilt and correct it. 
Thus, preventing concentrated political influence provides the 
strongest justification for viewpoint diversity and the maintenance of 
a large number of independent voices in news and public affairs 
programming.\29\
---------------------------------------------------------------------------
    \26\ 2002 Biennial Review Order, 18 FCC Rcd at 13627  19.
    \27\ Id. (citing Richard Brown, Early American Origins of the 
Information Age, A Nation Transformed by Info.: How Information Has 
Shaped U.S. from Colonial Times to the Present (Oxford Univ. Press, New 
York, NY, 2000) at 44-49 passim (``Because people widely believed that 
their republican government required an informed citizenry, they 
scrambled to make sure that they, and often their neighbors, were 
properly informed.'')).
    \28\ While the most important influence on our civic life comes 
from local news and public affairs, the Commission has acknowledged 
that entertainment programming may have significant public affairs 
content. Id. at 13631  33.
    \29\ See, e.g., 2006 Quadrennial Review Order, 23 FCC Rcd at 2038  
49 (``[O]ur new rule is designed to promote diversity by presumptively 
prohibiting combinations in the markets with the fewest number of 
voices, while presumptively permitting certain combinations in the 
largest markets where the loss of diversity is not a significant 
risk.''). See generally, 2002 Biennial Review Order, 18 FCC Rcd at 
13630  28 (``[O]wners of media outlets clearly have the ability to 
affect public discourse, including political and governmental affairs, 
through their coverage of news and public affairs. Even if our inquiry 
were to find that media outlets exhibited no apparent `slant' or 
viewpoint in their news coverage, media outlets possess significant 
potential power in our system of government.'').
---------------------------------------------------------------------------
    16. The main focus of concern for viewpoint diversity is local 
broadcast news, public affairs, and other local programming. Applying 
this insight, the Commission has stated that ``the greater the 
diversity of ownership in a particular area, the less chance there is 
that a single person or group can have an inordinate effect, in a 
political, editorial, or similar programming sense, on public opinion 
at the regional level.'' \30\ There is nothing in the fundamentally 
vertical structure of this transaction that would reduce the number of 
independent broadcast voices in any local market. After the 
transaction, all of NBCU's O&O broadcast stations will continue to 
operate and provide local news and other local programming. There is no 
consolidation of broadcast assets within any local market as a 
consequence of this transaction. Instead, this transaction transfers 
broadcast licenses from the control of GE to the control of Comcast. In 
no way does this combination of content with distribution impinge on 
the Commission's core concern--the reduction in the number of 
independent voices in local broadcast markets. Nor does the transaction 
impact national viewpoint diversity in any way.\31\
---------------------------------------------------------------------------
    \30\ Id. at 13632  38 (quoting Amendment of Sections 73.35, 
73.240, and 73.636 of the Commission's Rules Relating to Multiple 
Ownership of Standard, FM and Television Broadcast Stations, 45 F.C.C. 
1476, 1477  3 (1964)).
    \31\ In any event, the Commission has clearly concluded that there 
is a very robust market in national news and public affairs. Id. at 
13631  35.
---------------------------------------------------------------------------
    17. Program diversity refers to providing a large number of types 
of programs (dramas, sitcoms, ``reality'' a.k.a. nonscripted, science 
fiction, sports, news, children's, etc.) to viewers.\32\ The Commission 
clearly prefers to rely, in general, on competition in the video 
marketplace to ensure diversity of programming, rather than try to 
regulate the provision of program types directly.\33\
---------------------------------------------------------------------------
    \32\ Id. at 13631  36.
    \33\ The Commission restated this preference within the last 
decade. Id. at 13632  37. This is a long-running preference of the 
Commission. See FCC v. WNCN Listener's Guild, 450 U.S. 582, 590 (1981) 
(``[T]he Commission explained why it believed that market forces were 
the best available means of producing diversity in entertainment 
formats. First, in large markets, competition among broadcasters had 
already produced `an almost bewildering array of diversity' in 
entertainment formats. Second, format allocation by market forces 
accommodates listeners' desires for diversity within a given format, 
and also produces a variety of formats. Third, the market is far more 
flexible than governmental regulation and responds more quickly to 
changing public tastes. Therefore, the Commission concluded that `the 
market is the allocation mechanism of preference for entertainment 
formats, and . . . Commission supervision in this area will not be 
conducive either to producing program diversity [or] satisfied radio 
listeners.'') (citing Development of Policy re: Changes in the 
Entertainment Formats of Broadcast Stations, Memorandum Opinion and 
Order, 60 F.C.C.2d 858, 863-866 (1976)).
---------------------------------------------------------------------------
    18. There is no basis to anticipate that NBC, Telemundo, or any of 
their O&Os will alter programming in a way that would decrease the 
diversity of programming. The slight horizontal aspects of the merger 
(Comcast is contributing no over-the-air broadcast assets to the joint 
venture) indicate that there will be no significant, transaction-
specific incentive to change or reduce programming for the NBC or 
Telemundo networks, or in the programming of their O&Os. All program 
types that are currently represented will continue to be represented--
there is simply no credible incentive for the new entity to reduce 
program diversity, and no apparent reason to expect that such a 
reduction will take place. Thus, we should anticipate no reduction in 
program diversity in broadcast outlets. In addition, the December 3 
Cohen Letter demonstrates that the companies intend to increase the 
diversity of content available on multiple platforms as well as adding 
programming targeted to children and the Hispanic community.\34\ This 
provides further assurance that the public interest concern of 
diversity will be served by the transaction.
---------------------------------------------------------------------------
    \34\ Supra note 8.
---------------------------------------------------------------------------
    19. Of course, individual programs may be replaced as they lose 
popularity, as is the nature of series programming But the public 
interest goal--diversity of programming--is not about preserving 
individual shows. Rather, it is about ensuring a broad menu of types of 
programs for viewers. In this case, the types of programming that are 
supplied by the networks will almost certainly continue to be supplied; 
sports programming, comedies, dramas, science fiction, food, fashion, 
celebrity gossip, and so forth will continue to be available in 
abundance. In short, there is no significant probability that diversity 
of programming in broadcasting will be adversely affected by this 
transaction due to horizontal integration. The transaction is 
predominantly vertical in nature, and such combinations do not tend to 
induce the parties to eliminate program types that would otherwise be 
profitable to produce and distribute.
B. Localism
    20. The phrase ``localism'' covers many different topics,\35\ 
linked by the concern that a broadcaster must address the needs, 
interests, and issues of concern of the community that it is licensed 
to serve.\36\ The Comcast and NBCU transaction is irrelevant to most of 
these topics, and does not threaten, and in some cases may aid, the 
remainder. This result is reinforced by the applicants' voluntary 
public interest commitments in the December 3 Cohen Letter to 
strengthen localism through their owned-and-operated broadcast 
stations, On Demand and On Demand Online Programming platforms, and 
public, educational, and government (``PEG'') access programming.\37\ 
Putting more local content on more platforms will directly promote 
localism.
---------------------------------------------------------------------------
    \35\ There is a set of issues, usually addressed with fairly 
precise regulations, that is often addressed under the banner of 
localism. However, they are all quite tangential to evaluating the 
transaction in this case. These include disaster warnings, In the 
Matter of Broadcast Localism, Report and Notice of Proposed Rulemaking, 
MB Docket No. 04-233, 23 FCC Red 1324, 1358-61  81-87 (2008) (``2008 
Broadcast Localism Report''), Network Affiliation Rules, id. at 1361-64 
 88-96, payola and sponsorship identification, id. at 1364-69  97-
112, and license renewal procedures, id. at 1370-73  113-124. Because 
this transaction raises no genuine issue as to any of these concerns, I 
will not discuss them in text.
    \36\ Id. at 1326  2.
    \37\ Supra note 8.
---------------------------------------------------------------------------
    21. There is a significant overlap between localism and diversity 
because one of the central concerns of each goal is the extent to which 
broadcasters provide local news, public affairs, and other local 
programming Localism differs slightly because diversity focuses on the 
number of different types of local programs, while localism focuses 
more on the amount and source of local programs.\38\
---------------------------------------------------------------------------
    \38\ Typical community-responsive content includes local news 
stories, investigative features, consumer advocacy issues, politics, 
sports, community events, cultural offerings, weather, and emergency 
notices. 2008 Broadcast Localism Report, 23 FCC Rcd at 1338  31.
---------------------------------------------------------------------------
    22. The Commission has long been interested in whether broadcasters 
provide ``enough'' community-responsive programming.\39\ Because there 
is no reduction in the number of independent voices in any broadcast 
market in this transaction, there is nothing about the transaction that 
would lead us to expect any reduction in local news or public affairs 
programming, or similar community-responsive broadcast programming.\40\ 
In addition, the December 3 Cohen Letter demonstrates that the 
companies plan to increase locally-oriented programming.
---------------------------------------------------------------------------
    \39\ See id. at  30 (``Having recognized that certain groups have 
long complained that broadcasters do not air enough community-
responsive programming, the Commission sought comment on the nature and 
amount of such programming in the NOL The Commission inquired as to how 
broadcasters were serving the needs of their communities, whether they 
were providing enough community-responsive programming, whether the 
Commission could or should take action to ensure that broadcasters 
aired programming that served their communities' needs and interests, 
and whether non-entertainment or non-locally originated programming 
should constitute local programming.''). This, in turn, raises 
questions about what ``counts'' as community-responsive, how to combine 
time allocated to different categories (such as local public affairs 
and public service announcements), and whether the same rules should 
apply in all markets and to all classes of service.
    \40\ Thus, for example, regardless of how one views the studies 
cited by the Commission in its 2008 Broadcast Localism Report, 23 FCC 
Rcd at 1341-42 38 (citations omitted), and regardless of whether one 
thinks the amount of local news and public affairs increases with 
network ownership, all of the broadcast stations in this transaction 
were part of a network before the transaction, and will be part of a 
network after the transaction. In short, there is no change.
---------------------------------------------------------------------------
    23. Similarly, there is nothing about this transaction that would 
lead the applicants to reduce service to underserved audiences. The 
Commission has pursued policies directed at ensuring that ``enough'' 
programming is provided to underserved audiences, primarily women and 
racial and ethnic minorities.\41\ The Commission's theory is that all 
significant groups in the community of a licensee should get some level 
of service.\42\ This requires the Commission to walk a very fine line; 
intervening too far to require particular content threatens First 
Amendment values, while only issuing hortatory declarations may produce 
no action at all. The Commission's most recent approach to this subject 
relied on several structural responses. The Commission is proposing 
that broadcasters form community advisory boards that help to inform 
the broadcaster about the needs and issues of underserved 
audiences.\43\ Further, the Commission is considering ways to increase 
ownership of broadcast outlets by ``Eligible Entities,'' which may 
include minority- and women-owned businesses.\44\ No matter how the 
Commission resolves the question of underserved audiences, there is 
nothing in this fundamentally vertical transaction that reduces 
incentives to serve underserved audiences. There is no consolidation of 
broadcast assets at the local market level. Hence, the broadcast 
outlets will continue to have every incentive to appeal to and retain 
as wide and diverse an audience as possible.
---------------------------------------------------------------------------
    \41\ 2008 Broadcast Localism Report, 23 FCC Rcd at 1354-55  70.
    \42\ Id. at 1354  69.
    \43\ Id. at 1336-37  25-27, 1356  73. Note, this requirement is 
not yet effective.
    \44\ Id. at 1356-57  74-76.
---------------------------------------------------------------------------
    24. Within the localism sphere, the Commission also has expressed 
concern with the process of engagement among broadcasters, viewers, and 
community leaders. In the 1970s, the Commission promulgated a highly 
detailed set of regulations to govern the process of communication.\45\ 
In the 1980s these regulations were relaxed,\46\ but recently the 
Commission has proposed making them more formal for television.\47\ 
Nothing about this transaction will produce any significant change in 
the O&Os' interactions with viewers and community leaders. The stations 
can be expected to continue to comply with applicable regulations, will 
continue to learn about the needs and interests of their local 
communities, and will continue to air programming that responds to 
these needs and interests. There is no reason why the structure of the 
proposed transaction would affect the merging entities' incentives to 
continue to comply with, or indeed exceed, regulations in this area. 
Moreover, as outlined in the December 3 Cohen Letter, the companies are 
undertaking additional efforts to promote localism, which will further 
enhance the public interest benefits of the transaction.
---------------------------------------------------------------------------
    \45\ Primer on Ascertainment of Community Problems by Broadcast 
Applicants, Report and Order, 27 F.C.C.2d 650 (1971); Ascertainment of 
Community Problems by Broadcast Applicants, First Report and Order, 57 
F.C.C.2d 418 (1976).
    \46\ Deregulation of Radio, Report and Order, 84 F.C.C.2d 968 
(1981); Revision of Programming and Commercialization Policies, 
Ascertainment Requirements and Program Log Requirements for Commercial 
Television Stations, Report and Order, 98 F.C.C.2d 1076, 1099 (1984).
    \47\ 2008 Broadcast Localism Report, 23 FCC Rcd at 1333-37  16-
27.
---------------------------------------------------------------------------
V. Conclusion
    25. Based on public information provided to me by Comcast and NBCU, 
together with my analysis of publicly available information cited here, 
I have evaluated the consequences of the proposed transaction in terms 
of diversity and localism--two areas that have been at the center of 
the Commission's previous regulatory reviews with regard to the public 
interest. In my opinion, this transaction does not represent the sort 
of horizontal merger that has been at the core of the Commission's 
diversity and localism concerns over the past several decades. 
Notwithstanding the rhetoric of some, this transaction will not result 
in any reduction in the diversity of broadcast voices in a local market 
or any reduction in localism.
    26. In summary, this transaction is, from the standpoint of 
traditional Commission diversity and localism concerns, almost entirely 
a vertical transaction. I conclude that the proposed transaction will 
have no adverse effect on localism and diversity and thus is fully 
consistent with the Commission's the public interest approach along 
these dimensions. It is not the type of transaction that implicates the 
core concern of reduction in the diversity of voices in a local market.
    I, Matthew L. Spitzer, declare under penalty of perjury that the 
foregoing declaration is true and correct.
    Executed on January 26, 2010
    

    
                                 ______
                                 
                           Matthew L. Spitzer
    Gould School of Law
    University of Southern California
    Los Angeles, California 90089-0071

    California Institute of Technology
    Division of Humanities and Social Science
    Baxter Hall 228-77
    1200 E. California Boulevard
    Pasadena, CA 91125
Education
    Ph.D. (Social Science) California Institute of Technology, 1979
    J.D. University of Southern California, 1977
    B.A. (Mathematics)University of California, Los Angeles, 1973
Professional Associations and Service Positions
    Member, KUSC University Advisory Board, July 2000 to October 2001.
    Member, USC Budget Steering Group, August 2000 to July 2001.
    Member, USC Capital Planning Committee Radisson Subcommittee, 
August 2000 to August 2001.
    Member, USC Urban Deans Council, July 2000 to March 2004.
    Member, USC Provost's Council, August 2000 to June 2006.
    Member, Executive Committee, USC Provost's Council, August 2001 to 
June 2005.
    Member, Board of Directors, American Law and Economics Association, 
1997 to 2000.
    Member, Board of Editors, American Law & Economics Review, 1998 to 
2000.
    Director, American Law Deans Association, September 2000 to 2002.
    Member, American Law Deans Association, September 2000 to June 
2006.
    Member, The American Law Institute, 2000 to present.
    Member, The Fellows of the American Bar Foundation, 2003 to 
present.
    Member, Board of Governors, Beverly Hills Bar Association, 2005 to 
2006.
    Member, Law School Council, The Committee of Bar Examiners of The 
State Bar of California, 2005 to 2006.
    Member, Board of Directors, Telecommunications Policy Research 
Conference, 1993 to 1995.
    Organizing Committee for Telecommunications Policy Research 
Conference, 1991 to 1994.
Appointments
    Litigator with Nossaman, Krueger & Marsh, Los Angeles, California, 
from January 1977 to July 1979.
    Assistant Professor of Law at the Northwestern University School of 
Law, July 1979 to August 1981.
    Associate Professor of Law at the University of Southern California 
Law School, August 1981 to May 1984.
    Professor of Law at the University of Southern California Law 
School, May 1984 to July 1987.
    William T. Dalessi Professor of Law at the University of Southern 
California, August 1987 to June 2000.
    Visiting Professor of Law and Social Science in Division of 
Humanities and Social Sciences at California Institute of Technology, 
Pasadena, California, January 1988 to June 1988; January 1990 to June 
1990; January 1991 to June 1991; and January 1992 to June 1992.
    Professor of Law and Social Science in Division of Humanities and 
Social Sciences at California Institute of Technology, Pasadena, 
California, July 1992 to June 2001 and July 2006 to present.
    Visiting Associate in Division of Humanities and Social Sciences at 
California Institute of Technology, Pasadena, California, July 2001 to 
June 2006.
    Visiting Professor of Law at University of Chicago, October 1996 to 
December 1996.
    Visiting Professor of Law at Stanford University, September 1997 to 
December 1997.
    Director, Olin Program in Law and Rational Choice at the University 
of Southern California Law School, July 1990 to June 2000.
    Director, USC Center for Communications Law and Policy, August 1998 
to June 2005.
    Dean and Carl Mason Franklin Chair in Law at the University of 
Southern California Law School, July 2000 to June 2006.
    Dean and Carl Mason Franklin Chair in Law and Professor of 
Political Science at the University of Southern California Law School, 
November 2002 to June 2006.
    Robert C. Packard Trustee Chair in Law and Professor of Political 
Science at the University of Southern California Gould School of Law, 
July 2006 to present.
Publications--Books
    Seven Dirty Words and Six Other Stories: Controlling the Content of 
Print and Broadcast (1986, Yale University Press).
    Public Policy Toward Cable Television (1997, AEI/MIT Press)(with 
Thomas Hazlett).
    Administrative Law and Regulatory Policy: Problems, Text, and Cases 
(5th Edition, 2002, Aspen Law & Business)(with Stephen Breyer, Richard 
Stewart, and Cass Sunstein).
Publications--Articles
    1. An Economic Analysis of Sovereign Immunity in Tort, 50 S. Cal. 
L. Rev. 515 (1977).
    2. Multicriteria Choice Processes: An Application of Public Choice 
Theory to Bakke, the FCC, and the Courts, 88 Yale L.J. 717 (1979).
    3. A Reply to Consumption Theory, Production Theory, and Ideology 
in the Coase Theorem, 53 S. Cal. L. Rev. 1187 (1980) (with Elizabeth 
Hoffman).
    4. Radio Formats by Administrative Choice, 47 U. Chi. L. Rev. 647 
(1980).
    5. The Coase Theorem: Some Experimental Tests, 25 J. Law & Econ. 73 
(1982) (with Elizabeth Hoffman).
    6. Unions, Fairness, and the Conundrums of Collective Choice, 56 S. 
Cal. L. Rev. 465 (1983) (with Mayer Freed and Daniel Polsby).
    7. A Reply to Hyde, Can Judges Identify Fair Bargaining Procedures? 
57 S. Cal. L. Rev. 425 (1984) (with Mayer Freed and Daniel Polsby).
    8. Entitlements, Rights and Fairness: An Experimental Examination 
of Subjects' Concepts of Distributive Justice, 14 J. Legal Studies 259 
(1985) (with Elizabeth Hoffman). [Reprinted in Fall/Winter USC Cites at 
10-23; reprinted in Economic Justice (G. Brosio and H. Hockman Eds. 
1998).]
    9. Experimental Law & Economics: An Introduction, 85 Colum. L. Rev. 
991 (1985) (with Elizabeth Hoffman).
    10. Controlling the Content of Print and Broadcast, 58 So. Cal. L. 
Rev. 1349 (1985).
    11. Experimental Tests of the Coase Theorem with Large Bargaining 
Groups, 15 J. Legal Studies 149 (1986) (with Elizabeth Hoffman).
    12. Fear and Loathing in the Coase Theorem: Experimental Tests 
Involving Physical Discomfort, 16 J. Legal Studies 217 (1987) (with Don 
L. Coursey and Elizabeth Hoffman).
    13. Coasian Solutions to the Externality Problem in Experimental 
Markets, 97 Economic J. 388 (1987) (with Glenn W. Harrison, Elizabeth 
Hoffman and E. E. Rutstrom).
    14. Antitrust federalism and Rational Choice Political Economy: A 
Critique of Capture Theory, 61 So. Cal. L. Rev. 1293 (1988).
    15. Broadcasting and the First Amendment in Volume 1 of New 
Directions In Telecommunications Policy (1989, Duke Univ. Press).
    16. The Constitutionality of Licensing Broadcasters, 64 N.Y.U.L. 
Rev. 990 (1989).
    17. Comment on Noll and Krier's Some Implications of Cognitive 
Psychology for Risk Regulation, 19 J. Leg. Stud. 801 (1990).
    18. Justifying Minority Preferences in Broadcasting, 64 S. Cal. L. 
Rev. 293 (1990).
    19. Extensions of Ferejohn and Shipan's Model of Administrative 
Agency Behavior, 6 J.L. Econ. & Organization 29 (1990).
    20. Judicial Choice of Legal Doctrines, 8 J.L. Econ. & Organization 
8 (1992)(with Pablo Spiller).
    21. Term Limits, 80 Georgetown L.J. 477 (1992)(with Linda Cohen). 
[Reprinted in Maxwell Stearns, Public Choice and Public Law (1996).]
    22. Willingness-to-Pay versus Willingness-to-Accept: Legal and 
Economic Implications, 71 Washington University L.Q. 59 (1993)(with 
Elizabeth Hoffman).
    23. Solving the Chevron Puzzle, 57 Journal of Law & Contemporary 
Problems 65 (1994)(with Linda Cohen).
    24. Testing Minority Preferences in Broadcasting, 68 Southern 
California Law Review 841 (1995)(with Jeff Dubin).
    25. Judicial Deference to Agency Action, 69 Southern California Law 
Review 431 (1995)(with Linda Cohen).
    26. Framing the Jury, 81 Virginia Law Review 1342 (1995)(with Ed 
McCaffery and Dan Kahneman).
    27. Where is the Sin in Sincere? Sophisticated Exploitation of 
Naive Judges, 11 Journal of Law, Economics & Organization 32 
(1995)(with Pablo Spiller).
    28. Dean Krattenmaker's Road Not Taken: The Political Economy of 
Broadcasting in the Telecommunications Act of 1996, 29 Conn. L. Rev. 
353 (1996).
    29. An Introduction, to the Law and Economics of the V-Chip, 15 
Cardozo Arts & Entertainment Law Journal 429 (1997).
    30. Evaluating Direct Democracy: A Response, 4 University of 
Chicago Law School Roundtable 37 (1997).
    31. A First Glance at the Constitutionality of the V-Chip Ratings 
System, in Television Violence and Public Policy, Edited by James T. 
Hamilton (U. Mich. Press, 1998).
    32. Turner, Denver and Reno, pages 172-217 in A Communications 
Cornucopia: Markle Foundation Essays on Information Policy (1998, Roger 
Noll and Monroe Price, Eds.).
    33. Judicial Auditing, 29 Journal of Legal Studies 649 (2000) (with 
Eric Talley).
    34. The Government Litigant Advantage: Implications for the Law, 28 
Florida State Univ. L. Rev. 391 (2000) (with Linda R. Cohen).
    35. Digital Television and the Quid Pro Quo, 2 Business and 
Politics 115 (2000) (with Thomas Hazlett).
    36. Endowment Effects within Corporate Agency Relationships, 31 
Journal of Legal Studies 1 (2002) (with Jennifer H. Arlen and Eric L. 
Talley).
    37. Advanced Wireless Technologies and Public Policy, 79 Southern 
California Law Review 595 (2006)(with Thomas W. Hazlett).
    38. Television Mergers and Diversity in Small Markets, __ Journal 
of Competition Law And Economics __ (2010)(forthcoming).
Other Publications
    1. Book Review (of Human Inference by Richard Nisbett and Lee 
Ross), 9 Hofstra L. Rev. 1621 (1981).
    2. Book Review (of Misregulating Television by Stanley M. Besen, 
Thomas G. Krattenmaker, A. Richard Metzger, and John R. Woodbury), 2 
Information Econ. and Policy 91 (1986).
    3. Editor of Discussion in Symposium: Punitive Damages, 56 S. Cal. 
L. Rev. 1, 155 (1982).
    4. Bargaining Solutions to Environmental Problems, Neue Zurcher 
Zeitung, pg. 66, Sept. 16, 1987, (with R. S. Radford).
    5. Jurisprudence and Formal Models, 12 Int'l Rev. L. and Econ. 284 
(1992).
    6. Freedom of Expression, in The New Palgrave Dictionary of 
Economics and the Law, Edited by Peter Newman (Stockton Press, 1998).
    7. Book Review (of J. Gregory Sidak, Foreign Investment in 
Telecommunications), 59 Journal of Economic History 1124 (1999).
    8. Taking Over, 33 University of Toledo Law Review 213 (Fall 2001).
    9. Evaluating Valuing Empiricism (at Law Schools), 53 Journal of 
Legal Education 3 (September 2003).
    10. Diamonds and Deep Breathing, 36 University of Toledo Law Review 
191 (Fall 2004).
    11. Memorial Tribute to Dave Carroll, 78 Southern California Law 
Review 13 (2004).
Prize
    Ronald H. Coase Prize for excellence in law and economics

    Senator Dorgan. Mr. Roberts, thank you very much.
    Mr. Wells, nice to see you. You may proceed.

              STATEMENT OF JOHN WELLS, PRESIDENT, 
                 WRITERS GUILD OF AMERICA, WEST

    Mr. Wells. Thank you. Thank you, Mr. Chairman.
    I am honored to represent the 8,000 Writers Guild of 
America, West, WGAW, members working in film, television, and 
emerging media markets, including online video content. 
Virtually all of the entertainment programming and a 
significant portion of news programming seen on television and 
in film is written by our members and the members of our 
affiliate, Writers Guild of America, East.
    The WGAW has had a long association with NBC Universal. I 
have written and produced successful primetime television over 
the last few decades, including ER, The West Wing, and most 
recently, Southland. The WGAW is concerned that the impact of 
the proposed merger of NBC Universal and Comcast, what that 
merger will have on WGA content creators, entertainment 
industry workers, and U.S. consumers.
    Over the past several decades, our industry has 
consolidated from literally dozens of independent entrepreneurs 
and suppliers to a handful of large media conglomerates 
controlling content from start to finish. This has not been 
good for writers, who face fewer creative and economic 
opportunities, which, in turn, has a negative effect on job 
creation for other entertainment workers.
    The industry may point to the growth of channels and 
distribution platforms as evidence of opportunities for 
independent and diverse content, but the reality is that a 
handful of multinational companies control what viewers watch.
    WGAW analysis of primetime series on the Fall 2009 network 
schedule found that only 16 percent of series were 
independently produced across the 5 broadcast networks, with 
only 10 percent independently produced on NBC. Twenty years 
ago, under the financial syndication regulation, 78 percent of 
primetime lineup was independently produced, including ``Doogie 
Howser,'' ``The Wonder Years,'' ``Cosby Show,'' ``Who's The 
Boss?,'' and ``Designing Women.''
    With the integration of NBC Universal's cable networks, 
Comcast will have the incentive to bump other channels out of 
the most popular tiers in favor of its newly acquired networks. 
This new media superpower could, in effect, deny consumers the 
ability to select channels through its marketing practices of 
bundling channel position and tier placement.
    This proposed media consolidation also promises to have a 
significant impact on news programming. Diverse news sources 
are necessary for our democracy, and this merger will 
concentrate a significant amount of local, national, and online 
news programming within one company. We do not want to see a 
repeat of Clear Channel's consolidation of the radio industry. 
While Comcast has said it plans to preserve NBC local news, we 
fear this is a promise that could easily be forgotten in 
pursuit of corporate cost efficiencies.
    The greatest danger posed by the merger of the Comcast-NBC 
Universal is its effect on the developing online Internet video 
market. We believe Comcast may be tempted to use its position 
as the largest provider of residential Internet services to 
favor its newly acquired content and the content provided by 
other entertainment companies in reciprocal or monetary 
arrangements. This could come in the form of faster access to 
Comcast-NBC Universal content or other content that it chooses 
to favor, to the detriment of all other content now available 
to consumers over their Comcast-supplied Internet connections.
    Comcast's Xfinity service, in conjunction with the proposed 
merger, raises horizontal competition concerns as Comcast 
attempts to leverage its dominance of the cable market to 
control online Internet video. It could stifle competition 
between online video providers and strengthen the company's 
market control of video distribution by requiring a consumer to 
have a costly cable subscription to access online video.
    Most recently, we have seen NBC embracing this practice, 
restricting online access to some 2010 Winter Olympics content 
only to authenticated subscribers of a cable, satellite, or 
IPTV service. Comcast control over NBC Universal content will 
only enhance these anticompetitive efforts. The WGAW has 
serious concerns about Comcast-NBC Universal serving as the 
gatekeeper for video content online.
    In addition, Comcast would acquire 30 percent of Hulu and 
would likely put it behind an authentication wall. Consumers 
will no longer be able to watch TV episodes online without a 
cable subscription, which will reduce viewing of this content 
and, potentially, residual payments for writers and other 
talent.
    The Internet is quickly becoming our town square. To ensure 
a free and open Internet, we must require companies like 
Comcast to remain neutral in the delivery of content through 
its online service, both in the speed of delivery and the cost 
of delivery. As the creators of intellectual property, we 
believe in strong copyright protection and that piracy must be 
addressed through a combination of new technology and a strong 
enforcement regime, all the while maintaining a free Internet.
    Comcast has also said it would like to use its control over 
NBC Universal content to establish a model that can be 
replicated with other third parties. We are concerned that 
below-market transfer prices may become standards for pricing 
content from third-party suppliers. It is imperative that the 
interests of content creators and the entertainment industry 
workers not be sacrificed to enhance the value of Comcast's 
distribution business.
    The Guild shares the concerns about labor practices that 
have been voiced by the Communication Workers of America, the 
CWA. The CWA's experience with Comcast has demonstrated a poor 
track record of respecting worker rights. If approved, the 
merger of Comcast and NBC Universal will lead to a further 
consolidation of distribution and programming. The WGA believes 
that any public interest commitments should be made legally 
binding and enforceable by regulators.
    In the online space, regulators must require that Comcast-
NBC Universal not discriminate in favor of or against content 
on the Internet by agreeing to network neutrality rules on its 
Internet access service. This merged entity should also not be 
allowed to use its market power to deny distribution of 
programming on alternative services on the Internet that might 
compete with Comcast-NBC Universal's various platforms or video 
on demand services.
    To promote independent programming, Comcast must go beyond 
their offer of 2 independent channels, which will have little 
impact in a market of 500-plus channels, and be required to 
allocate 25 percent of primetime programming on its broadcast 
and cable networks to independent programming.
    The definition of independent programming should be crafted 
in such a way as to ensure maximum diversity of voices and 
artists on such programming, not to just provide more 
programming space for other media conglomerates. Local news and 
public broadcasting must be preserved to ensure community 
voices and diversity of opinions. And Comcast should be 
required to promote these programs through subsidized 
advertising campaigns.
    Thank you again for the opportunity to testify today. I 
look forward to answering any questions.
    [The prepared statement of Mr. Wells follows:]

             Prepared Statement of John Wells, President, 
                     Writers Guild of America, West
    Thank you, Chairman Rockefeller, Ranking Member Hutchison and 
members of the Committee for the opportunity to testify today. I am 
honored to represent the 8,000 Writers Guild of America, West (WGAW) 
members working in film, television and emerging new media markets 
including online video content. Virtually all of the entertainment 
programming and a significant portion of news programming seen on 
television and in film is written by our members and the members of our 
affiliate Writers Guild of America, East. WGAW has had a long 
association with NBC Universal (NBCU). As Chairman Rockefeller noted in 
his introduction, I have written and produced successful prime-time 
television over the last few decades including ER, The West Wing and 
most recently, Southland.
    Our entertainment industry is a shining example of the remarkable 
fruits that came come from the collaborative efforts between working 
people. As writers, the content we create results in hundreds, if not 
thousands of good paying jobs for electricians, caterers, truck 
drivers, technicians, actors, directors, and other skilled and 
unskilled workers. Our product is embraced by the public, as evidenced 
by the numbers at the box office and viewership of broadcast and cable 
television programming both here in America and abroad. We are also 
just beginning to unlock the potential of the online, Internet video 
market. Our workers are what make the American entertainment industry 
the envy of the world.
    That is why, the WGAW is extremely concerned about the impact the 
proposed merger of NBC Universal and Comcast will have on WGA content 
creators, entertainment industry workers and U.S. consumers. Over the 
past several decades, our industry has consolidated from literally 
dozens of independent entrepreneurs and suppliers, including many 
writer-owners making innovative and ground-breaking programming, to a 
handful of large media conglomerates most often controlling content 
from start to finish.
    This has not been good for writers who face fewer creative and 
economic opportunities, which in turn has a negative effect on job 
creation for other entertainment industry workers. Viewers are offered 
increasingly homogenized content driven by corporate decisionmaking and 
at higher and higher costs to the consumer.
    WGAW analysis of primetime series on the Fall 2009 network schedule 
found that only 16 percent of series were independently produced across 
the five broadcast networks, with only 10 percent independently 
produced on NBC. By way of contrast, twenty years ago under the 
Financial-Syndication regulations, 78 percent of the primetime lineup 
was independently produced including Doogie Howser, M.D., The Wonder 
Years, Cosby Show, Who's the Boss and Designing Women.
    The industry may point to the growth of channels and distribution 
platforms as evidence of opportunities for independent and diverse 
content, but the reality is that a handful of multinational companies 
control what viewers watch.
    The combined entity being discussed today will control 20 percent 
of television viewing hours. Control of both content and distribution 
provide ample opportunity for abuses of power in the pursuit of 
corporate self-interest. In this case, we are concerned that bigger 
won't be better.
    The vertical leverage created by this proposed merger will have a 
significant impact on competition in both the cable network and online 
video markets. In cable, there are now more than 500 channels for 
consumers to choose from. But the sheer number of channels means that 
cable network success is increasingly dependent upon cable tier 
placement, bundling and channel positioning. ``500 channels and still 
nothing to watch,'' we have all heard that lament.
    Comcast, as the largest provider of video services, is in a unique 
position to determine the fate of cable networks. With the integration 
of NBCU's cable networks, Comcast has an opportunity to abuse its 
dominant position to bump other channels out of the most popular tiers 
in favor of its newly acquired networks. This new media superpower 
could in effect deny consumers the ability to select channels, through 
its marketing practices of bundling channels, channel positioning and 
tier placement. With little transparency in pricing or rate increases, 
consumers will increasingly be at the mercy of dominant cable and 
Internet providers, with little or no competition to ensure reasonable 
access fees.
    The trend away from vertical integration between cable operators 
and cable networks, which includes separations by Viacom, News Corp and 
most recently Time Warner, has been a positive development for content 
creators and consumers. In order to attract viewers, cable channels 
have invested heavily in original content. The original dramas and 
comedies that once were only found on network television can now be 
seen on multiple cable channels including AMC, TNT, Lifetime, FX and 
many others. I have personally benefited from the rise of original 
programming on cable. When NBC Universal canceled Southland in a cost-
saving decision to move Jay Leno to the 10 p.m. time slot, my series 
found a home on TNT. This trend has benefited content creators and 
entertainment industry workers who have found new outlets for their 
work. Thus the WGAW has serious concerns about the proposed increase in 
vertical integration, which could threaten to undermine progress made 
in this area and lead to increased cost for consumers.
    This proposed media consolidation also promises to have a 
significant impact on news programming. Diverse news sources are 
necessary for our democracy and this merger will concentrate a 
significant amount of local, national and online news programming 
within one company. In pursuit of corporate profits, this merged entity 
may be tempted to cut costs and consolidate news programming, to the 
detriment of our vibrant democracy. We have witnessed this happen time 
and time again with media consolidation. We do not want to see a repeat 
of Clear Channel's consolidation of the radio industry, where cost-
cutting jeopardized public safety when a train containing hundreds of 
thousands of gallons of toxic ammonia derailed in Minot, North Dakota. 
Six of the seven local radio stations had recently been purchased by 
Clear Channel Communications and were operated by computer, including 
the station designated for emergency announcements. Instead of 
emergency announcements alerting the public, music played uninterrupted 
across the Clear Channel stations, beamed in from out of state. While 
Comcast has said it plans to preserve NBC local news we fear this is a 
hollow promise that could easily be forgotten in pursuit of corporate 
cost efficiencies.
    The greatest danger we see posed by the merger of Comcast-NBC 
Universal is it's possible effect on the developing online Internet, 
video market. A free and open Internet offers unforeseen possibilities 
for competitive and independent production and distribution of content 
free of traditional corporate controls.
    Comcast's Xfinity service, in conjunction with the proposed merger 
raises horizontal competition concerns as Comcast attempts to leverage 
its dominance of the cable market to control online Internet video. It 
could stifle competition between online video providers and strengthen 
the company's market control of video distribution by requiring a 
consumer to have a costly cable subscription to access online video. 
Most recently, we've seen NBC embracing this practice, restricting 
online access to some 2010 Winter Olympics content only to 
authenticated subscribers of a cable, satellite or IPTV service. 
Comcast control over NBC Universal content will only enhance these 
anti-competitive efforts. The WGAW has serious concerns about Comcast-
NBC Universal serving as the gatekeeper for video content online.
    In addition, Comcast would acquire 30 percent of Hulu and would 
likely put it behind an authentication wall. Consumers will no longer 
be able to watch TV episodes online without a cable subscription, which 
will reduce viewing of this content and, potentially, residual payments 
for writers and other talent.
    Comcast's desire to stifle competition on the Internet is not new 
or merely hypothetical. In October 2007, the Associated Press reported 
that Comcast was unilaterally blocking access to the Web application 
BitTorrent. This violation was pursued by the Federal Communications 
Commission and in 2008 the FCC ordered a ``cease and desist.'' Comcast 
is appealing the order in court.
    In light of these actions, we believe Comcast may be tempted to use 
its position as the largest provider of residential Internet services 
to in favor its newly acquired content and the content provided by 
other multinational entertainment companies in reciprocal or monetary 
arrangements, and authentication walls that favor other deep-pocketed 
providers, not consumers. This could come in the form of faster access 
to Comcast-NBC Universal content or other content that it chooses to 
favor--to the detriment of all other content now available to consumers 
over their Comcast-supplied Internet connections. This proposed merger 
is very much linked to the discussion of network neutrality, more 
properly called ``Net Freedom.'' The Internet is quickly becoming our 
town square, with access available to all Americans for the discussion 
of ideas, the viewing of news, commentary and entertainment, and for 
social networking. To ensure a free and open Internet, we must require 
companies like Comcast to remain neutral in the delivery of content 
through its online service, both in the speed of delivery and the cost 
of delivery. As the creators of intellectual property we believe in 
strong copyright protection and that piracy must be addressed, through 
a combination of new technology and a strong enforcement regime, all 
the while maintaining a free Internet.
    A real concern for talent including the writers I represent is the 
potential devaluation of content resulting from the combination of a 
major content producer and one of the country's largest content 
distributors. Comcast, which is primarily a distribution company will 
now have control over a large amount of content, much of which is 
written and produced by WGAW members. In documents filed with the FCC, 
Comcast has stated that a key rationale for the merger has been its 
inability to reach ``optimal agreements'' with producers that allow 
Comcast to distribute content as it sees fit. We are troubled by this 
statement.
    The consolidation of such a major producer and distributor creates 
a scenario where the transfer prices imputed to content created by the 
joint venture may well understate its value for competitive advantage 
and deprive talent of the fair market payments they are due under our 
contracts. Comcast and its shareholders may realize the benefits of 
bringing this content in-house but talent is likely to be left behind 
in the process, and consumers will certainly pay higher subscription 
costs as competition is further reduced and consumer delivery choices 
are narrowed. The combination of these companies may permit Comcast to 
operate in a more efficient economic marketplace, but the marketplace 
of ideas and consumer choice will be diminished in the process.
    Comcast has also said it would like to use its control over NBC 
Universal content to establish a model that can be replicated with 
other third-parties. We are concerned that these below-market transfer 
prices may become standards for pricing content from third-party 
suppliers. It is imperative that the interests of content creators and 
entertainment industry workers within the merged company and elsewhere 
not be sacrificed to enhance the value of Comcast's distribution 
business.
    Writers and other members of the Hollywood community depend on 
residual payments derived from the reuse of content in order to sustain 
their careers and support their Health and Pension Plans. Writers and 
other entertainment industry workers receive initial compensation for 
their work but also subsequently receive residual payments when their 
product is aired in syndication, sold on DVD, or purchased online. 
These payments essentially serve as R&D for the entertainment industry, 
allowing writers to develop new material while waiting for their next 
employment opportunity. Any devaluation of content could significantly 
impact the ability of writers to spend time developing original content 
and entertainment industry workers to remain available for their next 
job. To protect the value of content, regulators should require 
transparency and fair market valuation of all transactions between 
commonly owned or controlled parties.
    The Guild, shares the concerns about labor practices that have been 
voiced by the Communication Workers of America (CWA). The CWA's 
experience with Comcast has demonstrated a poor track record of 
respecting worker rights. Where Comcast has inherited union contracts 
through business acquisitions it has failed to abide by promises to 
respect employee's rights and collective bargaining. The entertainment 
industry including NBC Universal has a long and honored tradition of 
cooperative labor relations, which has produced quality employment for 
every person working on a project I have had the privilege to be 
associated with as a WGAW member. Our entertainment industry is the 
envy of the world because we have been able to maintain and support a 
talented union workforce for decades. This workforce stability is what 
keeps our industry strong and has made our product one of America's 
leading exports.
    If approved, the merger of Comcast and NBC Universal will lead to a 
further consolidation of distribution and programming, which will 
result in a decrease in the number of alternative, independent, and 
diverse programs. Such an outcome hurts the culture of the United 
States and results in fewer job opportunities for writers and all 
entertainment industry workers. While we are encouraged by the public 
interest commitments made by Comcast and NBC Universal, we believe that 
the concerns we have outlined are not sufficiently addressed by these 
proposed voluntary measures.
    If approved, the proposed public interest commitments should be 
made legally binding and enforceable by regulators. To promote 
independent programming Comcast must go beyond their offer of 2 
independent channels, which will have little impact in a market of 500 
plus channels. A merged Comcast NBC Universal should be required to 
allocate 25 percent of primetime programming on its broadcast and cable 
networks to independent programming. The definition of independent 
programming should be crafted in such a way as to ensure maximum 
diversity of voices and artists on such programming, not to just 
provide more programming space for other media conglomerates. Local 
news and public broadcasting must be preserved to ensure community 
voices and a diversity of opinions. Further, Comcast should be required 
to promote these programs through subsidized advertising campaigns.
    In the online space, regulators must require that Comcast-NBC 
Universal not discriminate in favor of or against content on the 
Internet by agreeing to network neutrality rules on its Internet access 
service. The merged entity should also not be allowed to use its market 
power to deny distribution of programming on alternative services on 
the Internet that might compete with Comcast--NBC Universal's various 
platforms or Video On Demand services.
    Without additional binding enforceable mandates--WGAW has grave 
concerns that the voluntary commitments offered will fail to protect 
consumers and content creators from the negative impact of this merger.
    Thank you, again for the opportunity to testify today. I look 
forward to answering any questions.

    Senator Dorgan. Mr. Wells, thank you very much.
    Dr. Cooper, welcome. You may proceed.

 STATEMENT OF DR. MARK COOPER, DIRECTOR OF RESEARCH, CONSUMER 
              FEDERATION OF AMERICA ON BEHALF OF 
CONSUMER FEDERATION OF AMERICA, FREE PRESS, AND CONSUMERS UNION

    Dr. Cooper. Thank you, Mr. Chairman, members of the 
Committee.
    When Comcast claims that there is a little for antitrust 
authorities to look at in this merger, they must think we are 
still living in the ``don't worry, be happy, do nothing'' era 
of antitrust and regulation. Thankfully for consumers, as you 
heard this morning, that is not the case.
    Officials who understand that concentration and vertical 
integration can be bad for consumers and the economy, who 
understand that public interest principles are good for 
citizens and civic discourse, are in office, and not a moment 
too soon. This merger is uniquely anticompetitive across a 
number of markets and threatens to restrict consumer choice, 
reduce programming diversity, and raise prices.
    Comcast and NBC compete head-to-head in local distribution 
of video content in a dozen of the Nation's most important 
local markets. They compete head-to-head in the production of 
video content for multichannel distribution with Comcast sports 
and news lined up against NBC's sports and news. They compete 
head-to-head in the distribution of video content online. 
Indeed, NBC is a major partner in Hulu, an Internet-based, 
multichannel video distribution platform.
    In addition to the outright elimination of direct 
competition between NBC and Comcast in these markets, the 
marriage of the Nation's largest cable operator with one of the 
Nation's premier video content producers will give Comcast an 
immense amount of vertical leverage to use against competing 
video programmers and distributors favoring its own content 
with access to cable systems that reach one quarter of the MVPD 
market and denying competing programmers access to those cable 
systems places a very heavy thumb on the scale of competition 
in the video content market.
    Withholding must-have content from competing distributors 
undermines competition for eyeballs in distribution. The merged 
entity will also have the incentive and ability to raise prices 
for its large suite of programming or to force that programming 
on cable systems, which raises consumers' prices as the bundles 
get larger and more expensive.
    The history of the cable industry since the passage of the 
1996 Act has been a history of consolidation and higher prices. 
We are all familiar with the fact that cable prices have 
increased twice as fast as the rate of inflation since 1996. It 
is less widely known but equally important to note that the 
operating cash-flow of the cable operators--that is the cash 
left over after all operating expenses, including programming--
has increased four times at the rate of inflation. That is 
where Comcast gets $6.5 billion in cash during the worst 
recession since the Great Depression to buy a 51 percent 
interest in NBC.
    Many of these processes have operated to push up prices 
over the last decade. This merger will reinforce all of those 
processes, perpetuating the problem of rising prices.
    But the most ominous threat to future competition is to the 
Internet as a platform for video competition. Comcast has 
already signaled its intention to extend the ugly cable 
business model to the Internet by proposing a market division 
scheme with the second-largest cable operator, Time Warner. 
Comcast is seeking to prevent local sports teams from making 
their content available online. NBC moved its Olympic coverage 
behind an Internet pay wall.
    The marriage of the Nation's largest broadband service 
provider with one of the Nation's premier video content 
producers heightens the dangers of these threats dramatically.
    Geography is not supposed to matter on the Internet. There 
are no franchises, no rights-of-way, no regulatory impediments 
to entry, few, if any, construction course. There is no reason 
that cable operators don't compete head-to-head on the Internet 
for every eyeball, no matter where they are located. But their 
proposal, called ``TV Everywhere,'' would actually restrict 
that competition, tying the Internet product to their physical 
cable product. In the lexicon of the cable industry, TV 
Everywhere means competition nowhere.
    Federal authorities must do more than just preserve the 
current industry structure, which is riddled with 
anticompetitive and anti-consumer institutions and practices. 
They should seize this moment to implement the long-overdue 
reform across the six areas that I mentioned in my testimony--
local markets, affiliate relations, cable program access, cable 
carriage, Internet distribution, and independent programming.
    If policymakers allow this merger to go forward without 
fundamental reform of the underlying industry structure, the 
prospects for a more competitive, consumer-friendly, 
competition-friendly, multichannel video marketplace will be 
dealt a severe blow.
    Thank you.
    [The prepared statement of Dr. Cooper follows:]

 Prepared Statement of Dr. Mark Cooper, Director of Research, Consumer 
Federation of America on behalf of Consumer Federation of America, Free 
                       Press, and Consumers Union
    Mr. Chairman and members of the Committee,
    My name is Dr. Mark Cooper. I am the Director of Research at the 
Consumer Federation of America. I appear before you today on behalf of 
the Consumer Federation of America, Free Press and Consumers Union. We 
appreciate the opportunity to share our views on media markets and a 
merger that is unique in the history of the video market, one that will 
go a long way toward determining whether or not the future of video 
viewing in America is more competitive and consumer-friendly than the 
past.
    The merger of Comcast and the National Broadcasting Company (NBC) 
is a hugely complex undertaking, unlike any other in the history of the 
video marketplace. Allowing the largest cable operator in history to 
acquire one of the Nation's premier video content producers will 
radically alter the structure of the video marketplace and result in 
higher prices and fewer choices for consumers. The merging parties are 
already among the dominant players in the current video market. This 
merger will give them the incentive and ability to not only preserve 
and exploit the worst aspects of the current market, but to extend them 
to the future market.
    Comcast has sought to downplay the impact of the merger by claiming 
that it is a small player in comparison to the vast video universe in 
which it exists. It has also glossed-over the fact that this merger 
involves the elimination of actual head-to-head competition. Finally, 
it has argued that existing protections and public interest promises 
will prevent any harms that might result from the merger. All three 
claims are wrong.
    Neither Comcast's regurgitation of market shares and counts of 
outlets and products, nor its public interest commitments begin to 
address the fundamental public policy questions and competitive issues 
at stake in this merger. Nor can the merger of these companies be 
viewed separately from the products they sell. NBC and Comcast do not 
sell widgets. They sell news and information and access to the primary 
platforms American use to receive this news and information. Control 
over production and distribution of information has critical 
implications for society and democracy. As a consequence, the merger of 
these two media giants reaches far beyond the economic size of the 
merging parties to the very content consumers receive, and how they are 
permitted to access it.
    Finally, if the size and scope of this merger is not sufficient to 
give you pause, the past actions of the acquiring party should. Comcast 
has raised cable rates for consumers every year, and is among the 
lowest ranked companies in terms of customer service. Comcast is the 
frequent subject of program access complaints of competing video 
providers, as well as of discriminatory carriage complaints by 
independent programmers. Finally, Comcast is on record lying to a 
Federal agency regarding whether they blocked Internet users' access to 
a competing a video application for anti-competitive purposes. These 
past practices do not bode well for future competition if Comcast is 
allowed to acquire NBC. Further, Comcast's lack of candor in past 
proceedings cast doubt on the prudence of relying on Comcast's 
voluntary public interest commitments as a means of addressing the 
anti-consumer impacts of this merger.
    The goal of mega-mergers such as this is to cut costs and increase 
revenues. The most direct path to those outcomes are firing workers and 
raising prices. Cutting jobs is hardly a laudable goal in the current 
environment, but the primary ``synergy'' that mergers produce is the 
ability to reduce employment by sharing resources between the commonly-
held companies. To expect the opposite to happen here based on the 
evidence-free assertions of Comcast would be foolhardy. Simply put, 
this merger is about higher prices, fewer choices, and lost jobs.
The Biggest Gets Bigger (And Stronger)
    Comcast is the Nation's largest cable operator, largest broadband 
service provider and one of the leading providers of regional cable 
sports and news networks. NBC is one of only four major national 
broadcast networks, the third largest major owner of local TV stations 
in terms of audience reach, an icon of local and national news 
production and the owner of one of a handful of major movies studios.
    As large as Comcast is nationally, it is even more important as a 
local provider of video services. Comcast is a huge entity in specific 
product markets. It is the dominant multi-channel video programming 
distributor (MVPD) in those areas where it holds a cable franchise, 
accounting, on average for over half of the MVPD market. It is the 
dominant broadband access provider in the areas where it has a cable 
franchise, accounting for over half of that market. This dominance of 
local market distribution platforms is the source of its market power. 
The merger will eliminate competing distribution platforms in some of 
its markets and will give Comcast control over strategic assets to 
preserve and expand its market power in all of its markets.
    Broadcasters and cable operators are producers of goods and 
services that compete head-to-head, including local news, sports, and 
advertising. In addition, NBC and Comcast are also suppliers of content 
and distribution platforms, which are goods and services that 
complement one another. In both roles there is a clear competitive 
rivalry between them. For example, in providing complementary services, 
broadcasters and cable operators argue about the price, channel 
location and carriage of content. The merger will eliminate this 
natural rivalry between two of the most important players in the multi-
channel video space, a space in which there are only a handful of large 
players.
    These anticompetitive effects of the merger are primarily what 
antitrust practice refers to as horizontal effects, as shown in Exhibit 
1. They are likely to reduce competition in specific local markets--
head-to-head competition in local video markets, head-to-head 
competition for programming viewers, head-to-head competition for 
distributions platforms. The merger will raise barriers to entry even 
higher through denial and manipulation of access to programming and the 
need to engage in two-stage entry. The merger will increase the 
likelihood of the exercise of existing market power within specific 
markets, and will increase the incentive and ability to raise prices or 
profits.
    The fact that some of the leverage is brought to bear because of 
the link to complementary products (i.e., is vertical in antitrust 
terms), should not obscure the reality that the ultimate effects are on 
horizontal competition in both the distribution and programming 
markets. The merger would dramatically increase the incentive and 
ability of Comcast to raise prices, discriminate in carriage, foreclose 
and block competitive entry and force bundles on other cable systems. 
The merger enhances the ability of Comcast to preserve its position as 
the dominant local MVPD, reinforce its ability to exercise market power 
in specific cable or programming markets and extend its business model 
to the Internet.
    We raise these concerns about the merger based on eight specific 
anti-competitive effects that the merger will have on the video market. 
The attached exhibit presents the list of distribution and content 
assets owned in whole or in part by these two companies. The exhibit 
makes it crystal clear that they do compete head-to-head across a 
number of product and geographic markets and the assets represent an 
arsenal of complements that would be powerful ammunition to use as 
leverage against existing competitors and new entrants.
Higher Prices, Fewer Choices, less Competition
    The history of the cable industry since the passage of the 
Telecommunications Act of 1996 has been a history of consolidation and 
higher prices. We are all familiar with the fact that cable prices have 
increase twice as fast as the rate of inflation since the 1996 (as 
shown Exhibit 2, cable rates increased approximately 100 percent, while 
Consumer Price Index increased about 50 percent). It is less widely 
known, but equally important to note that the operating cash-flow of 
the cable operators--that is the cash left over after all operating 
expenses, including programming costs--has increased four times faster 
than the rate of inflation. That is how during the worst recession 
since the Great Depression, Comcast has secured the $6.5 billion in 
cash necessary to pay General Electric for 51 percent of NBC-Universal. 
Many of the processes that have operated in the cable market to enable 
cable to push up prices and cash-flow in the decade and a half since 
the telecommunications Act of 1996 will be reinforced and perpetuated 
by this merger.
    1. This merger will reduce choice and competition in local markets. 
The merging parties currently compete head-to-head as distributors of 
video content, in local markets. Because broadcasters own TV stations, 
they compete with cable in local markets for audiences and 
advertisers--especially in the production and distribution of local 
news, and local and political advertising. This merger eliminates this 
head-to-head competition in 11 major markets where NBC owns broadcast 
stations and Comcast operates a cable franchise. These 11 markets 
account for nearly a quarter of U.S. TV households.
    This merger also eliminates a competitor for local and political 
advertising. In fact, in 2006 NBC told the Federal Communications 
Commission that local cable operators present the single biggest threat 
to broadcasters in terms of securing local and political 
advertising.\1\ The concentration of local markets and increase in 
concentration created by this merger, as measured by local advertising 
vastly exceed the level that should trigger close antitrust scrutiny 
under the DOJ/FTC Merger Guidelines. Now that NBC is looking to merge 
with Comcast, the potential elimination of this local competition has 
been conveniently ignored. But Federal authorities cannot and should 
not ignore the fact that a merger between Comcast and NBC is likely to 
cause a significant decline in competition in local advertising markets 
and excessive domination by the merged company. Not only will 
advertisers lose an important option, but also the merger will be to 
the detriment of other local broadcasters--particularly smaller, 
independent ones--who are already facing ad revenue declines in an 
economic downturn. A stand-alone broadcaster will not be able to offer 
package deals and volume discounts for advertising across multiple 
channels the way that Comcast/NBC will be able to do post-merger. That 
means other local broadcasters will have less money to produce local 
news and hire staff. To compete, rival broadcasters will have two 
options: fire staff and reduce production of local news and 
information; or consolidate in order to compensate for market share 
lost to the new media mammoth.
---------------------------------------------------------------------------
    \1\ NBC Media Ownership Comments, FCC Docket 06-121 (filed Oct. 
2006).
---------------------------------------------------------------------------
    2. This merger removes an independent outlet and an independent 
source of news and information. These two companies compete in the 
video programming market, where Comcast's regional sports and news 
production compete with NBC's local news and sports production. By 
acquiring NBC, Comcast's incentive to develop new programming would be 
reduced. Instead of continuing to compete to win audience, it just buys 
NBC's viewers. Where two important entities were producing programming, 
there will now be one.
    3. The merger will eliminate competition between Comcast and NBC in 
cyberspace. NBC content is available online in a variety of forms and 
on different websites and services. Most prominently, of course, NBC is 
a stakeholder in Hulu--an online video distribution portal that draws 
millions of viewers. Comcast has put resources into developing its own 
online video site--``Fancast''--where consumers can find content owned 
by the cable operator. The merger eliminates this nascent, head-to-head 
competition.
    Moreover, Comcast is the driving force behind the new ``TV 
Everywhere'' initiative. This collusive venture--which we believe 
merits its own antitrust investigation--would tie online video 
distribution of cable content to a cable subscription and pressure 
content providers to restrict or refrain from online distribution 
outside of the portal. This is a disaster for video competition. The 
proposed merger strengthens Comcast's hand in this scheme by increasing 
their market power in both traditional and online video distribution. 
Comcast is clearly attempting to control the distribution of the video 
content it makes available on the web by restricting sales exclusively 
to Comcast cable customers. It does not sell that content to non-
Comcast customers. By contrast, NBC has exactly the opposite 
philosophy--or at least it did. Through Hulu, NBC is competing for both 
Comcast and non-Comcast customers by selling video online that is not 
tied to cable. NBC also has incentives to make its programming 
available in as many points of sale as possible. Merger with Comcast 
will put an end that pro-competitive practice. ``TV Everywhere'' is a 
blatant market division scheme intended to extend the cable ``non-
compete'' regimen from physical space to cyberspace.
    4. The merger will provide Comcast with greater means to deny 
rivals access to Comcast controlled programming. Comcast already has 
incentive to undermine competing cable and satellite TV distributors by 
denying them access to critical, non-substitutable programming, or by 
extracting higher prices from competitors to induce subscribers to 
switch to Comcast. Post-merger it will have a great deal more content 
to use as an anticompetitive tool. Comcast has engaged in these 
anticompetitive acts in the past and by becoming a major programmer it 
will have a much larger tool to wield against potential competitors. 
Moreover, Comcast has opposed, and is currently challenging in court, 
the few rules in place that would prevent it from withholding its 
programming from competing services. Strangely enough, Comcast's CEO 
promised Members of Congress in a previous hearing that the company 
would continue to abide by these rules even if they were successful in 
getting the court to throw them out. Yet Comcast continues to spend 
shareholder dollars trying to overturn an FCC regulation that it 
promises to follow regardless of the case's outcome. As a show of good 
faith, we have asked Comcast to withdraw its suit. In response Comcast 
has equivocated. Now it claims it made no such promise.
    5. The merger will provide greater incentive for Comcast to 
discriminate against competing independent programmers. Comcast already 
has a strong incentive to, and significant track record of, favoring 
its own programming over the content produced by others with 
preferential carriage deals. Post-merger it will have a lot more 
content to favor. The current regulatory structure does not appear 
sufficient to remedy the existing problem and cannot be expected to 
address the resulting post-merger threat to independent programmers. 
The econometric analysis of program carriage indicates there is a great 
deal of discrimination occurring already. The fact that the FCC is 
continually trying to catch up with complaints of program carriage 
discrimination is testimony to the existence of the problem and the 
inability of the existing rules to correct it.
    6. The merger will stimulate a domino effect of concentration 
between distributors and programmers. The new combination will create a 
major asymmetry in the current cartel model in the cable industry. It 
brings together a large cable provider with a huge stable of must-have 
programming and the largest wireline broadband platform in America. 
Very likely, this will trigger more mergers and acquisitions because it 
changes the dynamics of the market. But there will be no positive 
competitive outcomes resulting from this change.
    This merger signals that the old, anticompetitive game is still 
on--but with a twist. Like all other cable operators, Comcast has never 
entered the service territory of a competing multi-channel video 
program provider, allowing everyone to preserve market power and 
relentlessly raise prices. But Comcast's expanded assets and especially 
its new leverage over the online video market will give it a 
substantial edge against its direct competitors in its service 
territory. The likely effect of the merger will be for other cable 
distribution and broadband companies to muscle up with their own 
content holdings to try and offset Comcast's huge advantage. In other 
words, there is only one way to deal with a vertically integrated giant 
that has must-have content and control over two distribution 
platforms--you have to vertically integrate yourself. This merger would 
send a signal to the industry that the decades old game of mutual 
forbearance from competition will be repeated but at the next level of 
vertical integration that spills over into the online market. Watch for 
AT&T and Verizon to be next in line for major content acquisitions. 
When that happens, it will be extremely difficult for any company that 
is merely a programmer or merely a distributor to get into the market. 
Barriers to entry to challenge vertically integrated incumbents will be 
nearly unassailable. The only option may be a two-stage entry into both 
markets at the same time--which is an errand reserved only for the 
brave and the foolish.
    7. By undermining competition this merger will result in higher 
prices for consumers. Comcast already raises its rates every year for 
its cable subscribers, and prices are likely to rise further after the 
merger. By weakening competition, Comcast's market power over price is 
strengthened, but there are also direct ways the merger will push the 
price to consumers up. Comcast will have the opportunity and incentive 
to charge its competitors more for NBC programs and force competitors 
to pay for less desirable Comcast cable channels in order to get NBC 
programming--those added costs will mean bigger bills for cable 
subscribers. Furthermore, the lack of competitive pressure that has 
failed to produce any appreciable downward pressure on cable rates 
since 1983, will not discipline Comcast from raising its own rates.
    8. This merger will result in higher prices for consumers through 
the leveraging of ``retransmission rights.'' Recently, disputes over 
retransmission consent payments between broadcasters and cable TV 
providers have escalated to the point where local television stations 
have pulled their broadcast signals from cable operators--leaving 
consumers without access to important local news and entertainment 
programming. Comcast's takeover of NBC will exacerbate this trend. 
Through its takeover of local NBC broadcast stations, Comcast will gain 
the retransmission consent rights to negotiate fees for cable carriage 
of NBC's broadcast signals. These rights will enable Comcast to 
leverage control over must-have local programming and larger bundles of 
cable channels to charge competing cable, telco and satellite TV 
providers more money for content. Once Comcast acquires NBC, it will a 
two-fold incentive to drive-up retransmission rates for NBC broadcast 
stations: first, higher rates mean more revenues for Comcast. Even if 
Comcast also pays those higher rates, it is essentially charging 
itself. Second, Comcast has a strong incentive to raise rates on 
competitive MVPDs to force them to either absorb these extra costs, or 
to pass them through to consumers who will then have an incentive to 
switch to Comcast. Moreover, if retransmission consent negations reach 
a stalemate, Comcast has additional incentive to pull NBC's signal from 
competing pay TV operators as a way to induce customers to switch to 
Comcast. Either way Comcast wins, but consumers and competition are 
caught in the crosshairs.
Empirically Grounded, Responsible Merger Analysis v. ``Do Nothing 
        Theory''
    In response to my February 4, 2010 testimony in the House Commerce 
Committee and the Senate Judiciary Committees, the Free State 
Foundation has posted a rebuttal by Richard Epstein, a law professor at 
the University of Chicago and a Senior Fellow at the Hoover 
Institution.\2\ His response to my testimony is an example of the 
predictable chorus of free market ideologues who inevitably parrot the 
claims of the merging parties that new efficiencies will benefit 
consumers and that there is more than enough competition to prevent 
abuses.
---------------------------------------------------------------------------
    \2\ Richard Epstein, ``The Comcast and NBCU Merger: The Upside Down 
Analysis of Dr. Mark Cooper,'' Perspectives from FSF Scholars, 5:4, 
February 12, 2010.
---------------------------------------------------------------------------
    Thankfully, the era of ``don't worry, be happy'' antitrust 
enforcement in America is over.\3\ Professor Epstein's approach to 
merger analysis reflects all of the worst weaknesses of the Chicago 
School approach that he espouses. It is based on pure theory, no 
facts.\4\ Moreover, it is premised on a theory that is biased toward 
the approval of mergers \5\ because it favors the creation of monopoly 
rents \6\ by dominant firms \7\ and ignores the importance of dynamic 
efficiency and disruptive entrants and mavericks.\8\
---------------------------------------------------------------------------
    \3\ This critique of the Chicago School is amply documented in 
Robert Pitfosky (Ed.), How the Chicago School Overshot the Mark: The 
Effects of Conservative Economic Analysis on U.S. Antitrust (Oxford: 
Oxford University Press, 2008). On the under enforcement that results 
from the Chicago school approach see 6, 36, 244-247.
    \4\ Id., at 5, 42, 57, 82.
    \5\ Id., at 48, 52, 123.
    \6\ Id., at 6, 37-38, 85, 183.
    \7\ Id., at 86, 127, 165.
    \8\ Id., 79-81.
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    Professor Epstein ignores the mountain of evidence that there are 
numerous clearly defined markets in which Comcast and NBC compete head-
to-head. In part this stems from the fact that he never attempts to 
define product and geographic markets. This failure is rooted 
conceptual and empirical flaws in his approach. On the one hand, the 
Chicago School approach assumes that self-correcting markets will 
automatically respond to the market power created by mergers,\9\ 
because entry is easy.\10\ One the other hand, the approach defines 
markets too broadly \11\ and underestimates the importance of 
horizontal market power.\12\
---------------------------------------------------------------------------
    \9\ Id., at 5.
    \10\ Id., at 42, 236.
    \11\ Id., 243.
    \12\ Id., 27, 57, 80, 126.
---------------------------------------------------------------------------
    Efficiency gains and benefits are overblown in the Chicago School 
approach. Indeed, they are used as an excuse to justify market power, 
rather than an empirically demonstrated fact.\13\ All merging parties 
claim efficiency gains and ``synergies'', though few actually deliver 
on those promises. Nevertheless, the Chicago School treats those claims 
as a bona fide magic wand that blesses every merger that comes 
along.\14\ Professor Epstein provides no evidence of efficiency gains 
or that the assumed benefits will be passed on to consumers and ignores 
the importance of wealth transfers as a consumer harm that can result 
from mergers, weaknesses that are endemic to this school of 
thought.\15\
---------------------------------------------------------------------------
    \13\ Id., at 5, 18, 42, 263.
    \14\ Id., at 5.
    \15\ Id., at 90, 263.
---------------------------------------------------------------------------
    The theoretically induced blindness to horizontal problems of this 
merger is matched by the utter ignorance of the vertical problems that 
it poses.\16\ Abuse of vertical leverage has long been recognized as a 
critical problem that is ignored by Chicago School theory.\17\ The 
cable industry has long been afflicted by the use of vertical leverage 
to undermine horizontal competition and Comcast has been in the 
forefront of that practice.\18\ Empirical studies have repeatedly shown 
that by discriminating against independent programmers in affording 
carriage, cable operators have advanced the interest of their own 
programming and undermined the prospect for independent programming, 
impairing competition in content markets. By denying competing 
distribution platforms access to video content, cable operator have 
retarded competition in the distribution market, a practice that has 
led to repeated disputes at the Federal Communications Commission.
---------------------------------------------------------------------------
    \16\ Id., at 52, 127, 141.
    \17\ Id., at 148-149.
    \18\ Mark Cooper, Cable Mergers and Monopolies: Market Power in 
Digital Media and Communications Markets (Washington, D.C.: Economic 
Policy Institute, 2002).
---------------------------------------------------------------------------
    The bitter fruit of lax, ``don't worry, be happy'' antitrust 
enforcement has been tasted by the public in the approval of a string 
of mergers that have allowed the MVPD market to become concentrated and 
sustained the constant increase in prices in the cable industry. 
Professor Epstein asks us to ignore this central fact of life in the 
MVPD market because Chicago School Theory pays little attention to 
consumer welfare.\19\ Responsible antitrust authorities cannot do so.
---------------------------------------------------------------------------
    \19\ Id., at 93-97.
---------------------------------------------------------------------------
    The track record of past mergers and merger conditions has become a 
bone of contention in the Comcast NBC case. In a thin attempt to soothe 
worries regarding the merger, merger supporters have listed a number of 
recent media and communications mergers, which they claim, did not 
result in the sky falling-in on consumers (to wit, AT&T-SBC, Verizon-
MCI, News Corp.-DirecTV, AOL-Time Warner, XM-Sirius). However, in 
referencing past mergers as a defense, supporters of the present merger 
draw the wrong conclusions in four crucial respects.
    First, these mergers pale in comparison to consolidation of control 
over both programming production and distribution that would occur as a 
result of a Comcast takeover of NBC. The Comcast-NBC merger is much 
larger and involves uniquely anticompetitive threats resulting from the 
marriage of a major video content producer to the Nation's largest 
cable television provider and broadband service provider.
    Second, many of these past mergers were prevented from doing their 
worst because, in every case, antitrust authorities imposed important 
conditions to prevent the anticompetitive, anti-consumer harms that the 
consolidation would have produced. These conditions were, of course, 
opposed by the Chicago School ideologues, just as they now oppose the 
imposition of any conditions on the current merger.
    Third, virtually all of these mergers all resulted in consumer 
harm, even in spite of conditions that helped to mitigate the damage to 
some extent. The telecom mergers, in particular were disastrous for 
consumers. They eliminated major competitors in the marketplace for 
wireline broadband service, reversed the outcomes of the pro-
competitive breakup of AT&T and the pro-competitive 1996 
Telecommunications Act, and delivered a wireline duopoly that has 
resisted meaningful price competition ever since. These mergers also 
resulted in massive consolidation in the wireless industry (by virtue 
of granting huge market power to these wireline companies that also had 
wireless services)--pushing AT&T and Verizon into dominant positions 
that are quickly giving us the same problems in mobile communications.
    Finally, these mergers did not produce the synergies and 
efficiencies that these companies promised. Instead, the claims of 
efficiency, that were used to justify mergers in the past decade, were 
vastly overblown or failed to materialize at all. The ``efficient 
market hypothesis'' at the center of the Chicago School analytic 
framework, which allowed companies to wave a magic efficiency wand and 
blind the antitrust authorities to the anticompetitive impact of 
merger, was the cornerstone of the ``don't' worry, be happy'' era. The 
``efficient market hypothesis'' is crumbling; buried, if not dead, 
beneath the rubble of the financial system.\20\
---------------------------------------------------------------------------
    \20\ The charge that set off the implosion of the theory was 
ignited by Allan Greenspan's admission that there is a fundamental flaw 
in the theory. ``Those of us who looked to the self-interest of lending 
institutions to protect shareholders' equity, myself included, are in a 
state of shocked disbelief. Such counterparty surveillance is a central 
pillar of our financial markets state of balance. . . . If it fails, as 
occurred this year, market stability is undermined . . . ``I made a 
mistake in presuming that the self-interests of organizations, 
specifically banks and others, were such that they were best capable of 
protecting their own shareholders and their equity in the firms (U.S. 
House of Representatives, Committee on Oversight and Government Reform, 
October 23, 2008) This has set off a series of analyses on all sides 
that retrospectively examine the cracks and weaknesses in the 
intellectual structure that should have been recognized (see for 
example Justin Fox, The Myth of the Rational Market: A History of Risk, 
Reward and Delusion on Wall Street (New York: Harper Collins, 2009); 
Richard Posner, A Failure of Capitalism: The Crisis of and the Decent 
Into Depression (Cambridge: Harvard University Press, 2009); John 
Cassidy, How Markets Fail: the Logic of Economic Calamities; New York: 
Farrar, Straus and Giroux, 2009). There were, of course, critics who 
recognized the problems much earlier, but whose warnings went unheeded 
(see for example, Joseph E. Stiglitz, The Roaring Nineties (New York: 
Norton, 2003); Robert Pollin, Contours of Descent: U.S. Economic 
Fractures and the Landscape of Austerity (Verso, 2005); Frank Portnoy, 
Infectious Greed (New York Holt, 2003); Robert Schiller, Irrational 
Exuberance (New York: Currency/Doublday, 2005); Pitofsky, op. cit.; 
George Cooper, The Origin of Financial Crises: Central Banks, Credit 
Bubbles and the Efficiency Market Fallacy (New York: Vintage, 2008).
---------------------------------------------------------------------------
A Comcast/NBC Merger Should Not Be Allowed to Proceed Without Major 
        Structural Reforms of the Video Market
    The merger has so many anti-competitive, anti-consumer, and anti-
social effects that it cannot be fixed. Comcast's claim that FCC 
oversight will protect the public is absurd. Moreover, such claims are 
undercut by the fact that Comcast is presently opposing the very rules 
it says will prevent it from anticompetitive conduct. The challenges 
that this merger poses to the future of video competition cannot be 
ignored, or brushed aside by reliance on FCC rules that have yet to 
remedy current problems and, thus, are ill-equipped to attend to the 
increased anticompetitive means and incentives that will result from 
Comcast's acquisition of NBC. The FCC rules have failed to break the 
stranglehold of cable to-date. There is no reason to believe they will 
be better able to tame the video giant that will result from this 
merger.
    Further, any suggestion that the public interest commitments 
Comcast has made will solve these problems is misguided. Temporary 
band-aids cannot cure long-term structural injuries. Comcast's promises 
lack substance and accountability. More importantly, the commitments do 
not begin to address the anticompetitive effects of the merger. Many of 
Comcast's commitments amount to little more that a promise to obey the 
law. Where they go beyond current law, they largely fall within the 
company's existing business plans. Anything beyond that is meager at 
best, and in no way substitutes for the localism and diversity that a 
vigorously competitive industry would produce.
    We recognize that the company has made some promises that address 
some specific concerns of Members of the Congress and this committee. 
We appreciate the fact that everyone recognizes that those special 
interest promises are far from adequate to protect the interests of the 
broader public. So in my remarks today I will take up the challenge 
that some members of the Committee have laid down in terms of 
identifying the conditions that would begin to address the broader 
problems with this merger and in this industry. I emphasize the 
structure and process of enforcement of conditions, rather than the 
details.
    First, all of the major areas of competitive concern should be 
addressed, in addition to the localism and diversity areas that Comcast 
has admitted are a problem--local markets/affiliate relations, cable 
program access, cable carriage, Internet distribution, independent 
programming in broadcast and prime time. If Federal authorities allow 
this merger to go forward, they should not merely impose conditions on 
the merger, they should reform the regulatory structure of the industry 
to address the underlying problems that this merger will make much 
worse. The only way to address the harm that this merger will do to 
competition and consumers is to address the underlying problems that 
afflict video consumers in America.
    To ensure that the conditions are enforceable, we believe that the 
Federal authorities with oversight over this merger should complete 
industry-wide proceedings that address the underlying problems before 
the merger is approved. In every one of the areas where we believe that 
broad public interest is at risk, there is a pending proceeding or 
complaint that provides the opportunity to address the underlying 
problems in the industry that would be made so much worse by this 
merger. When it comes to relations between the networks and their 
affiliates, cable program access, cable program carriage, and 
independent programming on broadcast networks, the FCC has available 
vehicles to move quickly to adopt strong rules to protect the public. 
The antitrust authorities have been asked to examine the anti-consumer, 
anticompetitive market division scheme Comcast is pushing for Internet 
distribution of video content. These agencies should act to outline the 
rules of the road and create the institutional structures that will 
prevent the abuse of market power and promote competition in the MVPD 
market.
    Once these industry-wide mechanisms are in place, the agencies 
should then consider whether additional conditions are necessary to 
meet the unique threat to competition and the public interest embodied 
in this merger.
    Finally, Federal authorities must not only impose meaningful 
conditions with enforceable sanctions, but Comcast should also agree 
not to challenge the legality of the conditions or render aid and 
comfort to those who do. If they challenge the legality of the 
regulatory mechanisms that underlie any of the major conditions imposed 
on the merger that should immediately trigger a reconsideration of the 
merger and a reconsideration of the transfer of the broadcast licenses 
in a proceeding that is treated as a de novo review of the merger. 
Since Comcast has volunteered to give up its right to stop obeying a 
law in the event it is declared illegal or unconstitutional, it should 
have no problem giving up it right to challenge such a law.
Fundamental Reform Is Long Overdue, Federal Authorities Should Seize 
        the Moment of the Largest Merger in History to Jump Start the 
        Reform Process
    Over the past quarter century there have been a few moments when a 
technology comes along that holds the possibility of breaking the 
chokehold that cable has on the multi-channel video programming market, 
but on each occasion policy mistakes were made that allowed the cable 
industry to strangle competition. This is the first big policy moment 
for determining whether the Internet will function as an alternative 
platform to compete with cable. We all hope the Internet will change 
everything in the video product space, but it has not yet. According to 
the Nielsen ``Three Screen Report,'' 95 percent of TV viewing and 90 
percent of the time spent with the media is still the traditional 
media. If policymakers allow this merger to go forward without 
fundamental reform of the underlying industry structure, the prospects 
for a more competition-friendly, consumer-friendly multi-channel video 
marketplace will be dealt a severe setback.
    It is only by taking the approach I have outlined that Federal 
authorities can do more than just preserve the current industry 
structure, which is riddled with anticompetitive and anti-consumer 
institutions and practices, that they can improve the terrain of the 
American video marketplace. This merger is an opportunity to jump-start 
the industry reform process.
    I urge policymakers to think long and hard before they allow a 
merger that gives the parties incentives to harm competition and 
consumers, while increasing their ability to act on those incentives. 
This hearing should be the opening round in what must be a long and 
rigorous inquiry into a huge complex merger of immense importance to 
the American people. It should be the first step in a review process 
that concludes the merger is not in the public interest and should not 
be allowed to close.




    Senator Dorgan. Dr. Cooper, thank you very much.
    Ms. Abdoulah, you may proceed. Thank you.

 STATEMENT OF COLLEEN ABDOULAH, PRESIDENT AND CHIEF EXECUTIVE 
    OFFICER, WOW!; BOARD MEMBER, AMERICAN CABLE ASSOCIATION

    Ms. Abdoulah. Hi. I appreciate the opportunity to represent 
WOW! and the 900 small and medium-sized companies who are 
members of the ACA.
    WOW! is a broadband competitive provider in five Midwest 
markets. One million of our households compete directly with 
Comcast in Michigan and Illinois. We differentiate ourselves 
through the customer experience that we provide, and customers 
appreciate having a choice.
    They recently recognized us as the number-one cable, 
Internet, and phone provider in last month's Consumer Reports. 
They have recognized us with 10 J.D. Power awards.
    Our customer-centric approach really works. We know how to 
compete. We are not here today to ask for favors from you, or 
Government assistance, or special advantages. We are here as a 
buyer of content, both cable and online.
    The prospect of having Comcast-NBCU combining their 
programming, much of which has been deemed by the FCC as 
``must-have,'' will give them significantly more market power. 
And I believe that should concern you on behalf of consumers. 
We are going to pay substantially more for the programming that 
we distribute today if this merger is approved without 
conditions, and we will have no other choice but to pass that 
on to consumers.
    And let me explain specifically why they will have more 
market power after the deal goes through. Comcast, as you know, 
is not just a large cable operator. It is also a significant 
owner of programming, including 10 must-have regional sports 
networks. And you can imagine how hard it would be to compete 
in our markets without local sports.
    Then NBC has 10 broadcast networks, also must-have. NBC 
owns popular cable networks that we need in order to compete. 
Comcast owns cable channels. You combine all that together, 
that is increased market power. And, post-merger, we will be 
negotiating with one consolidated entity with much greater 
leverage to extract higher prices and broader distribution of 
their programming. And I know this because it happens today.
    In a filing with the FCC, Suddenlink, another cable 
provider, demonstrated when they had to negotiate with one 
company for two must-have broadcast stations in their same 
market, their rates were 20 percent higher than in markets 
where Suddenlink negotiated on a station-by-station basis. And 
our experience at WOW! validates this experience, these kind of 
fees, and higher. And I am told that the DOJ finds a proposed 
transaction is anticompetitive if prices are likely to go up by 
more than 5 percent after a deal closes.
    So here are the harms that will result from the merger if 
it is not conditioned. Operators like WOW! are charged higher 
prices. As a result, consumers will pay more. Comcast will use 
its increased market power to demand that operators like WOW! 
carry additional networks not watched or wanted by customers.
    Mr. Roberts himself was quoted a few weeks ago that 
services like Comcast's G4 channel would ``enjoy the benefit of 
NBCU's scale.'' To me, that means more bundling, more tying of 
low-value networks with high-value networks, and charging more. 
And for direct competitors to Comcast, they will have every 
incentive to deny us both online content and advanced services.
    And in defense of my concerns, Comcast has offered to abide 
by little more than the existing program access rules. These 
concessions are meaningless since the program access rules fail 
to remedy abuses today and will continue to be meaningless if 
the merger is approved without conditions and reform.
    Here are the problems that need to be addressed 
specifically. Program access rules provide no automatic right 
to continued carriage of the network while the case is pending, 
and we all know the impact that has on customers. Program 
access rules are rife with loopholes that allow for 
discriminatory pricing. There is no price transparency to allow 
the FCC to resolve program access disputes. And finally, the 
current arbitration process is limited only to must-have sports 
programming and broadcast stations, and it is time-consuming 
and costly. So much so that it is beyond the means of any ACA 
member to utilize.
    So, in closing, I believe companies like WOW! are just the 
kind of competitors sought in the 1992 and 1996 Acts. I am not 
here to suggest that the merger not be approved. However, I am 
here to say that the FCC and DOJ need to consider structural 
and behavioral relief such as stronger, more effective program 
access requirements. The goal has to be to prevent increased 
consumer pricing, preserve competition, and most of all, set a 
positive precedent for future mergers of this type.
    Thank you for having me.
    [The prepared statement of Ms. Abdoulah follows:]

 Prepared Statement of Colleen Abdoulah, President and Chief Executive 
        Officer, WOW!; Board Member, American Cable Association
    Chairman Rockefeller, Ranking Member Hutchison, and members of the 
Committee, thank you for inviting me to appear today to testify on the 
proposed combination of Comcast and NBC Universal. My name is Colleen 
Abdoulah, President and CEO of WOW!, a terrestrial-based, mid-sized 
competitive provider of cable television and other broadband-related 
services operating in Illinois, Indiana, Michigan and Ohio.\1\ In those 
markets, we face some of the most intense competition in the United 
States, going toe-to-toe with multiple providers of video, Internet, 
and voice service. We also, by the very nature of our business, are a 
major consumer of programming on behalf of our subscribers. WOW! 
negotiates programming deals with some of the largest media 
conglomerates to secure rights to distribute broadcast stations and 
cable networks that are essential to our company's viability in the 
market.
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    \1\ WOW! began operations in March 2000 in the Denver market, and 
in 2001 it acquired Ameritech's extensive competitive cable television 
systems in the Midwest. Today, it serves approximately 465,000 
customers.
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    I am here today both in WOW!'s capacity as a consumer of 
programming and competitive MVPD (Multichannel Video Programming 
Distributor) to tell the Committee that the proposed combination of 
Comcast and NBC Universal is a major transaction--bringing together key 
programming assets from both companies as well as joining that 
programming with Comcast's extensive cable assets--that would cause 
significant horizontal and vertical harms, threatening both consumers 
and competition. The Federal Communications Commission (FCC) or the 
Department of Justice (DOJ) must impose robust relief to remedy these 
harms.
I. Introduction to WOW! and the American Cable Association
    Customers appreciate having a choice of communications providers, 
and when they choose WOW!, it is because we offer great value at a fair 
price. Our true differentiation is the customer experience we provide, 
from the products we offer to how we sell, install, and service our 
customers. It is for that reason that I am especially proud that 
Consumer Reports just ranked WOW! as the ``Number 1'' provider of 
video, Internet, and voice services in the United States, outperforming 
AT&T, Verizon, Comcast, and satellite providers. In addition, in 2009, 
we were ranked highest by J.D. Power and Associates for overall 
customer satisfaction among television, Internet, and residential phone 
providers in the North Central Region. WOW! has received 10 of these 
awards in the past 5 years. These awards are not serendipitous. Since 
our inception, WOW! has been dedicated to caring for and respecting our 
customers, and it is heartening that in turn our customers appreciate 
what we do for them.
    WOW! is a major consumer of content from Comcast and NBC Universal. 
It carries the majority of NBC Universal's 14 national cable networks 
on all of its systems, and the NBC and Telemundo Owned & Operated (O&O) 
stations in the relevant markets we serve. We also distribute most of 
Comcast's 5 national cable networks and its Regional Sports Networks 
(RSNs) in their relevant markets.\2\
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    \2\ The Federal Communications Commission (FCC) classifies some of 
this content as ``must have'' programming, and we know that other 
content is much in-demand by our customers. In reviewing this proposed 
combination, it is not critical that content be ``non-replicable'' or 
``must have''--only that the content be sufficiently desirable to 
enable the entity owning or controlling it to possess market power as a 
result. Moreover, once an entity has ``market power content,'' it can, 
and many do today, leverage it in a number of ways, many of which are 
discussed in this testimony. For instance, television network owners 
with market power today, bundle their low-value content with higher-
value networks, which in essence compels WOW! to carry non-consumer 
requested programming.
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    In addition to being a consumer of programming, in our Chicago and 
Detroit markets, covering approximately 1 million households, WOW! 
competes directly with Comcast's cable systems. It also competes with 
both Comcast and NBC's television stations in the local advertising 
market and now with their Internet distribution platforms. In sum, WOW! 
has a major vested interest in the Federal Government's review of the 
proposed combination to ensure that it neither harm consumers nor a 
vibrant competitive marketplace.
    I am also here on behalf of the American Cable Association (ACA), 
which represents approximately 900 smaller MVPDs that operate in every 
state. Just like WOW!, all of these providers are consumers of content 
controlled by Comcast and NBC Universal, and many of them compete as 
described above. More specifically, all ACA members purchase national 
programming from Comcast and NBC Universal; more than 100 purchase 
programming from Comcast's RSNs; and, more than 20 purchase programming 
both from a Comcast RSN and a NBC Universal O&O television station in 
the same market. Moreover, in addition to WOW!, more than 35 ACA 
members compete directly against Comcast's cable systems, including in 
West Virginia, California, Maryland, and Washington. So, harms caused 
by the proposed combination will be felt across the country.
II. Overview of Harms from the Proposed Combination and Focus of Relief
    In addressing the proposed combination of Comcast and NBC 
Universal, it is important for the Committee to understand at the 
outset that Comcast and NBC Universal have already admitted that the 
deal raises competitive concerns and have proffered a series of 
voluntary, albeit insufficient, commitments to address these 
concerns.\3\ Of course, Comcast and NBC Universal have greatly 
understated both the type and extent of harms that would result should 
this proposed combination be approved by the FCC and the DOJ. Let me 
summarize our concerns with the transaction:
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    \3\ While on their face the Comcast-NBC Universal ``commitments'' 
may superficially reflect access to programming (broadcasting and 
otherwise) concessions, in reality they provide neither material 
certitude of program access nor assurance of a level playing field with 
regard to terms and conditions for access. For example, using the same 
methodology for resolution of discriminatory pricing and terms in 
future Comcast-NBC Universal retransmission agreements as exists under 
the FCC's Program Access Rules (which are slated to expire in 2012) is 
a remedy without a solution given the time and cost of seeking a 
resolution and discontinuance of program access during the pendency of 
a complaint.

   First, the harms. This is an unprecedented deal, which, if 
        consummated, would substantially increase the market power of 
        Comcast, threatening consumers and competition in the 
        traditional, and the rapidly evolving Internet, content and 
        distribution arenas. Contrary to the claims of Comcast and NBC 
        Universal, the proposed combination is not a mere vertical 
        integration of Comcast's distribution assets with NBC 
        Universal's programming assets--which by itself would raise 
        competitive concerns.\4\ Rather, the deal is also a horizontal 
        combination of key content assets of the two firms, giving 
        Comcast substantially increased market power that it would 
        employ either to withhold content or extract additional fees 
        and impose unreasonable carriage requirements from video 
        distributors across the country. The harm would be especially 
        great for video distributors that compete directly with 
        Comcast's cable systems. The harm also would extend to the 
        evolving online marketplace where Comcast could either withhold 
        content from competitors or impose higher-fees and 
        discriminatory or other unreasonable conditions for carriage. 
        In the end, should this proposed combination be approved, as 
        programming fees ratchet-up and MVPDs are forced to carry low-
        value networks, consumers across the country will see 
        significant increases in prices to access video programming, 
        both via traditional cable services and online.
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    \4\ The vertical integration issues raised by the proposed 
combination, of course, raise anticompetitive concerns that the FCC and 
Department of Justice must address.

   Second, the relief. In fashioning relief to address the 
        anticompetitive harms caused by the proposed combination, it 
        would be a grave error to rely on the current Program Access 
        statute and rules or upon conditions, including arbitration, 
        agreed to in previous mergers with programmers and 
        distributors. Both are riddled with so many loopholes and flaws 
        and are so costly and resource-intensive that they are simply 
        ineffective in remedying access to programming issues, 
        particularly for smaller operators most vulnerable to market 
        power abuses. Rather, the FCC and the DOJ need to develop both 
        robust structural relief, including divestitures, and 
        behavioral relief, including much stronger program access 
        requirements, if the severe harms are to be remedied.
III. The Proposed Combination is Unprecedented and Will Greatly Enhance 
        Comcast's Market Power
    I have been in the cable industry for more than 25 years and have 
tremendous respect for Comcast and Brian Roberts and for NBC Universal 
and Jeffrey Zucker and their employees. Over the past decade, these 
gentlemen and their two firms have amassed a series of impressive 
assets.
    Through strategic acquisitions, Comcast has become the country's 
largest cable operator with 23.8 million subscribers, and the largest 
residential broadband access provider with 15.7 million customers. In 
recent years, Comcast also has emerged as a major cable content owner, 
including its 10 highly powerful Regional Sports Networks, or RSNs--
which MVPDs must carry to compete effectively. It also owns such cable 
networks as the Golf Channel, E! Entertainment Television, Style 
Network, Versus, and G4. Moreover, it has a robust video-on-demand 
platform, and has developed a TV Everywhere type of service (Fancast 
Xfinity TV) where cable programming is streamed over the Internet only 
for its cable customers.
    NBC Universal also controls key assets in the broadcast and cable 
programming markets, including the NBC network, 10 NBC O&O broadcast 
stations, 15 Telemundo O&O broadcast stations, and 14 popular cable 
networks, including the #1 rated USA Network, and others, like Syfy, 
Bravo, CNBC, MSNBC, and Oxygen. For MVPDs, most of this programming 
also is considered ``must have.'' The company also is an owner of the 
Internet-provided Hulu platform.
    As I indicated at the outset of my testimony, WOW! competes 
directly with Comcast and NBC Universal, and we have more than held our 
own in competing against other MVPDs despite having fewer customers and 
resources. WOW! has no problem with robust competition.
    However, when the programmers from whom you purchase content all of 
sudden acquire substantial additional key programming assets, problems 
are certain to ensue. Moreover, when your competitor also is a major 
vendor, supplying video content essential or important for any 
competitive provider to access, issues constantly arise.
    Over the years, WOW!, like most of us in the cable industry, has 
wrestled with each of these two firms individually to obtain content, 
and there is little doubt they have used their market power in these 
negotiations to extract additional value and obtain an advantage in the 
distribution market. What concerns me and I believe should concern the 
FCC, DOJ, and you about this proposed combination is that the problems 
WOW! sees in the current market are surely going to be exacerbated when 
the two firms come together. Those problems harm the consumer and the 
overall marketplace in many ways, including by abnormally inflating 
prices, reducing distributors' ability to tailor program offerings to 
consumer interests, and ultimately limiting advanced broadband services 
as distributors are forced to expend bandwidth for services consumers 
do not want.
A. Current (Pre-Combination) Problems Faced by WOW! and Smaller MVPDs 
        in 
        Accessing Content
    To understand the harms that will occur post-combination, it is 
first essential to understand the anticompetitive acts that occur in 
the industry today. Because I am forbidden by confidentiality clauses 
in agreements with Comcast and NBC Universal from disclosing specific 
terms and conditions, I will describe for the Committee general and 
frequent problems that MVPDs have encountered and currently face when 
negotiating content deals.\5\ These should provide you with a more 
complete understanding of why today's system is not as consumer-centric 
as it could and should be and why, after this combination, consumers 
and non-vertically integrated competitive providers such as WOW! will 
be even more disadvantaged. Anticompetitive behavior such as the 
following regularly occur:
---------------------------------------------------------------------------
    \5\ Confidentiality clauses are important to preserve the integrity 
of the negotiation process and relations between firms. However, 
government entities are entitled to receive agreements despite these 
clauses if they issue a subpoena or make a similar demand. WOW! and ACA 
members intend to cooperate fully with the FCC and the Department of 
Justice as they review the proposed combination and will respond 
promptly to all demands for information.

        1. In negotiations for retransmission consent agreements, major 
        owned-and-operated television network stations have conditioned 
        any agreement with MVPDs upon carriage of infrequently-viewed 
        networks because it drives their advertising revenues. As a 
        result, the MVPDs were unable to carry networks with greater 
        viewership or niche networks requested by their subscribers, 
        and, because these ``extra'' networks used valuable bandwidth, 
        the MVPDs were constrained in dedicating increased bandwidth 
---------------------------------------------------------------------------
        for advanced, higher-speed broadband services.

        2. An MVPD attempted to negotiate a carriage agreement with a 
        network that is partially owned by a large content provider. 
        The network refused to grant the MVPD carriage rights for 
        advanced platform content it was thinking about deploying--HD, 
        VOD, and online. However, the network reserved the right to 
        provide this advanced content on an exclusive basis, or simply 
        at more favorable terms, to larger competing providers 
        operating in the same markets. This would have the effect of 
        making the MVPD's product offerings less competitive with these 
        larger providers, thus limiting consumers' traditional and 
        online choices.

        3. Content providers with market power are increasingly 
        demanding ``take it or leave it'' rate ``resets'' during 
        contract renewal negotiations, enabling them to automatically 
        pass-through increased content costs. Consumers are harmed by 
        the pass-through of some of these inflated costs; the competing 
        MVPD is harmed when it must absorb the remaining costs, thereby 
        diminishing the resources needed to offer content from smaller 
        providers as well as implement advanced services.

        4. Content providers with significant market power sometimes 
        demand a higher penetration of distribution for their video 
        services from smaller operators than they do from larger 
        distributors. If even a relatively small number of new or 
        existing video subscribers choose the lower-cost ``broadcast 
        basic'' tier, the penetration of the higher-cost ``expanded 
        basic'' tier could fall below the required penetration floor. 
        The only remedy in that case would be to migrate the cable 
        network(s) in question to the Limited Basic tier of service, 
        forcing additional programming cost on those subscribers who 
        may least be able to afford it--and, in the process, causing 
        the entry-level video offering to become less competitive from 
        a retail pricing perspective than that offered by large 
        competitors who may not have equivalent penetration 
        requirements.
B. Horizontal and Vertical Harms to Competition Arising from the 
        Proposed Comcast-NBC Universal Combination
    With the proposed combination, the issue is whether post-
combination Comcast is able to use the newly aggregated assets and 
market power to engage in substantially enhanced anticompetitive 
activities, including by raising prices significantly, withholding or 
discriminating in providing access, mandating uneconomic tiering or 
minimum penetration requirements, or forcing unreasonable tying or 
bundling arrangements. The readily proven response is that of course it 
does given the assets that the combined entity will control post-
combination and given the current anticompetitive behavior of the two 
firms.
    While couched in terms of synergies and growth opportunities, at 
its heart, the Comcast-NBC Universal deal is principally driven by the 
aim to lock up a wider array of key content (a horizontal combination) 
and use that enhanced power to extract higher prices from purchasers 
and also to use that power vertically to reduce or eliminate 
competition, in either traditional or Internet-based markets. Let me 
elaborate.
Horizontal Harms
    The DOJ and Federal Trade Commission have adopted policies to 
govern mergers with horizontal effects, the Horizontal Merger 
Guidelines. These policies contain a rigorous framework the agencies 
use to determine whether a merger is ``likely substantially to lessen 
competition'' and the focus is on whether the merger will enable the 
entity to enhance its market power or facilitate its exercise. The key 
is to focus on the overlap of assets between the two merging entities 
to determine if, when combined, it will result in the entity possessing 
sufficiently greater power in the market.
    As discussed at the outset of my testimony, setting aside the fact 
that Comcast is the largest cable operator in the United States, it 
owns or controls significant programming assets, including 10 RSNs and 
a variety of national programming networks. NBC Universal also owns or 
controls the NBC O&O stations and a great array of cable programming 
networks. As I will discuss below, by combining these overlapping 
assets, Comcast will significantly increase the market power of the 
combined entity in programming markets across the country. As a result, 
pay television providers that purchase programming from the entity will 
pay higher prices and be burdened with more restrictive terms and 
conditions for this programming which will be passed on to subscribers.
    In a series of rulings over the past 5 years--one just recently 
\6\--the FCC has determined that sports programming was ``non-
replicable'' or ``must have.'' In other words, a video distributor such 
as WOW! or another ACA member could not succeed if it could not give 
customers access to such programming. The Commission has reached a 
similar conclusion for television network programming, which combines 
the value of prime-time content with extensive sports content. It also 
should be noted that a bundle of cable programming, which is how such 
programming is normally sold, can become similar to ``must have'' 
individual programming depending on its overall ratings. A main driver 
of the proposed combination is to ``lever'' the market power of these 
``must have'' content anchors--Comcast's RSNs, NBC's O&O stations, and 
NBC's extensive cable programming networks--and squeeze unaffiliated 
downstream multi-channel video providers to extract appreciably higher 
fees.\7\
---------------------------------------------------------------------------
    \6\ In the Matter of Review of the Commission's Program Access 
Rules and Examination of Programming Tying Arrangements, First Report 
and Order, MB Docket No. 07-198 (rel. Jan. 20, 2010) at  8.
    \7\ In their application to transfer control filed Jan. 28, 2010 
with the FCC, Comcast-NBC Universal contend there is not an issue with 
regard to RSNs arising from the proposed combination. However, they 
only arrive at this contention by artificially pigeon-holing RSNs into 
their own submarket. In this testimony, WOW! has provided one example 
of how RSNs and local television networks compete directly, which 
demonstrates the fallacy of Comcast-NBC Universal's market definition, 
and other distributors and WOW! can provide additional evidence 
supporting a conclusion that a more expansive market definition is 
justified.
---------------------------------------------------------------------------
    In the post-combination world Comcast will have sufficient 
additional market power that it can create its own economic reality and 
make one plus one equal five. This makes all distributors in the United 
States quake as they will be forced to pay more for the content so 
essential to their businesses. Further, it means that American 
consumers will pay more as well. This is the antithesis of a pro-
competitive deal.
    An example will help make this point clearly. In Chicago today, 
WOW! carries 19 networks from Comcast and NBC Universal, including both 
Comcast's RSN and NBC's O&O television station. We negotiate separately 
with the two firms, and I know firsthand that each firm leverages its 
existing ``market power content'' to the maximum extent. But, at least, 
Comcast and NBC Universal bargain independently, not knowing what the 
other would do. In other words, neither is completely certain of the 
effect on WOW! if all of this ``must have'' programming were withheld. 
Obviously, post-combination, that all changes. It will be as if Comcast 
and NBC Universal could collude today with each knowing how the other 
will bargain with WOW!. In the end, WOW! will pay more for programming, 
and it will have little choice but to pass this on to consumers.
    WOW!'s concern is not imaginary or merely academic. There are 
numerous instances of programmers combining or colluding to extract 
additional rents. The DOJ, for instance, filed a civil antitrust 
complaint against several broadcasters in a market for engaging in a 
combination and conspiracy to increase the price of retransmission 
rights to cable operators. The consent decree ending this litigation 
found that the broadcasters had restrained competition and enjoined 
them from agreeing to bargain jointly with cable operators.\8\
---------------------------------------------------------------------------
    \8\ United States v. Texas Television et al., Competitive Impact 
Statement, U.S. District Court, Southern District of Texas, Corpus 
Christi Division, 1996.
---------------------------------------------------------------------------
    More recently, the MVPD, Suddenlink, in a filing to the FCC stated:

        ``Suddenlink has examined its own retransmission consent 
        agreements and has concluded that, where a single entity 
        controls retransmission consent negotiations for more than one 
        Big 4 station in a single market, the average retransmission 
        consent fees Suddenlink pays for such entity's Big 4 stations 
        (in all Suddenlink markets where the entity represents one or 
        more stations) is 21.6 percent higher than the average 
        retransmission consent fees Suddenlink pays for other `Big 4' 
        stations in those same markets. This is compelling evidence 
        that an entity combining the retransmission consent efforts of 
        two `Big 4' stations in the same market is able to secure a 
        substantial premium by leveraging its ability to withhold 
        programming from multiple stations.''

    WOW! has been told by the ACA that various members have had 
experiences similar to Suddenlink, and, based on its own experience, 
WOW! can verify the increase in retransmission fees documented by 
Suddenlink.
    The harm resulting from these horizontal effects will be felt by 
consumers of all MVPDs that must negotiate for Comcast RSN 
programming.\9\ Because satellite television subscription prices are 
uniform across the country, this means that consumers nationwide will 
be effected by Comcast's leverage to extract higher programming fees in 
select markets. In the 7 television markets where there is both a 
Comcast RSN and an NBC O&O, Comcast will be able to exercise enormous 
newfound market power over local MVPDs who operate in only one market. 
In the most extreme case--the San Francisco-Oakland-San Jose television 
market--the combined company would own an NBC broadcast station, two 
Spanish-language broadcast stations, and two Comcast Regional Sports 
Networks.
---------------------------------------------------------------------------
    \9\ Comcast's RSN are available in 53 television markets across the 
country or 38 percent of all television homes.
---------------------------------------------------------------------------
Vertical Harms
    The Comcast-NBC Universal transaction is also a vertical 
integration of broadcast, cable-programming, and online content with 
distribution that will result in significant harms to consumers and 
competition across the country. By adding NBC Universal's vast array of 
``must have'' programming with its own cable distribution assets, 
Comcast will have increased abilities to raise cable and satellite 
rates for providers, like WOW!, that rely on access to key content--
such as Comcast's Chicago RSN and NBC's ``O&O'' station in Chicago--and 
that are competing directly with Comcast's Chicago cable systems. 
Numerous studies, including from the U.S. Office of Government 
Accountability,\10\ have demonstrated that competitors like WOW! 
provide real competition to incumbent cable providers and tangible 
benefits for consumers. As I discussed at the outset, WOW! has received 
an unprecedented number of awards for providing an exceptional service 
experience compared to incumbent providers. However, if WOW! is forced 
to either forgo access to content or pay supra-competitive prices or 
face anticompetitive terms and conditions for it, all of this is placed 
in jeopardy.
---------------------------------------------------------------------------
    \10\ Wire-Based Competition Benefited Consumers in Selected 
Markets, U.S. General Accountability Office, Report to the Subcommittee 
on Antitrust, Competition Policy and Consumer Rights, Committee on the 
Judiciary, U.S. Senate, GAO-04-241, Feb. 2004.
---------------------------------------------------------------------------
    Moreover, WOW! is not the only competing video distributor in an 
extremely vulnerable position. In 69 television markets across the 
country, Comcast competes against DirecTV, Dish Network, Verizon's 
FiOS, AT&T U-Verse and more than three dozen small and medium-sized 
cable and telephone companies retailing video programming. As discussed 
above, because satellite subscription prices are uniform across the 
country, Comcast's increased leverage in certain regions of the country 
will result in increased prices nationwide. When satellite companies 
raise their prices, this will also reduce competitive pressures on 
cable companies that compete with satellite companies.
Harms in the Online Distribution Market
    WOW! urges the Committee to pay particular attention to the harms 
that would be felt by online distributors of content and broadband 
users. WOW! recently experienced problems with initiating its own 
version of Comcast's Fancast XFINITY TV service because it was unable 
to obtain content from Comcast and other content providers with whom 
Comcast had struck deals. This despite the fact that Comcast claims the 
content used in its online service is non-exclusive. We're pleased to 
note that since raising this issue as a witness at other Congressional 
hearings on the Comcast-NBCU deal last month, Comcast has been willing 
to engage in talks for the online rights to their content. However, it 
is far from certain that these rights will ultimately be made available 
to WOW!.
    With the advent of Internet-delivered video content, the hundreds 
of ACA members who currently do not compete with Comcast's cable 
systems may become new targets. Comcast will be able to present them 
with the simple proposition: if you want your customers to have access 
to our content, you will now pay supra-competitive prices both to 
acquire Comcast-NBC Universal's ``must have'' content for traditional 
cable customers and to allow your customers to access this content as 
an Internet-delivered service.
    We also have concerns about the ability of Comcast-NBCU to use its 
market power to force cable and broadband providers to adopt the 
ESPN360 model, where an Internet service provider is foreclosed from 
having its users access online content unless it pays a fee for every 
user regardless of whether the user ever accesses that content. It is 
evident to us that Comcast wants to combine this business model with 
all the ``must have'' content it will control post-combination to 
extract additional fees from consumers.
    Finally, if WOW! must pay the combined Comcast-NBC Universal supra-
competitive prices for content or must accept anticompetitive terms and 
conditions, such as unreasonable tying, tiering, or penetration 
requirements, it will have little choice but to either raise prices for 
its customers far above what would occur in competitive markets or 
limit the content it acquires from other suppliers, including smaller, 
independent providers. Moreover, WOW! can envision that the combined 
entity will make demands much greater than today and that are so 
onerous that we will have to continue to shrink the bandwidth we would 
dedicate for advanced services and broadband offerings. This runs 
directly counter to the Federal Government's vision of expanding and 
enhancing next-generation Internet access services for all users.
IV. The FCC and DOJ Must Adopt Relief Sufficient to Address Both the 
        Horizontal and Vertical Harms Caused Post-Combination; 
        Traditional Behavioral Remedies are Insufficient to Remedy the 
        Vertical Harms
    The FCC and DOJ need to fashion relief that addresses both the 
horizontal and vertical harms caused post-combination. As noted above, 
the horizontal harms are most substantial and troubling for consumers 
and competition. The agencies thus must seriously consider structural 
relief, including divestitures of assets that are the cause of these 
harms. The great value of structural relief is that it creates the 
proper, pro-competitive market dynamic and minimizes any regulatory 
gaming that can occur. WOW! and the ACA were most heartened to see the 
Department of Justice rely on structural relief (a divestiture) in the 
recently negotiated Ticketmaster consent decree.
    As for dealing with the vertical effects, the Committee should 
understand that the program access statute and rules and related past 
merger conditions have serious flaws, which if not corrected will be 
inadequate to remedy harms arising from the combination of Comcast and 
NBC Universal. (It also should be noted that Comcast, which contends 
that the program access rules will remedy any harms from the proposed 
combination, has decided to challenge the FCC's 2007 extension of the 
rules in court.) WOW! is particularly concerned that the processes 
associated with pursuing a program access complaint (or any similar 
matter before the FCC or an arbitrator) are so burdensome and resource-
intensive that any rights we might have are effectively nullified. For 
instance, without an automatic ``standstill'' provision, enabling 
carriage during the many months while the dispute is pending, any 
program access rights are rendered meaningless.
    The program access statute, passed as part of the 1992 cable 
legislation, sought to address the market power that large cable 
operators had acquired and which they used frequently to squeeze 
programmers not affiliated with them and to refuse to sell (or 
otherwise discriminate in the sale of) affiliated programming product 
to competing distributors. The FCC promptly implemented the statute by 
adopting rules, but it became quickly apparent that there were so many 
loopholes in the rules that incumbent cable operators and their 
affiliated programmers could readily avoid them. The following are the 
major problems with the rules:

   The program access rules place no restriction on quantity 
        discounts. So long as a competing MVPD has fewer subscribers 
        than Comcast cable, Comcast has practically unlimited freedom 
        to charge the MVPD higher programming prices per subscriber 
        than it charges itself. Since the inception of the program 
        access rules in 1992, the ACA is aware of only two instances in 
        which the FCC has ruled in favor of a complaint alleging price 
        discrimination,\11\ and none since 1998.
---------------------------------------------------------------------------
    \11\ Corporate Media Partners v. Rainbow, 12 FCC Red. 15209, 1997; 
Turner Vision et al., v. CNN, 12 FCC Red. 12610, 1998.

   Even with very large MVPDs, Comcast can avoid any constraint 
        on the prices it charges its competitors simply by raising the 
---------------------------------------------------------------------------
        internal transfer price that it charges itself for programming.

   There are long delays in deciding cases with no automatic 
        right to continued carriage of programming while the case is 
        pending.

   It is uncertain that the program access rules apply to an 
        MVPD seeking to obtain rights for provision of online ``TV 
        Everywhere'' type services.

    As a result of these many flaws, the ACA estimates that its members 
are paying at least 20-30 percent more for programming that the larger 
cable operators.
    The FCC sought to tighten these loopholes in subsequent mergers 
between content providers and distributors, for instance, by permitting 
complainants to use third-party arbitration or collectively bargain for 
rights. But, here again, programmers affiliated with larger cable 
operators quickly found how to beat the system:

   The arbitration process is very costly because, while the 
        costs of arbitration are fixed, the benefits vary with the size 
        of the subscriber based. It is thus not feasible for small 
        operators to participate in their own individual arbitration, 
        and it is uncertain under what circumstances operators could 
        join together in a single arbitration. Finally, the terms 
        resulting from arbitrations undertaken by larger operators are 
        not available to smaller operators.

   Arbitration applies only to RSNs and retransmission consent 
        but not to national cable networks.

   The ``quantity discounts'' loophole is not clearly blocked.

    As a result, the ACA is aware of only one completed arbitration 
involving its members.\12\
---------------------------------------------------------------------------
    \12\ See, http://www.multichannel.com/article/131183-
Massillon_Cable_Wins_Its_Case.php.
---------------------------------------------------------------------------
    WOW! and the ACA are committed to addressing problems with 
behavioral relief and devising enhanced measures. They expect to 
present their proposals shortly.
V. Conclusion
    The proposed combination of Comcast and NBC Universal places 
Federal decision-makers at a crossroads: Will the agencies have 
sufficient foresight to adopt the necessary robust relief that will 
enable them to get ahead of anticompetitive problems caused by the 
proposed combination, or will they proceed cautiously waiting first to 
see if prices rise, jobs are lost, and firms go under? If the FCC and 
Department of Justice ignore or treat lightly the potential harms or 
provide inadequate relief, the already disturbing trend of big content 
and distribution mergers will only accelerate, all riding on the 
precedent of this deal. As a result, consumer hopes for greater choice 
will be dashed. On the other hand, if the Federal agencies address the 
grave potential harms with robust relief as described above, incumbent 
entrepreneurs will expand their businesses and new ones will rush into 
the market--all to the benefit of American consumers. The consequences 
of these choices make this proposed combination a ``big deal.'' WOW! 
and the ACA look forward to working with the Congress and the agencies 
as the review proceeds and as the agencies fashion relief to address 
anticompetitive harms.

    Senator Dorgan. Ms. Abdoulah, thank you very much.
    And finally, we will hear from Professor Yoo. You may 
proceed.

     STATEMENT OF CHRISTOPHER S. YOO, PROFESSOR OF LAW AND 
 COMMUNICATION, AND FOUNDING DIRECTOR, CENTER FOR TECHNOLOGY, 
                 INNOVATION, AND COMPETITION, 
                   UNIVERSITY OF PENNSYLVANIA

    Mr. Yoo. Thank you to the Committee for inviting me here to 
testify on how consolidation in the video and broadband markets 
will affect consumers.
    My written testimony contains a complete analysis of the 
likely consumer impact the proposed merger between Comcast and 
NBC Universal will have. Rather than rehearse those arguments 
here, I would like to use my time to emphasize two basic 
points.
    First, any antitrust analysis begins with the principles 
embodied by the decisions of the Supreme Court, this Congress, 
the antitrust regulatory agencies, and the FCC. And the 
starting point for the merger analysis is typically the merger 
guidelines issued by the Federal Trade Commission and the 
Justice Department.
    Those merger guidelines and the analysis that it lays out 
indicates that the proposed merger is unlikely to harm 
consumers. The guidelines also indicate that the markets 
affected by these mergers are competitive enough to protect 
consumers against anticompetitive effects.
    On the issues of horizontal integration, the decisions by 
this Congress, the courts, and the FCC recognize that local 
broadcasting and local cable operators constitute separate 
markets. Despite repeated attempts by the FCC to enact measures 
to prohibit combining television stations and cable operators 
under the same corporate umbrella, those rules were invariably 
struck down by the courts as arbitrary, capricious, and 
inconsistent with the statutory obligations established by this 
Congress.
    The FCC has now abandoned all efforts to reinstate these 
rules. Merger conditions limiting this type of cross-ownership 
would constitute a form of back door regulation that would 
allow the FCC to impose restrictions through the merger process 
that it was unable to enact through regular administrative 
processes.
    On vertical integration, the decisions of the Supreme Court 
and the merger guidelines establish that the proposed merger is 
unlikely to have any anticompetitive vertical effects. Any 
arguments about likely vertical effects must also take into 
account that the industry has undergone massive vertical 
disintegration over the past 15 years. During that time, the 
level of vertical integration has plummeted from a high of 56 
percent in 1994 to a mere 6 percent in 2009. This effect 
becomes even starker if one focuses only on the most highly-
rated television networks.
    The lateral or vertical concentration among the most 
highly-rated networks has plummeted from a high of 93 percent 
in 1994 to a low of 13 percent today. Moreover, the past 2 
years have witnessed the dissolution of the two largest 
vertically integrated companies operating in this sector.
    In 2008, News Corp., the owner of the Fox Television 
properties, reversed its 2004 acquisition of DirecTV. In 2009, 
Time Warner, the owner of such leading networks as TBS, CNN, 
and HBO, spun off its cable operations into a separate company. 
In short, while vertical integration may arguably have once 
been a concern at some point in the past, it is hard to make 
this case in the current business environment.
    Anyone suggesting that this merger will harm consumers, 
thus, bears a heavy burden. They must justify deviating from 
the standards established by this Congress, the Supreme Court, 
the FCC, and the antitrust authorities. They must then refute 
the facts indicating that the merger is so unlikely to hurt 
consumers that it should be approved under the merger 
guidelines without further analysis.
    Rebutting these arguments requires more than just opinions 
and conjecture. It requires reasoned analysis and empirical 
research. This makes the FCC's recent commitment to fact-based 
decisionmaking particularly welcome.
    The second point I would like to make is to focus attention 
on the recognized problems associated with using merger reviews 
to make regulatory policy. Traditional regulatory processes 
address problems on an industry-wide basis, guarantee public 
participation, and are subject to meaningful judicial review. 
Each of these features leads to better decisions and ensures 
that policies that are enacted remain fair.
    The same cannot be said of conditions imposed during the 
merger review process. Opportunities for public participation 
are more limited, and even when public participation is 
permitted, they tend to focus narrowly on the issues raised by 
a particular transaction instead of on how those issues affect 
the entire industry. Merger conditions are also less likely to 
yield clear statements of regulatory policy and are immune from 
scrutiny by the courts.
    Conditions on this merger also would necessarily only 
address 26 percent of the industry and would leave the vast 
majority of the problem unaddressed. The use of company-
specific adjudications to address issues that confront the 
entire industry threatens to skew the competitive landscape and 
raises serious issues of fairness.
    This is not to say that the current regulatory regime is 
perfect. Many industry participants have identified what they 
see as flaws in the process and have suggested possible 
reforms. The best course of action, when confronted with 
regulations that are imperfect, is not to jerry-rig a company-
specific solution simply because a particular party happens to 
be seeking clearance of a merger. The best practice is to open 
a general proceeding to address any problems that may exist on 
an industry-wide basis.
    As Chairman Genachowski said, the FCC has exercised ongoing 
oversight authority in this matter in the past and stands ready 
to do so in the future. In the wake of an era where the FCC was 
criticized by this Congress for failing to follow good 
administrative practices, maintaining the integrity of 
regulatory process would appear to be particularly important. 
Any other solution risks turning merger review into a source of 
back door regulation that hurts consumers, creates bad policy, 
skews the competitive landscape, and undermines democratic 
values, as well as the integrity of agency processes.
    Thank you.
    [The prepared statement of Mr. Yoo follows:]

    Prepared Statement of Christopher S. Yoo, Professor of Law and 
     Communication, and Founding Director, Center for Technology, 
        Innovation, and Competition, University of Pennsylvania
    Mr. Chairman, Ranking Member Hutchinson, and members of the 
Committee, I am grateful for the opportunity to testify on the proposed 
merger between Comcast and NBC Universal. I am happy to offer my 
analysis of how the merger will affect consumers.
    Anyone who examines Title 47 of the U.S. Code can attest to the 
fact that broadcast and cable television are governed by a complex and 
elaborate array of regulatory requirements and restrictions. As a 
result, when two media companies in these sectors merge, they typically 
have to divest themselves of a number of assets and request a variety 
of waivers before they can complete their merger. When a merger 
violates one of these rules or creates market conditions likely to harm 
consumers, it is entirely appropriate to include conditions in the 
order clearing the transaction requiring that the merging parties bring 
themselves into compliance.
    One of the most striking aspects of the proposed transaction is how 
clean the combination of Comcast and NBC Universal would be in this 
regard. The transaction does not create any new compliance issues,\1\ 
and as I will discuss in greater detail later in my testimony, 
conventional antitrust analysis indicates that the relevant markets are 
structured in a way that makes it unlikely that the merger will harm 
consumers.
---------------------------------------------------------------------------
    \1\ NBC Universal and its parent company, General Electric, are 
addressing two minor, preexisting compliance issues. Applications and 
Public Interest Statement by Comcast Corp. General Electric Co., and 
NBC Universal, Inc., at 73-75 (filed Jan. 28, 2010), Applications for 
Consent to the Transfer of Control of Licenses, General Electric Co., 
Transferor, to Comcast Corp., Transferee (MB Dkt No. 10-56). NBC's 
acquisition of Telemundo gave it control of three television stations 
in the Los Angeles market. Because the Los Angeles broadcast television 
market is home to more independent ownership groups than any city in 
the Nation and because forced sales reduce the value of stations and 
artificially limit the range of potential buyers, the FCC ruled that it 
was in the public interest to grant NBC a temporary waiver of its 
duopoly rule. Telemundo Communications Group, Inc. Transferor, and TN 
Acquisition Corp., Transferee, Memorandum Opinion and Order, 17 
F.C.C.R. 6968-79 46-53 (2002). In addition, the bankruptcy of 
American Community Newspapers caused debt owned by General Electric to 
be converted into nonvoting equity, which under the FCC's rules turned 
General Electric into a partial owner of two small community newspapers 
in Fort Worth, Texas, whose communities of service fall within the 
contour of one of its television stations. Given the involuntary nature 
of such changes, FCC policy usually accords parties subject to such a 
change in status a reasonable time to come into compliance with these 
rules. The Public Interest Statement reaffirmed the merging parties' 
commitment to resolving these issues in a reasonable timeframe.
    It bears noting that neither of these compliance issues is the 
result of the proposed merger. They are preexisting issues that are 
independent of the merger and would exist even if this merger had never 
been contemplated.
---------------------------------------------------------------------------
    Despite the fact that consummation of this merger would not create 
any violation any of the existing rules or any anticompetitive harms, 
opponents of the transaction are asking regulatory authorities to use 
the merger clearance process to impose additional conditions on the 
merging parties.
    Commissioners of the Federal Communications Commission (FCC) and 
commentators have long criticized the use of merger conditions as a 
mechanism for making policy.\2\ Traditional notice-and-comment 
rulemaking promotes public participation. By their nature, merger 
conditions restrict conduct permitted by the existing rules (otherwise 
the restriction would be imposed by general regulation rather than by 
the order clearing the merger). The problem is that they are imposed 
outside of the normal regulatory processes, and even when orders 
clearing the merger are subject to notice and comment, the resolution 
of the issues is more likely to be driven by the issues raised by a 
particular transaction and less likely to yield a clear statement of 
agency policy.
---------------------------------------------------------------------------
    \2\ For FCC Commissioner's criticisms of the merger conditions, see 
Verizon Communications Inc. and MCI, Inc., Memorandum Opinion and 
Order, 20 F.C.C.R. 18433, 18573 (2005) (separate statement of 
Abernathy, Comm'r); Applications for Consent to the Transfer of Control 
of Licenses and Section 214 Authorizations by Time Warner Inc. and 
America Online, Inc., Transferors, to AOL Time Warner Inc., Transferee, 
Memorandum Report and Order, 16 F.C.C.R. 6547, 6713 (2001) (Powell, 
Comm'r, concurring in part and dissenting in part); Applications of 
Ameritech Corp., Transferor, and SBC Communications Inc., Transferee, 
Memorandum Opinion and Order, 14 F.C.C.R. 14712, 15197-200 (1999) 
(Powell, Comm'r, concurring in part and dissenting in part); id. at 
15174-96 (Furchtgott-Roth, Comm'r, concurring in part and dissenting in 
part); Application of Worldcom, Inc. and MCI Communications Corp. for 
Transfer of Control of MCI Communications Corp. to Worldcom, Inc., 
Memorandum Report and Order, 13 F.C.C.R. 18025, 18166 (1998) (separate 
statement of Powell, Comm'r); id. at 18159 (separate statement of 
Furchtgott-Roth, Comm'r).
    For commentators' criticisms of the merger conditions, see Rachel 
Barkow & Peter Huber, A Tale of Two Agencies: A Comparative Analysis of 
FCC and DOJ Review of Telecommunications Mergers, 2000 U. Chi. Legal F. 
29, 54, 62-66, 69-81; Harold Furchtgott-Roth, The FCC Racket, Wall St. 
J., Nov. 5, 1999, at A18; Bryan Tramont, Too Much Power, Too Little 
Restraint: How the FCC Expands Its Reach Through Unenforceable and 
Unwieldy ``Voluntary Agreements,'' 53 Fed. Comm. L.J. 49, 51-59 (2000); 
Daniel E. Troy, Advice to the New President on the FCC and 
Communications Policy, 24 Harv. J.L. & Pub. Pol'y 503, 505-09 (2001); 
Philip J. Weiser, Institutional Design FCC Reform and the Hidden Side 
of the Administrative State, 61 Admin. L. Rev. 675, 708-11 (2009); 
Christopher S. Yoo, New Models of Regulation and Interagency 
Governance, 2003 Mich. St. Dcl L. Rev. 701, 704.
---------------------------------------------------------------------------
    In many cases, merger conditions address conduct that is not the 
result of the merger, and in most, if not all, cases, these issues 
addressed by the merger conditions are the subject of ongoing 
proceedings before the FCC. The use of company-specific adjudications 
to address issues that confront the entire industry threatens to skew 
the competitive landscape and raises serious issues of fairness. 
Moreover, merger conditions cannot be appealed, because the 
voluntariness of the commitment may well immunize it from meaningful 
judicial review.
    At best, the use of the merger review process to impose conditions 
represents a source of delay and uncertainty that reduces the 
industry's ability to adjust to a rapidly changing and increasingly 
challenging technological and economic landscape. At worst, it 
represents a form of backdoor regulation that hurts consumers, singles 
out individual companies for restrictions that could not necessarily 
withstand the rigors of normal regulatory processes, and undermines 
democratic values as well as the integrity of agency processes.
    It is no doubt tempting to use company-specific measures to address 
industry-wide problems. Even if the existing regulatory regime is not 
perfect, the better and fairer course is to address these shortcomings 
through the standard administrative processes. Consistent with these 
concerns, the current Commission has expressed reluctance to impose 
merger conditions that ``are not narrowly tailored to prevent a 
transaction-specific harm'' and has admonished that for harms that 
``apply broadly across the industry,'' it is ``more appropriate for a 
Commission proceeding where all interested industry parties have an 
opportunity to file comments.'' \3\ Particularly given Congress's 
recent criticisms of the FCC for its failure to adhere to sound 
regulatory practices,\4\ such commitments are particularly welcome.
---------------------------------------------------------------------------
    \3\ Applications of AT&T Inc. and Centennial Communications Corp., 
Memorandum Opinion and Order, 48 Communications Reg. (P & F) 1186  141 
(Nov. 5, 2009).
    \4\ Staff of H. Comm. on Energy And Commerce, 110TH Cong., 
Deception and Distrust: The FCC Under Chairman Kevin J. Martin (Dec. 
2008), available at http://energy
commerce.house.gov/images/stories/Documents/PDF/Newsroom/
fcc%20majority%20staff%20re
port%20081209.pdf.
---------------------------------------------------------------------------
The Standard Framework for Analyzing the Consumer Impact of Mergers
    The standard framework for evaluating the consumer impact of any 
merger is enshrined in the Merger Guidelines jointly promulgated by the 
Federal Trade Commission and the Antitrust Division of the U.S. 
Department of Justice.\5\ Recent studies conducted by Federal Trade 
Commission and the Justice Department reveal that actual enforcement 
policy is even more permissive.\6\ The thresholds contained in the 
Merger Guidelines should thus be considered a safe harbor within which 
parties should not expect to be challenged. Conversely, the fact that a 
merger may exceed the relevant thresholds by a small amount should not 
be regarded as inherently problematic.
---------------------------------------------------------------------------
    \5\ First promulgated in 1968, the portion of the guidelines 
governing horizontal mergers was last revised in 1997. U.S. Dep't of 
Justice & Fed. Trade Comm'n, Horizontal Merger Guidelines (revised Apr. 
8, 1997), available at http://www.justice.gov/atr/public/guidelines/
hmg.pdf [hereinafter Horizontal Merger Guidelines]. That revision left 
in place the existing guidelines governing nonhorizontal (including 
vertical) mergers, which were last revised in 1984. U.S. Dep't of 
Justice, Merger Guidelines (revised June 14, 1984), available at http:/
/www.justice.gov/atr/public/guidelines/2614.pdf [hereinafter Non-
horizontal Merger Guidelines].
    \6\ Fed. Trade Comm'n, Horizontal Merger Investigation Data, Fiscal 
Years 1996-2005 tbl. 3.1 (Jan. 25, 2007), available at http://
www.ftc.gov/os/2007/01/P035603horizmerger
investigationdata1996-2005.pdf; Fed. Trade Comm'n & U.S. Dep't of 
Justice, Merger Challenges Data, Fiscal Years 1999-2003 tbl. 1(Dec. 18, 
2003), available at http://www.justice.gov/atr/public/201898.htm.
---------------------------------------------------------------------------
    The Merger Guidelines draw a distinction between horizontal mergers 
and vertical mergers. A merger is horizontal if it is between two firms 
that sell products that substitute for one another. In short, consumers 
are likely to buy one or the other, but not both, which makes the firms 
selling these products direct competitors. A merger is vertical if it 
is between firms that sell products that complement one another, in 
that they are consumed together. In these cases, the fact that 
consumers typically have to buy both products if they are to enjoy them 
means that these parties to a vertical merger do not compete directly 
with one another.
    To use a concrete example, consider the difference between 
computers and the software that runs on them. Suppose there were two 
computer manufacturers that made devices with similar capabilities and 
vie to sell their goods to the same consumers. To the extent that 
consumers regard the decision between these two computers as an either-
or choice, these products are considered substitutes, and a combination 
between those two computer manufacturers would be a horizontal merger.
    Consumers do not regard the choice between software and hardware as 
an either-or choice. On the contrary, a computer that has no software 
is useless, as is software without a computer on which to run it. As a 
result, consumers must buy both types of products and use them together 
to gain any benefit from the products. Rather than being an either-or 
choice, a consumer buying a computer is more likely to buy software and 
vice versa. Software and hardware are thus considered complements, and 
a merger between a software and hardware manufacturer would be 
considered a vertical merger.
    Vertical mergers raise fewer competitive concerns than horizontal 
mergers.\7\ Consequently, the Merger Guidelines incorporate more 
permissive standards for vertical mergers than for horizontal mergers.
---------------------------------------------------------------------------
    \7\ Non-Horizontal Merger Guidelines, supra note 5,  4.0, at 23.
---------------------------------------------------------------------------
    The proposed Comcast-NBC Universal merger has both horizontal and 
vertical aspects. Both firms provide two distinct products. Both serve 
as a source of video programming through broadcast networks (such as 
NBC and Telemundo) and cable networks (such as the USA Network and the 
Golf Channel). Both also provide retail distribution of video 
programming through broadcast television stations owned and operated by 
NBC or through cable operators owned by Comcast.
    The merging firms predominantly operate in one or the other product 
market. NBC Universal predominantly provides television network 
programming. Comcast's primary business is in retail distribution. The 
focus of the inquiry into this merger should be on vertical combination 
of these two adjacent levels of production. The merger does have 
potential horizontal effects as well, although these are very likely to 
be quite small. For completeness, I will analyze each issue in turn, 
beginning with the horizontal effects.
Horizontal Integration in the Market for Retail Video Distribution
    The proposed Comcast-NBC Universal merger does raise issues of 
horizontal concentration in the market for retail video distribution. 
That said, these issues are relatively minor. Simply put, while Comcast 
is a major player in the market for retail video distribution, NBC 
Universal is not.
    The analytical framework laid out in the Merger Guidelines turns on 
a measure of concentration known as the Herfindhal-Hirschman Index 
(HHI), which measures the degree of market concentration by ranking it 
on a scale from 0 to 10,000.\8\ Markets with HHIs below 1,000 are 
considered unconcentrated. Markets with HHIs between 1,000 and 1,800 
are considered moderately concentrated. Markets with HHIs above 1,800 
are considered highly concentrated. The degree of market concentration 
in turn determines the degree of antitrust scrutiny:
---------------------------------------------------------------------------
    \8\ According to the Merger Guidelines, HHI is calculated by 
summing the squares of the individual market shares of all the 
participants. For example, a market consisting of four firms with 
market shares of 30 percent, 30 percent, 20 percent and 20 percent has 
an HHI of 302 + 302 + 202 + 
202 = 2,600. Horizontal Merger Guidelines, supra note 5,  
1.5, at 15 & n.17.

          Figure 1: HHI Thresholds Under the Merger Guidelines
------------------------------------------------------------------------
                      Increase in HHI Caused
   Post-Merger HHI           by Merger                  Outcome
------------------------------------------------------------------------
Less than 1,000       N/a                     Approved w/o further
                                               analysis
1,000-1,800           Less than 100           Approved w/o further
                                               analysis
1,000-1,800           More than 100           Further analysis required
More than 1,800       Less than 50            Approved w/o further
                                               analysis
More than 1,800       More than 50            Further analysis required
More than 1,800       More than 100           Presumed anticompetitive
------------------------------------------------------------------------
Source: , supra note 5,  1.51, at 16.

    When one looks at actual enforcement policy, the numbers become 
even more striking. During the decade under study (which spanned both 
Democratic and Republican Administrations), neither the Federal Trade 
Commission nor the Justice Department ever brought an enforcement 
action when the HHI was less than 2000 and the post-merger increase in 
HHI was less than 100.\9\ Actual enforcement practice in the 
telecommunications industry appears to be even more permissive,\10\ 
which is understandable given the scale economies inherent in the 
industry.
---------------------------------------------------------------------------
    \9\ Fed. Trade Comm'n, supra note 6, tbl. 3.1; Fed. Trade Comm'n & 
U.S. Dep't of Justice, supra note 6, tbl. 1.
    \10\ Fed. Trade Comm'n & U.S. Dep't of Justice, supra note 6, tbl. 
6.
---------------------------------------------------------------------------
    In the market for retail distribution, competition policy has 
traditionally drawn a distinction between single-channel television 
providers (such as broadcasters) and multichannel television providers 
(such as cable operators like Comcast, satellite television providers 
like DirecTV, and similar offerings provided by telephone companies, 
such as Verizon's FiOS or AT&T's U-verse), which the statute calls 
multichannel video programming distributors (MVPDs).
    MVPDs participate in multiple markets. First, they serve household 
subscribers, who consume video programming. Second, they sell 
advertising. Third, they obtain programs from various programming 
sources. The geographic scope of these markets differs substantially. 
The first two markets are local in scope. The third is national.
    The FCC's Annual Assessments of the Status of Competition in the 
Market for the Delivery of Video Programming (Video Competition 
Reports) routinely report HHI numbers for the MVPD market. Because the 
FCC has not released data since 2006, I have attempted to reconstruct 
their calculation from similar sources.

    Figure 2: HHI in the National Market for MVPDs (as of June 2009)
------------------------------------------------------------------------
                Company                    Subscribers    Share     HHI
------------------------------------------------------------------------
Comcast                                      23,891,000    23.3%     541
DirecTV                                      18,304,999    17.8%     317
DISH Network                                 13,610,000    13.2%     176
Time Warner Cable                            13,048,000    12.7%     161
Cox                                           5,316,055     5.2%      27
Charter                                       4,929,900     4.8%      23
Cablevision                                   3,093,000     3.0%       9
Verizon FiOS                                  2,515,551     2.4%       6
Bright House                                  2,301,320     2.2%       5
AT&T U-verse                                  1,585,470     1.5%       2
Other                                        14,139,493    13.8%       5
------------------------------------------------------------------------
    Total                                   102,734,788   100.0%   1,272
------------------------------------------------------------------------
Sources: SNL Kagan, Top Cable MSOs, June 2009; SNL Kagan, Basic & HD
  Cable Economics, 2009-2018; Media Business Corp., Media Census: All
  Video by DMA, 2Q2009.

    I calculate that as of the end of 2009, the HHI in the national 
MVPD market was 1,272. This represents a drop of 75 points from the 
year before. This implies that the national market for MVPDs is 
moderately competitive. Moreover, because NBC Universal does not 
control any MVPD assets, the post-merger increase in HHI is zero. Thus, 
under the approach described in the Merger Guidelines, which represents 
the starting point for all antitrust analyses, the Comcast-NBC 
Universal merger is unlikely to have any adverse effect on consumers. 
Under the Merger Guidelines, policymakers may thus set aside without 
any further analysis any concerns about the impact on horizontal 
concentration in the national market in which MVPDs bargain with 
sources of television programming.
    National numbers fail to capture conditions in the local market in 
which MVPDs provide service to subscribers and advertisers. Clearly, 
many consumers do not have as many MVPD options as they would like. 
That fact should not overshadow the ever-increasing competitiveness of 
local markets for MVPDs. Congress has established a threshold for 
determining when an MVPD faces sufficiently effective competition to 
justify exempting it from rate regulation. Under this standard, an MVPD 
faces effective competition if another MVPD offers service to at least 
50 percent of households in the service area and the unaffiliated MVPDs 
together capture more than 15 percent of the market. An MVPD also faces 
effective competition if the local exchange carrier offers multichannel 
service regardless of how many subscribers they have.\11\
---------------------------------------------------------------------------
    \11\ 47 U.S.C.  543(l)(1)(B) & (D).
---------------------------------------------------------------------------
    Studies show that direct broadcast satellite (DBS) providers, such 
as DirecTV and the DISH Network, have emerged as direct competitors to 
cable companies.\12\ DBS is available to any household with a clear 
view of the southern sky and thus should be available in well over 50 
percent of every service area. Moreover, as of the end of 2009, 
DirecTV's national market share is now 18 percent, and the DISH 
Network's market share is now 13 percent. Published reports indicate 
that as of mid-2009, DirecTV's share of video subscribers exceeded 15 
percent in 181 out of 211 DMAs, and the DISH Network's share exceeded 
15 percent in 132 out of 211 DMAs. When DBS subscribership is combined 
with the new offering by telephone companies discussed below, the 
market share of unaffiliated MVPDs exceeds the 15 percent threshold in 
virtually every DMA in the country.\13\
---------------------------------------------------------------------------
    \12\ See Implementation of Section 3 of the Cable Television 
Consumer Protection and Competition Act of 1992, Report on Cable 
Industry Prices, 16 F.C.C.R. 4346, 4364-65  53 (2001); Austin Goolsbee 
& Amil Petrin, The Consumer Gains from Direct Broadcast Satellites and 
the Competition with Cable TV, 72 Econometrica 351 (2004).
    \13\ Media Business Corp., Media Census: All Video by DMA, 2Q2009.
---------------------------------------------------------------------------
    At the same time, telephone companies are investing billions to 
increase the capacity of their networks and are actively competing with 
cable operators in the market for distributing multichannel video. 
Verizon has committed approximately $24 billion to build out its fiber-
based FiOS network. AT&T is investing $7 billion in its U-verse 
network. This competition should intensify further as the buildout of 
these networks continues. As noted earlier, the fact that the local 
telephone company is offering MVPD services in these service areas 
automatically indicates that these areas should be considered as 
subject to effective competition.
    Because NBC Universal does not possess any MVPD properties, the 
proposed merger would neither increase nor decrease concentration in 
the MVPD market. As a result, the merger would have no horizontal 
effects on the 87 percent of U.S. households that depend on an MVPD for 
their television service.\14\ Although many subscribers complain about 
cable prices, these subscribers are also receiving significantly larger 
numbers of channels. Empirical studies indicate that when adjusted for 
the number of channels, rate regulation caused quality-adjusted cable 
rates to rise, while deregulation caused quality-adjusted cable rates 
to fall.\15\ Although I am certain that these consumers could wish for 
more options and more competition, the evidence suggests that the 
market is already quite competitive and becoming more so.
---------------------------------------------------------------------------
    \14\ SNL Kagan, Basic & HD Cable Economics, 2009-2018.
    \15\ See Thomas W. Hazlett & Matthew L. Spitzer, Public Policy 
Toward Cable Television (1997); Gregory S. Crawford, The Impact of the 
Household Demand and Welfare, 31 Rand J. Econ. 422 (2000).
---------------------------------------------------------------------------
    At the same time, Comcast possesses no broadcast television 
stations. The proposed merger will thus have no effect on the remaining 
13 percent of U.S. households that rely solely on over-the-air service 
for the television needs. An analysis of the number of over-the-air 
channels available in these markets suggests that the broadcast-only 
portions of these markets remain relatively competitive. Moreover, 
where competition is lacking, it is the result of the FCC's spectrum 
allocation properties and would remain whether or not the merger is 
allowed to proceed.

                 Figure 3: Number of Commercial Over-the-Air Channels Available in Overlap DMAs
----------------------------------------------------------------------------------------------------------------
                      Market                            Total Channels              Channels Owned by NBC
----------------------------------------------------------------------------------------------------------------
Chicago                                                                 40                                    5
San Francisco                                                           31                                    3
Washington                                                              32                                    3
Miami                                                                   27                                    4
Philadelphia                                                            30                                    2
Hartford-New Haven                                                      21                                    1
----------------------------------------------------------------------------------------------------------------
Source: BIA Media Access Pro 4.5 Television Analyzer Data base, 2009 data.

    Although the FCC has previously considered treating broadcast 
stations and MVPDs as being in the same product market, subsequent 
congressional action foreclosed this possibility.\16\ Moreover, the FCC 
addressed precisely this issue when determining whether combining 
DirecTV with the Fox television stations owned by News Corp. raised any 
horizontal issues. The FCC concluded that a merger combining broadcast 
stations with an MVPD ``does not present horizontal concentration 
issues'' because the FCC has already determined that MVPDs and 
broadcast television are not sufficiently substitutable to fall within 
the same product market.\17\
---------------------------------------------------------------------------
    \16\ For the regulatory history examining the circumstances under 
which broadcasting could be regarded as a substitute for cable, see 
Christopher S. Yoo, Vertical Integration and Media Regulation in the 
New Economy, 19 Yale J. on Reg. 171, 228 & n.218 (2002).
    \17\ General Motors Corp. and Hughes Electronics Corp., 
Transferors, and News Corp., Ltd., Transferee, Memorandum Opinion and 
Order, 19 F.C.C.R. 473 (2004) (citing Competition, Rate Deregulation, 
and the Commission's Policies Relating to the Provision of Cable 
Services, Report 5 F.C.C.R. 4962, 5001  62 (1990); EchoStar 
Communications Corp., General Motors Corp., Hughes Electronics Corp. 
(Transferors) and EchoStar Communications Corp. (Transferees), Hearing 
Designation Order, 17 F.C.C.R. 20559, 20607-09  109-115 (2002)).
---------------------------------------------------------------------------
    Equally importantly, the FCC once imposed a rule preventing a 
single entity from owning both a cable operator and a television 
station in the same market. The court reviewing this rule concluded 
that it was inconsistent with the FCC's statutory obligations and 
ordered the FCC to vacate it.\18\ The FCC subsequently did so and 
appears to have abandoned all efforts to reinstate it.\19\
---------------------------------------------------------------------------
    \18\ Fox Television Stations, Inc. v. FCC, 280 F.3d 1027, 1049-53 
(D.C. Cir. 2002).
    \19\ 1998 Biennial Regulatory Review--Review of the Commission's 
Broadcast Ownership Rules and Other Rules Pursuant to Section 202 of 
the Telecommunications Act of 1996, Order, 18 F.C.C.R. 3002 (2003).
---------------------------------------------------------------------------
    Any attempt to impose merger conditions treating the cross-
ownership of a television station and cable operator serving the same 
area as problematic would amount to ad hoc, company-specific regulation 
of the type that would raise both fairness and procedural concerns. The 
fact that the courts overturned the rule because of the FCC's inability 
to offer a principled basis for it dictates that any attempt to 
penalize the merging parties for such a cross-ownership arrangement 
would raise concerns under the rule of law. Even if these 
considerations are taken for all they are worth, it bears noting that 
with 26 stations, the merged entity would control less than 2 percent 
of the nearly 1400 commercial broadcast television stations in the 
U.S., and only 6 of those stations (representing roughly 0.6 percent of 
the total number of commercial stations) operate in areas also 
predominantly served by Comcast.\20\
---------------------------------------------------------------------------
    \20\ Comcast also has a relatively small presence in the New York 
DMA, in which it serves less than 10 percent of the area.
---------------------------------------------------------------------------
    That said, the decisions ruling that broadcasting and MVPDs 
constitute distinct product markets antedated the digital television 
transition. As I have noted in my previous work, digital broadcasters 
have the option to use their channels to transmit multiple streams of 
standard-definition television.\21\ The result is a dramatic increase 
in the number of channels available. For example, Los Angeles residents 
can now receive nearly 70 over-the-air television stations. News 
reports indicate that the increase is so dramatic that some viewers are 
considering dropping their MVPD service and instead simply relying on 
broadcasting.\22\ Including broadcasters and MVPDs in the same product 
market would radically deconcentrate the market for local television 
distribution and make them more competitive.
---------------------------------------------------------------------------
    \21\ Yoo, supra note 12, at 213.
    \22\ After Digital Switch, Basic TV Offers Cable Alternative, NPR 
Weekend Edition, Feb. 27, 2010, available at http://www.npr.org/
templates/story/story.php?storyId=124056416; David Sarno, In the 
Digital TV Era, Rabbit Ears Multiply, L.A. Times, Dec. 25, 2009, at 1.
---------------------------------------------------------------------------
    But perhaps the most dramatic development of recent years is the 
emergence of the Internet as an important means for distributing video 
programming, demonstrated most forcefully by the growing importance of 
properties such as YouTube and Hulu. The proliferation of new last-mile 
broadband technologies has made determining the level of horizontal 
concentration in the market for high speed data more difficult.

     Figure 4: HHI in the National Market for High Speed Data (as of
                             September 2009)
------------------------------------------------------------------------
                Company                    Subscribers    Share     HHI
------------------------------------------------------------------------
Comcast                                      15,684,000    21.4%     459
AT&T                                         15,638,000    21.4%     456
Verizon                                       9,174,000    12.5%     157
Time Warner Cable                             9,167,000    12.5%     157
Cox                                           4,150,000     5.7%      32
Charter                                       3,010,100     4.1%      17
Qwest                                         2,951,000     4.0%      16
Cablevision                                   2,522,000     3.4%      12
CenturyLink                                   2,189,000     3.0%       9
Bright House                                  1,441,384     2.0%       4
Other                                         7,310,768     10.0       7
    Total                                    73,237,252   100.0%   1,326
------------------------------------------------------------------------
Sources: SNL Kagan, Top Cable MSOs, September 2009; Press Release,
  Leichtman Research Group, Over 900,000 Add Broadband in the Third
  Quarter of 2009 (Nov. 13, 2009), available at  http://
  www.leichtmanresearch.com/press/111309release.html.

    The calculation is further complicated by the advent of wireless 
broadband technologies. The most recent data reported by the FCC 
indicate that wireless broadband has already captured nearly 25 percent 
of the market for high-speed lines (defined as connections providing 
200 kbps in at least one direction) and nearly 17 percent of the market 
for advanced service lines (defined as connections providing 200 kbps 
in both directions).\23\ Because the market for wireless broadband 
services are even more competitive than the market for wireline 
broadband services, the addition of wireless broadband services would 
probably deconcentrate the market still further and make it even more 
price competitive.
---------------------------------------------------------------------------
    \23\ Fed. Commc'ns Comm'n, High-Speed Services for Internet Access: 
Status as of December 31, 2008, at 8-9 (Feb. 2010), available at http:/
/hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-296239A1.pdf.
---------------------------------------------------------------------------
    As a result, the market for high speed data is moderately 
unconcentrated. Again, it bears emphasizing that only one of the 
merging parties (Comcast) offers high-speed broadband services. The 
level of competitiveness is determined by the economics of the 
industry, which typically involves significant fixed costs, not the 
merger. Thus, permitting the merger to proceed would not alter the 
level of concentration in this market one iota. Conversely, to the 
extent that the concern is too few options in last-mile broadband 
services, blocking the merger would not address this concern in any 
way.
Horizontal Integration in the Market for Television Networks
    The horizontal issues in the market for video programming are the 
converse of those raised in the market for retail video distribution. 
In the case of retail video distribution, NBC Universal has a miniscule 
presence, while Comcast has a significant share of the market. In the 
market for television networks, it is the other way around.
    It is obvious that NBC Universal is a significant player in the 
market for television networks. If one considers only cable networks 
(and ignores broadcast networks) and measures market share in terms of 
total industry revenue, NBC Universal, led by USA Network, SyFy, CNBC, 
and Bravo, has earned an 8.8 percent share of the market revenue, good 
for 4th place among all cable programmers. Comcast in comparison is a 
relatively minor provider of cable programming. Its highest ranked 
channel is E! Entertainment Television, which checks in as the 34th-
highest grossing channel.\24\ Altogether, Comcast's cable programming 
properties account for only 3.3 percent of overall market revenues. The 
combined company would control only 12.1 percent of the market, which 
would leave the merged company in 4th place among cable programming 
companies. Most importantly, post-merger HHIs would only be 1,202, and 
the merger would lead to an increase of only 58 points. Under the 
thresholds provided by the Merger Guidelines, regulatory authorities 
should conclude without further analysis that the horizontal impact of 
this merger on the market for television networks will not adversely 
affect consumers.
---------------------------------------------------------------------------
    \24\ Estimates by SNL Kagan 2009 (combining advertising and 
affiliate revenue).

              Figure 5: HHI in the Market for National Cable Networks as Measured by Total Revenue
                                               (as of April 2009)
----------------------------------------------------------------------------------------------------------------
                                                       Revenue      Pre-Merger             Post-Merger
                     Company                         (millions)       Share       HHI         Share        HHI
----------------------------------------------------------------------------------------------------------------
Walt Disney                                                $9,388        20.6%      426           20.6%      426
Time Warner Inc.                                           $8,471        18.6%      347           18.6%      347
Viacom                                                     $5,528        12.2%      148           12.2%      148
NBC Universal                                              $4,003         8.8%       77           12.1%      147
News Corp. (Fox)                                           $3,260         7.2%       51            7.2%       51
A&E Networks                                               $2,504         5.5%       30            5.5%       30
Discovery                                                  $1,944         4.3%       18            4.3%       18
Comcast                                                    $1,505         3.3%       11             N/A      N/A
Liberty Media                                              $1,371         3.0%        9            3.0%        9
Scripps                                                    $1,251         2.7%        8            2.7%        8
Other                                                      $6,265        13.8%       19           13.8%       19
Total                                                     $45,491       100.0%    1,144          100.0%    1,202
----------------------------------------------------------------------------------------------------------------
Source: SNL Kagan, SNL Kagan Cable Network Ownership Data, Economics of Basic Cable Networks (2009 ed.).

    Evaluating the market power in terms of primetime Nielsen ratings 
instead of total revenue tells a similar story. NBC is again in 4th 
place, with a market share of 11.5 percent, while Comcast controls a 
mere 2.4 percent of the market for cable television networks. The post-
merger HHI would be 1249, and the merger would lead to an increase of 
only 55 points. Calculating market shares based on total-day Nielsen 
ratings instead of primetime Nielsen ratings yields similar results. 
Again, under the Merger Guidelines, this data also supports the 
conclusion that the horizontal effects of this merger on the market for 
television networks will not adversely affect consumers.

        Figure 6: HHI in the Market for National Cable Networks as Measured by Primetime Nielsen Ratings
                                          (Full-Year Average for 2009)
----------------------------------------------------------------------------------------------------------------
                                                                    Pre-Merger             Post-Merger
                      Owner                        Nielsen Rating     Share       HHI         Share        HHI
----------------------------------------------------------------------------------------------------------------
Viacom                                                        7.0        19.9%      396           19.9%      396
Time Warner Inc.                                              6.0        17.1%      291           17.1%      291
Walt Disney                                                   4.6        13.1%      171           13.1%      171
NBC Universal                                                 4.0        11.5%      132           13.9%      192
A&E Networks                                                  3.0         8.5%       72            8.5%       72
News Corp. (Fox)                                              2.7         7.5%       57            7.5%       57
Discovery                                                     2.2         6.2%       38            6.2%       38
Scripps                                                       1.5         4.4%       19            4.4%       19
Cablevision                                                   0.9         2.4%        6            2.4%        6
Comcast                                                       0.8         2.4%        6             N/A      N/A
Other                                                         2.5         7.1%        7            7.1%        8
Total                                                        35.1       100.0%    1,194          100.0%    1,249
----------------------------------------------------------------------------------------------------------------
Sources: Nielsen Media Research National MIT; SNL Kagan, Economics of Basic Cable Networks (2009 ed.).

    This basic conclusion does not change if one expands the analysis 
to include broadcast television networks as well as cable networks. 
Beginning again by measuring markets in terms of total revenue, the 
post-merger HHI is 1186, and the merger would lead to an increase of 
only 67 points.

          Figure 7: HHI in the Market for All National Television Networks as Measured by Total Revenue
                                               (as of April 2009)
----------------------------------------------------------------------------------------------------------------
                                                       Revenue      Pre-Merger             Post-Merger
                     Company                         (millions)       Share       HHI         Share        HHI
----------------------------------------------------------------------------------------------------------------
Walt Disney                                               $12,638        20.7%      428           20.7%      428
Time Warner Inc.                                           $8,766        14.3%      206           14.3%      206
General Electric                                           $8,260        13.5%      183           16.0%      255
News Corp. (Fox)                                           $5,724         9.4%       88            9.4%       88
CBS Corp.                                                  $5,546         9.1%       82            9.1%       82
Viacom                                                     $5,528         9.0%       82            9.0%       82
A&E Networks                                               $2,504         4.1%       17            4.1%       17
Discovery                                                  $1,944         3.2%       10            3.2%       10
Comcast                                                    $1,505         2.5%        6             N/A      N/A
Liberty Media                                              $1,371         2.2%        5            2.2%        5
Other                                                      $7,328        12.0%       13           12.0%       13
Total                                                     $61,114       100.0%    1,119          100.0%    1,186
----------------------------------------------------------------------------------------------------------------
Sources: SNL Kagan, SNL Kagan Cable Network Ownership Data, Economics of Basic Cable Networks (2009 ed.).

    The same is true if one includes both broadcast and cable networks 
and measure market share in terms of primetime Nielsen rating. The 
post-merger HHI is 1,114, and the merger would lead to an increase of 
only 42 points. Similar results hold if one uses total day Nielsen 
ratings instead of primetime ratings.

    Figure 8: HHI in the Market for All National Television Networks as Measured by Primetime Nielsen Ratings
                                          (Full-Year Average for 2009)
----------------------------------------------------------------------------------------------------------------
                                                                    Pre-Merger             Post-Merger
                     Company                       Nielsen Rating     Share       HHI         Share        HHI
----------------------------------------------------------------------------------------------------------------
Walt Disney                                                   8.8        15.0%      225           15.0%      225
NBC Universal                                                 8.7        14.7%      217           16.2%      261
News Corp. (Fox)                                              8.0        13.6%      184           13.6%      184
Viacom                                                        7.0        11.9%      141           11.9%      141
Time Warner Inc.                                              6.5        11.0%      121           11.0%      121
CBS Corp.                                                     6.3        10.8%      116           10.8%      116
A&E Networks                                                  3.0         5.1%       26            5.1%       26
Univision                                                     2.2         3.7%       14            3.7%       14
Discovery                                                     2.2         3.7%       13            3.7%       13
Scripps                                                       1.5         2.6%        7            2.6%        7
Cablevision                                                   0.9         1.4%        2            1.4%        2
Comcast                                                       0.8         1.4%        2             N/A      N/A
Other                                                         3.0         5.1%        4            5.1%        4
Total                                                        58.8       100.0%    1,072          100.0%    1,114
----------------------------------------------------------------------------------------------------------------
Sources: Nielsen Media Research National MIT; SNL Kagan, Economics of Basic Cable Networks (2009 ed.); Company
  websites and Form 10-K filings.

    As noted earlier, the Internet has become an increasingly important 
source of video programming. In this market, the amounts controlled by 
the merging parties are trivial. NBC Universal controls only 0.7 
percent of online video properties as measured by videos viewed. 
Comcast is even smaller at 0.3 percent.\25\ As a result, the merger 
would only cause HHI to increase by 3. NBC Universal holds a 32 percent 
stake interest in Hulu. It is not clear whether this holding is 
sufficient to attribute an ownership interest to NBC Universal. Hulu 
operates independently of both companies and has its own management. In 
any event, Hulu controls only 4.0 percent of the online video market. 
Even if it is included and all nonprofessional video content is 
omitted, the merger would only cause HHI to increase by 19.
---------------------------------------------------------------------------
    \25\ comScore, Media Matrix Report, Nov. 209, available at http://
www.comscore.com.
---------------------------------------------------------------------------
    No matter how one frames the issue, the level of horizontal 
concentration in the market for video programming resulting from this 
merger is sufficiently low to justify clearing the merger without any 
serious inquiry. In one respect, however, the advent of Internet video 
serves as a cautionary tale. One of the major differences between 
Internet distribution and conventional distribution of video 
programming is that advertising rates are much lower on the Internet. 
As a result, producers of video programming are facing much the same 
quandary as newspapers, another great source of high-quality content. 
As the shift to online distribution caused advertising revenue to 
dwindle, newspapers were forced to change their business model. Either 
they needed to find new sources of revenue, or they needed to 
drastically reduce their costs. Newspapers also sought repeal of the 
newspaper-broadcast cross-ownership rule, only to see these efforts 
blocked by opponents. Many of those who initially opposed these reform 
efforts have since changed course and are now looking for ways to 
bolster the newspaper industry.
    Producers of video programming face the same challenge. They are 
responding to the reduction in advertising revenue by exploring new 
pricing models, even those that may require consumers to pay for 
content that they received for free during the early, exploratory days 
of Internet video. In addition, they are exploring new forms of cross-
ownership to reduce costs and to better leverage their programming 
properties. The path followed by the newspaper industry should serve as 
a reminder of the dramatic changes that are transforming media 
industries and the potential costs of limiting companies' ability to 
respond to those changes.
Vertical Integration Between the Market for Television Networks and the 
        Market for Retail Video Distribution
    The preceding discussion established that the horizontal aspects of 
the proposed Comcast-NBC Universal merger do not exceed the thresholds 
generally used to evaluate when such a merger might potentially harm 
consumers. Whatever potential harms that may result from the merger 
must thus lie in the vertical integration between video programming and 
distribution.
    Vertical integration theory has long been a source of tremendous 
controversy in antitrust law.\26\ Some basic points of consensus have 
emerged and are now reflected in the Non-Horizontal Merger Guidelines.
---------------------------------------------------------------------------
    \26\ See Yoo, supra note 12, at 187-205 (tracing the longstanding 
debate between the Chicago and post-Chicago schools of antitrust law 
and economics).
---------------------------------------------------------------------------
    First, the firm must have market power in one market (typically 
called the primary market). Without market power in the primary market, 
the merging firm would have nothing to use as leverage over the other 
market. Market power in the primary market is assessed according to 
HHI. Because, as noted earlier, vertical mergers raise fewer 
anticompetitive concerns than horizontal mergers, the guidelines 
indicate that antitrust authorities are unlikely to challenge a 
vertical merger unless HHI in the primary market exceeds 1,800.\27\
---------------------------------------------------------------------------
    \27\ Non-Horizontal Merger Guidelines, supra note 5,  4.213, at 
28.
---------------------------------------------------------------------------
    Second, the other, vertically related market (typically called the 
secondary market), must be structured in a way that makes it vulnerable 
to monopolization. Otherwise, any attempt by the merging firm to use 
its control over the primary market to exert pressure on the secondary 
market would simply cause consumers to shift their purchases to other 
producers. This typically requires that the secondary market be 
concentrated and protected by entry barriers.\28\
---------------------------------------------------------------------------
    \28\ Id.  4.212, at 27-28.
---------------------------------------------------------------------------
    Third, even if these structural preconditions are met, the Merger 
Guidelines recognize that the presence of offsetting efficiencies might 
nonetheless justify permitting a merger to go forward even when the 
market is structured in such a manner as to raise the possibility that 
the merger might have some anticompetitive effects.\29\
---------------------------------------------------------------------------
    \29\ Id.  4.24, at 30.
---------------------------------------------------------------------------
    In the case of the proposed Comcast-NBC Universal merger, the 
primary market is presumably the market for retail video distribution, 
which is to be used as leverage over the programming market. Although 
television networks would, of course, like to have the broadest reach 
possible, they do not care if they can reach viewers in any particular 
location so long as they can reach a sufficient number of viewers 
nationwide to achieve minimum efficient scale. The market in which 
networks contract with MVPDs is thus a national one. To programmers, it 
is national reach, not local reach, that matters.
    The foregoing discussion of the potential horizontal issues reveals 
that the national market for retail video distribution is not even 
remotely close to the 1800 HHI level of concentration needed for 
vertical integration to even plausibly pose an anticompetitive threat. 
Moreover, as of 2006, there were 565 cable networks already on the air, 
with another 83 in the planning stages.\30\ Given this level of 
deconcentration and the ease of entry, it is hard to see how anyone 
could credibly argue that the merger poses a threat to consumers.
---------------------------------------------------------------------------
    \30\ Annual Assessment of the Status of Competition in the Market 
for the Delivery of Video Programming, Thirteenth Annual Report, 24 
F.C.C.R. 542, 550  20, 635  193 (2009).
---------------------------------------------------------------------------
    In addition, over the past decade, the level of vertical 
integration between cable networks and MVPDs has been dropping like a 
stone. For example, in 2008, News Corp. divested itself of its 2004 
acquisition of DirecTV. Furthermore, in early 2009, Time Warner 
separated its programming and retail distribution assets when it spun 
off its cable operations into a separate company known as Time Warner 
Cable. As a result, vertical integration in the cable industry has 
never been lower.
    Figure 9: Vertical Integration Between Cable Networks and MVPDs


    Sources: FCC Annual Video Competition Reports; Nielsen Media 
Research National MIT, Annual Prime HH 2005-2009; SNL Kagan, Economics 
of Basic Cable Networks 2008, pp. 88-90, 117, 161; SNL Kagan, TV 
Network Summary; SNL Kagan, Economics of Basic Cable Networks 2009, 
Section VII.

    The belief that vertical integration is unlikely to harm consumers 
unless the structural preconditions specified in the Merger Guidelines 
are met is based on more than just theory. Recent years have witnessed 
numerous vertical mergers in relevant industries, including News 
Corp.'s 2004 acquisition (and subsequent spinoff) of DirecTV, America 
Online's 2001 acquisition (and subsequent spinoff) of Time Warner, as 
well as Time Warner's 1996 acquisition of Turner Broadcasting. In each 
case, the vertical aspects of the merger did not pose a threat to 
consumers.
    The likelihood that vertical integration will not harm consumers 
draws further support from the empirical studies on vertical 
restraints. For example, a recent study conducted by four members of 
the FTC's staff surveying twenty-two published empirical studies 
(including four studies of vertical integration in the cable industry) 
found ``a paucity of support for the proposition that vertical 
restraints/vertical integration are likely to harm consumers.'' Indeed, 
only one study unambiguously found that vertical integration harmed 
consumers, and ``in this instance, the losses are miniscule ($0.60 per 
cable subscriber per year).'' On the other hand, ``a far greater number 
of studies found that the use of vertical restraints in the particular 
context studied improved welfare unambiguously,'' including at least 
one study in the cable industry. The survey thus concluded that 
``[m]ost studies find evidence that vertical restraints/vertical 
integration are pro-competitive.'' The weight of the evidence thus 
``suggests that vertical restraints are likely to be benign or welfare 
enhancing.'' \31\
---------------------------------------------------------------------------
    \31\ James C. Cooper et al., Vertical Antitrust Policy as a Problem 
of Inference, 123 Int'l J. Indus. Org. 1639, 648, 658, 662 (2005).
---------------------------------------------------------------------------
    Another survey published in the Handbook of Antitrust Economics 
similarly reviewed twenty-three published empirical studies of vertical 
restraints. Despite the relatively small sample size, the authors found 
the empirical evidence to be ``quite striking,'' ``surprisingly 
consistent,'' ``consistent and convincing,'' and even ``compelling.'' 
As a general matter, ``privately imposed vertical restraints benefit 
consumers or at least do not harm them,'' while government mandates or 
prohibitions of vertical restraints ``systematically reduce consumer 
welfare or at least do not improve it.'' Together ``[t]he evidence . . 
. supports the conclusion that in these markets, manufacturer and 
consumer interests are apt to be aligned, while interference in the 
market [by the government] is accomplished at the expense of consumers 
(and of course manufacturers).'' The authors conclude that ``the 
empirical evidence suggests that in fact a relaxed antitrust attitude 
toward [vertical] restraints may well be warranted.'' \32\
---------------------------------------------------------------------------
    \32\ Francine Lafontaine and Margaret Slade, Exclusive Contracts 
and Vertical Restraints: Empirical Evidence and Public Policy, in 
Handbook of Antitrust Economics 392, 408-09 (Paolo Buccirossi ed., 
2008).
---------------------------------------------------------------------------
    In the absence of structural considerations that make it likely 
that the proposed merger will harm consumers and in light of the strong 
empirical evidence that vertical integration typically does not harm 
and often benefits consumers, there seems little justification for 
imposing additional conditions on this merger.
Conclusion
    In evaluating the proposed merger between Comcast and NBC 
Universal, one should recall that this process began when General 
Electric decided to divest its media assets in order to refocus 
management attention on its core businesses. At this point, then, the 
question is not if NBC Universal will be sold, but rather to whom. In a 
perfect world, General Electric would sell NBC Universal to a merging 
party that would not increase horizontal concentration in any market 
and for whom the merger would not create any violations of FCC rules. 
Although the elaborate nature of the regulatory regime makes finding 
such merger partners exceedingly difficult, General Electric has found 
just such a merger partner in Comcast. Regulators considering whether 
to approve this transaction must not only evaluate this merger on its 
own terms. They must also evaluate it in comparison to who else that 
General Electric would sell NBC Universal if not Comcast. They should 
move to block the merger only if they believe that the next potential 
transaction would pose fewer problems under competition policy as the 
transaction under review today.
    The conventional benchmarks associated with antitrust law strongly 
suggest that the proposed Comcast-NBC Universal merger is very unlikely 
to harm consumers. The markets are not structured in a way that the 
combination of these two firms will have any anticompetitive horizontal 
or vertical effects. Suggestions that regulatory authorities subject 
the merger to additional conditions before clearing it thus seem 
unjustified. To the extent that vertical concerns exist, regulatory 
provisions such as the program access and leased access rules are 
already in place to address the problem.
    One need not believe that the existing regulatory regimes are 
perfect in order to oppose imposing conditions on this merger. At best, 
such conditions would apply to only one cable operator without 
addressing what is an industry-wide problem. The correct course of 
action when confronted with regulations that are imperfect is not to 
jury rig a company-specific solution simply because a particular party 
happens to be seeking clearance of a merger. Instead, the best practice 
is to open a general proceeding to address any problems that may exist 
on an industry-wide basis. In the wake of an era during which the FCC 
was often criticized for failing to follow good administrative 
practices, insisting on the integrity of regulatory processes would 
appear to be particularly important.

    Senator Dorgan. Professor Yoo, thank you very much for your 
testimony.
    I indicated to Senator Rockefeller that I would come back 
and chair the second panel. And I would just make a very brief 
statement, and then I will ask some questions.
    You know, I have a history on this committee with Senator 
Lott, the Dorgan-Lott provision. I think we were the first to 
exercise what was a legislative veto on the media ownership 
rules of the FCC some years ago.
    I have long been concerned about concentration, 
particularly in media ownership. I don't think big is always 
bad or small is always good, but I do think that we should 
always ask the question what does this mean to the free market? 
The free market works best when you have robust competitors 
competing around price and product differential.
    And so, the question is--I would have some disagreement 
perhaps with you, Professor Yoo. I think the burden is on those 
who come to us with a proposal to combine, for them to describe 
why this combination is not going to harm the free market 
system, why it is not going to be destructive of the public 
interest, and why it is not going to retard competition. I 
think that burden exists, and I would expect Mr. Roberts 
probably also agrees that he has that burden.
    There are a smaller number of interests in the country--I 
agree with Mr. Wells--that really determine what we see and 
hear and read each day. And so, we should be cognizant of that 
and understand what that means in terms of future 
concentrations.
    I mean, I have been here long enough so that I have watched 
Mr. Levin and Mr. Case sit at that table and tell us what an 
unbelievably wonderful idea it was to combine Time Warner and 
AOL. I am telling you, they were missionaries on a mission, 
absolutely completely convinced it was not only in the public 
interest, but in their interest. Of course, it turns out 
history answers a lot of those questions, and it certainly 
answered that in a very aggressive way.
    I am concerned about a number of things, which I will ask 
questions about. And I think what we want to do here is learn. 
We have differences of opinion on this panel.
    The independent programming issue is one that I am 
interested in. I am concerned that we have seen such diminished 
activity and opportunity for independent programming, and I 
fear more of that. And I think Mr. Wells raised the question. 
It is a very important question I am going to ask Mr. Roberts 
about that.
    Mr. Yoo, I will ask you, I didn't quite understand whether 
you were saying that the FCC should decide yes or no, but in 
any event should not establish conditions because you don't 
think conditions are appropriate. Either this merger should be 
approved or not approved, but you don't support conditions on 
the merger. That is kind of a fair piece from where I think 
most of us would expect. I mean, we have seen conditions 
attached to a fair number of mergers recently.
    Let me begin to ask just a few questions, and then I will 
turn to my colleagues, and we will all have an ample 
opportunity to ask these questions.
    Mr. Roberts, you have heard a lot of testimony about what 
you are trying to do and the testimony about Ms. Abdoulah's 
issue of how she has to--she is a smaller enterprise. So she 
has to deal with you, and you have more leverage. Mr. Wells's 
contention that he is worried about what you might do to Hulu. 
Give us your response and your retort to some of the questions 
that have been asked about what kind of leverage Comcast will 
have and what it will mean for the consumer.
    Mr. Roberts. Thank you very much.
    I think I would start with your point about AOL-Time 
Warner, that people who sit where I am sitting may have 
aspirations. At the time, there were many fears about that 
transaction. And as history, as you pointed out, proved, they 
made a mistake and they paid a very heavy price.
    And so, many have said, as we heard in Professor Yoo's 
testimony and as I have pointed out before, Time Warner and 
Time Warner Cable have separated, News Corp. and DirecTV, both 
deals that were approved through a similar process. But it 
didn't prove to be right for them as they wanted to operate 
their businesses.
    So I think I began by saying it is not a sure thing, and 
you start with what is your principal motivation? My opinion, 
principal motivation is an opportunity, at a time when our 
economy has really suffered in the last year or so, to make a 
bet that we are going to see a rebound and that this is a good 
time to bet on America, on advertising coming back, and on 
consumers wanting more and more content.
    And one of my answers to Mr. Wells is you don't buy the 
fourth-place network that was once, for my formative years, the 
number-one network and want to do harm, but rather, you want to 
invest and grow it and restore it to its grandeur.
    One of the reasons General Electric has chosen us to pick 
us to partner with in a 51/49 transaction is that they think we 
will be more focused and more committed to wanting to see 
innovation and investment. We know--as was discussed with the 
Internet, we know consumers are looking for more ways to get 
content on more devices. This is a very nascent market. I have 
said repeatedly I think video over the Internet is our friend, 
and we are trying to find ways to accelerate that.
    We have just invested billions of dollars to upgrade the 
speeds of our Internet capacity so that we can find more 
applications, be they, 3-D, high-definition, or whatever the 
great engineers will dream up next. So I have no desire to want 
to see that trend not continue to flourish. It is what is a big 
part of our growth of our company is broadband.
    To Ms. Abdoulah's points, I think that our company has been 
in the content business. She, I believe, carries a lot of our 
programming. Some of the things that are being talked about, as 
was pointed out, are industry wide. If the FCC process for 
program access has frustrated her in the past, I am not aware 
of any specific complaints that she has ever had about Comcast 
up until this transaction. But to me, the Chairman has an 
opportunity to do reform at the FCC, to look at that on an 
industry-wide basis. And I certainly would welcome a process 
like that, but I don't see how it relates specifically to this 
merger.
    Senator Dorgan. You have nearly exhausted my time.
    Mr. Roberts. Oh, I am sorry.
    Senator Dorgan. No, that is all right. What we want to do--
and I will have plenty of time to answer questions when 
everybody else has left, I guess.
    [Laughter.]
    Senator Dorgan. But let me ask this question again of you, 
Mr. Roberts. Because I think if this merger is approved--I have 
no idea whether it will be or not. I have no idea whether it is 
worthy. I have no idea whether it retards competition or is 
violative of the public interest. I think that is something 
that is going to be investigated substantially by Justice and 
the FCC.
    If it is subsequently approved, it is going to be approved 
with conditions. But I believe Comcast is actually even now 
contesting the FCC's authority with respect to certain 
conditions, the net neutrality issues and so on. So, tell me, 
is that a conflict for you?
    Mr. Roberts. You know, that has been raised, and I want 
to--I appreciate the chance to try to address it, and I will do 
it as quickly as I can. So I don't want to exhaust time, but I 
think it is an important issue.
    The certain parts of some of the rules that have been 
placed do get reviewed. The past FCC had some policies that I 
think have been overturned against the industry and about our 
company in specifics. So I think there is always that issue.
    What we tried to address here is we made voluntary 
commitments that we would be prepared to sign in a binding way 
with the FCC such as the program access, such as free broadcast 
television remaining free over-the-air, some of the issues that 
have been discussed in the prior panel and have been discussed 
previously. So, no, I don't believe--and in the event that they 
were overturned by the courts, we are prepared to have them 
apply to us and have that conversation with the FCC.
    Senator Dorgan. I have other questions for you, and I will 
ask a question of you when we are all done. Why should this 
merger be allowed? So, but don't answer that at the moment.
    Let me say this. I am going to ask all of you some 
questions because you have all raised a lot of really 
interesting issues that I think the purpose of this hearing is 
to explore those issues, and you have all contributed something 
substantial. But I want to have my colleagues have the 
opportunity to ask questions, and then I will continue when 
they are completed.
    Senator Johanns, in order of arrival?
    [Laughter.]

                STATEMENT OF HON. MIKE JOHANNS, 
                   U.S. SENATOR FROM NEBRASKA

    Senator Johanns. Yes, way back when. Thank you very much, 
Mr. Chairman.
    I appreciate you all being here. You all have, I guess, a 
different view of the world. So let me, if I might, zero in on 
some things.
    Mr. Wells, at various points in your testimony, you 
reference a free Internet. I was just curious what you meant by 
``free Internet?''
    Mr. Wells. I think that content creators have concern, both 
on the news side and on the entertainment side and also just on 
the community discussion side, that the companies that are 
providing Internet service to many, many of the homes in this 
country continue to provide that in an equal access fashion to 
everyone who wants to come through that pipe, through that 
Internet connection.
    I think we have concerns that there will be preferential 
financial treatment given to the speeds with which or with the 
costs which are associated with the difference between bundled 
content that might come from an NBC Universal-Comcast company 
together and also arrangement where others would be required to 
get that higher-speed delivery. And so, I think we have real 
concerns that there be an equal access in the speeds and in the 
cost of everything that is available through Internet 
connections.
    Senator Johanns. OK. Let me dig a little deeper on that. I 
don't use the Internet a lot. I maybe turn on the computer. I 
look at half a dozen sites because I am interested in what they 
are doing there. If I spend an hour a day on the Internet, that 
would be a lot for me.
    There are other people that spend most of their day. They 
download things, and they are watching movies or whatever they 
are doing. Should the two of us pay the same for that?
    Mr. Wells. Well, I think that everyone who wants to access 
material should be paying the same amount. So my question isn't 
so much exactly what the consumer is paying, although I think 
that is a concern. I think the concern is, will the speeds with 
which things that move through the Internet because video use 
and the band that video uses, which is why there was such a 
substantial amount of investment that has been made, require 
larger and larger amounts?
    And the problem with that is that people who do not have 
the financial resources to give that preferential treatment but 
may be very important to the way in which we actually receive 
everything that we get, particularly as I think we are seeing a 
diminution in local news, whether that be through the 
diminishment of local newspapers, whether that be through the 
diminishment of what will actually--I think many of us believe 
will end up happening with local news or a lot of local news 
and local broadcasting, that everyone have that same 
opportunity and through entertainment as well.
    So, I am just saying that we are concerned that if it takes 
when you sit down at the computer, that you get a very quick 
connection and an immediate feed on, let us say, NBC News. But 
that if you want to see a Huffington Post or another blog or 
something, that that comes through much more slowly. I think 
there are real concerns about that, and there are questions 
about this when we get into pirated materials, too, when we 
start talking about copyright and intellectual property.
    Senator Johanns. Mr. Roberts, let me turn to you, if I 
might? Your family kind of epitomizes what has happened in this 
arena. I am old enough where I remember the first TV being 
walked into the living room. I grew up in northern Iowa on a 
farm, and our method of changing channels was somebody had to 
be out back. We had a 2-x-4 wrapped around a pole with an 
antenna at the top, and then somebody inside would scream, 
``Too far, too far.'' And then you would constantly adjust so 
you could get that picture.
    [Laughter.]
    Senator Johanns. So, if you wanted to change channels in 
the dead of winter, somebody had to run around to the back of 
the house while somebody was screaming inside.
    Now I look at what we have done, and I have to tell you, 
there is probably a cost difference between the old system that 
I grew up with and today's system. But it is remarkable what we 
have the ability to access.
    So, I want to ask you, with the criticism that you have 
gotten here, how do you anticipate you will serve your 
consumers better, and what about this merger will allow you to 
take yet the next step and the next step and the next step?
    I read that pretty soon I will be able to sit in front of 
my TV and have a conversation in a video link with my 
grandchildren back in Nebraska. Tell me how you think you can 
benefit consumers because there are some here that are raising 
criticisms about what you are heading out to do.
    Mr. Roberts. Senator, I appreciate really putting it in 
historical concept because--in historical context. As I think 
about what my father's generation of entrepreneurs and what I 
have been doing for 30 years now is all about, people forget 
where we were, and we have liberated the viewer viewing 
experience.
    Not always for the better, you know? Some of the points 
that have been made, not all content is perfect. But in 
reality, it is breathtaking what has changed in such a short 
period of time, and what will happen in the next 5 or 10 years 
I dare try to guess.
    What I am trying to do for our company and for our 
customers is to, in this transaction, try to associate 
ourselves with some of the most creative and talented creators, 
try to find the technological ways to create successful 
businesses for them and to make it great for the consumer, to 
take this technology like wideband, which is beyond broadband, 
so that you could do the video conference in high-definition 
back home, and it is tremendous risk. There is absolutely no 
assurance that this is right or that this will work, but that 
is what American business is all about.
    And what I would suggest to some of the criticism is, sure, 
there is always a potential you might do this, you might do 
that. First of all, it is a very visible industry. There are 
many regulatory oversight agencies, and we have a track record 
of wanting to innovate. Our goal was not to get into cable to 
slow down innovation, but to speed it up.
    And as I look at this merger, I see that as a once-in-a-
lifetime opportunity, really, to try to associate ourselves 
with the best content that isn't doing quite as well, that is 
inside a company like General Electric that today has other 
business opportunities unique to them all over the world. And 
for us, this will be a defining opportunity.
    Senator Johanns. My time has expired. Thank you, Mr. 
Chairman.
    Senator Dorgan. Senator Johanns, your description makes us 
sound like fossils. But we didn't have individual television 
sets. In my town of 300, we had only one, and that was at the 
car dealership.
    And since it was 125 miles from the nearest television 
station, the only television we got was what were called 
``skips,'' and occasionally, we would get a skip signal from 
somebody broadcasting professional--I guess wrestling, not 
professional wrestling. And the whole town would come down to 
see that skip and watch wrestling from West Virginia for about 
8 minutes and then snow.
    [Laughter.]
    Senator Dorgan. Senator Isakson has gone. Senator Begich? 
Or Senator Klobuchar, I am sorry.

               STATEMENT OF HON. AMY KLOBUCHAR, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. You can see why they are so productive 
in North Dakota. There is not much time to mess around.
    It is good to see all of you again. I feel like Groundhog 
Day. I am the only Senator on both Judiciary and Commerce, and 
we all remember that Judiciary hearing well.
    So I thought I would start with you, Mr. Roberts. I 
actually did some follow-up questions after that hearing, and I 
raised this issue at the Judiciary hearing about the price of 
expanded basic cable that has gone up faster than the rate of 
inflation since 1995, four times faster. And customers are 
concerned in these tough economic times with their cable bills. 
And what assurances can you give that this merger won't result 
in higher fees for customers?
    Mr. Roberts. Well, first of all, we are always focused on 
that question. I don't think anything specific to this merger 
would incentivize us or cause us to want to raise cable rates. 
We are in a competitive business. We compete against Ms. 
Abdoulah. We compete against DirecTV. We compete against Dish. 
We compete against Verizon, FiOS, U-verse. It is a very 
different business than it has ever been, and it is very much 
on customers' minds.
    Today, for instance, in Washington, D.C., we start as low 
as $15. We have 14 different levels of service. We are much 
more competitively sensitive. We are trying to improve our 
programming with On Demand and other technologies. And you 
know, I still believe digital video, for which Comcast, by the 
way, is not the highest cost. I think there are many providers 
who charge more than we do.
    But as a group, the number of hours and what you get versus 
just going to a movie continues to be starkly different for the 
number of hours, of 300 hours a month that the average cable 
household watches, in excess of that. It turns out to be 33 
cents per viewing hour versus $15 to go to a movie for an hour 
for a family of four.
    So I think we still have a great value. It is why the 
industry has been healthy, been able to reinvest, and create 
jobs. But I am very mindful of that question. I don't believe 
this deal will cause that to change, and we have got to stay 
focused. And it is competitive.
    Senator Klobuchar. And I know there will be a lot of 
lawyers looking at this deal, but I just thought I would run 
through a few things that I have heard, that people have raised 
with me about concerns.
    One is that NBC and its affiliates have succeeded by 
getting its programming to as many viewers as possible and 
providing this content--we talked about this at Judiciary--for 
free over-the-air or over the Internet. Will Comcast use NBC's 
30 percent stake in Hulu.com to restrict the selection of NBC 
programming that is available on Hulu.com or NBC.com?
    Mr. Roberts. I have never even personally met with the Hulu 
team. We will own about 30 percent, 31 percent. It is a non-
controlling stake. We have no intention of changing NBC's 
relationship with Hulu.
    And Hulu itself, from what I have read in the trade press, 
is going through business model reviews and how to fund it and 
what its future will be. We are not at that table, and I look 
forward to learning more about that business once we get 
together, if we do get together.
    Senator Klobuchar. And do you expect Comcast to block any 
NBC content from the Internet, and what about charging 
subscriber fees?
    Mr. Roberts. I don't. Comcast does not want to block NBC 
content or, frankly, block any content on the Internet. And I 
don't think that--as I said, I think that there is--my vision 
is the content creator in different windows has different 
business models. Sometimes they want to be pay-per-view, like 
going to a movie in a movie theater. Sometimes you do that in 
your home. Sometimes it is ad-supported only. Sometimes it is 
part of a subscription. And who knows what other business 
models will come out in the future?
    From a Comcast perspective, my vision is to technologically 
try to create platforms and making sure that the content is not 
pirated--you know, that it is authentic--and finding a way to 
let the content companies create their own business models that 
work for their businesses into the future.
    Senator Klobuchar. OK. Now, Ms. Abdoulah has raised this 
issue about small and mid-sized cable operators, and they have 
long objected to how they are compelled to negotiate 
programming contracts, both with cable channels and with 
broadcast affiliates. Concerns about the leverage that you 
would have over both your video distributor competitors, your 
program distributor competitors--and I am going to ask her 
this, too--but what protections do you think should be in place 
to make sure Comcast doesn't have unfair advantage over its 
competitors in these negotiations?
    Mr. Roberts. Well, I believe that we have had an ability to 
resolve because we want her carriage and we want other 
competitors' carriage. You don't go spend what has been 
written, a $30 billion overall transaction value potentially, 
or some number that is very substantial, to not want--when you 
are about 24 percent of the distribution marketplace, you are 
hoping to get the other 76.
    So it is very much in our interest as a business matter. As 
was referenced in some of the other testimonies, there are 
antitrust laws. But in addition to that, there is the 
competitive reality that we all--you won't have a very vibrant 
channel if you are not distributed.
    And then you go to the program access rules, which we have 
talked about. And if there is not complete satisfaction with 
those, there is hopefully an opportunity for the FCC to make it 
more attractive across all companies, not just our own.
    We have also seen other video distributors, DirecTV and 
Time Warner Cable, be separated from their parent companies who 
were making content because they didn't see that there was some 
advantage. So I think there is a lot of answers to that 
question, but----
    Senator Klobuchar. Could I just get--I am running out of 
time here?
    Mr. Roberts. Please.
    Senator Klobuchar. Thank you very much.
    Ms. Abdoulah, what protections--and Dr. Cooper--do you 
think would most help with this issue here?
    Ms. Abdoulah. Well, you asked the great question about will 
prices go up for Comcast customers? And Mr. Roberts answered 
that. I would like to answer it. I can say it might not for 
Comcast, but I can tell you it will for us because of the 
reasons that I mentioned in my testimony.
    The issues for us are cost and carriage as a competitor and 
all people who compete for the product. In essence, your 
wholesaler is also your retailer. And so, here I am buying 
product now from these two large companies, and the remedies 
that you talk about, where do we go if we can't get what we 
need, if we can't represent our consumers' wants 
appropriately----
    Senator Klobuchar. So what protections would help with 
that?
    Ms. Abdoulah. And it is the access rules. Let us get them 
revised and reformed because----
    Senator Klobuchar. And they are set to expire 2012, right?
    Ms. Abdoulah. Yes.
    Senator Klobuchar. And you find them inadequate?
    Ms. Abdoulah. And I am saying if we are going to approve 
this merger before that, that is inadequate. To say that we 
will--for Comcast to say we will adhere to the current access 
rules, which are not effectual--if they don't help protect us 
in the ways that we need to from a competitive standpoint, then 
that is meaningless.
    So we would ask that the conditions be placed especially--
very specifically, if we have an issue, give us the right to 
make sure that that network stays on the air while we are 
negotiating. Put a ``time sensitive'' on it, which I noticed 
Comcast put in their conditions they would be willing to put a 
time on it.
    But also make sure that the network has to stay on during 
the time of the negotiation. Otherwise, we see what happens to 
customers. We witnessed that with the Academy Awards recently.
    Senator Klobuchar. What happened with the----
    Senator Dorgan. Senator Begich?
    Senator Klobuchar. Oh, I wanted to know what happened with 
the Academy Awards. I will ask her later. And Dr. Cooper--and I 
am going way over my time. And so, could you and I talk about 
this later?
    Senator Dorgan. Senator Begich, please?
    Senator Klobuchar. I will call you, and then, one, you 
could put the answer in writing for me. Thank you.
    Senator Begich. Thank you very much, Mr. Chairman.
    Just some very quick questions, if I can? Mr. Roberts, if I 
can just walk through, just so I understand the magnitude. What 
is your current Comcast gross revenues?
    Mr. Roberts. About $35 billion.
    Senator Begich. And with NBC, what will it be?
    Mr. Roberts. About $50 billion.
    Senator Begich. And what is your customer base for Comcast?
    Mr. Roberts. About 24 million.
    Senator Begich. About 24 million?
    Mr. Roberts. Customers, cable customers.
    Senator Begich. Let me, if I can walk through just a couple 
questions that I have? In the purchase, in the agreement, are 
you personally financing it through equity and debt? Is it a 
combo or is it----
    Mr. Roberts. It is a joint venture, 51 percent Comcast, 49 
percent GE. We are contributing some assets of some of our 
cable programming assets, as well as somewhere around $6.5 
billion in cash. We will borrow that cash, plus cash that we 
already have on hand. So the equity----
    Senator Begich. That gives me a sense.
    Mr. Roberts.--is GE remains 49 percent of the equity.
    Senator Begich. So it is a combo?
    Mr. Roberts. Combo.
    Senator Begich. In your investment, expected--can I ask the 
rate of return that you are expecting?
    Mr. Roberts. What we hope--we don't, haven't made a public 
forecast. What we said is we are hopeful to have a positive and 
hopefully double-digit rate of return.
    Senator Begich. Low, high?
    Mr. Roberts. It is----
    Senator Begich. Twelve, 13, or 17, 18?
    Mr. Roberts. No. High single, low double digits. Maybe mid 
double. It depends, your view of the economy and the strength 
of----
    Senator Begich. I have your faith that we are in the right 
mood, and that is why you are moving down this path.
    Mr. Roberts. We are also long term. We are looking--so it 
depends what time period you would ask that question. I want to 
clarify that.
    Senator Begich. Now, with that information, are you 
anticipating that to be all recovered through your rate 
structure both for residential and commercial rates?
    Mr. Roberts. No.
    Senator Begich. Do you anticipate more than 50 percent of 
it to be recovered?
    Mr. Roberts. The rate of return for this would be not 
related to our cable. What I was referring to was NBC 
Universal----
    Senator Begich. Understood.
    Mr. Roberts.--and their businesses, which don't--for the 
most part don't directly touch our rates.
    Senator Begich. But your investment that you are making 
into your ownership, are you expecting that to be partially 
repaid by users who are Comcast. And I am calling--I am from a 
state that doesn't have Comcast.
    Mr. Roberts. Right.
    Senator Begich. Great NBC affiliates, and I will get into 
that in a second. But are you expecting a rate of return from 
those customers, both residential--the users of Comcast, but 
also commercial users who put product in. And if so, how much 
of that volume of dollars----
    Mr. Roberts. Well, I think more than half or some 
percentage of NBC cable and NBC broadcast is an advertising-
supported business. So a large part of the answer is 
advertising. A second part of the answer would be improved 
quality. So you get higher ratings. Then you get higher 
advertising not just from a healthier market, but from a better 
product.
    Senator Begich. You moved from 4 to 3 to 2 to 1?
    Mr. Roberts. Correct. And same goes for their cable 
channels, and then there are subscription fees that the cable 
channels have. And traditionally, NBC has been a fairly priced, 
widely distributed group of cable channels like USA, Syfy, and 
we are counting on sort of business as usual in that regard.
    Senator Begich. OK. Let me ask you--and again, I am new to 
this process, and I am watching my time very quickly. So the 
question has come up on union contracts, or there has been some 
commentary that Comcast hasn't been as fair. And I am not 
saying those are my words. I am just repeating what I have 
heard and so forth.
    So here is the question. How many of your employees 
currently are under union contract in Comcast, in any form, any 
kind of union?
    Mr. Roberts. Understood. We have two basic businesses. In 
the cable business, it is around 2 to 3 percent. That is pretty 
normal for cable operators. And you will find that that is not 
an outlier, in my opinion. In our programming business, it is 
north of 10 to 14 percent, in that range, which is maybe in 
some of our business a little bit higher--in our regional 
sports business--which is also, I think, inside the norms.
    We have tried to stress that we intend to honor and support 
all of the agreements with the guilds and the trades that NBC 
has. It is a very different business than cable distribution. 
But we are very proud of what we have built at Comcast with 
100,000 employees and a company a lot of people would like to 
work for, and I am very proud of that.
    Senator Begich. No problem. Let me get to one quick 
question. And then, Mr. Wells, I have a quick one. Then I will 
submit the rest for the record because of time.
    Do you agree that conditions could potentially be placed on 
you during the agreement, and why not just not wait for 
Congress, because if you wait for Congress to do something on 
access rules, I may be dead and gone by then. But why not just 
work it out, insert it into the conditions, and move forward?
    Mr. Roberts. Well, in some ways, I think we have suggested 
that. On day one, we acknowledged that there were certain 
areas--how we compete, how we invest, how we feel about 
localism, how we feel about free over-the-air broadcasts, and 
how we feel about some of the union issues. In all of those 
instances, we made upfront commitments. One of the commitments 
that we have clarified that we are also prepared to talk to the 
FCC and make binding is if the court case were to overturn some 
of the access conditions. They tended to be focused on 
exclusivity and some of the issues like Sunday Ticket or 
NASCAR.
    Senator Begich. Let me in there. I apologize. My time is 
up.
    Mr. Wells, I have some questions. I will submit them to you 
for the record. But again, on the conditions issues because I 
think the Chairman asked an interesting question, and that is 
let us assume--I guess here is the question.
    Would you allow and work to make sure the conditions are in 
whatever agreement without the argument that, well, Congress 
will do it later? In other words, forget about what we are 
going to do. Because if you wait, you will never do this 
transaction.
    Mr. Roberts. No, the conditions we made have--the 
conditions that we have suggested and that we are prepared to 
further talk about and try to clarify would not premise 
themselves on Congress.
    Senator Begich. Great. Thank you, Mr. Chairman.
    Senator Dorgan. Senator LeMieux?

             STATEMENT OF HON. GEORGE S. LeMIEUX, 
                   U.S. SENATOR FROM FLORIDA

    Senator LeMieux. Thank you, Mr. Chairman.
    Professor Yoo, I want to start with you. My memory of 
antitrust analysis, and it has been some time, is that one of 
the first things you talk about is the market. What is the 
relevant market here in determining whether or not this 
transaction meets antitrust standards?
    Mr. Yoo. I really appreciate focusing on this. We have 
heard many dire warnings, a little discussion of law, a little 
discussion of facts, a little discussion of markets. There is 
basically two markets here.
    One is the market for distributing video programming 
locally, typically done by a local broadcast television station 
or a local cable operator. The second is the market for 
television networks, either broadcast television networks or 
cable networks. And in general, these are considered to be 
completely independent markets.
    There is a well-established framework by the merger 
guidelines for analyzing these mergers and the setting of 
concentration levels. It measures through the Hirschman-
Herfindahl Index, called HHI. The guidelines set up benchmarks 
for each kind of merger. There are some mergers which require 
strict scrutiny. Some get a light look, and some are approved 
without any extensive analysis at all.
    What is most interesting is when you define these markets 
properly, by actually looking at the facts, it falls into the 
category of things that should be approved without any 
significant scrutiny at all. And in fact, if you look at actual 
enforcement policy over the decade of about 1996 to 2005, 
spanning both Democratic and Republican administrations, no 
antitrust authority has ever challenged a merger at the low 
levels of concentration that are here.
    I think that there are real concerns that people have and 
mergers do--change is disruptive to a lot of people, and it is 
going to create different patterns. But that is an inevitable 
part of the business.
    Senator LeMieux. And when you say the relatively low 
concentrations, I am looking at your testimony on pages 14 and 
15, and you say that NBC Universal has 8.8 percent share of the 
market revenue, which makes them fourth place among cable 
programmers. The combined company, 12.1 percent of the market, 
fourth place among cable programming companies.
    So even in these markets--and it is also my sense that 
these markets are changing so quickly. I mean, the way that we 
get programming, you know, we are getting it on our BlackBerry. 
We are getting it on the Internet. Who knows what the next 
thing is going to be? It seems like it is a very dynamic 
changing. But even within the marketplace as it is now, which 
won't stay static, but even if it did, it seems like it is 
pretty low concentration.
    Mr. Yoo. Absolutely. And if you look at the trends, they 
are becoming less concentrated with every passing year.
    You also bring up the fact that the traditional models are 
changing. In a very real sense, there is an archaic aspect to 
this discussion. If you look at the way our kids access video, 
it bears no resemblance to any of the markets we are talking 
about now. And in those markets, the parties that are merging 
here have 0.7 percent of the market and 0.3 percent of the 
market, and the merger will yield an entity of 1 percent.
    We have heard much discussion about Hulu, which is run--
independently managed, independently financed. Even Hulu, as 
important as it is in people's minds, has 4 percent of the 
market. And so, we are talking about a very different landscape 
and very, very small players.
    Senator LeMieux. Mr. Roberts, one thing that occurred to me 
is, as you acquire more content, I guess one concern would be 
whether or not you would seek to charge more for other content 
to come on your cable network or whether you would give 
preferential pricing to your content so that it would be 
anticompetitive. Can you address those concerns?
    Mr. Roberts. You know, I have heard the concern, and it has 
been referenced a little bit. First of all, if that was such an 
achievable objective, why did News Corp. get out of DirecTV? 
Why did Time Warner spin off Time Warner Cable?
    Because it is such a competitive market, as you were just 
discussing with the professor, that I don't think that is 
really the motivation, nor do I really think that is truly 
viable. And there are--it is a very visible industry, and there 
are these program access opportunities at the FCC if that were 
one's behavior.
    What our motivation is, is to try to make these channels 
better, more relevant. Invest in them, be more focused on them 
than their current situation, and that we think they are good 
businesses, as you describe, as the next generation wants them 
on more platforms.
    And I don't know how we can state it that that is really 
what our goal is. And I think if we do all that, we will have a 
successful deal here.
    Senator LeMieux. Can you speak to what is going to happen 
to employees of NBC, and specifically, as you may expect, being 
a Senator from Florida, I am concerned about NBC Universal. 
They are headquartered--the theme park operation, I guess, is 
headquartered there. I expect that you are going to commit that 
there are no plans to move that to Philadelphia?
    [Laughter.]
    Mr. Roberts. People would love to be in the snow that we 
have had in Philadelphia all winter long and here in 
Washington.
    Yes, we are excited about other businesses that we haven't 
talked about at all today, NBC Universal and what have you, and 
the investment that is being made in Universal theme parks with 
Harry Potter. That is, in my opinion, under talked about is GE 
decided to sell. And in all likelihood, it was going to sell to 
somebody, and most of those somebodies that I can see would 
have had duplicative businesses, and there would have been real 
job reductions.
    The fact is Comcast doesn't own a theme park, doesn't own a 
news channel, doesn't own a broadcast, doesn't own a film 
studio, and doesn't own many of those cable type of news 
channels. So we don't anticipate any reductions and movements 
and all the disruption to people's lives at this really 
sensitive time in the economy.
    And I think that is maybe not the sole determinant factor, 
but a reality that GE had chosen to sell. And if they sold to 
somebody with more ``synergy,'' Wall Street would have liked 
it. Washington perhaps would have had more dislike.
    Senator LeMieux. And if you would like to move the general 
headquarters down to Florida, we would welcome that.
    Thank you, Mr. Chairman.
    Senator Dorgan. Senator Wicker?

              STATEMENT OF HON. ROGER F. WICKER, 
                 U.S. SENATOR FROM MISSISSIPPI

    Senator Wicker. Well, speaking of headquarters, I think 
members of the panel might be interested to know that this 
giant of Comcast actually had its beginnings in my hometown of 
Tupelo, Mississippi. And Mr. Roberts's father, Mr. Ralph 
Roberts, is sitting right behind him, if you would wave to the 
audience, Mr. Roberts?
    He is not from Mississippi, but he chose the City of 
Tupelo, Mississippi, in 1963 to start American Cable Systems, 
which has now grown into Comcast. I did not want this 
opportunity to pass without giving the members that little 
history lesson and to give our welcome on behalf of the 
Committee to Mr. Ralph Roberts.
    But to our witness Mr. Roberts, what do I tell my folks, 
regardless of where they get their signal, give me some 
specific benefits they are going to get. You are going to get 
this, this, and this that you haven't had, and it is going to 
be better if this gets approved.
    Mr. Roberts. First of all, thank you on behalf of the 
Roberts family. Somehow he gets the nice part, and I get the 
tough questions.
    [Laughter.]
    Mr. Roberts. But I have been living with that for a long 
time, and I am very comfortable.
    Senator Wicker. By the way, it occurs to me you might want 
to hasten to add that you really do love Philadelphia, snowy 
though it may be.
    Mr. Roberts. Yes. But I have been to Tupelo, and we are 
very proud of the Mississippi heritage in the company.
    Senator Wicker. And we are proud of it.
    Mr. Robert. So let me, right off the bat, I would tell your 
constituents I hope we are going to make better programs, and I 
hope that we are going to invest in localism because we are a 
local company. And whether that is the TV station or the cable 
station, there has been a trend to cut back on local public 
affairs programming, local news programming.
    Take something like On Demand. We today have 14 billion On 
Demand shows that have been downloaded on Comcast systems in 
the last several years, more than anybody else. That is as many 
as iTunes, more than iTunes across the whole United States.
    These are half an hour approximately, on average. That is a 
technology we sort of helped invent. The number-one criticism I 
get when I talk to customers about On Demand is, ``Why can't I 
get more movies? Why can't I get more TV shows On Demand?''
    Well, we have 4,000 movies in a library and 3,000 
television shows in a library. I certainly hope that we can 
hasten consumers' access to older content, newer content, on 
more distribution platforms than ever before.
    We are at heart a technology company that is embracing 
change, and I think both from the product itself side and from 
the availability and changing nature of how consumers at 
different ages want to consume, that is one of the goals I 
have. So more On Demand content, and I hope more content 
available over the Internet, not, as has been described, less 
content available over the Internet. That is not in keeping 
with what our goal would be for this transaction.
    Senator Wicker. OK. So more local programming, quicker 
access to On Demand, and more content over the Internet.
    Mr. Cooper or Ms. Abdoulah, would either of you care to 
challenge that?
    Dr. Cooper. Well, the economic interest of Comcast is to 
maximize its profit. And if it, in doing so----
    Senator Wicker. You don't object to that, do you?
    Dr. Cooper. Oh, no. I don't object to that at all.
    Senator Wicker. Neither do I.
    Dr. Cooper. But the antitrust laws believe that competition 
is the way to accomplish that. So here is an example of the 
math that Mr. Roberts might discover. If he can deny Ms. 
Abdoulah access to must-have regional sports programming, and 
thereby, he shrunk his audience, but undermine her right to 
steal eyeballs from him, he makes more money that way.
    He uses his control of access to this programming to reduce 
competition in the local distribution of video programming and 
increases his profit. And in all the numbers you heard about 
market shares, one number was left out. In almost every market 
where he said this is a local business, of the multichannel 
video market, he has at least a 50 percent market share. In 
many of his markets, he might have a 60 percent market share.
    That is local market power. That is the one number you 
didn't hear at all in this ocean of numbers. That is the heart 
of his market power. That gives him the ability. That is the 
business he is protecting. That is how he exercises market 
power there.
    Now you can take that arithmetic and apply it across the 
board. With NBC programming, he has guaranteed them access to 
24 percent of the market because now he owns them, right?
    Senator Wicker. Ms. Abdoulah wants to jump in, and we only 
have a minute left. And then maybe Mr. Roberts would like to 
have a rebuttal?
    Ms. Abdoulah. Well, and it is similar points. I mean, 
again, I am not here to debate whether it should be approved or 
not. If and when it is approved, it is critical that it has 
conditions for the very reasons that Mr. Cooper was saying. The 
numbers here, you can talk national numbers all you want. The 
concern competitively comes down to the local level. In 
Illinois----
    Senator Wicker. OK. But you are reiterating your previous 
points. What I was asking is, are my folks going to get more 
local shows, more access to On Demand, and more content over 
the Internet?
    Ms. Abdoulah. Well, if they are from Comcast, yes. If they 
are from a competitor, it depends whether they can negotiate 
for that content at a reasonable price, at reasonable carriage, 
and reasonable terms and conditions. And if they are not 
reasonable, right now the program access rules do not give us 
clear opportunity to resolve them.
    Senator Wicker. Can we ask Mr. Roberts to give a 30- second 
rebuttal?
    Mr. Roberts. I will do it in less than 30, I hope, because 
I think you are talking around all the issues, and I think 
there will be a thorough review. And the program access, the 
FCC said maybe they can do reform.
    NBC content today is not subject to those program access 
rules. So by combining with Comcast, there is now an additional 
governmental review process for any dealings on that content 
with Ms. Abdoulah's company that doesn't exist if GE kept the 
business.
    Senator Wicker. Thank you, Mr. Chairman.
    Senator Dorgan. All right. Senator McCaskill?

              STATEMENT OF HON. CLAIRE McCASKILL, 
                   U.S. SENATOR FROM MISSOURI

    Senator McCaskill. Thank you, Mr. Chairman.
    Dr. Cooper discussed the obvious, and I do want to make 
sure, Mr. Roberts, there is absolutely nothing wrong with your 
company making a profit. Obviously, your job is to make sure 
that your company makes a profit. You would be in big trouble 
if your company wasn't making a profit.
    So I think I want to ask the basic question. I am assuming 
you want this merger because you think you can make more money?
    Mr. Roberts. I think we--I stated earlier we hope to have a 
positive return on our investment. But as the chairman pointed 
out at the start, not all mergers have worked for shareholders. 
Others, like AOL-Time Warner or like DirecTV and News Corp. or 
Time Warner and Time Warner Cable----
    Senator McCaskill. You keep using those as examples, but I 
am assuming that you are only going forward because you believe 
you are going to make money?
    Mr. Roberts. I think we made a--I hope we have made a good 
deal.
    Senator McCaskill. You figured out something that Time 
Warner and AOL didn't figure out or what DirecTV and News Corp. 
didn't figure out, I am assuming, and you are telling your 
shareholders you have figured something out because you plan on 
making money on this deal.
    Mr. Roberts. We hope that the economy, perhaps the biggest 
difference is the moment in time--you have to, you know, AOL 
was at the peak of the Internet bubble, and we are hoping that 
we are at the bottom of the U.S. economy.
    Senator McCaskill. And let us assume that you do make money 
on it. Let us assume that this is a risk which is part of the 
fabric of American business, and it is a great part of the 
fabric of American business. It is one we should all relish. 
All of us in this room are in our hearts risk takers, or we 
wouldn't be here. There is a lot of risks in coming to this 
place, too.
    So let us assume your risk is a solid risk, and you make 
great money. I am assuming you have no problem with other 
consolidations that are similar to this, and let me ask you a 
hypothetical question. If, in fact, a year from now or 2 years 
from now, and you have been very successful at this, I would 
assume you would have no problem with Time Warner buying ABC?
    Mr. Roberts. If I might, which Time Warner--Time Warner or 
Time Warner Cable?
    Senator McCaskill. Time Warner Cable, your competitor.
    Mr. Roberts. Thank you. I would have no problem.
    Senator McCaskill. And you would have no problem with Dish 
buying CBS?
    Mr. Roberts. You know, again, the only comment I would 
make--I don't think so. But the only comment I would make is in 
the world of hypothetical, what are the facts at that time? I 
just want to caveat that answer.
    But I think the market the way I see it, it is more 
competitive than ever. There are new technologies, and we 
compete. And I think for the most part, what you are positing--
I don't think that is where the market will go, by the way, 
because the trend has been the other way.
    Senator McCaskill. But you are bucking that trend, and you 
wouldn't be doing it if you didn't think there was a money-
making opportunity there.
    Mr. Roberts. The CEOs of the companies you have just 
referenced have publicly come out and said they are not sure 
they like the trend we are on.
    Senator McCaskill. Well, the CEOs have a way of coming and 
going. I imagine----
    Mr. Roberts. Well, they have both been there a long time, 
but I understand your point.
    Senator McCaskill. And I guess what I am saying here is we 
are going down a road with this merger, and I want to make 
sure, since you may be the first one down the road, that you 
are perfectly fine with saying, ``Come on, everybody. Follow 
me. Let us do the same thing.''
    Mr. Roberts. You know, if we are successful, as I hope we 
are, and people want to follow that road, under the right 
circumstances, depending on what the conditions are, what the 
facts are at the time, one of the points I would use the chance 
to make is I am not sure that is what the trend will be, if you 
ask my opinion. But hypothetically, I don't think we own any 
media voices in the market. So different hypotheticals have 
different realities. We don't happen to own a news channel--we 
are a broadcast network--or a movie studio or a theme park.
    Senator McCaskill. OK. Do you charge yourself a lower rate 
for your regional sports network than you charge other 
operators?
    Mr. Roberts. We are in 10 different cities, hundreds of 
different agreements. We have more scale in some markets than 
some distributors. So I don't know off the top of my head every 
deal, every rate. I think for the most part, there is a 
transparent process.
    Senator McCaskill. Well, if you would get us that 
information, I think that would be helpful to know.
    Mr. Roberts. Well, some of those agreements are--I will 
have our team follow up with the best they can, given our 
confidentiality agreements. But we can try to summarize or 
generalize.
    Senator McCaskill. OK. I think it is important that we get 
a handle on whether or not you are, if there is a price premium 
to others for what you own. Because I think it is a good 
indicator of what may come in the future.
    Mr. Roberts. I would point out also that our regional 
sports business, the question you specifically asked, are 
subject to a condition we had on a previous deal that anyone 
who is not happy can complain to the FCC and go through a 
process.
    Senator McCaskill. That is good. That is good.
    OK, finally, I know there has been a lot of talk about 
program access rules and how they are going to be protective. 
And here is my question about that. And this is pointed, but 
that is kind of my job here.
    If you are relying on the program access rules to reassure 
people that there won't be problems associated with this, isn't 
it true that you are in court challenging those very program 
access rules as we speak?
    Mr. Roberts. Well, let me say, I said earlier in the 
testimony up front that previous to this transaction, there was 
a challenge made by, I think, it was Cablevision that we joined 
in on the exclusivity--primarily the exclusivity provision 
because those rules were written 20 years ago. In the last 20 
years, things like Sunday Ticket and NASCAR are exclusively on 
our competitor, DirecTV. Dish Network has something like 50 or 
60 or 80 ethnic channels that are exclusive.
    And so, the question was should the rules apply to these 
new platforms that are now way more successful than they were 
20 years ago when they didn't exist, or should the rules 
sunset? But what we have volunteered is that even if we were to 
win that case, we would want the program access rules to apply 
to us, and we are prepared to talk to the FCC about how to do 
that as part of this review.
    Senator McCaskill. Thank you.
    Mr. Chairman, I think that the Committee should take a look 
at those program access rules and see if there is something 
that we could be helpful on in making sure that they are tight 
enough and broad enough in this day and age. Because anything 
that is 20 years old in this current market obviously has huge 
issues with applicability today. So I would suggest that it is 
something we might want to take a look at.
    Thank you, Mr. Chairman. Thank you.
    Senator Dorgan. Thank you, Senator McCaskill.
    Senator Lautenberg?

            STATEMENT OF HON. FRANK R. LAUTENBERG, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Lautenberg. Thanks, Mr. Chairman, and welcome all 
of you. While I wasn't in the room, I was able to listen to 
your testimony, all of it was very helpful.
    Mr. Roberts, in the promotion of the Comcast-NBC merger, 
you have committed to expanding local broadcast news and public 
interest programming. Now, New Jersey, though its size would 
make it the fourth-largest media market in the country, lacks 
its own market, and the only commercial high-power station in 
New Jersey, WWOR, in my view, has not adequately served the 
people of New Jersey.
    Now what ways might a combined Comcast and NBC expand and 
improve and give us some assurance that our local coverage of 
New Jersey issues and events will be a major thing as a result 
of this?
    Mr. Roberts. Well, I am not sure I can completely change 
the broadcast business the way it has historically operated. So 
I don't want to create a false answer.
    But NBC Universal has 30,000 creative people and folks and 
talent that Comcast today doesn't have. And what we have 
committed to is trying to figure a way to take some of the news 
talent, the news gathering, rather than cut it back try, to 
find ways to have more airtime and more on demand for news, 
minority programming, diverse programming, and public affairs 
programming. So we will have more expertise in the company than 
we do if we don't do this deal.
    We are certainly not going in the other direction. And you 
know, as you know, we have many cable systems in New Jersey 
that now will have the resources of an NBC in New York, an NBC 
in Philadelphia. Whether that gets to New Jersey, I have got 
to--I know, sir, I have got to work on.
    Senator Lautenberg. Well, if we can be a little more 
specific? With the multicast, multiple channels, might Comcast 
and NBC seriously consider devoting a broadcast channel 
exclusively to the issues and needs of the people in New 
Jersey, as opposed to us reaching to New York or Philadelphia 
to get that?
    Mr. Roberts. I think it is something we should look at. 
There is an opportunity and a talent and a company looking to 
do more. We have New Jersey. I don't--I just don't know the 
answer as to why it hasn't happened before, and I am not an 
expert in broadcast news.
    Senator Lautenberg. But you will have a significant 
increase in the number of channels that are available. And we 
are--I am asking for some degree of comfort to be offered in 
terms of making sure that New Jersey, 9 million people, 9th 
largest state in the country, can get the attention it 
rightfully deserves.
    Mr. Roberts. So what I would like to do, Senator, is talk 
with NBC about that and, if we can, get back to you. And I 
would like to give a thoughtful response to that. It sounds 
like a market that is underserved and there is an opportunity 
there, and I don't know why we wouldn't want to focus on it.
    Senator Lautenberg. You mean these haven't been thoughtful 
things that we have been talking about here?
    Mr. Roberts. I am saying NBC----
    Senator Lautenberg. I am kidding you, obviously.
    Mr. Roberts. OK. Fair enough.
    Senator Lautenberg. What about new technologies? I had a 
chance to meet with your colleagues and your senior partner 
yesterday, and we discussed--unless the alliances have changed 
somewhat, but I thought Ralph was the senior partner.
    Mr. Roberts. Without a doubt.
    Senator Lautenberg. But talking about the advent of new 
technologies, the 3-D and so forth, what might this merger 
produce by way of acceleration to these new technologies and 
availability, would you think? What kind of pricing might be 
out there for people who want to use that technology, see the 
technology?
    Mr. Roberts. I think we are seeing an extraordinary moment 
right now with technology and its change, and it is 
generational in part. So if you look at the two largest movies 
in recent memory, one of which of all time, Avatar, and now 
Disney's latest movie with Johnny Depp, Alice in Wonderland, 
incredible response by the consumer to 3-D.
    How to bring that, you are seeing in the next couple of 
weeks or right now several television set manufacturers 
announced they are going to put 3-D into TVs. That is a great 
new consumer experience. I personally don't believe people want 
to watch with glasses 8 hours-a-day. But for events and for 
special high well-produced content, it can be a whole new 
business.
    By the way, I think if you speed up your Internet 
connections, you are going to be able to enjoy 3-D over the 
Internet. And we are going to do some demonstrations of that in 
the near future.
    So, I think that is what gets me most energized about this 
transaction is to work with--and that is sort of what I was 
saying before is certainly on a national basis, can you take 
this content and, by the way, export it around the world? And 
Comcast really transforms ourselves from a local company to a 
national and an international company and uses our technology 
roots and our historical roots and tries to now say can we put 
more energy and aggressiveness around this than, frankly, GE 
can or others are doing in this space?
    I don't know that it will all be perfect, all be simple. 
But that is really what motivates me.
    Senator Lautenberg. We had, as everyone is aware, a recent 
breakdown in negotiations between ABC-TV and Cablevision. 
Suggest that FCC's rules governing such negotiation may no 
longer be--and really, Professor Yoo, I would like your comment 
on it--sufficient to protect consumers. Might you suggest a 
change in the rules for retransmission consent and negotiation 
so that consumers are not constantly caught in the middle?
    This was a series of embarrassments, a feeling that too 
much muscle was being exercised over the viewing audience, and 
it was disturbing. And we jumped in, other people jumped in. I 
wasn't the lifeguard, the sole lifeguard in this. But a last-
minute change was finally induced.
    Is there something that you might suggest, Professor Yoo?
    Mr. Yoo. Can I think of something that will make it so that 
every bargain goes to completion successfully when you have two 
people bargain over money? The answer is no. There are times in 
every bargain where one party has to walk away from the table. 
It happens in union bargaining. It happened when I bought my 
house.
    If two sides have a different sense of their value, there 
is going to be deadlock. And if we are going to have a system 
built around arm's length bargaining, that is going to be the 
case. Can we do things that will help the process, start things 
earlier? Absolutely. Ms. Abdoulah has raised a number of 
concerns. I think they are all valid.
    The point I was trying to make, I am not opposed to merger 
conditions. I misspoke. I apologize to the Committee. I think 
that if a merger raises issues, it is, of course, entirely 
appropriate to impose conditions.
    What I am concerned about is, to take a general problem 
that affects the entire industry and to put that into a merger 
review process where the parties will do anything to consummate 
the merger and agree to anything gives short shrift to the 
issues.
    Network neutrality has been mentioned here today. We have 
an open proceeding since October, lots of filings. Comments are 
due, reply comments are due April 8. We have a proceeding that 
is going to consider every aspect of that decision. We should 
allow that proceeding to go run its course because that is how 
we make good policy, subject to judicial review, subject to 
public participation.
    The danger is if we do it ad hoc, we have a 21 percent part 
of the market in high-speed data. And to do it piecemeal 
through merger review processes actually hurts the process and 
leads to bad policy.
    Senator Lautenberg. And one can agree with you, as you 
review this. The question is, who is in charge? Are the people 
who use TV as a commodity in their lives today, and you know 
that certainly, Mr. Roberts. People consider that TV is 
rightfully an opportunity for them to learn and amuse, all of 
the things that occupy time. It is a wonderful addition to life 
for people who are in their later years, can seek 
communications from real-live situations.
    And so, the question is, who is the determination to be 
made by? And I am not suggesting that we impose rules there, 
except that I think there ought to be some sense of loyalty to 
the viewing public that says, OK, if you act to suspend or 
continue your negotiation, but don't grab a whole bunch, 
millions of people and say we are going to keep you from seeing 
something that is really important as part of this.
    Ms. Abdoulah. And if I may answer that, that is a great 
question, who is in charge? The programmers who provide the 
content have all the leverage. I can tell you a very quick 
story.
    We were negotiating with a programmer who had a suite of 
services. We took off one of the services because it wasn't 
viewed. We never wanted it in the first place. Two weeks later, 
not one customer complaint. I get a call saying that if we 
don't put it back on, their other service, which was highly 
viewed, would be taken off by midnight.
    Now it wasn't a Comcast-NBC programmer that I am talking 
about, but it is that kind of leverage that they have on 
operators, who are representing consumers. That wasn't going to 
be good for our consumers, and I had very little leverage 
because I could go and file a complaint. But even while I file 
a complaint, they can pull the network.
    Senator Lautenberg. Mr. Chairman, will the record--the 
record, I assume, will be kept open for a bit of time?
    Senator Dorgan. It will. It will. Yes.
    Senator Lautenberg. Thanks for your indulgence for my 
overrun here.
    Senator Dorgan. Let me ask some questions, following which 
I will turn it over to Senator Cantwell. Senator Cantwell, 
welcome.
    There are so many questions here.
    [Laughter.]
    Senator Dorgan. Ms. Abdoulah?
    Ms. Abdoulah. Yes?
    Senator Dorgan. The thing you have just described to this 
committee goes on all the time, and we hear about it all the 
time.
    Ms. Abdoulah. Yes, sir.
    Senator Dorgan. A provider saying we have four channels 
here, and you have to take all four of them despite the fact 
you don't want all four. And if you don't take two of them, 
they are going to yank the most popular. I mean, that is 
leverage, and there is a lot of leverage.
    Ms. Abdoulah. Yes, sir.
    Senator Dorgan. That is part of what we are talking about 
here. How is leverage used? Who is going to have the leverage? 
How will it affect what the consumer gets in the end? So that 
is important.
    Ms. Abdoulah. That is it.
    Senator Dorgan. Professor Yoo, I think you have at least 
resolved one question. You seemed to start in your testimony 
suggesting this is a slam dunk, yes or no--in your case, yes--
and no conditions. I think you have just disabused us of that. 
There is no problem with conditions. Right?
    Mr. Yoo. No problems with conditions.
    Senator Dorgan. OK. And let me just tell you that the ATT-
BellSouth merger included a condition of network neutrality, 
which I strongly support and, by the way, which, in my 
judgment, was very constructive in leading us to more progress 
at the FCC on network neutrality. Now that is not complete, 
thanks to a whole lot of folks that are fighting it tooth and 
nail. But I mean, I think things like network neutrality or 
Internet freedom, as I call it, are really important, and I 
would not want to have big interests decide to get married 
without a requirement.
    And famously, Mr. Whitaker, as you know--and he and I talk 
about it every time I see him--said, look, these wires belong 
to me, and I intend to--I don't want Google or somebody using 
my wires free of charge. So that set off, of course, exactly 
what the basic issue is with respect to Internet freedom and 
gatekeepers and tollbooths and so on.
    So, anyway, having said all that, you have no problem with 
conditions. I don't have a problem with conditions. And if in 
the future this is approved, there are going to be conditions.
    Mr. Yoo. If I may, I have no problem with the conditions 
that are implicated by the merger. If people use the 
opportunity of merger review to expand beyond the scope of what 
is implicated by the merger, I think that should go back to a 
normal regulatory process.
    To give you an example, the network neutrality example you 
gave leads to this very peculiar order. If you actually read 
the AT&T-BellSouth order, it says we as a Commission do not 
decide that network neutrality is not required. But they have 
voluntarily offered to do it, and we accept their voluntary 
condition as in the public interest. And it has created a very, 
very strange policy posture for the FCC.
    Senator Dorgan. A perfect public policy, in my judgment.
    [Laughter.]
    Senator Dorgan. Mr. Cooper, you wanted to comment?
    Dr. Cooper. Well, I mean, the interesting thing is that I 
actually agree with Professor Yoo, a fairly rare occurrence, 
about how we ought to deal with the fundamental problems. And 
Mr. Roberts has said these are fundamental problems in the 
industry.
    In my testimony, I suggest that the way to really handle 
this is to insist that the FCC and the other relevant agencies 
do the industry-wide rulemakings first so that we have the 
basic structure of protection that we need and then consider 
whether because of this merger there are additional things that 
need to be done. So I am agreeing with----
    Senator Dorgan. Dr. Cooper, you understand that some of the 
biggest interests in the country are doing all they can to 
prevent the FCC from moving. So I guess you can say that, but 
the fact is some of the biggest interests spend all of their 
time trying to prevent action being taken industry wide.
    So I understand your point, but I understand also why we 
have not made progress.
    Dr. Cooper. The dockets have been open for years. They 
simply need to be finished, and then we will have a base for 
understanding how market power can be controlled.
    Senator Dorgan. Let me ask Mr. Wells. Independent 
programming, I said earlier it is very important, and it is 
diminished and continues to be diminished. And so, how do you 
see us making progress on this?
    And I have, by the way, there is--who is doing the 
investigation? The GAO is doing the investigation at my request 
on independent programming. It is a very important area, and I 
would like to understand, between you and Mr. Roberts, how what 
is being proposed with respect to this merger will affect or 
can affect independent programming and the quantity of it.
    Mr. Wells. I think they are two separate issues. One, of 
course, is on the broadcast network itself, which is NBC, which 
has been very aggressive in attempting internally to produce 
things for themselves, and I think anything that could be done 
in what is now voluntary to compel some more independent 
programming would be terrific.
    And in the cable world, again, they control a great deal of 
it, and there is very little that is actually going on that 
they are not actually doing for themselves. And that has 
changed in a way that has made it very difficult for 
independent producers to bring things to the marketplace 
without conditions.
    Senator Dorgan. And why is that the case? I mean, why has 
it changed?
    Mr. Wells. It has changed----
    Senator Dorgan. Mr. Roberts can answer that as well 
perhaps?
    Mr. Wells. Yes, it has changed historically because the 
companies that have used the leverage of it is going to go on 
the air or not go on the air to either insist that it be 
produced through their own entity or to insist that it be a co-
production in some fashion before it goes on the air. There are 
numerous examples of that that could be brought forward.
    Senator Dorgan. Do--I am sorry.
    Mr. Wells. Yes. And I was just going to say that--and 
again, this is why we have tremendous concerns about the net 
neutrality acts because we believe that independent producers 
may be able to get some sort of leg up on doing things 
independently if they actually have another distribution 
outlet, which we might be able to use for people to produce 
independently, assuming that we won't end up having the exact 
same kinds of financial restrictions to getting that material 
on, particularly since it is going to require greater speed 
with which to put on that video content.
    Senator Dorgan. Mr. Roberts, for those of us that believe 
that more independent programming, rather than dramatically 
less independent programming, is good for the country, what can 
we take from this, from the recent history and from your 
proposal to get larger through this acquisition?
    Mr. Roberts. First of all, I put it in the context that the 
previous Senator mentioned. Let us go back in time. There were 
three TV channels, and today, there are hundreds. So I think, 
Comcast has helped totally open up choice, as have other cable 
companies. I think many independent producers exist and many 
have been--sold their company, chosen to consolidate into other 
providers.
    I think we should separate some of these issues that we are 
talking about. We have never really made broadcast television 
programming. So, first of all, whatever NBC has done to be in 
fourth place, we hope we can do better in the future. So I come 
with an open mind on how to do better. I don't know that I 
would support a Government quota that would apply to us that is 
an X percentage should be this and Y percentage should be that, 
and it doesn't apply to anybody else.
    So there are other rules in the past that seem to affect 
this area, like fin-syn, and if there should be an industry 
review, I am sure NBC will have a point of view on that matter, 
but I don't think this merger changes that trend or that 
existence. If anything, we come with an open mind not to just 
want to make it ourselves. Our history with our Comcast 
networks is not to do that.
    A substantial percentage of our programming is from 
independent producers. Six out of every seven cable channels we 
carry after the merger we will have no financial interest in. 
And we have got to compete with other carriers and the programs 
they want to carry. So whatever has been happening inside this 
industry, we come and want to try to see how to get the best 
programming possible in the future.
    Senator Dorgan. You will inherit through this acquisition, 
I believe, 10 NBC television stations?
    Mr. Roberts. Yes.
    Senator Dorgan. And 17 Telemundo stations?
    Mr. Roberts. Yes.
    Senator Dorgan. Are there communities in which you would 
have two NBC stations or two stations and also in which you are 
the dominant cable provider? And then, is that an issue, or 
should it be an issue?
    Mr. Roberts. There are some markets where both Telemundo 
and NBC are there, and Comcast is the cable operator. I don't 
believe so because one of the conditions we voluntarily started 
with was retransmission consent for those broadcast stations 
that would have program access apply to it, where heretofore 
program access has never applied to retransmission consent.
    Senator Dorgan. Well, I mean, I think--Ms. Abdoulah, do you 
want to----
    Ms. Abdoulah. Well, applying a meaningless rule to 
something is still meaningless. And it is an issue. In 
Illinois, we would negotiate for the regional sports network. 
We have the O&O NBC network, and we have Telemundo. So now we 
are going to be--instead of negotiating with two different 
providers, now we negotiate with one for all of the suite of 
those services. And that is intense leverage that they are 
going to have on us today, increasing from today.
    Senator Dorgan. I am going to call on Senator Cantwell. Let 
me say that I think this is a significant issue. We should 
think through it carefully, understand the consequences, pro 
and con, and then make judgments.
    If it is approved, it would have to be approved with the 
conditions, in my judgment. But it is not for us. I mean, it is 
for the two regulatory agencies, and my hope is from this 
hearing, they will take a good look at this and understand the 
consequences.
    I think there are two different views here. One is at what 
level are you talking about competition, the local level or a 
national level? And these are always difficult and interesting 
issues. And I--as I said, my background on the issue of media 
concentration and the media ownership rules at the FCC have 
caused me to have a substantial amount of concern about 
concentration.
    On the other hand, I don't think that in every 
circumstance, big is bad and small is beautiful. I mean, I 
think that there are circumstances where concentration can 
provide benefits to consumers.
    But I will tell you something, I think concentration and 
leverage has to be tempered with rules and regulations and 
conditions. We have seen many examples where they were not 
tempered in such a way, and it turned out much, much different 
than was suggested.
    Mr. Roberts, you, Mr. Wells, Dr. Cooper, and Ms. Abdoulah, 
and Professor Yoo have spent almost 3 hours with this committee 
and answered all of the questions. I say to all five of you we 
appreciate that very much.
    I am going to call on Senator Cantwell and ask Senator 
Cantwell, would you mind finishing the questioning and then 
just adjourn the hearing? I have to be at the Capitol. Our FAA 
bill is on the floor, and so I have to be on the Senate floor.
    Senator Cantwell. Thank you.
    Senator Dorgan. Thank you. I thank all of the witnesses.
    Senator Cantwell, why don't you proceed?
    Senator Cantwell [presiding]. Thank you, Mr. Chairman. And 
I want to recognize your long leadership in media consolidation 
issues and the importance of that. And not that you are going 
anywhere today or tomorrow, but we certainly will miss that 
voice at the end of this Congress. And it has been a critically 
important one, and we in the Pacific Northwest value it. So 
thank you for your leadership on that.
    I am not going to keep you here. I only have two questions. 
I am sure that you have been through many questions from my 
colleagues here, and I have watched most of it.
    So I wanted to ask, Mr. Roberts, one of the reasons I think 
that people think cable rates keep going up. And I know my 
colleague Senator Klobuchar alluded to the fact I think it is 
something like between 1995 and 2008, basic services increased 
122 percent, which is--you know, CPI only grew by 38 percent.
    But one reason why people think that this growth in cable 
rate has been the cable networks' willingness to bid up rights 
to broadcast sports programming because they know that they can 
pass that through to the subscriber base. And a number of my 
Washington State broadcasters have expressed a concern that 
they--at the crux of this is this rabbit ear world of 
advertising eyeball content as a business model versus your 
business model.
    And I am sure there are some people who are wishing we 
could go back because of the costs, and the networks are 
worried that they are going to be eventually priced out of 
major sporting events because their business model and 
inability to pass those costs on to advertisers is going to be 
challenged. So some people have even said that we in the not-
too-distant future will be watching the Super Bowl on cable, 
which means that we will be paying for the Super Bowl, as 
opposed to having an advertising model, which would give access 
to a broader number of people.
    So do you share those concerns, and Mr. Cooper, Ms. 
Abdoulah, do you want to comment on that?
    Mr. Roberts. Thanks, Senator Cantwell.
    I think there are some industry trends that have been going 
on. Just pick two examples, the BCS game is going from Fox to 
ESPN in the future, and Monday Night Football went from ABC to 
ESPN. So I don't think this merger actually changes that 
potential in a way--we wouldn't be buying NBC if we didn't want 
to find ways to make NBC vibrant, valuable, great, and sort of 
back to some of the glory of what it did in the past and, 
hopefully, what it can do in the future.
    So I think some of the questions that get raised by that 
are retransmission consent that we have been talking about 
today on the panel, and I think our industry--and I think we 
can now perhaps play a constructive role. We will be basically 
80 percent a cable operator, 20 percent a content company after 
the transaction.
    So, in a sense, we are going to look at it from both sides 
and say are there creative and good for consumer solutions that 
we can propose that apply to the whole industry, not just to 
one company, that address some of the things that I think are 
very real that you have raised.
    Senator Cantwell. Dr. Cooper, do you worry that we are 
going to have to pay for the Super Bowl in the future?
    Dr. Cooper. Yes. The only reason that the cable operators 
are able to pass through the outrageous costs for sports 
programming is because they force consumers to buy bundles, and 
deny consumers per-channel choice. One study done of those 
channels was that three-quarters of the American people would 
not pay the price that they are being charged.
    So the answer is that the market power they have at the 
local level and the changed incentives NBC today has an 
incentive to be on every TV set. Once they are owned by 
Comcast, they have a different incentive because now they are 
on 24 percent of the Nation's TV sets. And so, all of their 
incentives will change. Their willingness to maximize profits 
will change.
    TV Everywhere is a perfect example of tying the cable fee 
to another service. That is another bundle. So that is the way 
we must address this. There is a real incentive here to extract 
from consumers what is called surplus. By tying those products 
together, they will have that incentive. So it is a very real 
concern.
    Senator Cantwell. Ms. Abdoulah, did you have----
    Ms. Abdoulah. Yes, from our perspective, the content 
providers have such leverage during negotiation. Not only do 
they make sure we take the product that they want us to take 
and not necessarily what consumers want or want to pay for, but 
also how we carry it.
    For a long time, I have wished that our programming 
agreements allowed us to tier the service appropriately. So 
that when I got customer complaints--I have a direct e-mail and 
a direct 800 number for customers to call me directly. And they 
will say, ``Why do I have to pay for this sports programming? 
Why is my bill continuing to go up?''
    I can't tier that because I am not allowed to. I would love 
to be able to offer services in a way that if we have sports 
fanatics, they can buy it and pay extra for it. But that is not 
how our program agreements are currently structured.
    Senator Cantwell. Thank you. I have one more question I 
wanted to ask Mr. Roberts about customer service.
    When I think about the vertical integration, and I think 
this whole area we have some barriers to entry here, and we 
have challenges even for the consumers in switching from one 
competitor to another. It isn't as easy as people might think 
to just do that. And if we are only talking about two or three 
or we are going to continue to see integration, to me, customer 
service is very important.
    And when you think about the amount of money that Comcast 
has been able to make, how much are you pouring into increased 
quality on customer service?
    Mr. Roberts. Well, let me first give a bad statistic, which 
is we have lost 1.2 million cable customers in the last couple 
of years. So there is real competition that is hurting us, and 
some of that is self-inflicted with mistakes we have made on 
customer service.
    So I have made it a top priority for our company to improve 
customer service and the customer experience because it is not 
just when you call. It is how well the entire experience is 
defined.
    Senator Cantwell. What grade would you give your----
    Mr. Roberts. I think we have improved. I would say we 
were--I don't know. This is--we spent over $2 billion in the 
last 2 years more to improve the customer experience. And the 
number-one thing that we are rolling out and we rolled out in 
the last 6 months all across the Nation, including in your 
market, is a guarantee to our customers. If we mess up, we fess 
up.
    And that is a huge change. So if we are late for an 
appointment, it is on us. We will pay your bill. We will give 
you free premium service. We will pay $25. There is on-the-
spot----
    Senator Cantwell. You will get free premium service?
    Mr. Roberts. For that month, a couple of months. Different 
markets have different specifics, but if we are late, here is 
$25. Here is a free install. Here is a guarantee. If you don't 
like the product, give it back to us at the end of the first 
month. The kinds of things you have seen in other businesses 
that back up their claims is now something that we have across 
the entire footprint.
    We are upgrading the speeds of the Internet, but we know 
that it has to work. And we know that even if we have more 
choices than we have ever had before, the TV, if it breaks, 
there is a car crash and the cable goes out because the pole 
got knocked down. Sometimes it is not our fault. You, the 
consumer, don't want to hear that. You want to know how fast am 
I back up, and can you text me a message that the cable is out 
and you are on it, and you know about it?
    So we are building diagnostics into the system so that we 
know there is a problem. Maybe you are not even home watching, 
and we are already on it before you call us. All sorts of 
improvements along those nature because of competition, because 
it is the right thing to do, because it is good business.
    And I think we have made progress. I would say the grade is 
improving, but it is still not perfect.
    Senator Cantwell. I think it is probably far from perfect, 
and I think really the issue, from my perspective, is that you 
are taking this revenue that you are making off of this 
consumer base and trying to consolidate in a more vertical way, 
which is going to leave the market with even less choice. And 
it would be one thing if the consumer experience continued to 
get great customer service.
    So, I would just encourage you to go back and look at your 
business from that perspective and I think there are some 
interesting things out there. But saying to people that you are 
going to come within a 4-hour window and then not showing up 
and saying, well, here is $20, I think that hardly helps the 
consumer, and when they have to spend the time to change to 
another service.
    So we are making--this vertical integration makes it even 
more challenging. And we want to see that the consumer 
definitely has choice, definitely has competition, but is also 
going to have a good experience and can easily move toward 
other competitors if that experience isn't delivered.
    Mr. Roberts. If I might, just to that point. I agree with 
you, and just to demonstrate a couple of points of progress. We 
had 2 million, 2.2 million fewer customer-reported problems in 
the last quarter or in the last month from a year prior. We 
had--we went from 87 or 84 percent on-time by putting the 
guarantee in place.
    Our employees, even if it is not--it doesn't completely 
compensate the consumer, to your point, our system, nobody 
wants to report that they spent that money. So we have gotten 
to 95 percent on-time from 87 percent just by putting that 
insurance in place and that guarantee in place. So there is 
momentum in this direction.
    I take your constructive points that this should be the 
main focus of what we have to do well. We just recruited a new 
head of Comcast Cable, and this is the number-one thing in 
recruiting him that I suggested that we focus on, which is 
continually improving the customer experience.
    Senator Cantwell. Thank you.
    Thank you. Well, I want to thank all the panelists. I know 
that we are going to leave the record open for 2 weeks, and if 
you can help respond to any questions from members or any 
additional statements that they put in for the record.
    And again, thank you for your time today. I am sure that 
this is going to be a continued discussion. As you can see from 
my colleagues, we will be following it closely.
    So the hearing is adjourned.
    [Whereupon, at 1:07 p.m., the hearing was adjourned.]
                            A P P E N D I X

   Prepared Statement of Gregory Babyak, Head, Government Relations, 
                              Bloomberg TV
    Bloomberg TV (``BTV'' or ``Bloomberg'') appreciates the opportunity 
to express its views and concerns about the proposed combination of 
Comcast and NBC-Universal (``NBCU'') and respectfully requests that the 
testimony be entered into the written record. BTV, which is wholly 
owned by Bloomberg, L.P., an internationally recognized provider of 
financial news and information, is an independent news channel that 
provides 24 hour business news programming. BTV has been in existence 
for nearly 15 years. In the past two years, Bloomberg has invested 
substantially to revitalize BTV to be a stronger provider of news and 
information. These investments have included the hiring of Andrew Lack, 
the former chairman and CEO of Sony Music Entertainment and president 
and COO of NBC, and an entirely new management team. As a result, BTV 
is fast becoming a formidable competitor to CNBC, the dominant provider 
of televised business news, as well as Fox Business News. As BTV's new 
business strategy evolves, it will become even more competitive.
    BTV is the principal news and information channel not affiliated 
with any national programming network or other national producer of 
video programming, including programming channels affiliated with 
multichannel video programming distributors (``MVPDs''). Congress, in 
particular the Senate Commerce Committee, has historically been very 
concerned about preserving and advancing independent sources of news 
and information. In an era of increased media consolidation, ensuring 
that the public maintains access to independent sources of news and 
information, such as Bloomberg, is critically important to the public 
interest. A robust marketplace of ideas is by necessity one that 
reflects varied perspectives and viewpoints. Indeed, the opportunity to 
express diverse viewpoints lies at the heart of our democracy.
    The Comcast-NBCU merger will join together the country's largest 
cable operator with the country's oldest broadcast network. The 
combined company will be the largest cable operator, own outright 26 
television stations in the largest markets, own the NBC network which 
reaches nearly every designated market area (``DMA'') in the United 
States, own several of the highest rated cable television networks and 
the Universal film library, and be one of the largest broadband 
providers in the country. The NBCU networks include such ``must-haves'' 
as NBC, The Weather Channel, MSNBC, NBC Sports and, of course, CNBC. 
CNBC is far and away the dominant business news network in the United 
States with more than 75 percent of viewership and revenue in the 
business news programming market. Comcast also owns a number of ``must-
have'' networks in these markets including principally its regional 
sports networks. In addition, Comcast is already the largest cable 
operator in the United States with market shares in excess of 50 
percent in such important DMAs as Chicago, Philadelphia, San Francisco, 
Boston, Detroit, Seattle-Tacoma, Miami-Ft. Lauderdale, Denver, 
Pittsburgh, Baltimore, West Palm Beach, Harrisburg and Jacksonville and 
in excess of 45 percent in Washington, D.C., and other major markets.
    This horizontal and vertical combination will create a powerhouse, 
which could have the incentive and ability to eliminate consumer and 
advertiser choice and to deprive competing independent programmers, 
such as Bloomberg, from access to a level playing field in the market 
for viewers and advertisers.
    Bloomberg does not oppose the merger per se. In fact, Bloomberg 
looks forward to Comcast continuing to be an important distributor of 
BTV, right alongside CNBC, MSNBC, and any other Comcast-owned or -
controlled news programming. Indeed, our goal is to ensure that 
Comcast-NBCU plays a critical role as an unbiased and nondiscriminatory 
distributor.
    Bloomberg is seeking, however, to ensure that the merger will not 
impede Bloomberg's mission as an independent source of news. Bloomberg 
is seeking voluntary commitments by Comcast or, in the alternative, 
conditions required by the Federal Communications Commission (``FCC'') 
and the Department of Justice on the merger that will protect the 
ability of it and other independent providers, and particularly 
independent news providers, to continue to serve the public interest by 
being an important source of news and information for the entire 
country.
    Let me outline some of the more significant steps that the merged 
entity could take that would significantly harm BTV's competitiveness.

        1. Discriminatory Channel Placement--As an independent news 
        channel, it is important for Bloomberg's programming to be 
        placed in the channel line-up near other news channels. 
        ``Neighborhooding'' refers to an industry practice of putting 
        all program channels in the same genre adjacent to one another 
        in the channel line-up. Thus, for example, on modern 
        distribution systems such as DirectTV, Dish, Fios and U-Verse, 
        children's programs, shopping, cooking and, most important, 
        business news and 24 hour cable news channels are clustered 
        together. Neighborhooding is especially preferred by viewers 
        because it allows them to easily scroll between programs within 
        the genre that interests them.

        BTV's concern is that Comcast will place CNBC and MSNBC in more 
        favorable positions. This is already the case, for example, on 
        Comcast's Washington, D.C. area systems, where CNN, CNN 
        Headline News, Fox News, MSNBC and CNBC are clustered together, 
        but BTV is located on a much higher channel number.

        Although other MVPDs are expected to transition to 
        neighborhooding as they transition to fully digital technology, 
        as a result of the transaction, Comcast will have a strong 
        incentive to hinder this pro-consumer development on its 
        systems and disadvantage networks like Bloomberg that compete 
        with its ``owned'' networks like CNBC. This issue will be 
        presented immediately upon consummation of the merger, as 
        Comcast has stated in a public earnings call on Feb. 3, 2010 
        that ``by the end of 2010'' it expects to have ``80 percent of 
        its systems to have made the conversion to All-Digital.''

        Comcast could also decrease viewership of BTV relative to CNBC 
        by placing BTV on a higher, more expensive tier, while keeping 
        CNBC on the basic non-premium tier.

        2. Discriminatory Payment Terms--As BTV increases viewership, 
        any license fees it gets paid by Comcast should be raised 
        accordingly. Following the merger, Comcast would have an 
        incentive to pay BTV less than marketplace rates relative to 
        CNBC.

        3. Disadvantaging BTV's Ability to Obtain Advertisers--
        Comcast's carriage agreements frequently require programmers 
        like BTV to provide Comcast with free advertising time on the 
        BTV network. As a result, after the merger Comcast will be able 
        to bundle ads on BTV with slots on its own news networks in a 
        way that would deprive BTV of a fair opportunity to sell 
        advertising to advertisers who prefer the BTV network.

        4. Limiting or Degrading Internet Access--As a news provider 
        who simultaneously distributes all its content over the 
        Internet, BTV is concerned that Comcast-NBCU could unreasonably 
        inhibit users' access to Bloomberg TV video on the Internet. 
        Comcast could pressure alternative content providers into 
        removing or limiting content availability on the Internet by 
        offering them discriminatory or unfavorable terms if the 
        provider used other platforms such as the Internet to 
        distribute their content.

    To address these potential harms we hope that Congress will work 
with the Department of Justice and the Federal Communications 
Commission to find ways to protect important independent sources of 
news and information. For example, the FCC and the Department of 
Justice could insist on a judicial decree or conditions that require 
Comcast to provide Bloomberg and other similarly situated independent 
programmers with at least the following protections, which correspond 
by number to the potential harms outlined above:

        1. Neighborhooding of independent business news programming 
        with Comcast-owned business news programming by channel 
        position and programming tier.

        2. Most favored and non-discriminatory terms and conditions of 
        carriage for independent business programming networks on all 
        Comcast platforms so that they obtain the same terms as CNBC.

        3. Prohibition against the offering by Comcast of advertising 
        time on competing business networks combined with the purchase 
        of advertising time on Comcast-owned networks.

        4. Prohibition of any restriction, limitation or disincentive 
        on the ability of alternative business news networks to offer 
        their content on other platforms, including the Internet.

    We look forward to any assistance that the Committee can provide in 
ensuring ComcastNBC does not engage in the foregoing activities or any 
others that will harm the public by unfairly diminishing the ability of 
independent programmers, including BTV, to compete on the merits with 
CNBC.
                                 ______
                                 
Response to Written Questions Submitted by Hon. John D. Rockefeller IV 
                       to Hon. Julius Genachowski
    In the Cable Television and Consumer Protection Act of 1992, 
Congress expressed concern about discrimination that can result from 
the vertical integration of multichannel video programming distributors 
and video programming vendors. Pursuant to this law, the FCC set up a 
regulatory regime to govern program carriage disputes. These rules are 
an important part of making sure that independent programmers have a 
fair chance of securing carriage on multichannel video programming 
distributors, like cable companies and satellite companies. It is my 
impression, however, that the FCC rarely resolves carriage disputes in 
a timely way.
    These concerns, which I have previously expressed to you in 
questions for the record, rise anew in the context of the proposed 
combination of Comcast and NBC-Universal.
    To this end, I have several questions:
    Question 1. Has the FCC ever taken an enforcement action involving 
a carriage complaint against a multichannel video programming 
distributor?
    Answer. In eight program carriage cases, the Commission staff has 
found that the complainant met its initial burden of establishing a 
prima facie case of a violation of the program carriage rules. The 
Commission staff referred these matters to an Administrative Law Judge 
(``ALJ'') to conduct further fact finding. In four of the eight cases, 
the parties settled their dispute before a decision was reached on the 
merits of the dispute. In the remaining four cases, the ALJ's decision 
on the merits is currently under review by the Commission.

    Question 2. Are there existing complaints pending at the FCC 
involving carriage under either FCC rules or merger-specific carriage 
complaint procedures? If so, how long have they been pending and when 
will the agency resolve them?
    Answer. There are six pending program carriage cases, one of which 
involves an appeal of an arbitrator's ruling pursuant to merger-
specific carriage complaint procedures. Five of these cases have 
already been ruled upon by either Commission staff or an ALJ, and these 
initial decisions are currently on appeal to the Commission. Of these 
appeals, four have been pending for 5 months since the appeal was filed 
with Commission and the remaining case has been pending for 16 months 
since the appeal was filed. The pleading cycle on the remaining pending 
complaint closed in late March 2010 and is awaiting an initial decision 
by the Commission staff The Commission intends to resolve all of these 
matters as quickly as possible.

    Question 3. How can the FCC be a more efficient forum for the 
resolution of these disputes?
    Answer. In the Commission's recent program access order dealing 
with the so-called ``terrestrial loophole,'' the Commission took an 
approach that will expedite proceedings by establishing a presumption 
that will resolve the case unless factually rebutted. We will explore 
whether similar rules or presumptions can expedite decisions in program 
carriage disputes.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                        Hon. Julius Genachowski
    Question 1. This past weekend, more than 3 million subscribers in 
New York, New Jersey and Connecticut lost access to the New York City 
ABC affiliate only to have service suddenly restored fifteen minutes 
into the Oscar telecast. In the context of these recent disputes while 
the FCC has urged the parties to resolve their differences, it seems 
clear to me that the Commission needs to do more to protect innocent 
consumers.
    During the debate over the retransmission consent provision in 
1992, we anticipated the possibility of what we hoped would be rare 
instances when negotiations might breakdown and provided the authority 
to address these situations.
    In light of this legislative history, and the fact that changes in 
the marketplace are leading to more disruptions what, if anything, will 
the FCC do to ensure that consumers are not harmed as a result of 
retransmission consent disputes. Do you need any assistance from the 
Congress?
    Answer. First, I share your concern about the effect on consumers 
of programming disruptions. It is not fair to consumers that they 
suffer loss of service and are needlessly inconvenienced when two 
private sector entities fail to agree on carriage arrangements.
    There are legitimate questions about whether to update the 20-year 
old framework for retransmission consent and must carry. While it is 
understandable that broadcasters desire cash compensation for their 
programming from cable operators and other multichannel providers, 
commercial negotiations affect third parties who aren't at the table, 
namely consumers. As we move forward, we will be reviewing 
retransmission consent rules and I will be focused on making sure we 
have a framework that is fair to consumers, as well as each of the 
businesses involved.
    To that end, on March 19, 2010, the Commission released a Public 
Notice seeking comment on a petition for rulemaking. The petition 
requests that the Commission amend and supplement its retransmission 
consent rules and was filed by 14 entities, including small, medium and 
large cable companies, satellite operators, and consumer groups. 
Comments are due on May 18, 2010, and reply comments are due on June 3, 
2010. The staff will evaluate the record developed in the proceeding in 
order to determine how to proceed. I look forward to working with you 
on this matter.

    Question 2. Over the course of the past few months, we have 
witnessed some very high-profile retransmission consent disputes, 
including Cablevision-Disney and Time Warner Cable-FOX. Consumers are 
clearly caught in the middle of these fights. Is it appropriate for the 
FCC to intervene in these disputes when the public interest is harmed?
    Answer. The FCC becomes formally involved in these disputes when 
one or both parties files a complaint alleging that the good faith 
retransmission consent rules have been violated. In 2006 and again last 
year, Mediacom brought such a complaint to the Commission involving its 
negotiations with Sinclair Broadcasting. In 2006, the Commission's 
Media Bureau determined that, based on the totality of the 
circumstances, Sinclair had not breached its good faith duty. Mediacom 
appealed that decision to the full Commission; however, the parties 
settled their dispute while that appeal was pending. In the 2009 
dispute, the Commission was involved in attempting to bring the parties 
to resolution. I was pleased that the parties ultimately agreed to a 
short term extension that allowed Mediacom's subscribers to view the 
New Years bowl games and enabled the parties to complete their 
negotiations. Even when the parties do not bring a formal complaint to 
the Commission, if agency staff become aware that negotiations are 
reaching a standstill, Commission staff have reached out to the 
parties, requested status updates and encouraged retransmission consent 
extensions so that subscribers are not subjected to a service 
disruption. The petition for rulemaking on retransmission consent rules 
that was put on public notice includes a request for comment on the 
issue of whether and to what extent the Commission should intervene and 
has authority to intervene in retransmission consent disputes. The 
record developed in the proceeding will be evaluated and a 
determination on how to proceed will soon follow.
                                 ______
                                 
 Response to Written Question Submitted by Hon. Frank R. Lautenberg to 
                        Hon. Julius Genachowski
    Question. While we work to bring new communications services to 
more Americans, New Jerseyans still lack basic TV coverage of local 
news and events. WWOR, New Jersey's only high-power commercial TV 
station, has not adequately served the people of New Jersey and is 
operating under a license that expired almost three years ago. When 
will the FCC be in a position to act on WWOR's renewal application and 
concerns about its local news coverage?
    Answer. As of course you are aware, a petition to deny was filed 
against the renewal application of WWOR questioning the quantity and 
quality of New Jersey specific news provided by the station. Recently 
the petitioner submitted new information into the docket in this 
proceeding which could bear on the course of action taken regarding the 
renewal application, currently are under review in the Media Bureau. I 
am hopeful this matter can be concluded expeditiously.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Mark Warner to 
                        Hon. Julius Genachowski
    Question 1. Content negotiations seem to be getting tougher over 
time. This past December's carriage negotiations between Fox and Time 
Warner Cable almost resulted in loss of service to subscribers. If the 
Comcast-NBCU merger is approved, how do we find a balance between 
marketplace negotiations between distributors and content providers and 
a process that unfairly gives advantage to one party? Should the merger 
have standstill protections for consumers or binding arbitration if 
parties reach an impasse? If not, why not?
    Answer. Among the commitments that Comcast Corporation, General 
Electric Company and NBC Universal, Inc. (the ``Applicants'') have made 
is to commit to the ``key components'' of the Commission's program 
access rules in negotiations with MVPDs for retransmission rights to 
the signals of the NBC and Telemundo owned-and-operated television 
stations for as long as the Commission's current program access rules 
remain in place. While the transaction is pending before the agency, 
and until we have compiled and reviewed the full record in the 
proceeding, it would be premature for me to comment on the specifics of 
the Comcast/NBCU transaction, including the sufficiency of this 
commitment. However, generally speaking, I remain concerned about 
recent retransmission disputes that have left consumers stranded with 
the threat of--and in some cases the actual loss of--their favorite 
programming while the parties work out their differences. For that 
reason, we have played an active role in trying to facilitate agreement 
among the parties in those retransmission disputes that have occurred 
during the past several months. The Commission also recently sought 
public comment on a Petition for Rulemaking filed by various 
multichannel video programming distributors (``MVPDs'') and public 
interest organizations, asking the Commission to amend its 
retransmission consent rules. By seeking comment on the Petition, the 
Commission will be in a better position to assess any possible next 
steps in this area.

    Question 2. Rising cable prices over the past decade have been a 
big issue for consumers. One of the concerns expressed about the merger 
is that it may lead to higher prices for both Comcast subscribers and 
for other consumers because their distribution company (satellite or a 
smaller cable provider) may have to pay more for content sold by the 
merged company. What are your thoughts about this contention?
    Answer. At this time, it would be inappropriate for me to comment 
on the specifics of any possible impact of the proposed Comcast/NBCU 
transaction, including that on MVPD rates, while the transaction is 
pending before the agency. We are proceeding with an open and 
transparent review of the proposed merger, and encourage public comment 
on all issues of concern, including the potential impact of the merger 
on the rates that consumers will pay for video content. We will 
carefully review the record on this and any other issues regarding the 
proposed transaction.

    Question 3. Does a la carte pricing of cable makes sense as a 
possible way to provide content to consumers at a more affordable 
price? If not, why not?
    Answer. There has been much debate regarding the potential benefits 
and harms if cable television system operators and other MVPDs were to 
market their service on an a la carte basis, rather than by requiring 
fees based upon a bundled group of channels. On the one hand, 
proponents of a la carte maintain that it would provide subscribers 
more choice in the programming channels that they receive and allow 
them to pay only for those channels that they select. Opponents argue 
that the a la carte model would threaten the economic viability of less 
popular or niche channels, particularly those that program for the 
benefit of smaller audiences, including some targeted to minorities or 
women. While the Commission does not have the explicit authority to 
require MVPDs to provide service on an a la carte basis, there is no 
legal impediment to the provision of most services on that basis.

    Question 4. There has been much discussion about the gatekeeper 
role of broadband providers. Both in terms of net neutrality 
protections, and also because the nascent Internet TV sector may depend 
on consumers being able to access content either through a distribution 
agreement (such as cable) or directly through an ISP, some consumer 
groups have expressed concerns about the merger because of these 
issues. What are your thoughts about these concerns?
    Answer. I believe that the Commission's role in promoting 
competition in the video marketplace is essential. The Commission is 
charged under the Communications Act with ensuring effective 
competition; promoting innovation; and encouraging investment and the 
broad and rapid deployment of broadband and other advanced 
communications services throughout the United States. Specifically with 
respect to video programming, the Commission's goals include protecting 
and advancing the interests of consumers while fostering a vibrant 
marketplace. In the Comcast-NBCU proceeding, Commission staff 
specifically requested that the Applicants submit an economic report on 
the potential impact of the proposed merger on the Internet video 
sector. In anticipation of that filing, in order to allow all 
interested parties sufficient time to comment on that submission, 
earlier this month, we suspended the public comment deadlines, and will 
allow a full 45 days for the filing of petitions and comments, once the 
Applicants have filed that report and another addressing the benefits 
that they have claimed will accrue from their merger.

    Question 5. How do we ensure that all content will be available to 
all distributors in the marketplace on the same terms and conditions?
    Answer. At the outset, the Commission's program access rules, which 
are intended to ensure that the content of certain cable-affiliated 
programming networks is available on non-discriminatory terms to all 
MVPDs, will apply to the merged Comcast-NBCU entity and its affiliates. 
Among the commitments that the Applicants have made is to accept the 
application of those rules to the high definition feeds of any network 
whose standard definition feeds are subject to the program access rules 
for as long as those rules remain in place. While the transaction is 
pending before the agency, and until we have compiled and reviewed the 
full record in the proceeding, it would be premature for me to comment 
on the specifics of the Comcast/NBCU transaction, including the 
sufficiency of this commitment.

    Question 6. Comcast made a voluntary commitment to add at least 2 
independent programming channels to its line up for the next 3 years. 
Some independent programmers have expressed concerns about this level 
of commitment. What do you think is a reasonable level of independent, 
unaffiliated content?
    Answer. The Commission is charged with ensuring that any proposed 
transfer or assignment of FCC licenses or authorizations is in the 
public interest. Thus, as we review the transaction that is before us, 
we will consider the complete record, including all comments that we 
receive on this commitment, in evaluating its sufficiency, as well as 
the possibility of imposing other conditions that serve the public 
interest as conditions on the merger. It would be premature for me to 
comment on the specifics of the Comcast/NBCU transaction while it is 
pending before the agency, including the adequacy of this or any of the 
applicants' other commitments.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Mark Begich to 
                        Hon. Julius Genachowski
    Question 1. The Washington Post, CNN and other news sources 
continue to talk about the existing and future disputes between 
broadcasters and distributors. I know the market continues to evolve, 
but no matter the dispute, consumers continue to be put in the middle. 
What process would you favor to protect consumers?
    Answer. First, I share your concern about the effect on consumers 
of programming disruptions. It is not fair to consumers that they 
suffer loss of service and are needlessly inconvenienced when two 
private sector entities fail to agree on carriage arrangements.
    There are legitimate questions about whether to update the 20-year 
old framework for retransmission consent and must carry. While it is 
understandable that broadcasters desire cash compensation for their 
programming from cable operators and other multichannel providers, 
commercial negotiations affect third parties who aren't at the table, 
namely consumers. As we move forward, we will be reviewing 
retransmission consent rules and I will be focused on making sure we 
have a framework that is fair to consumers, as well as each of the 
businesses involved.
    To that end, on March 19, 2010, the Commission released a Public 
Notice seeking comment on a petition for rulemaking. The petition 
requests that the Commission amend and supplement its retransmission 
consent rules and was filed by 14 entities, including small, medium and 
large cable companies, satellite operators, and consumer groups. 
Comments are due on May 18, 2010, and reply comments are due on June 3, 
2010. The staff will evaluate the record developed in the proceeding in 
order to determine how to proceed. I look forward to working with you 
on this matter.

    Question 2. The head of tech policy research at Stifel Nichols, 
Rebecca Arbogast, is quoted as saying that the retransmission ``spat 
will increase policy maker interest in reviewing the legal framework 
governing negotiations.'' Given the recent filing by a number of key 
players in the industry, is it appropriate for the Commission to 
consider ways to provide a process that protects consumers during the 
negotiations, and uses the sword of arbitration as a mechanism to force 
compromise?
    Answer. The above-mentioned proposes arbitration as a potential 
reform to the retransmission consent process. We will evaluate this and 
other reforms to ensure that viewers are fully protected. If after 
reviewing the record developed in the petition for rulemaking, we 
determine that assistance from Congress is necessary to correct any 
problems with the retransmission consent regime, we will promptly 
inform Congress.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. Jim DeMint to 
                        Hon. Julius Genachowski
    Question 1. You have testified that the scope of the FCC's review 
of a potential merger, such as that between Comcast and NBC, is based 
on an FCC finding that transaction is in the public interest. You 
detailed a number of considerations that the FCC utilizes in reaching 
this decision, including: ``protecting and advancing the interests of 
consumers, as well as those of children, and families; ensuring 
effective competition; promoting innovation; and encouraging investment 
and the broad and rapid deployment of broadband and other advanced 
communications services throughout the United States.'' You further 
testified that ``some of these considerations may be more centrally at 
issue than others''--in your opinion, which of these factors, whether 
among those you listed or not, are more centrally at issue in the 
present case than others? If the FCC resolves these considerations to 
its affirmative satisfaction, are there any other reasons that the FCC 
would not pursue a final decision on this proposed merger in an 
expeditious and timely fashion?
    Answer. It would be inappropriate to comment on the specifics of 
the Comcast/NBCU transaction while it is pending before the agency. 
Moreover, speculating about which considerations might be centrally at 
issue before the Commission has received and reviewed all public 
comments and completed a full and thorough investigation would not only 
be premature, it could adversely affect the fairness of the 
Commission's review process under the Communications Act and the 
Administrative Procedure Act. The Commission is dedicated to providing 
a thorough, efficient, and transparent review of the proposed 
transaction as quickly as possible. On March 18, 2010 (after the 
parties had submitted their economic study), we sought public comment 
on the proposed transaction. Initial comments are due on May 3, with 
the formal pleading cycle ending on June 17. After the record is 
complete and the Commission has concluded its investigation, the 
Commission will issue its decision in a timely manner.

    Question 2. At recent speech to the Media Institute, NTIA 
Administrator Strickling stated that a hands-off approach to the 
Internet was the right call in the 1990s but suggested this is no 
longer the right policy. I see the Internet as even more competitive 
now then in the `90s--do you agree with his belief that greater 
government regulation of the Internet is necessary? Are you concerned 
that such an approach would chill the additional investment in 
broadband network infrastructure that is critical to the Internet's 
continued explosive growth? In comparison to the last 5 years, do you 
feel that there is currently more competition in the broadband market 
or less?
    Answer. Competition is crucial for promoting consumer welfare and 
spurring innovation and investment in broadband access networks. The 
FCC's recently-released National Broadband Plan, quoting the Department 
of Justice, noted that the critical question is not an abstract notion 
of whether or not broadband markets are ``competitive,'' but rather 
whether there are policy levers around competition policy that can be 
used to produce the best possible level of competition. The National 
Broadband Plan did not look backward and attempt to compare the 
competitiveness of today's broadband market with that of broadband 
markets earlier in the decade.

    Question 3. In its previous decisions, the FCC has determined that 
broadband services contain two ``inextricably intertwine[d]'' 
components--one that involves information processing, retrieval, and 
storage, and another that provides the transmission of information from 
the consumer to the Internet. This factual determination has been 
based, in part, upon the manner in which consumers obtain broadband 
service--through the purchase of a single, integrated offering rather 
than two separate services. Do you disagree that broadband services 
contain these two ``inextricably intertwine[d]'' components, or that 
consumers obtain broadband through the purchase of a single, integrated 
offering?
    Answer. As your question points out, the FCC's determination in 
2002 and in later follow-on orders concerning the classification of 
broadband services were based on the facts and market conditions that 
existed then, the facts and market conditions that were expected to 
develop in the future, assessments of the Commission's legal authority 
under the existing case law, and policy judgments by the Commission. 
With respect to cable modem service, a majority of the Supreme Court 
upheld the Commission's conclusions as ``a reasonable policy choice for 
the Commission to make.'' NCTA v. Brand X Internet Servs., Inc., 545 
U.S. 967, 997 (2005) (brackets omitted). The Commission has not 
undertaken any recent reexamination of these questions. If such a 
proceeding were commenced, it would involve notice, a full opportunity 
for comment, and a record-driven inquiry. I will not prejudge the facts 
or predictive judgments the Commission might develop through such a 
proceeding, nor its ultimate outcome. Moreover, Commission's Office of 
General Counsel is currently reviewing the U.S. Court of Appeals for 
the District of Columbia's opinion in Comcast Corporation vs. FCC and 
is assessing its implications for Commission authority and policies.

    Question 4. Recent statements by high-ranking FCC officials 
indicate that the FCC is contemplating a reclassification of broadband 
services from ``information services'' to ``telecommunications 
services.'' Do you believe that such a reclassification would comport 
with the definitions of each service under the Communications Act? Do 
you believe that such a reclassification is justified, and if so, could 
you please explain your rationale in detail?
    Answer. See answer to Question 3, above.
                                 ______
                                 
    Response to Written Question Submitted by Hon. David Vitter to 
                        Hon. Julius Genachowski
    Question. Do you believe your agency currently has adequate 
authority to exercise responsibility to review certain transactions? If 
not, can you cite examples where you feel more government invention 
into private market decisions and negotiations is warranted in the 
video and broadband market?
    Answer. I believe the Commission's current authority to review 
transactions is adequate to allow us to consider the effect of those 
proposed transactions under the broad public interest mandate 
established by the Communications Act, which includes, among other 
things, protecting and advancing the interests of consumers, as well as 
those of children and families; ensuring effective competition; 
promoting innovation; and encouraging investment and the broad and 
rapid deployment of broadband and other advanced communications 
services throughout the United States. The Commission has a unique 
statutory role that complements the Department of Justice's/Federal 
Trade Commission's review of transactions, which focuses on the impact 
of the transaction on competition.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Sam Brownback to 
                        Hon. Julius Genachowski
    Question 1. If broadband services are reclassified as 
telecommunications services, and thus subject to more regulation, do 
you think that broadband providers would increase or decrease 
investment in broadband networks?
    Answer. The FCC's determinations in 2002 and in later follow-on 
orders concerning the classification of broadband services were based 
on the facts and market conditions that existed then, the facts and 
market conditions that were expected to develop in the future, 
assessments of the Commission's legal authority under the existing case 
law, and policy judgments by the Commission. With respect to cable 
modem service, a majority of the Supreme Court upheld the Commission's 
conclusions as ``a reasonable policy choice for the Commission to 
make.'' NCTA v. Brand X Internet Servs., Inc., 545 U.S. 967, 997 
(2005). The Commission has not undertaken any recent reexamination of 
these questions. If such a proceeding were commenced, it would involve 
notice, a full opportunity for comment, and a record-driven inquiry. I 
will not prejudge the facts or predictive judgments the Commission 
might develop through such a proceeding, nor its ultimate outcome. 
Moreover, Commission's Office of General Counsel is currently reviewing 
the U.S. Court of Appeals for the District of Columbia's opinion in 
Comcast Corporation vs. FCC and is assessing its implications for 
Commission authority and policies.

    Question 2. If broadband services are reclassified as 
telecommunications services, would such an outcome increase or decrease 
innovation in network management?
    Answer. See answer to Question 1, above.

    Question 3. The FCC concluded in 2002, 2005, 2006, and 2007 that 
broadband competition was robust, negating the need for stringent 
regulation of broadband services. Do you believe that there is more 
broadband competition in 2010, or less broadband competition than in 
previous years?
    Answer. Competition is crucial for promoting consumer welfare and 
spurring innovation and investment in broadband access networks. I 
agree with the Broadband Plan, quoting the Department of Justice, that 
the critical question is not some abstract notion of whether or not 
broadband markets are ``competitive,'' but rather whether there are 
policy levers around competition policy that can be used to produce the 
best level of competition. The Broadband Plan did not look backward and 
attempt to compare the competitiveness of today's broadband market with 
that of broadband markets earlier in the decade.

    Question 4. In its previous decisions, the FCC has determined that 
broadband services contain two ``inextricably intertwine[d]'' 
components--one that involves information processing, retrieval, and 
storage, and another that provides the transmission of information from 
the consumer to the Internet. This factual determination has been 
based, in part, upon on the manner in which consumers obtain broadband 
service--through the purchase of a single, integrated offering rather 
than two separate services. Do you disagree that broadband services 
contain these two ``inextricably intertwine[d]'' components, or that 
consumers obtain broadband through the purchase of a single, integrated 
offering?
    Answer. See answer to Question 1, above.

    Question 5. The Supreme Court has accepted the FCC's factual 
conclusion that broadband service is a unified service: ``the high-
speed transmission used to provide cable modem service is a 
functionally integrated component of that service because it transmits 
data only in connection with further processing of information and is 
necessary to provide Internet service.'' Do you disagree with the 
Supreme Court's view that broadband service is a single, unified 
service?
    Answer. See answer to Question 1, above.

    Question 6. As the Supreme Court articulated, ``classif[ying] as 
telecommunications carriers all entities that use telecommunications 
inputs to provide information services, . . . would subject to 
mandatory common-carrier regulation all information-service providers 
that use telecommunications as an input to provide information 
service.'' Do you agree that, if the FCC classified broadband providers 
as telecommunications carriers, Internet applications providers would 
also have to be classified as telecommunications carriers?
    Answer. No. The quoted passage is from the Supreme Court's decision 
in NCTA v. Brand X Internet Servs., Inc., 545 U.S. 967, 994 (2005). The 
Court was there rejecting a statutory argument ``that the 
Communications Act unambiguously classifies as telecommunications 
carriers all entities that use telecommunications inputs to provide 
information service.'' The Commission has never held that view of the 
Communications Act and I do not believe it is correct.
                                 ______
                                 
 Response to Written Questions Submitted by Hon. George S. LeMieux to 
                        Hon. Julius Genachowski
    Question 1. The video marketplace is currently going through a 
tremendous phase of growth and evolution as content becomes 
increasingly available through multiple mediums. With some change 
occurring, how do you view the role of the FCC in ensuring competition 
and promoting innovation in this environment? Are there particular 
challenges facing the FCC that are of concern to you as monitor this 
marketplace?
    Answer. The Commission is charged under the Communications Act with 
ensuring effective competition; promoting innovation; and encouraging 
investment and the broad and rapid deployment of broadband and other 
advanced communications services throughout the United States. 
Specifically with respect to video programming, the Commission's goals 
include fostering a vibrant and healthy marketplace. In this regard, 
the Commission is guided by well-settled public policies grounded in 
the Communications Act, including promotion of the values of 
competition, diversity, localism, and the importance of the First 
Amendment. Thus, the Commission's role is essential. The Commission is 
dedicated to fulfilling its statutory mandates of ensuring effective 
competition and the unfettered flow of video programming to consumers.

    Question 2. It is my understanding that some cable and satellite 
companies have weighed in with Congress and the FCC regarding the 
retransmission consent process. By statute, retransmission consent 
requires cable and satellite companies to obtain the consent of a 
television station before carrying the station's signal. While these 
negotiations have historically been conducted privately, some are now 
suggesting that the Federal government needs to have a greater role in 
mediating these negotiations with the broadcasters. As a principle, I 
am not so sure involving the Federal government more deeply in yet 
another industry is such a good idea at this time, especially when so 
many changes are going on within the industry. I am concerned about any 
efforts that put the government in a position of choosing winners and 
losers in this market place. Could you please share with us some 
possible unintended consequences of greater government intervention in 
the marketplace, in particular with regards to the retransmission 
consent process?
    Answer. It is difficult to speculate on any impact to the 
marketplace with regard to retransmission consent process. I am 
concerned about recent disputes that have left consumers stranded with 
the threat of--and actual loss of--their favorite programming while the 
parties work out their differences. For that reason, we have played an 
active role in trying to facilitate agreement in each of the 
retransmission disputes that have occurred in recent months. The 
Commission also recently put out for public comment a Petition for 
Rulemaking filed by various multichannel video programming 
distributors, asking the Commission to amend its retransmission consent 
rules. By asking for public comment on the Petition, the Commission 
will be in a better position to assess any possible next steps in this 
area. I also am happy to work with the Committee to further discuss the 
issue and what role the Commission can constructively play.
                                 ______
                                 
     Response to Written Question Submitted by Hon. Jim DeMint to 
                        Hon. Christine A. Varney
    Question. The approval process for this potential merger is shared 
by the Federal Communications Commission and the Department of Justice. 
Chairman Genachowski has testified that the FCC's review is based on it 
finding affirmatively ``that the transfer is in the public interest.'' 
Since the DOJ reviews a potential merger on a different standard, can 
you please outline what that standard is and list the specific 
considerations that will govern DOJ's review in this particular case? 
In your opinion, is the scope of this standard of review a broader 
inquiry than that the FCC uses, or is it a more narrow test?
    Answer. Section 7 of the Clayton Act (15 U.S.C.  18) makes illegal 
mergers and acquisitions when the effect of such merger or acquisition 
``may be substantially to lessen competition, or tend to create a 
monopoly.'' This is a different standard than that of the FCC, and 
focuses specifically on the merger or acquisition's competitive effect, 
not other regulatory issues that could be encompassed in a public 
interest determination.
    The specific considerations that the Department has applied to 
reviews of proposed mergers are described in detail in the Horizontal 
Merger Guidelines and the Commentary to the Horizontal Merger 
Guidelines, available on the Department's website at www.justice.gov/
atr/public/premerger.htm. These documents were developed and issued 
jointly with the Federal Trade Commission, with which the Department 
shares antitrust enforcement authority. The Guidelines set forth the 
analytical framework and standards, consistent with the law and with 
economic learning, that the agencies use to assess whether an 
anticompetitive outcome is likely.
                                 ______
                                 
    Response to Written Question Submitted by Hon. David Vitter to 
                        Hon. Christine A. Varney
    Question. Do you believe your agency currently has adequate 
authority to exercise responsibility to review certain transactions? If 
not, can you cite examples where you feel more government invention 
into private market decisions and negotiations is warranted in the 
video and broadband market?
    Answer. Since the passage of the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976 (HSR Act), the Department typically reviews 
mergers within the HSR Act's framework. Under the HSR Act, parties to 
proposed transactions in 2010 valued at over $63.4 million typically 
must provide to us information regarding their proposed merger or 
acquisition and businesses before consummating their transaction. For 
those transactions that require a closer look for us to make an 
informed judgment about their likely competitive effects, the HSR Act 
provides the Department the authority to issue what is called a second 
request, which is essentially a request for a more complete set of 
party documents and data. Until they comply with the second request and 
provide us time to review their materials, parties are not allowed to 
consummate their proposed deal. During the period of time when the 
parties are complying with a second request, we typically conduct 
interviews with customers and competitors, and often request documents 
and data from industry participants. Working together, the Antitrust 
Division's economists and lawyers examine the transaction's likely 
competitive effects based on the facts as they present themselves, and 
the Division pursues enforcement actions when appropriate. If a 
transaction falls outside the statute's reporting thresholds, any 
review can be more difficult, however, the Department can still 
investigate under its Civil Investigative Demand authority.
                                 ______
                                 
     Response to Written Question Submitted by Hon. John Ensign to 
                            Brian L. Roberts
    Question. Mr. Roberts, many people have expressed concern about the 
possibility that Comcast might move all of NBC's and Telemundo's good 
broadcast content to your cable properties, and thus starving your 
broadcast properties. Are those fears justified, or is Comcast 
committed to NBC Universal's free over-the-air broadcast networks?
    Answer. Comcast and NBCU remain committed to continuing to provide 
free, over-the-air broadcast television, through NBC's owned and 
operated stations, and through local broadcast affiliates throughout 
the Nation. Comcast wants to invest in the broadcast industry and help 
it grow. Broadcasting is so important to us that it topped our list of 
voluntary public interest commitments. Consistent with this commitment, 
we intend to continue to invest in high-quality programming for 
broadcast on the NBC Television Network. We have no intention of 
removing attractive NBC network content from the broadcast platform, 
and viewers will continue to find their favorite shows like The Office, 
Meet the Press, and Saturday Night Live on their local NBC station. 
This is not to say that no show will ever be moved from a broadcast 
network to a cable network; such moves have happened in the past and 
may happen again in the future. For example, Law & Order: Criminal 
Intent originally aired on the NBC Television Network, and has since 
migrated to USA. And on occasion, shows have migrated from cable to 
broadcast and syndication, such as Monk. But our intention is to 
strengthen the NBC Television Network. We are acquiring a network that 
is often fourth in prime-time ratings and we want to work toward making 
it number one again.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Sam Brownback to 
                            Brian L. Roberts
    Question 1. Many of my fellow members of this committee are 
concerned about jobs. Mergers aren't always so friendly to the workers 
at affected companies--what will this deal mean for jobs at NBC and 
Universal?
    Answer. For over 45 years, Comcast has been a job creator. When we 
started Comcast in Tupelo Mississippi in 1963, we had 12 employees, and 
today we have over 100,000. As recently reported in Fortune Magazine, 
despite massive layoffs nationwide, Comcast is one of 28 major U.S. 
companies creating jobs. In addition to this internal job growth, 
NBCU's 33,000 employees will join the Comcast family.
    Because the proposed combination between Comcast and NBCU is 
largely a vertical combination, we do not expect that the proposed 
synergies of this combination will include job losses. Comcast is 
primarily a distribution company, and NBCU is primarily a content and 
production company. As a result, there is very little overlapping 
employment of the sort you would typically find with horizontal mergers 
(and which typically is the cause of job reductions in a merged 
entity).

    Question 2. How would Comcast be willing to ensure that the new 
entity does not have the incentive to deny carriage to competitors' 
networks on Comcast Cable?
    Answer. Competition in the video marketplace requires us to supply 
the attractive, compelling programming that our customers demand. The 
need to meet competition is the principal driver of our carriage 
decisions; we need to provide the programming our customers want, or we 
will risk losing customers to competing MVPDs that do so. In a 
competitive marketplace, we need to offer our customers attractive 
packages of programming at attractive prices, and this inevitably 
requires that we carry scores of unaffiliated networks. That's why the 
vast majority of the networks we carry today are unaffiliated--and, 
even post-transaction, approximately six out of seven channels we carry 
will be unaffiliated with Comcast. Thus, intense competition provides a 
powerful discipline against anticompetitive behavior in the buying of 
programming.
    Beyond the competitive incentive, the program carriage rules 
provide further assurance against our ability to discriminate against 
programmers based on affiliation. The program carriage rules generally 
require that MVPDs act fairly in selecting the programming that they 
assemble in packages for sale to consumers. Parties who believe that 
they have been treated unfairly have available to them a complaint 
process at the FCC through which claims of violations can be 
adjudicated. Comcast has always conducted its business in full 
accordance with these rules and has never been found to have violated 
them.

    Question 3. Comcast has one of the largest broadband footprints in 
the country. How much has Comcast invested in its network, and how many 
Americans are able to access the network?
    Answer. Since 1996, Comcast and its predecessors-in-ownership have 
invested nearly $60 billion to upgrade network infrastructure by 
installing fiber optics and other technological enhancements like 
DOCSIS 1.0, 2.0, and most recently, 3.0. Comcast's network has 
approximately 140,000 miles of fiber optic plant, enough to crisscross 
the country more than 45 times. As a result of these investments, 
Comcast now provides access to our state-of-the-art, two-way network to 
nearly 51 million people, or over 99 percent of the homes passed by 
Comcast.

    Question 4. You have said in the past that you believe that an open 
Internet is important. How involved do you think the government should 
be in keeping the Internet open--and what steps has Comcast taken to 
keep the Internet open?
    Answer. Comcast was one of the very first companies to deliver on 
the promise of broadband to American homes. Ever since we first started 
offering our High-Speed Internet service in 1996, we have operated it 
in a manner consistent with the principles of openness embodied by the 
FCC in its 2005 Internet Policy Statement. Our commitment to doing so 
in the future is unwavering, regardless of whether the FCC chooses to 
adopt any of the open Internet rules currently under consideration.
    In the comments we've filed in the FCC's ``Open Internet'' 
proceeding, we made three major points. First, we believe the FCC still 
needs to clearly articulate its statutory authority to adopt the 
specific rules proposed. Second, we believe the record still lacks any 
evidence or data demonstrating a problem in the marketplace that these 
rules would help to address, and it may be that adopting rules in the 
absence of a clearly identifiable problem might present more risks than 
benefits. Third, we said that if the FCC can establish both that it has 
the necessary authority and that there is a need for rules to achieve 
the core goal of ``preserving a free and open Internet'' (as Chairman 
Genachowski has put it), the FCC's proposed rules should be amended in 
several respects to minimize the potential for unintended consequences 
that may hurt consumers.
    In particular, we noted that the FCC would be better served by a 
prohibition on unreasonable and anticompetitive discrimination, rather 
than an absolute prohibition on discrimination, as this would allow 
broadband Internet service providers and content and application 
providers to experiment with various technologies and business models 
that may lead to socially-beneficial differentiation. We also urged the 
FCC to ensure that any rules it may adopt apply to all players in and 
all layers of the Internet ecosystem, because that is the only way to 
ensure that the potential risks to the open Internet are addressed no 
matter where they may occur or who causes them--otherwise, the 
Commission's concerns about potential threats to a ``free and open 
Internet'' cannot be effectively addressed.
    For further elaboration on some of the points made above, I am 
attaching a blog posting from our Executive Vice President, David 
Cohen, earlier this year.
                                 ______
                                 
Comcast, the FCC, and ``Open Internet'' Rules: Where We Stand
Posted by David L. Cohen, Executive Vice President, January 11, 2010
    On Friday, Comcast presented oral argument before the U.S. Court of 
Appeals for the D.C. Circuit in the company's challenge to the FCC's 
``Bit Torrent'' Order. Comcast has challenged the FCC's 2008 Order 
which found, in the absence of any applicable Federal law, that Comcast 
violated ``Federal Internet policy'' in the way it chose to manage 
congestion on its network--engineering decisions designed in good faith 
to provide the best possible Internet experience to as many of our 
customers as possible. In March 2008, while the FCC was considering the 
matter, Comcast announced that it had chosen to move to a different 
technique for managing network congestion. Unfortunately, the FCC 
proceeded to issue an order against Comcast in August 2008. We and many 
others (including two FCC Commissioners) thought the order was simply 
wrong, both legally and factually.
    A little history: In 2005, the FCC had adopted a very short, four-
point ``Internet Policy Statement'' that, among other things, described 
what consumers should be able to expect from their Internet service 
provider, including ``reasonable network management.'' But policy 
statements are not law. They are not the same thing as enforceable 
rules. Members of the FCC and even advocates of ``net neutrality'' 
regulation made that very point at the time. When that Statement was 
issued, Comcast made it clear that we supported the four principles. We 
served (and still serve) our customers consistent with those 
principles.
    When in 2007 the FCC instituted proceedings based on a complaint 
against Comcast's network management and told us we needed to show why 
we had not violated ``Federal Internet policy,'' we were surprised. And 
when the FCC ultimately issued an order telling us what they thought we 
had done wrong--and telling the world for the first time how the FCC 
intended to interpret and enforce this ``policy''--we were very 
disappointed. We felt our network management practices were reasonable 
and consistent with the Internet Policy Statement. Perhaps more 
importantly, from a legal standpoint, we felt the FCC had not given us 
(or anyone else) fair notice of what its standard was for determining 
whether conduct (including network management) was permissible. It also 
didn't give fair notice that it would try to directly enforce the 
aspirational Policy Statement regarding consumer expectations against 
us (or anyone else).
    When the FCC issued its Order finding of a violation of Federal 
standards based on our network management practices that we believed in 
good faith were reasonable, we had no choice but to challenge it in 
court.
    It remains our hope that the court will tell the FCC to vacate 
(withdraw) the Comcast order, and thereby set the record straight and 
clear our name. In the meantime, last fall the new FCC began doing what 
the previous FCC should have done in the first place--FCC Chairman 
Julius Genachowski asked the agency to start a proceeding to adopt 
rules to ``preserve an open Internet'' that are based, in significant 
part, on the FCC's 2005 Internet Policy Statement. In other words, the 
FCC is now determining whether there is a need for enforceable rules 
and, if so, to properly establish them and to decide what guidance 
those rules should give to Internet Service Providers and others in the 
Internet ecosystem. The current rulemaking proceeding will also create 
a proper record for the FCC to consider its legal authority to proceed 
with any rules it ultimately decides to adopt. And Comcast, in turn, 
has been supportive of this FCC's actions to bring some clarity to this 
unsettled area.
    Some activists insist that Comcast's challenge to the FCC is ``a 
fight about net neutrality.'' That's simply not true. The primary basis 
for our challenge, and the basis on which we hope the court will decide 
this case, is that no Federal agency can subject any company or 
individual to sanctions for violation of Federal standards when there 
was no law in the first place. This is a basic issue of fair notice, 
regardless of the issue at stake. So it shouldn't matter whether you 
are for or against ``net neutrality'' regulation--this is simply not 
the way the government should conduct its business. If the FCC--or any 
agency--wants to regulate in an area, it needs first to establish 
binding regulations and apply them properly, consistent with the 
process that Chairman Genachowski has now proposed.
    So where does Comcast stand on whether rules are needed? As I've 
noted before, we support the Chairman's commitment to an ``open, 
transparent, fact-based and data-driven'' rulemaking proceeding on this 
topic. In an interview on CNBC last Friday, our Chairman and CEO Brian 
Roberts also endorsed the FCC trying to make clear what the rules of 
the road are moving forward. He noted our support of the Chairman's 
process, and pledged our constructive participation.
    And while, as we will make clear in our comments, we continue to 
question whether the record will show a need for new rules--because 
broadband competition and consumer demand will ensure that the Internet 
remain open as it has always been--the FCC may decide otherwise. If 
that is the result, we are obviously better off having ``clear rules,'' 
as Brian stated, than with the confusion of having the FCC try to 
enforce an unenforceable and vague ``policy statement.''
    It's truly sad that the debate around ``net neutrality,'' or the 
need to regulate to ``preserve an open Internet,'' has been filled with 
so much rhetoric, vituperation, and confusion. That's gone on long 
enough. It is time to move on, and for the FCC to decide, in a clear 
and reasoned way, whether and what rules are needed to ``preserve an 
open Internet,'' and to whom they should apply and how. In launching 
the rulemaking, the FCC said that greater clarity is required, and we 
agree. Comcast will join many other interested parties in making 
comments to the FCC this week regarding its proposed open Internet 
rules. Our goal is to move past the rhetoric and to provide thoughtful, 
constructive, and fact-based guidance as the FCC looks for a way 
forward that will be lawful and that will effectively balance all the 
important interests at stake.
                                 ______
                                 
 Response to Written Questions Submitted by Hon. George S. LeMieux to 
                            Brian L. Roberts
    Question 1. Mergers aren't always so friendly to the workers at 
affected companies--what will this deal mean for jobs at NBC and 
Universal? I have a significant number of constituents who work for 
Universal and NBC. What will this deal mean for them?
    Answer. For over 45 years, Comcast has been a job creator. When we 
started Comcast in Tupelo Mississippi in 1963, we had 12 employees, and 
today we have over 100,000. As recently reported in Fortune Magazine, 
despite massive layoffs nationwide, Comcast is one of 28 major U.S. 
companies creating jobs. In addition to this internal job growth, 
NBCU's 33,000 employees will join the Comcast family.
    Because the proposed combination between Comcast and NBCU is 
largely a vertical combination, we do not expect that the proposed 
synergies of this combination will include job losses. Comcast is 
primarily a distribution company, and NBCU is primarily a content and 
production company. As a result, there is very little overlapping 
employment of the sort you would typically find with horizontal mergers 
(and which typically is the cause of job reductions in a merged 
entity).

    Question 2. Online video is an emerging market. What is the amount 
of online content already available, and where does Comcast fit in? How 
sizable do you foresee Comcast's presence becoming in the online video 
market? How will the new entity's market share compare to the rest of 
the current providers in the online video market?
    Answer. The amount of online content today is vast and growing. 
High-quality video content is increasingly available from a rapidly 
growing number of online sources including but not limited to Amazon, 
Apple TV, Blinkx, Blip.tv, Blockbuster, Boxee, Clicker.com, Crackle, 
Electus, Hulu, iReel, iTunes, Netflix, Sezmi, SlashControl, Sling, 
Vevo, Vimeo, VUDU, Vuze, Wal-Mart, Xbox, Yahoo, and YouTube, and there 
are new entrants all the time. These sites offer significant quantities 
of professionally-produced content that can be accessed from a variety 
of devices, including computers, Internet-equipped televisions, 
videogame boxes, Blu-ray DVD players, and mobile devices. In addition, 
there is a huge supply of user-generated video content, including 
professional and quasi-professional content. YouTube, for example, 
which is by far the leader in the nascent online distribution business, 
currently receives and stores an entire day's worth of video content 
for its viewers every minute.
    Comcast and NBCU are both relatively small players in both the 
production and distribution of online video content. Online video 
distribution sites owned by Comcast (e.g., Fancast) account for less 
than one-half of one percent of online video views, and sites owned by 
NBCU account for less than one percent of online video views. Hulu, in 
which NBCU owns a minority interest, accounts for only 4 percent of 
online video views. Even if NBCU's minority, non-controlling interest 
in Hulu meant that Hulu viewing was 100 percent attributed to NBCU, the 
combined company's share of online video views would total 
approximately 5 percent. The combined company will therefore have no 
market power, either as a provider or distributor of online video 
content, and no ability to limit competition in this dynamic 
marketplace. The competitive dynamics of this nascent business will be 
determined by the interplay of many, many actors on the Internet, 
including Google (which accounts for 55 percent of all online video 
views) and countless other web-based providers large and small.

    Question 3. Some of the concerns about the merger have focused on 
potential anti-competitive behavior. How would Comcast be willing to 
ensure that the new entity does not have the incentive to deny carriage 
to competitors' networks on Comcast Cable?
    Answer. Competition in the video marketplace requires us to supply 
the attractive, compelling programming that our customers demand. The 
need to meet competition is the principal driver of our carriage 
decisions; we need to provide the programming our customers want, or we 
will risk losing customers to competing MVPDs that do so. In a 
competitive marketplace, we need to offer our customers attractive 
packages of programming at attractive prices, and this inevitably 
requires that we carry scores of unaffiliated networks. That's why the 
vast majority of the networks we carry today are unaffiliated--and, 
even post-transaction, approximately six out of seven channels we carry 
will be unaffiliated with Comcast. Thus, intense competition provides a 
powerful discipline against anticompetitive behavior in the buying of 
programming.
    Beyond the competitive incentive, the program carriage rules 
provide further assurance against our ability to discriminate against 
programmers based on affiliation. The program carriage rules generally 
require that MVPDs act fairly in selecting the programming that they 
assemble in packages for sale to consumers. Parties who believe that 
they have been treated unfairly have available to them a complaint 
process at the FCC through which claims of violations can be 
adjudicated. Comcast has always conducted its business in full 
accordance with these rules and has never been found to have violated 
them.

    Question 4. The entire media landscape is going through a 
transformation right now. The economic recession and the push for 
content online have caused many newspapers to lay off staff members, or 
fold altogether. Has Comcast made news content a priority in this 
transaction and is Comcast working to expand in this area?
    Answer. In their Public Interest Statement filed with the FCC in 
support of their application for approval, Comcast, GE, and NBCU made 
unprecedented commitments to continuing to provide free overthe-air 
broadcasting and preserving and enriching valuable content that is 
currently broadcast on NBC O&O broadcast stations. We said and I firmly 
believe that this transaction will help to preserve and enhance 
traditional broadcast television. Our objective is to strengthen the 
NBC Television Network and restore its former glory, not weaken it.
    The proposed transaction will strengthen the companies' local 
content businesses, both by making the existing local news and other 
local programming available to consumers at more times and on more 
platforms than ever before, and by facilitating and encouraging the 
creation of new local programming. For example, the NBC O&Os air their 
locally produced, regularly-scheduled news programs in limited time 
periods each day. The proposed transaction creates significant 
opportunities to extend that local news content to other outlets and 
platforms, such as Comcast's local and regional cable networks, VOD, 
and online, thereby increasing consumers' access to high-quality local 
news and information.
    As we said in our Public Interest Statement, we remain committed to 
preserving and enriching the output of local news, local public 
affairs, and other public interest programming on NBC O&O stations. 
Through the use of Comcast's On Demand and On Demand Online platforms, 
time slots on cable channels, and use of certain windows on the O&O 
schedules, we believe we can expand the availability of all types of 
local and public interest programming. Specifically, we committed that 
for 3 years following the closing of the transaction, the NBC O&Os will 
maintain the same amount of local news and information programming they 
currently provide. This is a particularly significant commitment to 
promote localism given the economic challenges facing all broadcasters 
today. In addition, we also said that the NBC O&Os will collectively 
produce an additional 1,000 hours per year of local news and 
information programming, consisting of a range of local and regional 
content, including general interest news and public affairs 
programming, weather, traffic, and other informational programming 
focused on community events, local lifestyle, fashion, arts, and 
multicultural features. We will use a combination of distribution 
platforms to make this new local content available to consumers, 
including the NBC O&O stations, Comcast's local and regional networks, 
VOD, and online, as appropriate for each local market.
    Finally, we are also committed to preserving NBCU's tradition of 
independent news and public affairs programming and its commitment to 
promoting a diversity of viewpoints. Comcast has committed to continue 
the policy of journalistic independence with respect to the news 
programming organizations of all NBCU networks and stations, and will 
extend these policies to the potential influence of each of the owners. 
To ensure such independence, the combined entity will continue to 
effect the position and authority of the NBC News ombudsman to address 
any issues that may arise.

    Question 5. Comcast has a substantial share of the broadband market 
and has been involved in the FCC's effort at putting together a 
National Broadband Plan. How do you see the acquisition fitting in with 
other important priorities like broadband deployment?
    Answer. Comcast was one of the very first companies to deliver on 
the promise of broadband to American homes. Ever since we first started 
offering our High-Speed Internet service in 1996, we have invested and 
innovated to remain a leader, deploying high-speed service as broadly 
as possible throughout our footprint. We keep providing faster speeds 
and greater security, and doing the other things required to 
continuously improve the performance of the network. In the past 15 
years, we have invested tens of billions of dollars in our network 
infrastructure, and we are continuing to invest and innovate. Today, 
over 99.5 percent of the homes we pass have access to our High-Speed 
Internet service, and about 80 percent (and growing) of the homes we 
pass have access to DOCSIS 3.0 technology, which enables us to offer 
download speeds of up to 50 Mbps, and soon 100 Mbps and greater. 
Comcast is committed to delivering its customers a world-class, state-
of-the-art broadband Internet service.
    In the recently released ``National Broadband Plan,'' the FCC's 
Omnibus Broadband Initiative staff recognized what they called the 
``virtuous cycle'' of innovation that is driven by the relationship 
between applications, content, and networks. They also recognized that 
lack of ``relevance'' is one of the major reasons why people choose not 
to subscribe to broadband. In other words, despite the wonderful array 
of content, applications, and services available on the Internet today, 
some consumers do not yet see the value in subscribing to a broadband 
Internet service. We hope to change their minds.
    We at Comcast have always recognized the symbiotic, interdependent 
relationship amongst the various stakeholders in the Internet 
ecosystem. At a very high level, the development of innovative content, 
applications, and services on the Internet drives demand for our 
product, while our high-speed Internet service facilitates this 
innovation by providing a platform for entrepreneurs to reach millions 
of potential customers. A primary reason that Comcast and NBCU have 
entered into this joint venture is because, by marrying NBCU's content 
with Comcast's multiple distribution platforms, we believe we can 
accelerate the creation and adoption of ``new media'' entertainment. In 
so doing, we will improve the value proposition of broadband Internet 
service, driving demand for the service and, hopefully, improving the 
business case for further investment in and deployment of world-class, 
state-of-the-art networks by all broadband Internet service providers.

    Question 6. A keystone of the FCC's mission is promoting localism 
and diversity. How can this transaction--with Comcast's distribution 
platforms and NBCU's content--continue to foster these longstanding 
policy goals?
    Answer. We think that the proposed transaction will foster both 
localism and diversity. The new venture will provide more and better 
local programming, including local news and information programming, 
thereby advancing localism. It will also expand the amount, quality, 
variety, and availability of content more than either company could do 
on its own, thus promoting diversity. In addition, Comcast and NBCU 
have made a number of commitments regarding localism and diversity.
    With respect to localism, and as discussed above, Comcast is 
committed to maintaining free, over-the-air broadcast television, 
through NBC's owned and operated stations, and through local broadcast 
affiliates throughout the Nation. The proposed transaction will 
strengthen the companies' local content businesses, both by making the 
existing local news and other local programming available to consumers 
at more time and on more platforms than ever before, and by 
facilitating and encouraging the creation of new local programming. 
Comcast intends to preserve and enrich the output of local news, local 
public affairs, and other public interest programming on NBC O&O 
stations. Specifically, we committed that for 3 years following the 
closing of the transaction, the NBC O&Os will maintain the same amount 
of local news and information programming they currently provide. This 
is a particularly significant commitment to promote localism given the 
economic challenges facing all broadcasters today. In addition, we also 
said that the NBC O&Os will collectively produce an additional 1,000 
hours per year of local news and information programming, consisting of 
a range of local and regional content, including general interest news 
and public affairs programming, weather, traffic, and other 
informational programming focused on community events, local lifestyle, 
fashion, arts, and multicultural features. We will use a combination of 
distribution platforms to make this new local content available to 
consumers, including the NBC O&O stations, Comcast's local and regional 
networks, VOD, and online, as appropriate for each local market.
    With respect to diversity, the proposed transaction will provide 
the combined entity with the ability and incentive to make more 
programming available for diverse audiences. Comcast has been working 
hard to increase the diverse programming options available to its 
subscribers for several years.\1\ The combined entity will be able to 
explore ways to deliver more diverse programming faster, on top of what 
Comcast alone would otherwise achieve. Because the combined entity will 
be able to increase the number of platforms on which such programming 
can be delivered--in effect expanding the potential audience--it will 
have a greater incentive to explore innovative business models to 
support the production and distribution of more and higher quality 
diverse programming. With NBCU's interest in Telemundo and mun2, and 
with Comcast's founding role in TV One and its extensive offerings of 
cable channels meeting the needs and interests of diverse viewers, the 
combined entity will be second to none in providing and promoting 
programming that reflects a wide range of perspectives in a variety of 
formats and content, furthering the Commission's goal of viewpoint and 
program diversity.
---------------------------------------------------------------------------
    \1\ For example, Comcast's digital migration brought Portland 
viewers more than 20 new Spanish-language channels (for a total of more 
than 45 Spanish-language channels), in addition to 65 new HD channels 
(for a total of more than 100 HD channels), four new international 
channels, and six new standard-definition channels.
---------------------------------------------------------------------------
    Comcast intends to expand the availability of over-the-air 
programming to the Hispanic community utilizing a portion of the 
digital broadcast spectrum of Telemundo's O&Os (as well as offering it 
to Telemundo affiliates) to enhance the current programming of 
Telemundo and mun2. Within 12 months of closing the transaction, 
Applicants will launch a new multicast channel, using Telemundo's 
library of programming. Comcast has also committed to using its On 
Demand and On Demand Online platforms to feature Telemundo programming, 
and Comcast intends to continue expanding the availability of mun2 on 
the Comcast Cable, On Demand, and On Demand Online platforms.

    Question 7. Though most consumers pay for cable services, there is 
still a substantial segment of the population that relies on free, 
over-the-air broadcasts. How will the new entity continue to service 
the interests of this group?
    Answer. Comcast and NBCU remain committed to continuing to provide 
free, over-the-air broadcast television, through NBC's owned and 
operated stations, and through local broadcast affiliates throughout 
the Nation. Comcast wants to invest in the broadcast industry and help 
it grow. Broadcasting is so important to us that it topped our list of 
voluntary public interest commitments. Consistent with this commitment, 
we intend to continue to invest in high-quality programming for 
broadcast on the NBC Television Network. We have no intention of 
removing attractive NBC network content from the broadcast platform, 
and viewers will continue to find their favorite shows like The Office, 
Meet the Press, and Saturday Night Live on their local NBC station. 
This is not to say that no show will ever be moved from a broadcast 
network to a cable network; such moves have happened in the past and 
may happen again in the future. For example, Law & Order: Criminal 
Intent originally aired on the NBC Television Network, and has since 
migrated to USA. And on occasion, shows have migrated from cable to 
broadcast and syndication, such as Monk. But our intention is to 
strengthen the NBC Television Network. We are acquiring a network that 
is often fourth in prime-time ratings and we want to work toward making 
it number one again.
                                 ______
                                 
     Response to Written Question Submitted by Hon. Jim DeMint to 
                            Dr. Mark Cooper
    Question. In your written testimony, you expressed concern that, if 
the Comcast/NBC merger is successful, the new entity would be able to 
offer ``package deals and volume discounts for advertising across 
multiple channels.'' Whether in the advertising context or in the 
broader context of video and broadband market, aren't lower prices and 
greater efficiencies desirable outcomes?
    Answer. Short-term lower prices that result in exit from the 
industry and ultimately greater concentration can result in higher 
prices in the long term. An efficient monopoly in the media is an 
unacceptable outcome, as it contradicts the essential goal of media 
policy that is the ``widest possible dissemination from diverse and 
antagonistic source,'' as defined by the Supreme Court in a number of 
media decisions dating back to Associated Press in 1945.
                                 ______
                                 
    Response to Written Question Submitted by Hon. David Vitter to 
                            Dr. Mark Cooper
    Question. You've claimed that the only cost savings from the 
Comcast-NBCU transaction would come from massive job cuts. Please 
provide the Committee with your analysis in support of this assertion.
    Answer. The experience in this industry, as well as many others, 
has been that the first place merging parties look for cost savings is 
labor cuts. The loss of potential new jobs is also a concern. For 
example, Comcast's efforts to create regional news operations will 
likely be cut back as exiting NBC operations will be repurposed.
                                 ______
                                 
 Response to Written Questions Submitted by Hon. George S. LeMieux to 
                            Dr. Mark Cooper
    Question 1. You have expressed concerns that the only cost savings 
from this transaction will come from massive job cuts. This is of 
serious concern to me since others have claimed that the merger would 
not result in job losses. Could you please provide the Committee with 
your data and analysis in support of this assertion?
    The experience in this industry, as well as many others, has been 
that the first place merging parties look for cost savings is labor 
cuts. The loss of potential new jobs is also a concern. For example, 
Comcast's efforts to create regional news operations will likely be cut 
back as exiting NBC operations will be repurposed.

    Question 2. In your testimony, you indicated that NBC and Comcast 
should be considered competitive rivals because they often disagree and 
must negotiate the terms of the services and content they provide each 
other. Do antitrust scholars and regulators ordinarily consider 
suppliers and distributors to be ``head to head'' competitors, because 
they often disagree and must negotiate the price and terms of 
distribution?
    The local broadcast stations and cable operators are direct 
competitors in distribution of video content. NBC and Comcast compete 
head-to-head in the distribution of content on the Internet. In merger 
review, potential competition is a focal point of attention. In high 
tech, platform industries strong complements are frequently an ideal 
base from which to launch disruptive competition. The ongoing disputes 
between cable and broadcasters demonstrate that they have divergent 
interests. The merger would eliminate those divergent interests. This 
speaks to the incentives that the firms have. For example, in the 
bargaining over retransmission consent, today Comcast has a pure cable 
companies incentives. It has no interest in higher retransmission rates 
or in being forced to take bigger bundles. After Comcast acquires NBC, 
it will have, in part, a broadcaster's view of retransmission and could 
use those rights to harm competitors by raising their costs and 
squeezing their profits.
                                 ______
                                 
     Response to Written Question Submitted by Hon. John Ensign to 
                            Dr. Mark Cooper
    Question. Dr. Cooper, in your testimony you state that the Comcast/
NBCU ``merger will stimulate a domino effect of concentration between 
distributors and programmers.'' What was the level of vertical 
ownership of distribution and programming in the cable and satellite 
industries 10 years ago? What is the level of vertical ownership today? 
Please indicate the source of your data. Does the data support your 
thesis?
    Answer. Viewed in terms of audience, vertical integration in the 
video marketplace has increased dramatically since the early 1990s. 
Five media corporations have come to dominate the top 30 shows and 
expanded basic channels with large bundles of channels (NBC/U, 
Newscorp., ABC/Disney, CBS-Viacom, and Time Warner). These same five 
corporations own the major movie studios and own all the national 
broadcast networks. The NBC-Comcast merger would dramatically increase 
vertical integration by joining one of the big five video companies 
with the dominant cable operator. The vertical leverage that Comcast 
would gain will place the other four video giants at a disadvantage, 
giving them a strong incentive to seek a similar union. The data on 
which I base this analysis is contained in the attached 
paper.*
---------------------------------------------------------------------------
    \*\ The Negative Effect of Concentration and Vertical Integration 
on Diversity and Quality In Video Entertainment by Mark Cooper, Fellow, 
Donald McGannon Center for Communications Research, Fordham University 
and Derek Turner, Free Press. This document is retained in Committee 
files and can be found at: http://www.policyarchive.org/handle/10207/
bitstreams/8001.pdf.
---------------------------------------------------------------------------
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Mark Begich to 
                            Colleen Abdoulah
    Question 1. During your testimony in committee you called on some 
conditions to be added to the merger agreements. Can you provide more 
detail what you feel would be appropriate conditions?
    Answer. The proposed joint venture brings together Comcast's 
regional sports networks with NBCU's national programming and local 
broadcast signals. It also combines NBCU's programming with Comcast's 
cable assets. The transaction will result in significant harms to both 
consumers and competition from these proposed combinations unless the 
FCC and DOJ impose adequate remedies.
    In fashioning relief to address the anticompetitive harms caused by 
the proposed combination, it would be a mistake to rely exclusively on 
the Program Access statute and rules or upon conditions, such as 
arbitration, that were imposed in previous mergers involving 
programmers and distributors. Rather, more robust relief is required to 
improve upon previous remedies. This relief should include such 
conditions as prohibiting Comcast-NBCU from unfairly charging higher 
programming fees to other MVPDs, especially those smaller than Comcast, 
and denying these operators online distribution rights to all of its 
programming.

    Question 2. In Alaska, there is a much smaller population that has 
access to cable television. I am concerned the impacts this merger will 
further harm small cable companies. Can you describe the potential 
impact on small cable operators?
    Answer. A once functional wholesale programming market is no longer 
working for all pay TV operators. Today, smaller operators find 
themselves at the mercy of a handful of supersized companies with 
market power that unfairly charge these providers significantly higher 
fees than larger ones for national and local programming. This price 
discrimination harms consumers living in smaller markets and rural 
areas by forcing them to pay drastically more for the same programming 
as their urban counterparts. Smaller operators prefer market-based 
solutions, but the market as it exists today is simply not working.
    As highlighted in the previous question, the Comcast-NBCU deal will 
combine Comcast's regional sports networks with NBCU's national 
programming and local broadcast signals, creating a single entity with 
significantly more market power than the companies in aggregate possess 
today. The new company will be able extract higher fees and impose more 
onerous terms and conditions on all pay TV providers, but smaller 
operators and their customers will be impacted the most because the 
differences in bargaining power will be the greatest.

    Question 3. During the Committee hearing, you seemed as though you 
wanted to discuss the negotiation position especially related to 
regional sports networks. Do you care to elaborate on any negotiations 
you have been a part of?
    Answer. Smaller operators have little bargaining power in 
negotiations for regional sports programming. The Federal 
Communications Commission has deemed these regional sports networks 
(RSNs) and network-affiliated broadcast stations ``must have'' because 
not carrying this programming would significantly harm an operators' 
ability to compete against other MVPDs in the market. As a result, 
owners of this content have significant market power during carriage 
talks, particularly against smaller operators. In instances where the 
programming supplier is also a competing MVPD, the problem is 
compounded because the company's programming business has an added 
incentive and ability to charge higher fees or withhold the programming 
from competing distributors because it will benefit the company's 
distribution business.
    In the Chicago metro region, Comcast Sports Net Chicago (CSNC) is a 
RSN that features four local professional sports teams. The network is 
affiliated with Comcast Corporation. In this market, there are also 
five video providers serving the same set of households, including 
Comcast which is the largest and WOW! which is the smallest.
    In our last negotiation with CSNC, the programmer insisted that we 
accept a deal that would force us to pay approximately two million 
dollars more than what we believed was its fair market value. We were 
in a pickle. CSNC wouldn't budge on the price, and dropping the network 
from our lineup wasn't an option because we'd lose a large number of 
subscribers, the majority of whom would likely become Comcast 
subscribers.
    We had few regulatory options to address CSNC's exploitation of the 
circumstance. Under existing program access rules, we had no viable 
relief because of the loophole in the regulations that permit excessive 
and discriminatory ``volume discounts.'' Our only choice was to bring 
our dispute to arbitration under baseball-style rules which was a 
condition imposed on Comcast by the FCC in exchange for the 
Commission's approval of the company's purchase of Adelphia cable 
systems in 2006. When we told CSNC that we were considering seeking 
arbitration, their response was, in effect, ``fine, go ahead.''
    We soon learned that the cost of arbitration could easily exceed 
one million dollars, and take a year or longer to conclude. For a 
smaller operator like WOW!, we just couldn't afford to spend the money 
on arbitration. Thus, we had no choice but to accept CSNC's final 
offer, knowing that this result would lead to higher cable TV prices 
for our subscribers; fewer dollars to devote to independent 
programming; and fewer resources to spend on upgrading our systems to 
offer more advanced services, including broadband.
    The lesson here is that the wholesale programming market is not 
working for smaller operators, particularly with respect to ``must 
have'' programming. Moreover, the program access rules and the 
conditions imposed by the FCC on the past deals to address the harms 
that flow from vertical integration, such as arbitration, do not 
provide any meaningful relief for smaller operators. Before approving 
the Comcast-NBCU deal, we believe the DOJ and the FCC must take these 
issues into account in fashioning proper relief.

    Question 4. In your testimony, you discussed some of the vertical 
and horizontal harms that might occur should this merger be approved. 
Can you please compare and contrast the vertical and horizontal harms 
in this situation compared with other mergers?
    In the last decade, there have been two big deals similar to the 
Comcast-NBCU transaction, although neither has the same combination of 
significant horizontal and vertical harms as the currently proposed 
transaction: News Corp.-DIRECTV and Adelphia-Time Warner-Comcast. As 
per your request, I compare and contrast the harms of these deals to 
the present one below.
    The News Corp.-DIRECTV deal combined the key programming assets of 
News Corp., which included national programming networks, regional 
sports networks, and local broadcast stations with DIRECTV, a satellite 
TV provider who was the second largest MVPD in the country. With 
respect to programming matters affecting smaller operators, this deal 
was mainly a vertical integration because neither company had competing 
programming or distribution assets--there was no significant horizontal 
combination.
    The Adelphia-Time Warner-Comcast deal integrated Adelphia's cable 
distribution assets, which included systems across the country, with 
Time Warner and Comcast's distribution and programming assets, which 
included national and regional sports networks. Regarding the 
programming matters most important to ACA members, this transaction was 
both a horizontal combination of the Adelphia's cable systems with Time 
Warner and Comcast's systems, and a vertical integration of Time Warner 
and Comcast's programming and Adelphia's cable systems.
    The Comcast-NBCU deal is similar to News Corp.-DIRECTV and 
Adelphia-Time Warner-Comcast concerning the vertical harms. Comcast-
NBCU, like the other companies, will integrate its programming and 
distributions assets giving it the incentive and ability after the deal 
is completed to increase costs or withhold programming from its direct 
MVPD competitors. For this reason, the FCC and DOJ must impose more 
robust conditions on the deal to address these vertical harms.
    With respect to the horizontal harms, the Comcast-NBCU joint 
venture is different. First, there is no horizontal combination of 
cable or satellite distribution assets in the Comcast-NBCU deal like 
there was in Adelphia-Time Warner-Comcast. In this regard, the deal is 
similar to News Corp.-DIRECTV. However, Comcast-NBCU differs from both 
Adelphia-Time Warner-Comcast and News Corp.-DIRECTV in that neither one 
of those deals combined significant programming assets, like in the 
present deal. Comcast-NBCU combines key programming assets from both 
companies that will substantially increase the market power of the new 
entity allowing the company to extract higher fees and more onerous 
carriage requirements from operators in the market, particularly 
smaller operators. This is a unique harm, and one that the DOJ and FCC 
must specifically remedy before approving this deal. The agencies 
should consider both structural and behavioral remedies to address 
these significant concerns.
                                 ______
                                 
     Response to Written Question Submitted by Hon. John Ensign to 
                            Colleen Abdoulah
    Question. Ms. Abdoulah, my understanding is that small cable 
operators often work cooperatively to negotiate collective deals with 
content providers in order to take advantage of economies of scale. I 
also understand that your company is a member of the National Cable 
Television Cooperative (NCTC). In your testimony you talk about the 
possibility of having to pay ``supra-competitive prices for content.'' 
However, as a member of NCTC, don't you have the ability to pool your 
resources with other smaller cable operators in order to negotiate 
volume discounts and better terms? While it may not be perfect, doesn't 
such collective bargaining power offset some of the leverage of major 
content providers?
    Answer. Wide Open West is a member of the National Cable Television 
Cooperative (NCTC) whose principal mission is to reduce its members' 
costs through the negotiation and administration of cooperative 
purchasing of business goods and services. NCTC's membership consists 
of small to medium-sized cable operators--but all of them are small 
relative to the size of Comcast.
    With regard to programming deals, the NCTC negotiates with major 
content and independent programmers for national cable networks, such 
as TBS, Discovery, Nickelodeon, USA Network, etc. However, the NCTC 
does not bargain on behalf of its members for any regional sports 
networks, nor for the local network-affiliated or Owned & Operated 
broadcast stations, which are often among the most expensive 
programming carried. NCTC's members negotiate these deals directly with 
these networks and stations' owners.
    By bargaining with NCTC, national programmers can reduce the costly 
and time-consuming process of negotiating and administering individual 
deals with the NCTC's more than 900 members (e.g., contract management, 
single-point billing, subscriber reporting, etc.), and as a result, 
they can pass these costs savings along to the Cooperative's members. 
However, even though it has a lower cost structure, the Cooperative 
still cannot secure programming prices and terms that are equivalent to 
other MVPDs with an equivalent number of subscribers as the total 
number of customers of all of NCTC's members. As a result, the 
Cooperative's members' programming costs are generally not competitive 
with those of larger MVPDs, like Comcast.
    The existence of the NCTC as a cooperative purchase of programming 
for its members does not diminish the anticompetitive harms that will 
result from the Comcast-NBCU transaction. First, regardless of the 
NCTC, Comcast-NBCU will be able to exercise its increased market power 
against any Cooperative member who must negotiate directly with the new 
entity for its regional sports networks or its NBCU broadcast stations. 
Second, Comcast-NBCU is under no obligation to bargain with the NCTC at 
all, or, as the process is now constituted, it could seek to limit the 
size or identity of members who can participate in the Cooperative's 
master programming agreement. For these reasons, the NCTC is unable to 
provide any adequate safeguards to the harms that would result from a 
Comcast-NBCU deal that is approved without conditions.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. John Ensign to 
                           Christopher S. Yoo
    Question 1. Professor Yoo, since this is a hearing on consumers and 
the broadband market, I would like to hear what your thoughts are on 
the potential reclassification of Internet services under Title II of 
the Communications Act. Is such re-regulation necessary to protect 
consumers, and what would the impact of such action be on the broadband 
marketplace, particularly in terms of investment?
    Answer. Any attempt to subject broadband Internet access to Title 
II of the Communications Act faces substantial legal obstacles. In 
order to fall within Title II, broadband Internet access must be a 
telecommunications service, which the statute defines as the offering 
of ``the transmission, between or among points specified by the user, 
of information of the user's choosing, without change in the form or 
content of the information as sent and received'' for a fee directly to 
the public. In NCTA v. Brand X Internet Services, 545 U.S. 967, 998-
1000 (2005), the Supreme Court upheld the FCC's determination that 
broadband Internet access services provider end users with access to 
the domain name system and caching services that go beyond the simple 
transmission necessary to bring it within the ambit of Title II. Any 
attempt to reclassify broadband Internet access as a Title II service 
must thus overcome a leading Supreme Court precedent pointing in the 
other direction.
    The history of past efforts to regulate the telephone industry 
indicate that reclassifying broadband Internet access as a Title II 
service would likely harm consumers. Any regulatory regime mandating 
that a network operator provide access to an outside party would 
inevitably require two unwilling parties to do business with one 
another. Under these circumstances, the regulators must oversee the 
terms and conditions of interconnection. Although some commentators 
have suggested that all this would require is a simple 
nondiscrimination mandate, such a strategy would not provide any 
meaningful limitation on vertically integrated enterprises, which would 
simply charge both its vertically integrated subsidiary and similarly 
situated unaffiliated companies an exorbitantly high price. For the 
vertically integrated company, this would simply transfer profits from 
the subsidiary to network operations, which would have no adverse 
effect on the company whatsoever. It would effectively exclude 
unaffiliated companies.
    This is why it is generally recognized that any regime of mandated 
access must necessarily regulate prices. There is a large body of 
research studying how to determine what a fair price is. There is a 
question the proper rate of return as well as which costs on which the 
network operator should be permitted to earn a rate of return. In an 
attempt not to create a system that is inherently inflationary, 
regulators typically limit returns to investments that are ``prudent,'' 
based on whether the assets are ``used and useful.'' This approach 
falls into the trap of hindsight bias, in that many investments that 
were prudent when they were made turn out not to be after the fact. 
Even after determining which assets to include, regulators have also 
struggled to determine the best way to value those assets, as reflected 
in the more-than-century old fight over whether historical cost or 
replacement cost represents the better measure. The standard method for 
computing prices induces a well-known bias in the technology used known 
as the Averch-Johnson effect. If the same assets are used for more than 
one service, regulators must allocate the cost of shared assets to 
multiple services. This is a problem to which there is no clear 
theoretical answer. Access regimes also only work when the interface is 
relatively simple. Alternative approaches, such as price caps, have 
failed to resolve all of these problems. On a broader level, price 
regulation only works when products are relatively uniform, the 
underlying technology is uniform and relatively static, market shares 
are relatively stable, and regulators are allocating access to a 
network that already exists and thus do not have to worry about 
investment incentives.
    None of these things are true for the Internet. When that is the 
case, imposing Title II regulation on broadband Internet access would 
likely harm consumers. Even for telephony, the evidence suggests that 
Title II regulation facilitated collusion, raised prices, and stifled 
innovation. Such problems would likely be even worse for broadband 
Internet access.
    Finally, as the Supreme Court recognized in Verizon Communications 
Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407-08 
(2004), the manner in which compelling access reduces incentives to 
invest in telecommunications networks. Empirical studies of both 
competitive local telephone service and broadband Internet service have 
confirmed this key insight.\1\
---------------------------------------------------------------------------
    \1\ For empirical studies of the adverse impact of unbundling on 
investment in new telephone facilities, see Robert W. Crandall et al., 
Do Unbundling Policies Discourage CLEC Facilities-Based Investment?, 4 
Topics in Econ. Analysis & Pol'y 14 (June 7, 2004), http://
www.bepress.com/bejeap/topics/vol4/iss1/art14/; Jerry A. Hausman & J. 
Gregory Sidak, Did Mandatory Unbundling Achieve Its Purpose? Empirical 
Evidence from Five Countries, 1 J. Competition L. & Econ. 173 (2005); 
Thomas W. Hazlett, Rivalrous Telecommunications Networks With and 
Without Mandatory Sharing, 58 Fed. Comm. L.J. 477 (2006); Augustin J. 
Ros & Karl McDermott, Are Residential Local Exchange Prices Too Low?, 
in Expanding Competition in Regulated Industries 149 (Michael A. Crew 
ed., 2000); James Zolnierek et al., An Empirical Examination of Entry 
Patterns in Local Telephone Markets, 19 J. Reg. Econ. 143 (2001); James 
Eisner & Dale E. Lehman, Regulatory Behavior and Competitive Entry 
(2001) (unpublished manuscript presented at the 14th Annual Western 
Conference, Center for Research in Regulated Industries), http://
www.aestudies.com/library/elpaper.pdf; Robert S. Pindyck, Mandatory 
Unbundling and Irreversible Investment in Telecom Networks (Nat'l 
Bureau of Econ. Research, Working Paper No. 10287, 2004), http://
www.nber.org/papers/w10287.pdf.
    For empirical studies of the adverse impact of unbundling on 
investment in new broadband facilities, see Debra J. Aron & David E. 
Burnstein, Broadband Adoption in the United States: An Empirical 
Analysis, in Down to the Wire: Studies in the Diffusion and Regulation 
of Telecommunications Technologies (Allan L. Shampine ed., 2003); 
Bronwyn Howell, Infrastructure Regulation and the Demand for Broadband 
Services: Evidence from OECD Countries, 47 Comm. & Strategies 33 (2002) 
(employing bivariate analysis to find no detectable positive effect of 
unbundling on broadband uptake); see also Johannes M. Bauer et al., 
Broadband Uptake in OECD Countries: Policy Lessons and Unexplained 
Patterns (Sept. 20, 2003), (unpublished manuscript), available at 
http://userpage.fu-berlin.de/jmueller/its/conf/helsinki03/abstracts/
Bauer_Kim_Wildman.pdf; Johannes M. Bauer et al., Effects of National 
Policy on the Diffusion of Broadband in OECD Countries 15 (Jan. 25, 
2005) (unpublished manuscript), available at http://bear.cba.ufl.edu/
centers/purc/docs/presentations/events/0205%20LBS/ paper/Bauer-Kim-
Wildman-UFL-2005.pdf (finding variable representing unbundling and two 
other policy attributes not statistically significantly related to 
broadband diffusion); Thomas Hazlett & Coleman Bazelon, Regulated 
Unbundling of Telecommunications Networks: A Stepping Stone to 
Facilities-Based Competition? 16-19 (Oct. 4, 2005) (unpublished 
manuscript), available at http://mason.gmu.edu/thazlett/pubs/
Stepping%20stone%20TPRC.10.04.05%20.pdf.

    Question 2. Professor Yoo, Dr. Cooper believes that the Comcast/
NBCU merger would make the already uncompetitive video market even less 
competitive and that binding merger conditions should be imposed on the 
deal. On the other hand, you looked extensively at vertical mergers and 
the media marketplace and have found that competition is robust and 
that merger conditions would be unjustified. What factors led you to a 
conclusion that is so different than Dr. Cooper's?
    Answer. My testimony regarding the likely impact of the Comcast-NBC 
Universal merger represents an updated version of my earlier work 
analyzing the impact of vertical integration in the cable industry 
initially published in 2002.\2\ The factors that led me to a conclusion 
that is so different from Dr. Cooper's is that my analysis applied the 
conventional wisdom on the likely competitive impact of vertical 
mergers on competition laid out in the Merger Guidelines promulgated by 
the Federal Trade Commission and the Justice Department to the actual 
data. This analysis indicated that the relevant markets fall below the 
levels of concentration generally thought to give rise to 
anticompetitive concern. Dr. Cooper's analysis represents a departure 
from these well accepted principles and did not analyze the underlying 
data at all.
---------------------------------------------------------------------------
    \2\ Christopher S. Yoo, Vertical Integration and Media Regulation 
in the New Economy, 19 Yale J. on Reg. 171, 226-43 (2002).

    Question 3. Professor Yoo, doesn't the media sector go through 
cycles of acquisition and divestiture along with changes in the broader 
economy? If Comcast and NBC Universal are right that this deal creates 
a stronger competitor that can better serve viewers in this economy, 
the joint venture will succeed. If they are wrong, it will fail, just 
as the AOL-Time Warner merger did. Does the government need to 
intervene here?
    Answer. Various industries do go through periods of acquisition 
followed by periods of divestiture. Although some mergers are 
successful, others are not. Policymakers and business executives have 
never been able to reliably predict in advance which mergers will 
succeed. In such an environment and absent some definitive showing that 
the markets are sufficiently concentrated that the merger is likely to 
lead to consumer harm, the government's role is to permit the merger to 
proceed. The merger may succeed. If it does so, the shareholders will 
enjoy the equity returns that go along with taking those risks. 
Conversely, the merger may fail. If so, it is not the government's job 
to protect shareholders against such downside risks. Instead, 
shareholders should be left free to experiment with different business 
models.

    Question 4. Professor Yoo, we have heard a lot today about how 
vertical mergers can potentially be harmful for consumers and 
competition. Are there any instances, however, of vertical transactions 
being pro-competitive?
    Answer. The economic literature has recognized a wide variety of 
ways in which vertical mergers may be procompetitive. As I have 
detailed in my previous work, vertical integration may yield lower 
prices, reduce transaction costs, and limit cable operators' 
vulnerability to strategic behavior.\3\ The FCC's decisions explicitly 
recognize how vertical mergers in the cable industry may benefit 
consumers.\4\
---------------------------------------------------------------------------
    \3\ Id. at 232-38.
    \4\ Competition, Rate Deregulation and the Commission's Policies 
Relating to the Provision of Cable Television Service, Report, 5 
F.C.C.R. 4962, 5009  83-84, 5010  86, 5037,  144(a) (1990).

    Question 5. Professor Yoo, Dr. Cooper and Ms. Abdoulah have 
suggested that Comcast might use NBC Universal programming as an 
anticompetitive tool against competing pay-TV providers by refusing to 
license NBC content to them. Having spent billions of dollars to buy 
NBCU and its content, do you think it would make economic sense for 
Comcast to act in this manner?
    Answer. Content owners have strong economic incentives to license 
their content to the venue that would generate the most revenue. To 
pick one leading example, the highest rated show on television these 
days is often CSI. Even though this show is produced by Disney, it is 
broadcast on CBS, not ABC (which is owned by Disney). Although the 
theoretical literature does identify circumstances under which a 
vertically integrated enterprise might operate in an inefficient 
manner, these theories require that a number of strict structural 
preconditions be satisfied in order for such effects to arise. An 
empirical analysis of the cable industry reveals that it is not 
structured in a manner to give rise to such concerns.
    Even if such concerns were met, regulatory controls such as the 
program access rules exist to ensure that competing pay television 
providers have adequate access to NBC Universal's programming. To the 
extent that these rules are imperfect, such flaws are not the product 
of the merger. They are thus more appropriately addressed through a 
general regulatory proceeding rather than through merger conditions.

    Question 6. Professor Yoo, in Dr. Cooper's testimony, he claims 
that the TV Everywhere initiative is ``a disaster for video 
competition'' and ``merits its own antitrust investigation.'' It seems 
to me, however, that TV Everywhere provides viewers with more online 
options, not less, and that it gives cable subscribers more bang for 
their buck. Do you agree that TV Everywhere is a disaster for video 
competition?
    Answer. TV Everywhere represents an innovative approach to online 
video distribution that incorporates a different pricing model and 
provides greater copy protection than other models. Such innovation 
enriches consumers' options and should be encouraged. As I noted in my 
written testimony, the market share of these initiatives are 
vanishingly small in antitrust terms. NBC Universal controls only 0.7 
percent of market for online videos properties as measured by videos 
viewed. Comcast is even smaller at 0.3 percent. The merger would thus 
create a company that controls only 1 percent of the market, which 
would fall well below the thresholds that would justify any further 
antitrust scrutiny.
    NBC Universal holds a 32 percent stake interest in Hulu. The fact 
that Hulu operates independently of both companies and has its own 
management makes it unclear whether its share should be attributed to 
the merged entity. Even if it is, the merged entity would control only 
4.0 percent of the online video market. These market shares are too low 
to cause any anticompetitive concerns.
                                 ______
                                 
 Response to Written Questions Submitted by Hon. George S. LeMieux to 
                           Christopher S. Yoo
    Question 1. Some experts have suggested that Comcast will use NBCU 
content as an anticompetitive tool to exclude rival cable, satellite, 
and TV distributors. Comcast would do this by refusing to license NBCU 
content to rival distributors. In your opinion, would it make sense for 
Comcast to limit the value of that content in this way? If so, why? If 
not, why not?
    Answer. As noted above in my answer to question 5, it would rarely 
make sense for Comcast to refuse to license NBC Universal's content to 
rival distributors. To repeat the example given above, the highest-
rated show on television these days is often CSI. Even though this show 
is produced by Disney, it is broadcast on CBS, not ABC (which is owned 
by Disney). The reason is that content owners have powerful incentives 
to license their shows to the distribution outlet that would generate 
the most revenue. Although limited circumstances exist when such 
problems may arise, the data show that the cable industry is not 
structured in a manner to make such concerns plausible. Any remaining 
concerns are not the product of the merger and should be addressed 
through general regulatory proceedings rather than through merger 
conditions.

    Question 2. Following the proposed transaction, will Comcast have 
an incentive to ``go it alone'' and rely exclusively on NBCU 
programming to the detriment of unaffiliated programmers? What would 
stop Comcast from following that course of action?
    The Comcast-NBC Universal merger would not be the first example of 
vertical integration in the pay television industry. Time Warner merged 
its cable distribution properties with content when it acquired Turner 
Broadcasting and developed such leading pay channels as HBO. Similarly, 
News Corp. combined the Fox programming properties with distribution 
when it acquired DirecTV. In both cases, the pay television provider 
did not ``go it alone.'' Instead, they remained highly motivated to 
identify and carry the content that viewers wanted most. Regulatory 
regimes, such as leased access and program access, exist to address any 
problems that may arise.

    Question 3. What impact will this merger likely have on competition 
in local advertising?
    Answer. Cable operators do not generate significant revenue from 
local advertising. As such, merging Comcast's cable distribution 
operations with NBC Universal's content is not likely to harm 
competition in local advertising.

    Question 4. There have been some concerns expressed about the 
impact this merger could have on competition in online video. What 
would be the combined market share of the new company and how does this 
compare with other anti-trust situations that have been of concern in 
the past?
    Answer. As noted in my answer to question 6 above, the combined 
market share of the new company in the market for online video 
distribution would only be 1.0 percent. Even if the entirety of Hulu is 
attributed to the merged company, the market share would only be 4.0 
percent. These market shares are far below the levels that have 
historically raised concern under the antitrust laws in the context of 
vertical mergers.
                                 ______
                                 
                         Patton Boggs LLP, Attorneys At Law
                                     Washington, DC, March 24, 2010
Hon. John D. Rockefeller IV,
Chairman,
Senate Committee on Commerce, Science, and Transportation,
Washington, DC.

Dear Chairman Rockefeller:

    The Fair Access to Content and Telecommunications (FACT) Coalition 
\1\ applauds you and your Committee for recently examining Comcast 
Corporation's (Comcast) proposed acquisition of NBC Universal (NBCU) 
during the Committee's March 11th hearing on ``Consumers, Competition 
and Consolidation in the Video and Broadband Market.'' As the Committee 
continues to examine the implications of the proposed merger and its 
impact on consumers and competition, FACT offers its views and 
respectfully requests that this letter be submitted into the written 
record.
---------------------------------------------------------------------------
    \1\ The FACT Coalition represents smaller telecommunications 
carriers that distribute data, voice and video services. The National 
Rural Telecommunications Cooperative (NRTC), the Organization for the 
Promotion and Advancement of Small Telecommunications Companies 
(OPASTCO), and the Rural Independent Competitive Alliance (RICA) formed 
FACT out of concern that the proposed Comcast-NBCU combination would 
harm the ability of their members to maintain and expand the provision 
of innovative broadband and video services to their customers. Many of 
the carriers represented by FACT are video competitors in both the 
existing television market and the emerging online video market.
---------------------------------------------------------------------------
    In recent years, rural telecommunications providers have invested 
considerable resources building out their broadband networks to improve 
voice and broadband services. These robust networks are also capable of 
providing consumers with new video services, including both traditional 
subscription video and innovative new ``over the top'' broadband video 
applications. FACT's founding members are deeply concerned that the 
ability of the customers to obtain the video content they desire, and 
in the manner of the customers choosing, will be significantly impaired 
if the Comcast-NBCU merger is permitted without stringent protective 
conditions.
    The Federal Communications Commission (FCC) has correctly 
recognized that there is an intrinsic link between a provider's ability 
to offer video service and to deploy broadband networks.\2\ Indeed, 
rural carriers that are able to bundle video with broadband services 
have experienced broadband adoption rates that are nearly 24 percent 
higher than those carriers that offer broadband alone.\3\ Therefore, 
nondiscriminatory access to programming is a vital component to 
broadband deployment and adoption, in addition to being necessary to 
enable more consumer choice in the video marketplace.
---------------------------------------------------------------------------
    \2\ Implementation of Section 621 (a)(1) of the Cable 
Communications Policy Act of 1984 as amended by the Cable Television 
Consumer Protection and Competition Act of 1992, MB Docket No. 05-311, 
Report and Order and Further Notice of Proposed Rulemaking, 22 FCC Rcd 
5101, 5132-33,  62 (2007).
    \3\ See, National Exchange Carrier Association comments, GN Docket 
Nos. 09-47, 09-51, 09-137, p. 6 (01. Dec. 7, 2009).
---------------------------------------------------------------------------
    However, the FCC has also found that, ``. . . absent a prohibition, 
cable-affiliated programmers will engage in withholding of programming 
from [competitors].'' \4\ Beyond the outright withholding of content, 
programmers with this kind of market power also routinely charge 
discriminatory rates, and/or provide access to vital content only under 
onerous terms and conditions. These circumstances diminish consumer 
choice, raise customers' costs, and impede broadband deployment and 
adoption.
---------------------------------------------------------------------------
    \4\ In the Matter of Implementation of the Cable Television 
Consumer Protection and Competition Act of 1992; Development of 
Competition and Diversity, in Video Programming Distribution; Sunset of 
Exclusive Contract Prohibition, Report and Order and Notice of Proposed 
Rulemaking, MB Docket 07-29, FCC 07-169,  51 (rel. Oct. 1, 2007).
---------------------------------------------------------------------------
    Comcast is the Nation's largest cable and broadband operator with 
more than 23.6 million cable homes, 15.9 million high-speed broadband 
homes, and 7.6 million digital voice customers. If the merger is 
consummated, Comcast will control 20 cable channels, have attributable 
ownership interests in 24 additional cable channels, own 10 regional 
sports networks (RSNs), 2 broadcast networks, 26 owned and operated 
broadcast TV stations, 32 online video properties, as well as Universal 
Studios and Focus Features.\5\ Comcast also controls iN DEMAND, the 
Nation's dominant video-on-demand/pay-per-view provider which 
distributes content via satellite to cable and Internet Protocol 
television (IPTV) operators across the country.
---------------------------------------------------------------------------
    \5\ A listing of the media properties that will be owned or 
controlled by the proposed merged entity follows this letter. The 
listing is published by Comcast and GE and may be accessed at the 
following link: http://www.nbcutransaction.com/pdfs/
JointVentureFactSheet.pdf.
---------------------------------------------------------------------------
    This potential concentration of ownership in content by an entity 
that is already the Nation's largest distribution outlet is 
unprecedented. Owning or controlling such an enormous interest in TV, 
online and theatrical content is real cause for concern for competitive 
video distributors and broadband providers.
    Comcast's control of the principal video pipes into the home--both 
cable and broadband--will give it market power to favor the programming 
it owns today and that which it would acquire from NBCU on its cable 
system, to block competitors' access to popular and must-have 
programming, to raise cable and advertising rates above competitive 
levels, and to impede, if not prevent, competition in the nascent 
online video market.
    In the existing television market, Comcast will have the incentive 
and the ability to use its control over sports and other regional 
programming to foreclose entry by competitors. In its Eleventh Annual 
Report on Video programming, the FCC highlighted the ``strategic 
significance'' of sports programming for multichannel video programming 
distributors because of its widespread appeal, noting that these 
networks are owned in whole or in part by multiple system operators.\6\ 
Due to the large number of subscribers that Comcast has in many 
metropolitan areas, it will have the market power to deny competitors 
access to their affiliated programming, particularly must-have regional 
sports networks.
---------------------------------------------------------------------------
    \6\ In the Matter of Annual Assessment of the Status of Competition 
in the Market for Delivery of Video Programming, Eleventh Annual 
Report, MB Docket No. 04-227,   166-167, Feb. 4, 2005.
---------------------------------------------------------------------------
    Distributors that have deployed advanced technology, such as 
Internet Protocol television (IPTV), often are subject to carriage 
conditions and costs imposed by programming rights-holders that are far 
more burdensome than those imposed on incumbent cable operators. Often 
the practice involves forcing carriage and packaging unpopular and 
unwanted programming with programmers' most widely viewed services. 
With ownership interests in 44 cable channels and 10 regional sports 
networks, there is great potential for the merged Comcast--NBCU entity 
to engage in practices that force carriage of more channels and further 
drive up costs for competitive distributors and their customers. (FACT 
members are constrained by confidentiality clauses in their programming 
agreements and cannot reveal specific details, but FACT would urge the 
Committee, the Department of Justice, and the FCC to examine the 
current practices of programmers, including NBCU, with respect to 
licensing of content to incumbent cable systems vis-a-vis to IPTV 
distributors.)
    The proposed merger's potential effect on the emerging online video 
market is perhaps even more significant and daunting. In some cases, 
popular cable services have tied licensing of online content for a fee 
(with a requirement that the fee not be disclosed to broadband 
consumers) to the licensing of the service's mainstream cable 
programming, either as a condition of carriage or through punitive 
pricing. The Comcast--GE website referenced at footnote 5 reflects that 
the merged entity would will have ownership in 32 online (digital) 
media properties, including NBC.com, nbcsports.com, nbcolympics.com, 
weather.com, and the popular online video platform, Hulu.com. Consumers 
recently experienced a rather dubious practice during the 2010 Winter 
Olympics when NBCU denied online access to some Olympics coverage 
unless the consumer first proved that he or she was a subscriber to the 
mainstream NBCU cable services.
    Competitive distributors represented by FACT are deeply concerned 
that the new Comcast/NBCU entity will either restrict access to online 
content the entity controls, or will tie carriage of cable programming 
to online distribution at a fee. Neither possibility is good for 
consumers, for competition, or for the growth of broadband adoption, 
because service providers will have to raise rates and/or divert 
resources to content costs, away from infrastructure maintenance, 
upgrades, and expansion.
    Retransmission consent for carriage of broadcast stations is 
another area of concern. There have been cases--and not rare ones--
where content rights owners that own both cable programming services 
and broadcast affiliates have conditioned retransmission consent for 
the broadcast signal upon carriage of the cable content that is under 
common ownership with that broadcaster. With the Comcast--NBCU merger, 
the Nation will have an entity with 10 owned and operated NBC broadcast 
stations, 234 non-owned NBC affiliates, and 15 owned and operated 
Telemundo broadcast stations. Experience indicates that the potential 
for tying retransmission rights for broadcast signals to carriage of 
cable services will be great.
    One additional area of concern--conspicuously absent from any 
Comcast-disseminated data regarding the merger--is in the area of pay-
per-view (PPV) and video-on-demand (VOD) distribution. Comcast owns a 
majority stake in ``iN DEMAND Networks,'' the Nation's dominant 
distributor of VOD content to the cable industry.\7\ (Other owners of 
iN DEMAND include subsidiaries of cable giants Time Warner and Cox.)
---------------------------------------------------------------------------
    \7\ FACT member NRTC owns a minority stake in Avail/TVN, a 
competitive VOD and PPV distributor.
---------------------------------------------------------------------------
    According to the iN DEMAND website, it is the ``world leader in 
providing exciting entertainment delivered through television's most 
innovative technologies.'' \8\ iN DEMAND reportedly holds exclusive 
rights to PPV and VOD distribution of Major League Soccer, the National 
Hockey League, and Major League Baseball. With the merger, Comcast will 
gain ownership of Universal Studios and Focus Features, key 
distributors of theatrical films. For competitive distributors that 
rely upon iN DEMAND for their PPV and VOD content, experience again 
leads to great fear that this level of market power will result in 
discriminatory pricing, withholding of content, or other unfair 
practices.
---------------------------------------------------------------------------
    \8\ http://www.indemand.com/about/.
---------------------------------------------------------------------------
    Unless clear and stringent conditions are imposed on Comcast, 
should the merger be allowed, the potential consequences will be higher 
programming costs for consumers and fewer resources for competitive 
video distribution services. These results will disproportionately 
impact rural markets where higher costs are least affordable, and 
sparse populations make investment more difficult from the outset. 
Anticompetitive practices also make it exceedingly difficult for new 
market entrants to compete, thereby impacting consumers' access to 
affordable cable and online content of their choosing.
    While one avenue of recourse exists at the FCC under the program 
access rules,\9\ which would be applicable to much of the cable 
programming the merged entity would offer, those rules have 
historically been of little effect. The financial and time costs of 
prosecuting a complaint at the FCC under the rules have deterred 
competitive distributors from filing complaints. Also, the broad volume 
discount loophole that exists in the rules has been employed by many 
programmers to ensure that significant rate disparities continue to 
benefit large incumbent distributors while impeding new market 
competitors.
---------------------------------------------------------------------------
    \9\ 47 C.F.R.  76.1000, et seq.
---------------------------------------------------------------------------
    Furthermore, there are no similar protections for online video, 
broadcast retransmissions, or VOD/PPV services. In short, the existing 
program access rules do not afford an adequate shield or sword for 
competitive video distributors--in either cable or broadband 
operations.
    For these reasons, FACT respectfully urges Congress, the Department 
of Justice and the FCC to carefully consider the impact pact of the 
proposed merger on consumers and competition in video distribution in 
cable, broadband (including ``over the top'' video distribution), VOD 
and PPV. If the merger is allowed to proceed, Congress should urge the 
FCC and, to the extent relevant, DOJ, to impose clear, enforceable 
conditions, including:

   Prohibit the merged entity from compelling the tying of 
        multiple channels, including a prohibition against forced tying 
        via pricing differentials;

   Mandate fair, reasonable and non-discriminatory licensing of 
        all Comcast--NBCU content without a volume-based loophole;

   Prohibit the tying of online content to cable subscriptions 
        or the forced carriage of online content;

   Apply provisions of Title 47 CFR Sec. 76.1000, et seq.--the 
        program access rules--to all Comcast--NBCU-owned channels 
        retroactively (i.e., contracts entered into pre-and post-
        merger);

   Compel the divestiture of iN DEMAND or, alternatively, 
        prohibit the tying of on demand content (e.g., MLB, NHL, and 
        Comcast/NBCU-owned studios' films) as a condition of licensing 
        and pricing;

   Examine and address anticompetitive concerns with respect to 
        the distribution of digital media online, including, Comcast's 
        ``Fancast'' (TV Everywhere) and other ``over the top'' delivery 
        of content; and

   Address requirements with respect to NBCU broadcast network 
        retransmission consent.

    More broadly, FACT urges Congress and the reviewing Federal 
agencies to:

   Address programmers' practice of mandating carriage and 
        forced tying of channels;

   Ensure nondiscriminatory volume discounting to all 
        distributors;

   Apply the FCC's competitive access rules to all programming 
        regardless of method of distribution, whether by satellite, 
        terrestrial, cable or broadband;

   Conduct a full review of FCC rules with regard to access and 
        price discrimination and the application of rules to all 
        programmers (not just those that are vertically integrated with 
        cable systems) and ensure that volume discounts are truly 
        justifiable;

   Provide a means for the Congress, the FCC, DOJ, and any 
        other Federal agencies to review programming license terms to 
        ensure fairness; and

   Prohibit the tying of broadband over-the-top content as a 
        condition of licensing mainstream television content.

    FACT greatly appreciates the Committee's consideration of the 
aforementioned concerns and conditions and its ongoing attention to the 
proposed merger of Comcast-NBCU. FACT looks forward to working with you 
and thanks you for your consideration.
            Sincerely,
                                     Mark C. Ellison, Esq.,
                                                  Patton Boggs LLP,
                                                For the FACT Coalition.




                                 ______
                                 
                                                       HITN
                                       Brooklyn, NY, March 25, 2010
Hon. John D. (Jay) Rockefeller IV,
Chairman,
Committee on Commerce, Science, and Transportation,
U.S. Senate,
Washington, DC.

Hon. Kay Bailey Hutchison,
Ranking Member,
Committee on Commerce, Science, and Transportation,
U.S. Senate,
Washington, DC.

Dear Chairman Rockefeller and Ranking Member Hutchison:

    I respectfully submit for your committee's consideration and for 
the public record comments on behalf of the Hispanic Information and 
Telecommunications Network (HITN). This is being done as a follow-up to 
the Committee's Hearing on ``Consumers, Competition, and Consolidation 
in the Video and Broadband Market,'' held on Thursday, March 11.
    HITN is America's oldest and only Spanish language non-profit 
public interest educational television network. It was established in 
1983 as a non-profit organization, to use technologies to serve 
America's growing Hispanic community and to provide engaging, 
educational, and entertaining programming. HITN's mission is dedicated 
to using telecommunications technologies for the advancement of 
Hispanic Americans and minority audiences. The network invites 
individuals and families to live fuller lives and enables them to serve 
as an ever-growing engine of intellectual power and economic progress.
    As such, we strongly believe that HITN, much like PBS or C-SPAN 
should be afforded the opportunity to reach the maximum number of 
Hispanic and non-Hispanic viewers through national and basic tier 
carriage. HITN is very proud to be associated with and carried 
nationally on: DirecTV; Dish Network; AT&T U-verse and Verizon FiOS. 
These satellite and Telco providers clearly see the needs and benefits 
to providing a national or system-wide viewer link to the expanding 
Hispanic community. It is clearly a win-win proposition. In addition, 
HITN is carried on TimeWarner Cable (NJ, NY, and TX) and Charter (CA, 
GA. NV, and WA).
    We are also proud to be carried on Comcast in Colorado and Illinois 
However, we have struggled for years to be made available to all 
Comcast subscribers with very limited success. We will continue to seek 
every opportunity to make the clear business case with Corneas' as to 
the benefits of national, basic tier carriage for HITN programming.
    HITN is also the largest holder of Educational Broadband Service 
(``EBS'') spectrum in the United States, with spectrum in more than 90 
markets covering over 100 million people in the U.S. and Puerto Rico. 
Through a partnership with Clearwire Corporation. HITN plans to provide 
WiMAX 4G wireless services to educational institutions and non-profits 
nationwide using this spectrum.
    Since its inception. HITN has worked with community-based 
organizations serving and representing the Hispanic community. HITN 
also has close relationships with Hispanic organizations such as the 
Congressional Hispanic Caucus Foundation, National Hispanic Caucus of 
State Legislators (NHCSL), and NCLR, U.S. Hispanic Chamber of Commerce, 
LULAC, ASPIRA, NALEO, LISTA and other Latino organizations. This 
provides HITN a strong audience base from the membership of these 
organizations. It also affords an opportunity for Hispanics and non-
Hispanics alike to have a glimpse into what is happening with the 
exciting, vibrant and growing Hispanic community.
    These relationships allow HITN to produce programming originating 
from the conventions, events, and meetings of Latino organizations as 
well as showcasing those proceedings on www.hitnonline.tv.
    The questions surrounding the proposed merger between NBC-Universal 
and Comcast represent a major turning point for the future of U.S. 
media policy. If approved, the proposed merger would create the largest 
entertainment company in the U.S. if not the world. Additional 
consolidations are certain to follow. This transaction represents one 
of the first major tests for the Justice Department's Anti-Trust 
division under the leadership of Christine Varney and the FCC under 
Chairman Julius Genachowski. As both testified at your Committee 
Hearing their approach to competition, media diversity and opportunity 
is an issue of great importance. Those policies are very important to 
HITN as well as the larger Hispanic and minority communities.
    The issue of competition and diversity is further heightened by the 
FCC's National Broadband Plan which seeks to address the needs of 
disadvantaged and minority populations to gain greater access to 
broadband across multiple platforms.
    The consolidation of media entities over the last twenty years has 
had profound effects on our American life, economy and democracy. The 
sources of media, whether it be entertainment, news, or education have 
rapidly been concentrated in fewer and fewer corporate hands.
    Media diversity has long been one of the fundamental tenets of our 
communications law. Diversity of voices has, unfortunately, not been a 
major component of recent media mergers and acquisitions. If this 
merger should proceed, then real diversity must be a pan of the NBC-
Universal and Comcast transaction and all similar transactions going 
forward.
    In his written testimony, Brian Roberts, Chairman and CEO of 
Comcast Corp, stated, that ``. . . the new venture will be able to 
increase the amount, quality, variety, and availability of content, 
thus promoting diversity. This includes content of specific interest to 
diverse audiences, children and families, women, and other key audience 
segments.'' HITN applauds efforts to create more programming options 
for Latino families. However, in the commitment to expand content and 
distribution of a new Telemundo channel; which will be owned by the 
merged entity highlights precisely the risks of the merger to 
independent and minority viewers, programmers and networks.
    Rather than reach out to Latino networks like HITN which itself is 
ready, willing and able to provide its popular network to all Comcast 
viewers, the merged entity proposes to reach into its own vaults to 
grow its own network in the Hispanic market.
    There is nothing wrong with Comcast mining its own assets to find 
new uses as long as the combined company does not crowd out or put up 
barriers to others. Brand extension and consolidation--does not equal 
diversity. Diversity is achieved when there arc multiple voices or 
speakers; not just one voice speaking on multiple channels even 
speaking in multiple languages. The merger gives the new Telemundo 
channel instant system-wide access while others not part of the NBC-
Universal Comcast family are held at bay.
    HITN fully agrees with Mr. Robert's stated goals of diversity and 
service. We believe him to be a man of good character and intention. As 
a network carried on Comcast systems in Denver and Chicago, we have 
sought and continue to seek to be one of the sources of diverse 
programming available to all Comcast viewers.
    Recent media consolidations have moved the Nation away from Mr. 
Robert's stated goal. If the combined NBC-Universal and Comcast family 
use brand extensions to occupy cable capacity on their systems and 
others without making room for truly diverse and independent networks 
like HITN, this moves things in the opposite direction of diversity.
    In the consolidated media environment, diversity of voices 
reinternets important as ever, even in the Internet age. Some have 
argued that the Internet has reduced the need for diversity policies. 
Because broadcast and cable channels so dominate the Internet, and 
because of the increasing troubles facing print media, diversity of 
voices and policies geared to that end are increasingly critical to our 
democracy. Indeed, if the Internet were such a perfect substitute for 
broadcast and cable distribution, there would be no business case for a 
merger of this size and breadth.
    HITN respectfully urges the Senate Committee on Commerce, Science, 
and Transportation, as well as other Congressional Committees with 
jurisdiction over these matters to be vigilant and aggressive in 
assuring that independent, minority, non-profit, unaffiliated and 
educational networks are not crushed in this proposed transaction. They 
should have a fair opportunity to succeed in the emerging media 
environment. Specifically, there should be at least some meaningful 
capacity set aside for the nation-wide distribution of non-profit, 
educational public interest channels as is done on direct broadcast 
satellite.
    As the Telemundo announcement illustrates, this proposed 
transaction will give NBC-Universal complete and instant access to 
Comcast's national distribution network and Comcast access to NBC's 
broadcast and interne assets. It will also give the merged entity 
extraordinary leverage to secure access for its content on competing 
cable systems at very favorable terms.
    Our concern with this transaction is how it affects the 
underrepresented millions of viewers and audiences that have too often 
been left behind. It should be possible for a network which is not 
affiliated with the large media conglomerates, or an educational 
network which serves minority families such as HITN-TV or an emerging 
network to gain national carriage on multi-channel video platforms. For 
example, the proposed merged entity should not be allowed to 
discriminate in favor of its own content or brand extensions.
    Comcast has additionally committed that once the merged entity has 
``. . . completed its digital migration company-wide (anticipated no 
later than 2011), it will add two new independently-owned and -operated 
channels to its digital line-up each year for the next 3 years . . .'' 
That's six new channels.
    The merged company would constitute the largest media and 
entertainment entity in the U.S. with a reach and penetration into 
literally every television household in the Nation as well as access to 
millions of individuals both nationally and globally through multiple 
programming platforms. Certainly it can find room for more than six 
independent stations over the next several years.
    The public record is full of examples of smaller networks 
struggling for years to secure access to cable systems while new 
channels owned by the large media conglomerates are added quickly with 
case.
    Comcast CEO Roberts also stated that ``. . . Comcast will commit 
voluntarily to extend the key components of the FCC's program access 
rules to negotiations with MVPDs for retransmission rights to the 
signals of NBC and Telemundo O&O broadcast stations for as long as the 
FCC's current program access rules remain in place (and Comcast has 
expressed a willingness to discuss with the FCC making the program 
access rules binding on it even if the rules were to be overturned by 
the courts).''
    Comcast clearly changed its position on program access, perhaps 
because if the merger proceeds it will be the beneficiary of such 
rules. Policymakers should also look to channel access rules from the 
perspective of those networks which seek to be carried on Comcast on 
other networks.
    We respectfully urge Congress as well as the 1301 and FCC to 
carefully review this transaction and consider at a minimum mechanisms 
that would:

   Provide for national system-wide basic-tier access to 
        independent non-profit educational networks;

   Eliminate barriers and ensure opportunities for minority 
        controlled networks;

   Reserve a meaningful amount of capacity exclusively for 
        independent networks not owned or controlled by media giants; 
        and

   End ``most favored nation'' pricing clauses in carriage 
        agreements which effectively amount to price fixing among cable 
        giants.

    We understand the desire among merger partners for efficiency, 
synergy and productivity; but believe that the American people have an 
equal interest in the free flow of information and access to a full 
spectrum of opinions. Our media environment should value a diversity of 
voices both in fact as well as in spirit and provide an opportunity for 
even the smallest network to survive and thrive. We ask you to 
carefully scrutinize this transaction.
    We realize that due diligence in reviewing a proposed merger of 
this size will take time and that this committee session is unlikely to 
be the last word on this issue. As such, we look forward to working 
closely in the months ahead with your committee as well as with 
Congress on these important issues.
            Sincerely,
                                       Jose Luis Rodriguez,
                                                 President and CEO.

                                  
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