[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]




                  COMPETITION IN THE VIDEO AND BROADBAND
                    MARKETS: THE PROPOSED MERGER OF
                     COMCAST AND TIME WARNER CABLE

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                           REGULATORY REFORM,
                      COMMERCIAL AND ANTITRUST LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               ----------                              

                              MAY 8, 2014

                               ----------                              

                           Serial No. 113-94

                               ----------                              

         Printed for the use of the Committee on the Judiciary





[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





   Available via the World Wide Web: http://judiciary.house.gov

                         U.S. GOVERNMENT PRINTING OFFICE 

87-799 PDF                     WASHINGTON : 2014 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Printing 
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                          Washington, DC 20402-0001










                 COMPETITION IN THE VIDEO AND BROADBAND
                    MARKETS: THE PROPOSED MERGER OF
                     COMCAST AND TIME WARNER CABLE

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                           REGULATORY REFORM,
                      COMMERCIAL AND ANTITRUST LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 8, 2014

                               __________

                           Serial No. 113-94

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov
                                 ______

                         U.S. GOVERNMENT PRINTING OFFICE 

87-799 PDF                     WASHINGTON : 2014 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Printing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001














                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
HOWARD COBLE, North Carolina         ROBERT C. ``BOBBY'' SCOTT, 
LAMAR SMITH, Texas                       Virginia
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
SPENCER BACHUS, Alabama              SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California          STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa                       Georgia
TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas                 JUDY CHU, California
JIM JORDAN, Ohio                     TED DEUTCH, Florida
TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah                 KAREN BASS, California
TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho                 JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas              HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina       DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia
RON DeSANTIS, Florida
JASON T. SMITH, Missouri
[Vacant]

           Shelley Husband, Chief of Staff & General Counsel
        Perry Apelbaum, Minority Staff Director & Chief Counsel
                                 ------                                

    Subcommittee on Regulatory Reform, Commercial and Antitrust Law

                   SPENCER BACHUS, Alabama, Chairman

                 BLAKE FARENTHOLD, Texas, Vice-Chairman

DARRELL E. ISSA, California          HENRY C. ``HANK'' JOHNSON, Jr.,
TOM MARINO, Pennsylvania               Georgia
GEORGE HOLDING, North Carolina       SUZAN DelBENE, Washington
DOUG COLLINS, Georgia                JOE GARCIA, Florida
JASON T. SMITH, Missouri             HAKEEM JEFFRIES, New York
                                     DAVID N. CICILLINE, Rhode Island

                      Daniel Flores, Chief Counsel































                            C O N T E N T S

                              ----------                              

                              MAY 8, 2014

                                                                   Page

                           OPENING STATEMENTS

The Honorable Spencer Bachus, a Representative in Congress from 
  the State of Alabama, and Chairman, Subcommittee on Regulatory 
  Reform, Commercial and Antitrust Law...........................     1
The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in 
  Congress from the State of Tennessee, and Ranking Member, 
  Subcommittee on Regulatory Reform, Commercial and Antitrust Law     3
The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Committee on the Judiciary     4
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Ranking Member, Committee on 
  the Judiciary..................................................     5
The Honorable Blake Farenthold, a Representative in Congress from 
  the State of Texas, and Vice-Chairman, Subcommittee on 
  Regulatory Reform, Commercial and Antitrust Law................     9

                               WITNESSES

David L. Cohen, Executive Vice President, Comcast Corporation
  Oral Testimony.................................................    12
Robert D. Marcus, Chairman and CEO, Time Warner Cable Inc.
  Oral Testimony.................................................    14
  Joint Prepared Statement.......................................    16
Matthew M. Polka, President and CEO, American Cable Association
  Oral Testimony.................................................    74
  Prepared Statement.............................................    76
C. Scott Hemphill, Professor of Law, Columbia Law School
  Oral Testimony.................................................    81
  Prepared Statement.............................................    83
Allen P. Grunes, Partner, Geyergorey LLP
  Oral Testimony.................................................    90
  Prepared Statement.............................................    95
Patrick Gottsch, Founder and Chairman, RFD-TV
  Oral Testimony.................................................   117
  Prepared Statement.............................................   119
Dave Schaeffer, Chairman and CEO, Cogent Communications Group, 
  Inc.
  Oral Testimony.................................................   126
  Prepared Statement.............................................   128
Craig Labovitz, Ph.D., Co-Founder and CEO, Deepfield
  Oral Testimony.................................................   138
  Prepared Statement.............................................   140

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Material submitted by the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, and 
  Ranking Member, Committee on the Judiciary.....................     6
Material submitted by Allen P. Grunes, Partner, Geyergorey LLP...    91

                                APPENDIX
               Material Submitted for the Hearing Record

Addendum to the Joint Prepared Statement of David L. Cohen, 
  Executive Vice President, Comcast Corporation; and Robert D. 
  Marcus, Chairman & Chief Executive Officer, Time Warner Cable 
  Inc............................................................   189
Material submitted by the Honorable Sheila Jackson Lee, a 
  Representative in Congress from the State of Texas, and Member, 
  Subcommittee on Regulatory Reform, Commercial and Antitrust Law   241
Material submitted by the Honorable Spencer Bachus, a 
  Representative in Congress from the State of Alabama, and 
  Chairman, Subcommittee on Regulatory Reform, Commercial and 
  Antitrust Law..................................................   243
Material submitted by the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, and 
  Ranking Member, Committee on the Judiciary.....................   259
Letter from the Writers Guild of America, West (WGAW)............   262
Response to Questions for the Record from David L. Cohen, 
  Executive Vice President, Comcast Corporation..................   267
Response to Questions for the Record from Robert D. Marcus, 
  Chairman and CEO, Time Warner Cable Inc........................   319
Response to Questions for the Record from Matthew M. Polka, 
  President and CEO, American Cable Association..................   320
Response to Questions for the Record from C. Scott Hemphill, 
  Professor of Law, Columbia Law School..........................   324
Response to Questions for the Record from Dave Schaeffer, 
  Chairman and CEO, Cogent Communications Group, Inc.............   327

 
                      COMPETITION IN THE VIDEO AND
                           BROADBAND MARKETS:
                         THE PROPOSED MERGER OF
                     COMCAST AND TIME WARNER CABLE

                              ----------                              


                         THURSDAY, MAY 8, 2014

                       House of Representatives,

                  Subcommittee on Regulatory Reform, 
                      Commercial and Antitrust Law

                      Committee on the Judiciary,

                            Washington, DC.

    The Subcommittee met, pursuant to call, at 9:34 a.m., in 
room 2141, Rayburn Office Building, the Honorable Spencer 
Bachus (Chairman of the Subcommittee) presiding.
    Present: Representatives Bachus, Goodlatte, Farenthold, 
Issa, Marino, Holding, Collins, Smith of Missouri, Johnson, 
Conyers, DelBene, Garcia, Jeffries, and Cicilline.
    Also Present: Representatives Gohmert and Jackson Lee.
    Staff present: (Majority) Anthony Grossi, Counsel; Ashley 
Lewis, Clerk; Ellen Dargie, Legislative Assistant for Rep. 
Issa; Jaclyn Louis, Legislative Director for Rep. Marino; Jon 
Nabavi, Legislative Director for Rep. Holding; Justin Sok, 
Legislative Assistant for Rep. Smith of Missouri; and 
(Minority) James Park, Counsel.
    Mr. Bachus. Good morning. The Subcommittee on Regulatory 
Reform, Commercial and Antitrust Law herein will come to order.
    Without objection, the Chair is authorized to declare 
recesses of the Committee at any time. However, I do not think 
we anticipate a recess unless it goes fairly long, and then we 
will have one for everyone's convenience.
    I now recognize myself for an opening statement.
    Today's hearing is on the proposed merger between Comcast 
Corporation and Time Warner Cable. The purpose of the hearing 
is not to determine ultimately whether the merger should 
proceed as proposed, be modified, or denied. That 
responsibility lies with the other branches of the Federal 
Government, and, most particularly, involves the Department of 
Justice and the Federal Communications Commission. Rather, we 
are here to provide a public forum in which to discuss the 
potential benefits and harms to the American consumer and to 
competition that could result from a merger between the 
country's two largest cable companies. In doing so, the 
Committee will perform an important function for the public 
that is historically provided pursuant to its antitrust 
jurisdiction.
    The transparency of the companies in an open hearing serves 
a vital role in any evaluation of a proposed merger's potential 
impact on consumers. One of the issues in the public 
examination of the proposed merger is how the size of the 
combined companies will impact competition and choice in the 
voice, video, and broadband markets.
    As separate entities, Comcast and Time Warner now 
respectively reach most of the country, although they do not 
really compete directly against each other in individual 
markets. If the companies were to combine, the joint venture 
would be the largest pay television provider in 37 of the top 
40 viewing markets, serve nearly a third of all TV audiences, 
and provide Internet service to nearly 40 percent of all 
broadband customers.
    Size alone does not necessarily do harm to competition. In 
fact, large companies use their resources every day to invest 
in emerging technologies and achieve efficiencies in scale. In 
its filing with FCC, which is available for public review, 
Comcast stated that it would deploy capital to enhance 
broadband speed, expand the diversity of its programming 
content, and increase the avenues over which consumers can 
access content. Size, however, can in some cases result in the 
ability to influence markets in any competitive manner.
    There have been cases in our country's economic history of 
companies which have used their achieved dominance to exercise 
monopolistic powers. Various parties have raised concerns about 
the potentially negative competitive implications of this 
merger, and we will hear from some of them today.
    The purpose of my statement is not to fully lay out all the 
pros and cons of this proposed merger. That is what the hearing 
is for, to allow our witnesses to advocate. Let me conclude by 
saying this. There are those who remember when you could count 
the number of television channels you could choose on your 
fingers, and the number depended on the strength of your 
antenna. And you might recall struggling with the rabbit ears 
to try to improve the picture quality. We are long past that.
    If there is any industry in America that has had a 
revolution in the past 20 years, is the cable and video 
business, telecommunications business, in a broader sense. We 
have gone from only over-the-air broadcast television to cable 
and satellite, and now to mobile and Internet streaming. 
Consumers have multiple choices. In fact, there are some people 
who are only getting their content from their Internet, and 
there are some services and channels only available online.
    The structure and economics of the industry continue to 
rapidly change. So the challenge for policymakers and antitrust 
regulators is to determine how the consumer's interest is best 
served in this evolving and exciting environment.
    Today's hearing will give our witnesses an opportunity to 
share their perspectives and experiences to face each other and 
answer the questions of Members of the Committee. It will aid 
the public record that American consumers will be able to 
review, and help the Committee as we continue in our ongoing 
oversight of the antitrust laws and their application by the 
antitrust enforcement agencies.
    With that, I look forward to the testimony of our panel, of 
the esteemed witnesses, and turn to my Ranking Member, Mr. 
Johnson of Georgia, for his opening statement.
    Mr. Johnson. Thank you, Mr. Chairman, and I would like to 
take a moment to thank both you and Chairman Goodlatte for your 
bipartisan approach to today's hearing.
    This discussion today on the proposed Comcast/Time Warner 
Cable merger is a fresh opportunity for this Committee to 
continue its long history of promoting a dynamic, competitive 
marketplace and protecting the public interest through strong 
antitrust oversight.
    The twin objectives of antitrust law are to promote 
competition in markets and to protect the public interest. The 
twin objectives are very important. Comcast does not compete 
directly with Time Warner Cable for broadband or video 
subscribers. There is also scant evidence that this merger will 
substantially increase Comcast's concentration in any single 
market. And due to the extremely costly process of building out 
networks within a competitor's territory, there is little to 
suggest that either company had planned to compete directly in 
any local market.
    However, it is plainly clear that the proposed merger 
occurs at a time of immense disruption in the broadband and 
video marketplace. Through explosive growth of edge providers, 
like Netflix and Amazon, consumers have more video options. 
More than ever, these companies' recent success in original 
programming also suggests that competition between online video 
distribution and linear television will continue to grow and 
benefit consumers through increased choice and quality in video 
programming is implicated, and I believe that it will offer 
more choice and more quality.
    Though still in its infancy, the broadband marketplace is 
also undergoing a period of staggering disruption. In 2013 
alone, the fiber broadband marketplace grew 29 percent to 126.6 
million subscribers globally, according to ABI Research. And 
according to findings earlier this week by Sanford Bernstein, 
an equities research firm, Google Fiber's early success in the 
Kansas City market demonstrates that their fiber service could 
scale into 30 million homes over the next several years. I am 
encouraged by the prospect of this expansion, especially 
considering Google's announcement earlier this year that it 
plans to roll out service in Atlanta and parts of Georgia's 4th 
Congressional District, as well as over 30 other cities.
    Combined with similar services from AT&T and Verizon, the 
roll out of all fiber networks across the country promises more 
and better options for consumers online. It is my strong belief 
that technology is one of the most important tools for 
empowering all levels of society. We must keep an eye to 
protect future innovation within this marketplace, but also 
keep in mind the disruption already occurring in the video and 
broadband marketplace. I therefore encourage the Department of 
Justice and the Federal Communications Commission to keep this 
in mind as it considers the effects of the merger upon 
competition in the video and broadband marketplace.
    Before I yield back to the Chairman, I would note that 
earlier this week, the Wall Street Journal reported that the 
proposed merger of Comcast and Time Warner is already having a 
ripple effect in the video and broadband marketplace. Many 
companies are already looking for new ways to compete for 
customers. It is my hope that the groundwork that we lay in 
today's hearing will serve as a strong foundation for future 
hearings on competition in the communications, video, and 
broadband marketplace. And with that, I yield back.
    Mr. Bachus. Thank you, Mr. Johnson. I would now like to 
recognize the full Committee Chairman--our Subcommittee on 
Regulatory Reform, Commercial and Administrative Law is a 
Subcommittee of the Judiciary Committee. And at this time, I 
recognize Chairman Bob Goodlatte of the Judiciary Committee for 
his opening statement.
    Mr. Goodlatte. Thank you, Mr. Chairman. The cable 
television industry and the Internet have become about as 
American as baseball and apple pie. We watch the events of our 
Nation, cheer on our teams, follow our favorite characters, 
and, on occasion, glimpse history changing before our eyes on 
television. The Internet is used to connect family and friends, 
doctors to patients, teachers to students. Cable and the 
Internet are portals from our homes and offices to the world 
and are vital components of our national economy.
    Today the House Judiciary Committee will provide a public 
platform to discuss the proposed combination of Comcast 
Corporation and Time Warner Cable, which together provide cable 
and Internet services to a third of Americans. Given the 
importance of these services to our constituents and the 
economy, the transparency afforded and the record created by 
this proceeding is integral to the overall consideration of the 
merger.
    As we discuss the proposed merger, we should be mindful of 
the ever-evolving nature of the relevant industries. The rapid 
technological developments that have taken place over the last 
10, 20, and 30 years in the cable and broadband markets have 
been remarkable and unpredictable. We have seen the growth of 
cable from a nascent industry that just covered a fraction of 
the population and only offered a few dozen channels to one 
that reaches nearly every home in the country and delivers 
hundreds of channels, now even in 3-D, in addition to providing 
voice and Internet services.
    Gone are the days of rushing to the living room to watch 
the news, sports, or a favorite show when it starts at 7:00, or 
8:00, or 9 p.m. Now, consumers can watch content when they want 
it nearly wherever they would like. These improvements have not 
come without a cost. Cable bills have risen at nearly twice the 
rate of inflation annually over the last 17 years, including a 
nearly 6 percent rise just this last year. Consumers, who have 
grown tired of rising cable bills, have begun cutting the cord 
and are looking to new, emerging ways to receive content. That 
is how the free market is supposed to operate. When costs rise, 
competitors emerge, and as they do, consumers have greater 
choices.
    Today's hearing will examine whether the proposed Comcast 
and Time Warner merger would impact competition in the cable 
and broadband markets and explore whether consumers would 
benefit from the combined scale of the joint venture. 
Proponents of the merger argue that it would spur innovation, 
increase choices, and improve service. Critics of the merger 
raise concerns regarding the influence of a post-merger Comcast 
might yield over key aspects of the cable and broadband 
markets.
    We will hear the views of both sides of this debate today 
and allow the panelists to test each other's theories of the 
future of the industry. I look forward to hearing from today's 
witnesses on this important issue. Thank you, Mr. Chairman, and 
I yield back the balance of my time.
    Mr. Bachus. Thank you, Chairman Goodlatte. I would now like 
to recognize the full Committee Ranking Member, my friend, Mr. 
John Conyers of Michigan, for his opening statement.
    Mr. Conyers. Thank you, Chairman Bachus. And to eight 
witnesses, when was the last time we had--well, we ran out of 
tables. I am sorry, we have only eight here today.
    We consider the proposed acquisition of these two 
corporations, and if consummated it would enable the combined 
entity to control approximately 30 percent of the national 
cable market and at least 40 percent of the high speed 
broadband Internet market. It would also dominate 19 of the 20 
largest geographic markets in the Nation, including the New 
York and Los Angeles areas where Comcast currently is not 
present.
    Currently, Comcast, in addition to its cable and Internet 
businesses, owns the NBC Television Network, 10 NBC-owned and 
operated local television stations, the Telemundo Spanish 
language broadcast network, nine cable networks, regional 
sports and news networks, and nine major metropolitan areas, 
and the motion picture studio, Universal. So not surprisingly, 
the sheer size and scope of the proposed merger, which would 
extend well beyond cable television, has raised concerns.
    Several consumer groups, including Public Knowledge, Free 
Press, the American Antitrust Institute, and Consumers Union 
have raised concerns about the proposed merger. And I ask 
unanimous consent, Chairman Baucus, to offer a letter from 
Consumers Union dated May 7, 2014 for the record.
    Mr. Bachus. Without objection.
    [The information referred to follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                               __________
    Mr. Conyers. Thank you. While neither we nor the 
competition enforcement agencies should pre-judge any deal, 
there are a number of issues concerning competition and 
consumer welfare that I would like as many on the panel to 
address as possible. To begin with, witnesses should address 
whether the combined Comcast/Time Warner Cable would have such 
market power that it could discriminate against rival content 
providers, because, according to critics, the merged company 
would have the ability and incentive to discriminate in favor 
of Comcast/Time Warner content, including NBC content.
    And given that the merged entity would have almost 30 
million subscribers, being unable to distribute on Comcast's 
video distribution network could potentially be fatal to non-
Comcast affiliated programmers. Ultimately, this could give the 
merged entity enormous sway over the kind of content that is 
available to the public.
    The witnesses should also address whether the combined 
Comcast/Time Warner Cable could emerge as a gatekeeper of the 
Internet, and thereby be able to stifle competitive innovation 
as some critics have already alleged. Recently, Netflix, an 
online video distributor, signed an agreement with Comcast that 
would allow Netflix to directly access Comcast customers rather 
than paying companies to carry traffic between its service and 
Comcast customers.
    On the one hand, this could be seen as a simple, 
straightforward business transaction. After all, Netflix is 
responsible for a third of all United States web traffic. 
Paying Comcast to connect directly to its pipes instead of 
sending traffic through other companies, which are struggling 
to handle its traffic, may simply have been categorized as a 
smart business decision. But on the other hand, Netflix itself 
raises concerns about its agreement with Comcast, asserting 
that it was forced to pay Comcast for reliable delivery to 
Comcast customers.
    In opposition to the Comcast/Time Warner merger, Netflix 
CEO Reed Hastings and CFO David Wells argued that the Internet 
faces a long-term threat from the largest ISPs driving up 
profits for themselves and costs for everyone else, and that is 
if the Comcast/Time Warner Cable merger is approved, the 
combined entity would possess even more anti-competitive 
leverage to charge arbitrary interconnection tolls for access 
to their customers.
    The real question, however, is not what effect the merger 
may have on Netflix per se, but on the next Netflix that might 
emerge as an alternative to Comcast video distribution 
business. Would a combined entity be able to use its potential 
leverage over high speed Internet access to stifle potential 
competition in this way?
    So finally I conclude on this point. To the extent that 
there may be competition concerns, I would like the witnesses 
that choose to discuss whether imposing behavioral remedies 
would be sufficient. As a condition for approval of the 
Comcast/NBCUniversal transaction, the FCC and the Justice 
Department required Comcast/NBCU to take affirmative steps to 
foster competition, including voluntary compliance with net 
neutrality protections as well as steps to benefit the public 
interests. Comcast has indicated that it will extend the same 
commitments to its proposed acquisition of Time Warner Cable.
    Additionally, Comcast has entered into an agreement with 
Charter Communications to sell 1.4 million subscribers and 
divest another 2.9 million subscribers to form a new rival 
cable company.
    Nevertheless, some observers are concerned that behavioral 
remedies imposed in the Comcast/NBCU transaction were 
ineffective and unenforceable to the extent Comcast did not 
abide by them. And accordingly, we should consider whether such 
commitments should be strengthened and made enforceable to 
better protect the public interest with respect to Comcast's 
proposed acquisition of Time Warner Cable. I look forward to 
your testimony, and I thank the Chairman, and yield back my 
time.
    Mr. Bachus. Thank you, Mr. Conyers. At this time I 
recognize the Vice-Chairman of the Subcommittee, Mr. Farenthold 
of Texas, for his opening statement.
    Mr. Farenthold. Thank you very much, Mr. Chairman, and I 
will be brief. As a free market conservative, I am on the 
record as stating that I do not think government should 
interfere in business mergers to the extent they do not violate 
antitrust laws. And I generally support this merger and do not 
think it should be destroyed by excessive government 
intervention.
    However, there are some concerns that I am hoping will get 
cleared up during this hearing, the primary one being the 
impact this merger will have on how programmers, particularly 
independent and small programmers, are able to compete in the 
marketplace and gain access. We have also got issues developing 
about new ways to distribute video content that may make this 
moot, but they are probably 10 years out. You have got video on 
demand delivery by companies like Google, Amazon, Verizon, 
Microsoft, Yahoo, and Apple. Obviously there is a potential 
concern that these compete with video on demand services 
actually native to the cable providers.
    I am also concerned, again, as I said, about new companies 
and new programmers having access to getting on. I am concerned 
also about the percentage of the Hispanic and Spanish-language 
market that this merger would have in the overall national 
pricing. Even though Time Warner and Comcast do not compete in 
any markets to speak of, there is an overall national accepted 
pricing as there are more players in the Internet delivery 
game, in particular, what people expect to pay on a national 
basis is set by that. And with 30 percent of the market, there 
are also concerns over data caps that Time Warner does not 
have.
    Now, that being said, I am blessed in Corpus Christie, 
Texas by living in a community that is served by two competing 
cable providers. The capital cost of that is high, but as we 
are seeing by investments in fiber by Verizon, Google, and 
other companies, multiple options are becoming available. It is 
the short-term that I am worried about. And I do hope that some 
of the witnesses will address short-term versus long-term 
competition and availability of programs.
    And finally, I do think we ought to talk a little bit to 
distinguish about what is delivered in real time and what is 
important to be delivered in real time, for instance, news and 
sporting events as opposed to entertainment content, which is 
shifting more and more to an on-demand or a pay-per-view model 
for delivery, be that through DVRs or services like Netflix or 
iTunes Store and the like.
    I have been looking forward to this hearing for a long 
time, and hope we can get it all cleared up. Thank you.
    Mr. Bachus. Thank you. We have a very distinguished panel 
today, and Mr. Conyers made a remark about the table being so 
long. And this was an attempt to balance the witnesses, and 
when we add a witness, you have to balance them on the other 
end. I hope that balance is fine.
    Our first witness is Mr. David Cohen, executive vice 
president of Comcast Corporation, where he has responsibilities 
that include corporate communications, government and 
regulatory, public and legal affairs, and community investment. 
I guess, in other words, everything.
    Prior to joining Comcast in 2002, Mr. Cohen served as a 
partner and a chairman of Ballard Spahr Andrews & Ingersoll, 
one of the 100 largest law firms in the country. Prior to his 
time at Ballard, Mr. Cohen served as the chief of staff to the 
Honorable Ed Rendell, mayor of Philadelphia. Mr. Cohen received 
his B.A. from Swarthmore College and his J.D. summa cum laude 
from the University of Pennsylvania Law School. Welcome, Mr. 
Cohen.
    Mr. Cohen. Thank you very much, Mr. Chairman.
    Mr. Bachus. I am going to actually introduce all the 
witnesses, and I should have told the panel that.
    Mr. Cohen. Okay.
    Mr. Bachus. And then we will go back.
    Mr. Cohen. Sorry.
    Mr. Bachus. Our second witness is Mr. Robert Marcus, 
chairman and CEO of Time Warner Cable. Mr. Marcus is, as I 
said, chairman and CEO, and he has served in that capacity 
since January 1st of this year. Mr. Marcus first joined Time 
Warner in 2005, and since that time he has served the company 
in various capacities, including president, chief operating 
officer, chief financial officer, and senior executive vice 
president.
    Prior to joining Time Warner Cable, he held various 
positions at Time Warner, Inc., including senior vice president 
of mergers and acquisitions. Before joining Time Warner, Mr. 
Marcus practiced law at Paul, Weiss.
    Mr. Marcus received his B.A. magna cum laude from Brown 
University and his J.D. from Columbia Law School, where he was 
a Harlan Fiske Stone scholar and editor of the Columbia Law 
Review. We welcome you, Mr. Marcus.
    Our next witness, Mr. Matthew Polka, is president and CEO 
of the American Cable Association, an 850-member non-profit 
association, whose members serve nearly 7 million cable 
television subscribers, primarily in small, rural markets. 
Prior to joining the association, Mr. Polka was the vice 
president and general counsel of Pittsburgh-based Star Cable 
Associates.
    Mr. Polka graduated from West Virginia University magna cum 
laude, and received his J.D. from Pittsburgh University School 
of Law where he was editor of the law school news magazine and 
recipient of the law school's Most Distinguished Graduate 
Award. Welcome to you, Mr. Polka.
    Our next witness, Professor Scott Hemphill of Columbia Law 
School, is a law professor at Columbia, as I said, where his 
research examines the balance between innovation and 
competition set by antitrust law, intellectual property, and 
other forms of regulation.
    From 2011 to 2012, Professor Hemphill served as chief of 
the Antitrust Bureau in the Office of the New York State 
Attorney General. Before joining Columbia's faculty, he served 
as a law clerk for Judge Richard Posner on the U.S. Court of 
Appeals for the 7th Circuit, and to Justice Scalia on the 
United States Supreme Court.
    Professor Hemphill is a graduate of Harvard College and the 
London School of Economics, where he studied as a Fulbright 
Scholar. He received his J.D. and Ph.D. from Stanford 
University. So we welcome you, Professor.
    Our next witness is Mr. Allen Grunes, antitrust lawyer at 
the law firm of GeyerGorey. Mr. Grunes advised on mergers and 
acquisitions, provides counsel on non-merger matters, and 
represents clients before the courts, antitrust agencies, and 
Congress.
    Prior to joining the law firm, Mr. Grunes spent more than a 
decade at the United States Department of Justice Antitrust 
Division where he led many merger and civil non-merger 
investigations in a number of industries, including radio, 
television, newspapers, and motion pictures.
    Mr. Grunes received his B.A. from Dartmouth College and 
received his J.D. from Rutgers Camden School of Law, and holds 
an L.L.M. from New York University.
    Our next witness is Mr. Patrick Gottsch. He is founder and 
chairman of Rural Media Group, Inc., the world's leading 
provider of multimedia content dedicated to a rural and western 
lifestyle. In fact, he does not wear a tie, and his 
representative asked me if he should wear a tie. And I told him 
that we wanted him in his natural state. [Laughter.]
    And so, if you are saying he does not have a tie on, it is 
the prerogative of the Chairman and of Mr. Gottsch.
    Mr. Gottsch. Thank you.
    Mr. Bachus. Rural Media Group is the parent company of a 
number of multimedia companies, including RFD-TV, the Nation's 
first 24-hour television network dedicated to serving the needs 
and interests of rural America.
    Before launching Rural Media Group, Mr. Gottsch served as 
director of sales for Superior Livestock Auction, the largest 
livestock auction enterprise in the United States. Prior to 
joining Superior Livestock, Mr. Gottsch started ET 
Installations in Nebraska, which introduced over 2,000 
satellites to the Midwest, and was recognized as the Nation's 
largest privately-owned home satellite retailer in 1987. Before 
ET Installations, Mr. Gottsch worked on the Chicago Mercantile 
Exchange as a commodities broker.
    Mr. Gottsch graduated from Sam Houston State University in 
Huntsville, Texas. We welcome you, Mr. Gottsch.
    Mr. Gottsch. Thank you.
    Mr. Bachus. Our next witness is Mr. David Schaeffer. Mr. 
Schaeffer is founder and CEO of Cogent Communications, one of 
the world's largest Internet providers. Prior to joining 
Cogent, Mr. Schaeffer successfully funded and operated six 
other businesses spanning a wide array of industries, from 
communications to commercial real estate. Mr. Schaeffer's 
diverse background and business successes have enabled him to 
build management teams that construct and operate the only 
facilities-based non-oversubscribed multi-national network of 
its kind.
    Mr. Schaeffer received a B.S. in physics from the 
University of Maryland where he was also a Ph.D. candidate in 
economics. Mr. Schaeffer, we welcome you.
    Our final witness is Dr. Craig Labovitz. Is that right?
    Mr. Labovitz. It is.
    Mr. Bachus. All right. He is co-founder of DeepField 
Networks. He founded that in 2011 and serves as its CEO and 
president. Dr. Labovitz is a widely recognized expert on 
Internet infrastructure, security, and cyber threats.
    Prior to founding DeepField, he served as chief scientist 
for Arbor Networks based in Ann Arbor, Michigan. His research 
and work is used by over 400 Internet service providers, and 
more than 70 percent of the Internet backbone transit traffic 
is protected by products stemming from his research.
    Dr. Labovitz also served as one of the original engineers 
for the NSF Net Backbone, which is where the Internet as we 
know it today originated. And that was one of the six 
universities or what was that----
    Mr. Labovitz. It was.
    Mr. Bachus. All right. Dr. Labovitz received his master's 
of science of engineering and Ph.D. from the University of 
Michigan and his bachelor of science in engineering from the 
University of Pennsylvania. So we welcome you as our final 
witness.
    And at this time, Mr. Cohen, we welcome your testimony. And 
let me say this. Each of the witnesses' written testimony will 
be entered into the record in its entirety. And I ask that each 
of you try to summarize your testimony in 5 minutes. There will 
be some lights to guide you, but there is no electrical shock 
if you go past that time. [Laughter.]
    So do not take that as a traffic light red. Mr. Cohen?

                 TESTIMONY OF DAVID L. COHEN, 
         EXECUTIVE VICE PRESIDENT, COMCAST CORPORATION

    Mr. Cohen. We will try this again, and thank you, Chairman 
Goodlatte, Chairman Baucus, Ranking Members Conyers and 
Johnson, and Subcommittee Members. We appreciate the 
opportunity to discuss the substantial consumer and public 
interest benefits that will arise from our merger with Time 
Warner Cable.
    Over the last 50 years, Comcast has grown from a small 
cable operator with 1,200 customers in Tupelo, Mississippi into 
one of the most innovative media and technology companies in 
America. We are truly an American success story.
    In a nutshell, this transaction will give us the scale to 
invest more in innovation and infrastructure so we can compete 
more effectively with our mostly larger national and global 
competitors, including the Bells, DirecTV, DISH, Apple, and 
Google to name a few as were referenced in some of your opening 
statements. And when we invest, so do our competitors. AT&T, 
for instance, has said that this transaction puts a heightened 
sense of urgency on competitors to invest more in their 
networks and improve service.
    And the ultimate beneficiary of this enhanced competition 
and greater investment is the American consumer. Specifically, 
Comcast will bring Time Warner Cable residential customers 
faster Internet speeds, more programming choices, more robust 
Wi-Fi, and our best in class X1 operating system. And business 
customers will benefit as well.
    We will also expand our acclaimed Internet essentials 
program, which has already connected over 1.2 million low 
income Americans to the Internet more than any program of its 
kind in the Nation. And we will extend many other public 
interest benefits from the NBCUniversal transaction to the Time 
Warner Cable footprint, including our commitments to diversity 
and to an open Internet. More investment, faster speeds, better 
technology, more Americans connected. Even with these 
compelling benefits, we recognize that questions arise whenever 
two big companies combine. Let me address some of them very 
briefly.
    Americans are benefitting today from robust competition. 97 
percent of the homes in America are in census tracts where at 
least three competitors offer fixed or mobile broadband 
Internet services. And almost 99 percent of American homes have 
access to at least three multi-channel video providers.
    Objectively, this transaction is very straightforward from 
an antitrust perspective. As Ranking Member Johnson said, our 
two companies do not compete for customers anywhere. It is a 
fact that every customer will have the same choices among 
broadband and video providers after this transaction as before. 
Nor will Comcast gain undue power over programmers. Last week, 
we announced a transaction with Charter to divest almost 4 
million customers, thereby reducing the number of our customers 
to approximately 29 million, below a 30 percent share of multi-
channel video subscribers.
    Some history here. The FCC has twice concluded that a 30 
percent ownership cap was justified to prevent a single cable 
operator from wielding undue control over programmers. But the 
Federal courts twice rejected that cap saying that no cable 
operator could exercise market power at 30 percent. 
Nevertheless, we will remain below that level, which, by the 
way, is essentially the same share of the market we had after 
our AT&T Broadband and Adelphia transactions in the first 
decade of the 21st century.
    Comcast is a company that keeps its promises and plays 
fair. Since our NBCUniversal transaction, we have successfully 
negotiated dozens of agreements with MVPDs for carriage of 
NBCUniversal content without any withholding of content from 
consumers, and no arbitrations have been needed under the MVPD 
provisions of the NBCUniversal order.
    We also play fair in the exchange of Internet traffic, or 
what is sometimes called interconnection. This market is 
distinct from the ISP market, and the two markets should not be 
analytically conflated as some will try to do. For 20 years, we 
have successfully negotiated very common business arrangements 
with thousands of companies that connect to our network, 
including direct connection agreements with content providers, 
such as Netflix. Other ISPs do the exact same thing.
    The interconnection market is fiercely competitive with 
dozens of substantial players, evidenced by the fact that 
prices have plummeted in that market by 99 percent over the 
last 15 years. Nothing in this transaction will affect the 
competitiveness of that market. Comcast wants to bring more 
investment and technology and new services to more American 
homes and businesses. In doing so, we will incentivize our 
competitors to invest more, which will benefit still more 
consumers. We have a track record as a fair competitor and as a 
company that over delivers on its promises.
    Thank you very much for the opportunity to appear here 
today.
                              ----------                              


    Mr. Bachus. Thank you, Mr. Cohen.
    And at this time, Mr. Marcus, you are recognized.

 TESTIMONY OF ROBERT D. MARCUS, CHAIRMAN AND CEO, TIME WARNER 
                           CABLE INC.

    Mr. Marcus. Thank you. Chairman Goodlatte, Ranking Member 
Conyers, Chairman Bachus, Ranking Member Johnson, and Members 
of the Committee, I appreciate the opportunity to testify today 
about the proposed transaction between Comcast and Time Warner 
Cable.
    I agree with David's assessment that the combination of our 
two companies will create a dynamic company poised for the 21st 
century, bringing new choices to consumers and spurring 
competition in the marketplace. This transaction will give the 
combined companies greater scale, which will drive investment 
in R&D, infrastructure, software, and talent, investment that 
will bring more consumers next generation technologies, more 
secure and reliable networks, faster broadband speeds, and 
enhanced video and voice services.
    The combination of Comcast and Time Warner Cable also will 
bring new competition to business customers that neither 
company could effectively serve on its own. Not only will the 
merger drive investment and innovation at the new Comcast, but 
it will also drive investment and innovation from our 
competitors. Consumers clearly will be the beneficiaries.
    And as David explained, this transaction will achieve these 
benefits without reducing competition in any way because 
Comcast and Time Warner Cable serve distinct geographic areas. 
To be clear, consumers will have the same choices of providers 
after the transaction as before.
    The video broadband and voice businesses have never been 
more competitive. Today in nearly every market, consumers have 
at least three, and in many cases four or more, choices of 
facilities-based video providers. For years now, the satellite 
providers, DirecTV and DISH, have had video nationwide. Verizon 
and AT&T now offer video in a significant portion of our 
footprint. Google has launched video in several markets and has 
announced plans to expand that offering, and smaller over-
builders also offer competing facilities-based video services.
    At the same time, there are an increasing number of 
national over-the-top providers, including Netflix, which now 
has over 33 million customers in the U.S., and Google video 
websites, which attract over 157 million unique visitors each 
month.
    Especially because of this increased competition among 
video distributors, programmers, including smaller, independent 
programmers, have more options for reaching consumers than ever 
before. Time Warner Cable and Comcast both carry scores of 
independent programming networks, and I am confident that the 
combined company will continue to be a leading platform for 
such content.
    As for larger programmers, their ability to impose 
significant price increases every year demonstrates their 
extraordinary bargaining leverage. Programming costs at Time 
Warner Cable per subscriber will rise 10 percent this year, and 
I have no doubt that large programmers will continue to 
negotiate from a position of strength after our transaction.
    Like video, the broadband marketplace is incredibly dynamic 
with cable facing competition from large broadband providers, 
such as AT&T and Verizon, rapidly expanding services from 
Google fiber, and increasingly robust mobile wireless broadband 
services. In fact, recent announcements by both AT&T and Google 
underscore how quickly this marketplace is evolving.
    Just last month, AT&T named 100 candidate cities for 
broadband speeds of up to 1 gigabit per second. In February, 
Google stated that it has targeted an additional 34 cities for 
its 1 gig broadband service.
    I would also note that mobile wireless is rapidly becoming 
a viable alternative to cable broadband given the ever-
increasing capabilities of LTE, as well as continued advances 
in compression technology. The market for voice is also flush 
with competition with landline, mobile, and a growing number of 
over-the-top services, such as Skype. As relatively new 
entrants into the voice business, Comcast and Time Warner Cable 
have contributed meaningfully to the competitive of this 
market, and will continue to do so as a combined company.
    This transaction will also create new and enhanced 
competition in the business market. Commercial services 
traditionally have been dominated by incumbents such as AT&T 
and Verizon, which leveraged their scale and scope to provide 
end-to-end services that businesses increasingly demand. Time 
Warner Cable has gained a foothold, especially with small- and 
medium-sized businesses. However, our ability to compete 
effectively in the telco-dominated business of serving larger 
multi-regional businesses has been constrained by our limited 
geographic footprint.
    This transaction will significantly boost competition for 
commercial services by giving the combined company greater 
scale, a broader geographic footprint, and efficiencies 
necessary to meet the needs of business customers, especially 
the super-regional enterprises that demand a broad network 
footprint.
    So in summary, today's dynamic and ever-evolving 
marketplace presents both new challenges and new opportunities. 
Enabling the new Comcast to compete with greater scale will 
yield more robust competition and significant benefits for 
consumers and businesses.
    Thank you again for the opportunity to testify today, and I 
look forward to your questions.
    [The joint prepared statement of Mr. Cohen and Mr. Marcus 
follows:]


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                               __________

    Mr. Bachus. Thank you, Mr. Marcus. And, Mr. Polka, before 
you testify, let me say this. The heat was on in here when I 
arrived, and I have asked them to turn on the air conditioner, 
which I understand has now kicked on. But if any of the 
witnesses or audience, particularly if you have completed your 
testimony and you want to slip off your coat, or prior to 
giving your testimony you want to take off your coat, you may 
save yourself a lot of shine when you give your testimony. 
[Laughter.]
    So I would invite and encourage anyone who wants to do that 
to do that.
    Mr. Cohen. Thank you, Mr. Chairman.
    Mr. Bachus. You all look great, but as this wears on----
    Mr. Cohen. Thank you, Mr. Chairman. We certainly appreciate 
you bringing to life the analogy of being on the hot seat.
    Mr. Bachus. That is right. And this is a hotter hot seat 
than normal, and was not intended that way. I think Mr. Issa 
sometimes does turn up the heat, but we do not do that on this 
Committee. [Laughter.]
    Mr. Polka, you are recognized at this time.
    Mr. Polka. Thank you, sir. Thank you very much.
    Mr. Bachus. But it is not stress. It is not stress.

  TESTIMONY OF MATTHEW M. POLKA, PRESIDENT AND CEO, AMERICAN 
                       CABLE ASSOCIATION

    Mr. Polka. Thank you, sir. The proposed combination of 
Comcast and Time Warner Cable with later divestitures and swaps 
with Charter is a big deal that threatens consumers and 
competition. The singular point that I want you to know is that 
this is a complicated deal that will negatively impact your 
constituents. Unless the FCC and Department of Justice adopt 
robust relief, it should not be approved.
    To begin with, it is important to realize that Comcast is 
more than just the largest pay TV provider. It is also a very 
large programmer through its ownership of the NBC Television 
Network, 10 NBC-owned and operated stations, 13 regional sports 
networks, and many popular national cable networks. Like 
Comcast, Time Warner Cable is also a very large cable operator, 
and also a large programmer through its ownership and/or 
control of 16 regional sports networks, including those in New 
York and Los Angeles.
    I wish I could simplify this deal into a single component, 
but the fact is that there are three separate elements to 
consider that each causes harm. First, the combination of the 
two companies' programming; second, the combination of Comcast 
programming with the new cable systems Comcast acquires; third, 
the combination of the companies' cable systems. The first two 
are similar to ACA's concerns about the Comcast/NBCUniversal 
transaction that DoJ and FCC addressed through conditions. The 
third raises new and significant concerns not present in 
Comcast's previous deal.
    Regarding the first component, by merging its programming 
with Time Warner Cable's regional sports networks and selling 
them in a bundle, Comcast will gain greater bargaining power 
against all pay TV providers in all regions where Time Warner 
Cable's regional sports networks are carried. It will be severe 
in New York and Los Angeles where there is both an owned NBC 
television station and a must-have Time Warner Cable regional 
sports network. All pay TV providers and their consumers in 
these markets will be affected by this harm, including many ACA 
members.
    With respect to the second component, Comcast will have an 
incentive to disadvantage pay TV providers that compete 
directly with the cable systems it acquires. It will do this by 
either withholding Comcast programming during negotiation 
impasses or by demanding higher prices for this programming. 
However, the competitive harm will not be limited to Comcast's 
pay TV rivals. Because many of these pay TV providers obtain 
their programming through the National Cable Television 
Cooperative, NCTC, Comcast/Time Warner Cable will have an 
incentive to charge the NCTC higher prices for its programming, 
and this will harm the 900 pay TV providers that obtain 
Comcast/Time Warner Cable through the buying group.
    Regarding the third component, Comcast denies harm arising 
from combining its distribution assets with the Time Warner 
Cable and Charter cable systems it is acquiring because it does 
not compete locally against them. However, this ignores that 
this massive combination will dramatically increase the merged 
entity's bargaining power over video programmers.
    The merged entity will have about 30 percent of all pay TV 
subscribers nationally. This level of market share has 
traditionally raised concerns with Federal antitrust 
authorities. It will also have greater regional market share 
because of the Comcast-Charter deal. As a result, it will 
become a must-have distribution outlet for national and many 
regional programmers. In the short run, it will demand even 
larger volume discounts than its rival, thereby weakening these 
rivals' competitive position or worse. And in the long run, 
Comcast/Time Warner Cable may leverage its pay TV industry 
dominance to increase its market share in the video programming 
industry, ultimately reducing this industry's competitiveness, 
too. The final result: higher prices and fewer choices for 
consumers.
    The FCC adopted arbitration conditions designed to 
ameliorate the first two harms described above in the Comcast/
NBCUniversal order. However, requiring Comcast/Time Warner 
Cable to abide by these same conditions is insufficient because 
they are flawed. In particular, arbitration remains too 
expensive for smaller pay TV providers. Moreover, the 
conditions incompletely described how bargaining agents for 
smaller pay TV providers could avail themselves of the 
arbitration conditions.
    Lastly, the Department of Justice and FCC will need to 
fashion new remedies for the harm arising from combining 
Comcast distribution assets with distribution assets of Time 
Warner Cable and Charter which did not arise in the Comcast/
NBCU transaction.
    In conclusion, the DoJ and FCC have some big decisions 
ahead. ACA looks forward to working closely with Congress and 
the agencies as the review proceeds and conditions are 
fashioned to address the transactions anti-competitive harms. 
Thank you very much.
    [The prepared statement of Mr. Polka follows:]


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                               __________

    Mr. Bachus. Thank you, Mr. Polka.
    And at this time, Mr. Hemphill, you are recognized--or 
Professor Hemphill--for your opening statement.

TESTIMONY OF C. SCOTT HEMPHILL, PROFESSOR OF LAW, COLUMBIA LAW 
                             SCHOOL

    Mr. Hemphill. Thank you. Mr. Chairman, Ranking Member, and 
Members of the Subcommittee, thank you for the opportunity to 
testify today about the antitrust implications of this proposed 
merger. As several Members have already noted, antitrust 
protects dynamic and competitive markets, and a number of 
antitrust concerns have been raised out this merger. These 
concerns, however, are generally based on mistaken analogies 
that do not really apply.
    For example, critics have charged that this merger is just 
like AT&T-Mobile, and, therefore, it can be expected to raise 
prices to consumers, but, in fact, this merger is nothing like 
that. You have heard this already, but I think it bears 
emphasis. To see why, suppose I want to buy a wireless service 
where I live in New York City. I can choose from AT&T, T-
Mobile, and other providers. Take one of these away, though, 
and the remaining firms may be able to raise prices, which has 
the bad effect of squeezing some consumers out of the market.
    Now, compare that to the video service. Where I live in 
West Village, I can choose among Time Warner and other options, 
but Comcast is not a choice unless I am willing to move to 
Philadelphia, which I currently am not. In fact, Time Warner 
and Comcast do not really compete anywhere for cable customers, 
so nothing is lost by their combination.
    Now, critics offer a second analogy that Comcast is sort of 
like a powerful grain buyer acting in a predatory way against 
farmers. Now, in an agricultural market, farmers might well 
find themselves at the whim of, let us say, the only two grain 
buyers in town. And if the two buyers merge, they have an 
opportunity to reduce purchases in order to depress the price. 
But again, this merger is nothing like that.
    In fact, programmers, companies like ESPN, are nothing like 
farmers. When ESPN sells programming to Comcast, nothing is 
used up. ESPN is free to sell the same programming to other 
video providers, too, and, of course, it does so to DirecTV, 
FiOS, and on and on. Put differently, when there is no rivalry 
in the use of the product, this whole buyer strategy, the 
strategy of cutting back on purchases in order to force a price 
drop, just collapses.
    Now, there is another argument here, which is that Comcast 
might be able to strike a better bargain thanks to its 
increased size. Now, that is far from clear. To be sure, the 
stakes are higher for ESPN compared to today because ESPN loses 
more revenue if its contract negotiations within Comcast break 
down, but that is true for Comcast, too. The stakes are higher 
for Comcast as well as more customers complain or cancel their 
service. Nor is Comcast such a must-have with programmers that 
it gains special power that way.
    The third analogy is that Comcast is just like Microsoft. 
Now, the idea here is that Netflix and other online video 
providers will be undermined, foreclosing their ability to 
compete with traditional video. Now, this deserves careful 
attention because I think we can all agree that preserving 
innovation and competition from online video is very important.
    But this third analogy seems wrong to me as well. For one 
thing, the cost of foreclosure strategies is quite high, and 
there are existing protections under the earlier NBCU merger 
conditions for online video that would actually be extended to 
Time Warner which could be thought of as a benefit of the deal.
    What I do think we see here is not so much foreclosure, but 
an ongoing fight among powerful firms, an ongoing fight to 
figure out who should pay for the infrastructure that makes 
possible the dramatic growth in online video and how those 
payments should be achieved.
    Thank you again for the opportunity to address these 
issues, and I look forward to your questions.







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    [The prepared statement of Mr. Hemphill follows:]


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                               __________

    Mr. Bachus. Thank you, Professor.
    And at this time, Mr. Grunes, we invite you to testify.

                 TESTIMONY OF ALLEN P. GRUNES, 
                    PARTNER, GEYERGOREY LLP

    Mr. Grunes. Thank you, Chairman and Vice Chairman, and 
Chairman--Ranking Member--sorry--of the full Committee, and 
Ranking Member of the Subcommittee, and Committee Members. I am 
very happy to be here. I have practiced antitrust law for about 
25 years, and about half of that time I was with the antitrust 
division.
    Now, Comcast and Time Warner Cable say they do not compete 
for subscribers, and you have heard that this morning. But the 
fact is that Comcast and Time Warner Cable do compete. That is 
what Brian Roberts, the Comcast CEO, told the Senate Judiciary 
Committee in Comcast's last mega merger with NBCUniversal. And 
Mr. Roberts was right. The two companies compete in a number of 
ways. For instance, they compete to carry local and regional 
sports teams, and they compete for advertising dollars.
    Mr. Chairman, to help illustrate how sports programming in 
particular would be abused post-merger, I would ask unanimous 
consent to submit for the record an article by former Bush 
Administration official, Brad Blakeman. The article explains in 
detail the impact of the merger on sports and sports fans, and 
it is highly relevant here.
    Mr. Bachus. And without objection, all the witnesses can 
introduce any extraneous materials or records into the record.
    [The information referred to follows:]


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                               __________

    Mr. Grunes. Thank you, Mr. Chairman. And as for cable 
advertisers, they will have less choices if this merger goes 
through, including smaller local advertisers in your districts 
who may get shut out entirely.
    Now, Comcast says that people have a multitude of choices 
for how they get broadband. You have heard that here today. But 
at an investment conference in 2011, Mr. Roberts said that 
Comcast had only one broadband competitor. He was talking about 
FiOS, which was and still is in only about 15 percent of 
Comcast's territories.
    This merger is very likely illegal. The parties know it. 
That is why they are here talking about how they plan to fix 
it. But I am here to tell you what they will not, why it is 
illegal, and why the fix does not cut it. This time it is 
different.
    Let us talk about video first since I think that is the 
easiest. They want to put together Comcast content with Time 
Warner Cable's wires. The antitrust theory is that after the 
merger, the company would have both the ability and the 
incentive to withhold NBC and sports programming from rivals, 
such as the satellite companies, the telcos, other cable 
systems, that would drive up their competitors' costs, and make 
them less competitive. That is called input foreclosure in 
antitrust jargon. Is it a radical theory? No. It is right out 
of the Comcast/NBCU complaint that the Antitrust Division filed 
in 2011. But this time, it is worse.
    Now, let us talk about the even more serious issue of 
broadband. Comcast and Time Warner Cable shares of the 
broadband markets are much higher. We have not heard the 
witnesses talk about what those shares are, but by some 
estimates they are 50 percent or even more.
    So what is the problem? Simple: online video distributors 
like Netflix, according to the Antitrust Division, are likely 
to be the best hope for additional video programming 
competition in Comcast and Time Warner Cable's territories. If 
Comcast can get a hold of about 50 percent of broadband 
subscribers through this merger, it puts itself into a position 
to influence how this new form of competition will play out.
    The antitrust theory here is called ``customer 
foreclosure.'' You had input foreclosure. This is customer 
foreclosure. Keep innovative competitors from being able to 
connect with their audience or charge them so their costs go 
up. Again, this is not a radical theory. It was mentioned as a 
concern in the 2011 Comcast/NBCU complaint. It is very similar 
to a theory that the Division, the Antitrust Division, actually 
litigated and won in the D.C. Circuit in the Microsoft case. 
The same analysis has been applied in other cases where the 
Internet is threatening an old business model. The key point is 
that a legitimate role of antitrust is to keep the pathways for 
innovation open. There is also a buyer power theory, which is 
discussed in my written testimony.
    Finally, a word about remedies. If, as I believe, the 
merger is anti-competitive, the best remedy is simply to say 
no. Behavioral remedies do not work well. In fact, Professor 
John Kwoka, who studied empirically how well they work, said 
they are disastrous on the whole. They do not prevent prices 
from going up. Partial divestitures, such as shedding 
subscribers, also often fail. In this case, where Comcast would 
pick up New York, and LA, and other markets, it is likely to 
try to keep the most profitable subscribers and the most 
profitable markets and divest the others. That will not restore 
lost competition.
    And I am happy to answer any questions. Thank you.
    [The prepared statement of Mr. Grunes follows:]



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                               __________

    Mr. Bachus. Thank you, Mr. Grunes.
    And at this time, Mr. Gottsch, you are recognized.

                 TESTIMONY OF PATRICK GOTTSCH, 
                  FOUNDER AND CHAIRMAN, RFD-TV

    Mr. Gottsch. Thank you. Good morning, Chairman Bachus, 
Ranking Member Johnson, and Members of the Subcommittee. My 
name is Patrick Gottsch. I along with my daughters, Raquel and 
Gatsby, who I am proud to say are sitting right behind me 
today, represent the founders and majority shareholders of Real 
Media Group, owners of RFD-TV, RURAL TV, FamilyNet, and RURAL 
RADIO on Sirius XM Channel 80. Thank you for the opportunity to 
testify about the importance of independent programming and the 
impact of consolidation in the cable industry from a rural 
perspective.
    RFT-TV is about as independent as one can get. After 8 
years of rejection, in December of 2000, RFD-TV was finally 
launched as a public interest channel on DISH, and then added 
to DirecTV in 2002, thanks to Congress and the FCC establishing 
Section 335 of the 1992 Cable Communications Act. The 146 
independent program producers associated now with RMG, along 
with the millions of viewers who value the rural and 
agricultural news, western sports, and traditional family-
oriented entertainment featured on our channels, have Congress, 
the FCC, and Charlie Ergen to thank for having the foresight to 
create opportunities to give independent channels a chance to 
exist and prosper.
    In 2007, RFD-TV evolved into a for-profit entity, and Rural 
Media Group was formed. Recognized now as one of America's 
leading independent networks, RFD-TV was ranked most reasonably 
priced in the recent 2013 Independent Cable News Survey. 
Nielsen rated and distributed into over 40 million homes in 
cable and DBS, RFD-TV is the number one channel now for C&D 
County viewership, number one for time spent viewing, and for 
adults 50 plus as a percentage of our overall audience 
composition.
    In 2008, RFD-TV signed an 8-year master affiliation 
agreement with Comcast. Following success in Nashville, in 
October of 2010, Comcast launched RFD-TV on all systems in 
Colorado, New Mexico, and Utah. RFD-TV worked closely with 
Comcast's Denver office and invested heavily in this launch by 
purchasing billboards, radio ads, organizing radio remotes, and 
training Comcast telemarketers. The launch was a resounding 
success with RFD-TV generating an average 2.8 percent lift with 
connects up 15 percent on the D-1 tier in all these Comcast 
markets. Independents try harder and have to deliver.
    As you know, in January 2011, the Comcast/NBCUniversal 
merger was approved. Since then, Comcast has not launched RFD-
TV in a single new major market and has declined to carry RFDHD 
in any of their markets, despite the provisions added to the 
merger designed to protect independents. On August 13th of this 
past year, despite strong ratings, low costs, and over the 
vehement objections from thousands of Comcast customers 
represented by these binders in front of me, we were given only 
a 30-day notice. Comcast dropped RFD-TV on all its cable 
systems in Colorado and New Mexico. In 1 day, RFD-TV lost 
470,000 homes, 43 percent of its very limited Comcast 
distribution.
    To date, RFD-TV has worked diligently to understand 
Comcast's decision and to find a solution. The City of Pueblo, 
the State of Colorado, and even the Colorado governor's office 
mobilized significant efforts to persuade Comcast to reverse 
its decision and return RFD-TV's popular rural and western-
themed programming to these two States with such strong ties to 
the western lifestyle.
    Meetings have also been held with the regional Denver 
office and with Comcast programming executives in Philadelphia, 
to no avail. Why was RFD-TV dropped despite all this support? 
It is the question that everybody has, no matter who we meet 
with. But it seems to be simple. We are just a true 
independent.
    RFD-TV enjoys excellent relations with most all other cable 
operators. In fact, this past year, Charter launched RFD-TV on 
their Fort Worth system, and in October, Time Warner added RFD-
TV to franchises in the State of Kentucky. Our concerns with 
Comcast now taking over this major western city and another 
rural State should be obvious. In addition, 30 million homes 
may be denied the choice to access this proven channel and a 
wall will be built between rural and urban America if Comcast 
does not reverse its recent behavior with RMG and RFD-TV.
    In the past, the United States Government has taken 
critical steps to ensure that rural America has a balance of 
services offered between rural and urban populations. The 
information super highway must go down each and every country 
road and provide two-way communication in order that city and 
country remain connected, just as it was when the 1893 Mail 
Communications Act led to the establishment of our namesake, 
rural free delivery, or RFD-TV.
    Thank you, Mr. Chairman, for allowing me not to wear a tie, 
and I look forward to answering all your questions.
    [The prepared statement of Mr. Gottsch follows:]


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                               __________

    Mr. Bachus. Thank you very much, Mr. Gottsch.
    And at this time, Mr. Schaeffer, you are recognized for 
your opening statement.

     TESTIMONY OF DAVE SCHAEFFER, CHAIRMAN AND CEO, COGENT 
                   COMMUNICATIONS GROUP, INC.

    Mr. Schaeffer. Well, thank you, Chairman Bachus, Ranking 
Member Johnson, and the entire Committee for the opportunity to 
voice our concerns.
    This particular transaction is not about video, but rather 
about the future. It is about the Internet. You know, 15 years 
ago I had the good fortune and maybe the good luck to found a 
company on a simple principle that the Internet was going to be 
the only network that mattered, bandwidth was a commodity, 
technology would allow us to drive down prices forever. Those 
bets turned out to be correct. It was difficult. We went 
through a tough market segment, and we have been a good 'net 
citizen in helping lead that technology fight and driving down 
the costs of bandwidth.
    Comcast, however, has not been quite as good of a 'net 
citizen, and is actually looking to be a worse 'net citizen 
going forward if they are allowed to combine their network with 
that of Time Warner. So the Internet is based on the idea of 
free exchange of traffic. One of the mechanisms that traffic is 
exchanged is peering. So while Comcast signed a consent decree 
as part of its last merger with NBCUniversal and said it is not 
going to interfere with traffic inside of its network, it has 
actually been very clever. It interferes with traffic before it 
enters its network.
    So the Internet today has allowed 2.7 billion people 
wirelessly and another billion people wire line to connect. 
Over half of the population of the world exchanges information. 
The Internet is 44,000 networks. Those networks interconnect 
one of two ways: they buy connectivity from companies such as 
ours, or they peer and they connect through those peering 
connections.
    Comcast does not operate a global network, in fact, should 
be buying connectivity to the global Internet, but has used its 
market scale and scope to extract an unusual concession. It 
wanted free connectivity peering to the Internet. Even though 
it did not operate a global network, it did not carry its fair 
load. But because it represented so many customers, backbone 
operators, like Cogent and others, agreed to peer with them.
    That was not good enough for Comcast. As Comcast's market 
power continued to increase, as consumers had less choice, they 
actually started to demand payments for connectivity. A larger 
Comcast will demand even greater payments.
    Let me use an example of Netflix. Netflix is our largest 
customer. We are their primary carrier of Internet traffic. 
Netflix buys that connectivity from Cogent because we deliver 
the highest quality at the lowest price. We have dozens of 
competitors. We win business every day by competing and 
offering the lowest price and the highest quality.
    Netflix wanted to do business with us. They continue to be 
our largest customer, but there was a problem. We could not 
deliver all the traffic that Netflix was delivering to Comcast 
customers. We deliver no traffic to a Comcast customer that a 
paying Comcast does not request. When we deliver that traffic, 
the ports, or connections, between our network and Comcast 
became full. We went back to Comcast and said could you please 
upgrade these connections in a normal pattern and practice that 
we have been doing for years. Even though you, Comcast, are not 
really qualified to be a global peer, we will give you free 
connectivity. Allow us to deliver the content at our expense to 
the customers that you are charging, those 20.7 million 
customers that you collect $30 million a day from.
    Comcast refused. They not only refused Cogent, they refused 
every other major backbone, and in doing so forced Netflix, an 
innovative company, into a corner. They forced Netflix to have 
to go and directly enter into a contract with Comcast, paying a 
higher price for a less robust product. That is not a free 
market. That is an abuse of market power. A larger and more 
combined company would have even more market power.
    So there are two parties that do not sit in front of this 
Committee today: tens of millions of consumers. I think this 
Committee cares about them and will protect those consumers, as 
well the FTC, the Justice Department, the FCC. But there are 
also entrepreneurs and innovators. We today sell service to 
thousands of edge providers. I cannot predict where the next 
You Tube or the next Netflix will come from. I can tell you, 
though, that their business models are highly dependent on 
getting inexpensive connectivity. And what they are not 
dependent on is entering into a bilateral agreement, paying a 
toll to an inefficient operator, such as Comcast, who has not 
honored the commitments that they have made to date. Why should 
you in this Committee expect them to honor those commitments 
going forward?
    Thank you very much.
    [The prepared statement of Mr. Schaeffer follows:]


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                               __________

    Mr. Bachus. Thank you, Mr. Schaeffer.
    At this time, Dr. Labovitz?

              TESTIMONY OF CRAIG LABOVITZ, Ph.D., 
                 CO-FOUNDER AND CEO, DEEPFIELD

    Mr. Labovitz. Thank you. Thank you, Mr. Chairman, Ranking 
Member Conyers, Chairman Bachus, Ranking Member Johnson, and 
Members of the Subcommittee. I am pleased to be here today to 
discuss some of the technical issues that may be relevant to 
your consideration of the proposed Comcast/Time Warner Cable 
merger. At the outset, I want you to know that Comcast and Time 
Warner Cable are two of the many companies with whom my 
company, DeepField, has commercial relationships. The views 
expressed in my testimony are my own.
    I am both an academic researcher and a commercial vendor. 
My current company, DeepField, provides network management and 
analytic solutions to a range of large content companies and 
consumer Internet providers. My career has included roles as 
the chairman of the Principal Internet Industry Engineering 
Association in North America, as well as the project director 
of several National Science Foundation research project 
studying Internet architecture.
    I received a Ph.D. in the study of Internet architecture 
from the University of Michigan in 1999. In 2010, I 
collaborated on the largest research study of Internet traffic 
to date. Earlier this year, my company, DeepField, along with 
academic and industry research partners, began work on a large-
scale follow-up study to the 2010 study. My testimony this 
morning is largely based on these research efforts.
    Ten years ago, the Internet was both much smaller and 
looked very different than it does today. Early on, almost all 
traffic traveled across an Internet core consisting of 10 to 12 
large national and international Internet providers, including 
companies like AT&T and Level 3. The Internet core connected 
the majority of content providers with the many thousands of 
consumer access networks around the world, such as Earthlink 
and AOL.
    These interconnections between providers are known as 
peering. Unlike telephony, the exchange of Internet traffic has 
largely developed without regulation. Both today and in the 
early days of the Internet, service providers such as AT&T 
sometimes negotiate the exchange of Internet traffic with other 
large providers without paying for access or traffic rights. 
The industry calls these arrangements settlement free peering.
    Both today and in earlier Internet periods, consumers have 
paid access networks, such as AOL, and in turn those access 
networks have paid larger providers, such as AT&T, for 
connection to other access networks and large providers. The 
industry calls these arrangements transit peering.
    Over the last 10 years, technological advances and market 
forces have dramatically transformed the landscape of core 
Internet connection. These market forces include consolidation, 
such as the Google's acquisition of YouTube, and the rapid 
growth in Internet content and advertising revenue. Our 
research has documented the accelerating impact of these market 
forces. Internet traffic was once broadly distributed across 
thousands of companies, but by 2009, half of all Internet 
traffic originated in less than 150 large content and content 
distribution companies. Today just 30 companies, including 
Netflix and Google, contribute on average more than one-half of 
all Internet traffic in the United States during prime time.
    There have also been significant changes to interconnection 
at the core of the Internet in recent years. Specifically, 
today there is much more direct interconnection between access 
networks, such as Verizon, and content providers, like Hulu and 
Google, than there were previously. The removal of transit 
provider ``middlemen'' is because content and access networks 
seek greater efficiencies of scale and economy.
    Our research has also found a significant degree of 
vertical integration and blurring of traditional distinction 
between companies, content providers, and they will build 
global backbones. Cable Internet service providers offer 
wholesale transit. And transit Internet providers offer content 
distribution and cloud hosting services. For example, Level 3 
is both a large transit provider as well as the second largest 
content distribution provider.
    Finally, our ongoing work has found growing diversity and 
complexity in the Internet ``cyber supply chain.'' This refers 
to the increasingly diverse set of third party infrastructure 
and services supporting the delivery of Internet content. 
Websites once came from computers directly owned and managed by 
the content owners located in tens of thousands of enterprise 
machine closets and enterprise data centers around the world. 
Today the majority of Internet content leverages one or more of 
multiple third party content distribution services, hosting 
providers, exchange points or cloud providers, often with many 
diverse direct interconnections to networks like Comcast or 
Verizon. Examples of companies providing these different 
services are identified in my prepared statement.
    I hope my testimony and my research findings help provide 
the technical context of the increasingly complex economic and 
engineering issues associated with Internet content delivery 
and interconnection. I thank you for your time and attention. I 
would be pleased to answer any questions you may have.
    [The prepared statement of Mr. Labovitz follows:]


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                               __________

    Mr. Bachus. Thank you, Doctor. At this time, we will 
proceed under the 5-minute rule with questions. In order that 
each Member has sufficient time to ask questions of our large 
panel, we expect to have two rounds of questioning. And I will 
say that Members who are not Members of the Subcommittee but 
Members of the whole Committee, as we start that second round, 
I will yield my time to you because I am told that that is the 
only way that we can accomplish that. So, Mr. Gohmert, you have 
been here the entire hearing, so you will commence the second 
round.
    I will recognize myself for 5 minutes. Mr. Cohen, your 
response to a question by Senator Amy Klobuchar, who is my 
counterpart in the Senate, was that ``We carry independent 
networks because we are always focused on the consumer. If you 
have compelling content and you can make that case that our 
consumers want to watch that content, we will carry it.''
    First, I would ask you if you stand by that statement. But 
secondly, I would just caution you what may be a consumer in 
Philadelphia and what may be a consumer in Coosa County, 
Alabama, which is an agricultural county, or in Colorado, is a 
totally different consumer.
    Mr. Cohen. So, thank you, Mr. Chairman. And the answer is I 
definitely do stand by that statement, and I completely 
acknowledge the second part of what you are saying. We try and 
assess what our customers want in individual local markets, so 
whereas we do centralize negotiation of content deals out of 
headquarters in Philadelphia, there is enormous input from 
local systems as to what channels and what programming their 
customers might want to say.
    And just to put flesh on the bones of this, I mean, we 
think we are, if not the most, one of the most independent 
programmer friendly distributors in the industry. We carry 160 
independent programming networks. And in the last 3 years, we 
have negotiated and given expanded distribution for 120 of 
those networks. So we are a company that really does try and 
find the niches. Most of those networks may not have national 
distribution, but we really try and find the niches of 
programming that customers in particular markets are interested 
in.
    Mr. Bachus. Thank you. Mr. Gottsch, in your experience, has 
Comcast lived up to the statement of Mr. Cohen?
    Mr. Gottsch. Well, of the----
    Mr. Bachus. Yes, there we go.
    Mr. Gottsch. Excuse me. The 160 programmers that Mr. Cohen 
mentioned, we are proud to be two of those programmers with our 
RFD-TV channel and our FamilyNet channel. But that has not been 
the case here in the last year and specifically since the last 
merger.
    We, in fact, as I mentioned in our statement, were taken 
off in Colorado and New Mexico. And in those States, there was 
not a rate dispute. We were under contract. We had the support 
of the City of Pueblo, the State of Colorado, and the 
governor's office in Colorado. When it was announced that RFD-
TV would be removed on August 13th, we had a lot of customers 
that were contacting us directly who said they could not get a 
hold of Comcast, or that Comcast customer service was telling 
them that it was a rate dispute.
    We invited folks to write us and that we would personally 
deliver their letters and their concerns to the Denver office, 
which we did. We have seven of these binders, so over 4,000 
customers were asking Comcast not to remove us, yet we still 
were removed in August of 2013.
    Mr. Bachus. Thank you. And I would say that, you know, and 
maybe it is not just the numbers, but content. I know that with 
mergers in the radio business, Birmingham, which is an SEC 
football town, is getting a lot of hockey news, and we get a 
lot of soccer, which is growing, but most people my age do not 
know what the rules of soccer are. There is football, baseball, 
and basketball. So I would just call it a challenge, but it is 
a challenge that if you become bigger, you need to be aware of 
it.
    Mr. Cohen. Sir, we're--look, I am sympathetic to this 
argument. I was actually involved at the time of this decision. 
And, you know, in a perfect world if money was not an issue and 
if bandwidth was not an issue, and in the RFD-TV case bandwidth 
was the much more substantial issue, those systems in Denver 
and Albuquerque are very bandwidth constrained, and our local 
teams there made a judgment that it was more important for us 
to add more high definition channels of popular programming, 
like the Smithsonian Channel and the Food Channel, that those 
were more valuable to the customers in that market.
    And it is nothing punitive against RFD-TV. We continue to 
carry RFD-TV to about 600,000 or 700,000 of our customers, 
including in Kentucky and Nashville, I mean, the markets where 
we first started with them. Let us always stay focused on the 
consumer. It is not that they do not have a choice. If RFD-TV 
is sufficiently important to them, they can switch to DISH and 
DirecTV and those markets, both of which carry RFD-TV.
    So we are not controlling consumer choice here. We are 
primarily an urban clustered cable company. And this content, 
even in Colorado, the bulk of our base is in the urban areas of 
Colorado, and we make the best judgments we can.
    Mr. Bachus. Yes. I think that sort of encapsulates, I 
think, the fear that, you know, the rural market gets left out. 
And I would say we would be very sensitive to that because, you 
know, there are still a lot of people in rural areas. But I 
will let Mr. Gottsch respond, and then my time is up.
    Mr. Gottsch. Yes, just a brief reply. The curious thing 
here, the question that we cannot get answered is out of the 
160 independent channels that Comcast carried, they appear to 
have taken off one of the most popular channels in the Colorado 
and New Mexico markets. Our Nielsen ratings are higher than the 
other 159 channels in many day parts and throughout the week.
    And then, again it was the support of local governments and 
the request of Colorado that if there is going to be 160 
independents, is there not room for one independent channel 
devoted to rural interests, which make up 27 million homes in 
this country. There appears to be 11 million homes of the 29 
million that Comcast is taking over and 70 million people. Just 
one channel devoted to rural America is all we are asking for.
    Mr. Bachus. Thank you. At this time, I will recognize the 
Ranking Member of the full Committee, Mr. Johnson, for 5 
minutes.
    Mr. Johnson. Thank you, Mr. Chairman. The minority lead 
ownership in the video and broadband marketplace is good 
business, it is an important societal goal, and it helps to 
expand our economy. And that is a value that many people hold 
dear.
    When Comcast announced its merger with Time Warner, it 
stated that it anticipated that the FCC would require it to get 
under the 30 percent limit for cable TV systems. And so, there 
was an agreement that has been worked out with Charter to sell 
the 3.9 million channels that, or--excuse me--subscribers that 
would be required to get under that 30 percent benchmark.
    Did Comcast, Mr. Cohen, consider doing smaller transactions 
with African-American and Hispanic companies instead of giving 
the whole 3.9 million to Charter?
    Mr. Cohen. So, Mr. Johnson, I know you are aware of our 
commitment as a company to minority participation and ownership 
as well as in access to minority-centric programming. And so, 
this was a significant part of our discussion and remains a 
significant part of discussion.
    The problem is that there was no way to accomplish the 
significant tax efficiencies and competition and public 
interest enhancing efficiencies that we have been able to 
generate through this three-part transaction with Charter by 
dividing the systems into smaller pieces and making them 
available for smaller companies, whether they are minority or 
not minority to be able to bid for them. It was a topic of 
discussion. We have had discussions with numerous minority-
owned groups who are interested in purchasing cable systems. 
And I will report to you the same that we have reported to 
them, which is we will continue to look for opportunities to 
create minority ownership in the cable system space.
    Mr. Johnson. And what about enabling already-existing 
minority-owned providers to get larger?
    Mr. Cohen. So I am running through my mind and do not think 
it would be appropriate to disclose the various groups that we 
have talked to. I honestly am not sure whether any of them are 
existing minority owners of cable systems. But to the extent we 
would engage in this kind of a process, we would obviously not 
exclude those types of groups from participating.
    And if I can, Mr. Chairman, I mean, I think that I have 
some credibility speaking to this because 4 years ago when we 
were doing the NBCUniversal transaction, I talked about our 
company's commitment to minority ownership in the cable channel 
space. I referenced TV One, which we helped to create as a 
cable company after our acquisition of AT&T Broadband, and 
which we continue to support. And it is one of the great 
success stories of a minority-owned channel.
    And in the NBCUniversal transaction, we committed to launch 
eight new minority-owned independent networks over an 8- to 10-
year period. We have launched four of those already, two of 
them African-American owned and two of them owned by Hispanic-
Americans. So this is a space where minority ownership of 
businesses, wealth creation opportunities, and conversation 
shaping opportunities is very important to us as a company.
    Mr. Johnson. All right, thank you. As you know, African-
Americans view television programming at a more significant 
level than the general population. Yet there seems to be a 
disproportionately small amount of programming geared toward 
urban and African-American audiences. On its basic cable 
programming tier, does Comcast carry any African-American 
controlled and operated networks? And if so, are those networks 
carried on the basic tier in every market, or only in select 
franchise areas?
    Mr. Cohen. So I am not sure what our basic tier is anymore, 
but I can tell you that our most popular tier is our basic 
digital tier. And on that tier we carry 11 African-American 
owned or targeted networks, which is the sum of African-
American owned or operated networks that we know about.
    Now, I know only three of them are African-American owned--
TV One, ASPiRE, and Revolt. We do not necessarily know whether 
these other networks are majority African-American owned, 
minority. But they identify themselves as African-American 
targeted networks, and we carry all 11 of them on our most 
popular digital tier.
    Mr. Johnson. All right, thank you. How do you respond to 
claims that Comcast/NBCU has blocked certain content providers, 
like Univision Sports, from being carried on your services, or 
unfairly place channels of other content providers, like 
Bloomberg News, because they compete with NBCU channels?
    Mr. Cohen. Two very different questions, but the answer 
would be the same to both, which is I would deny those charges. 
I think they are not true. In terms of the way we treated 
Bloomberg News, the irony of the Bloomberg News situation was 
that Bloomberg News was positioned in the place it was in the 
channel lineup before we owned CNBC, so there could not have 
been any discriminatory intent.
    But I do not even rely on that argument anymore. We had a 
dispute with Bloomberg News. It was resolved at the FCC. We 
have now repositioned Bloomberg News to news neighborhoods as 
they have requested----.
    Mr. Johnson. What about Univision?
    Mr. Cohen [continuing]. And we have resolved that matter 
entirely.
    Mr. Johnson. All right. Would you care to respond to the 
claim about Univision Sports?
    Mr. Cohen. I am sorry. I was worried about the time, but I 
am happy to answer that.
    Mr. Farenthold [presiding]. And I was going to go there in 
my line of questioning, too.
    Mr. Cohen. I will quickly say we carry eight Univision 
networks. Univision has come to us and they have asked for 
additional carriage of three Univision networks, and we are 
under discussions with them. We are one of the largest, if not 
the largest, carrier of Hispanic programming----
    Mr. Johnson. What about sports?
    Mr. Cohen [continuing]. Fifty-eight channels. So as a 
business matter, we will resolve our issues with Univision in 
due course.
    Mr. Johnson. All right, and I will yield back.
    Mr. Farenthold. Thank you very much, Mr. Johnson. I do want 
to follow up a little bit on that, Mr. Cohen. I do want to 
point out, I do not want to sound hostile to this merger 
because I really think that the government needs to stay as 
much out of the business world as possible. But I have had some 
concerns raised by constituents and some interest groups that I 
have agreed to talk to you guys about. And I think that is the 
purpose of this hearing is to get the stuff on the table.
    And, you know, one of my concerns is that I learned last 
week that a combined Comcast/Time Warner Cable will serve 91 
percent of the Hispanic households in the U.S., and it will be 
the top distributor in 19 out of the 20 top Hispanic markets. 
We know that you guys own Telemundo, one of the current 
providers of Spanish language programming. And along with what 
Mr. Johnson was asking, what assurances can you give us that 
you will not discriminate against non-Comcast/NBCUniversal 
owned programming produced by other companies? And do you have 
internal procedures in place to prevent that kind of 
discrimination?
    Mr. Cohen. So I should have waited for your follow-up. I 
would have been able to give a more complete answer. So first 
of all, we have not been able to verify those numbers, just for 
the record. But I have observed before in this transaction that 
sometimes big is bad, and I understand that. But sometimes big 
is good, and sometimes big is very good. And when you have a 
company like Comcast, which has this extraordinary commitment 
to diverse programming, but, in particular, to Hispanic and 
Hispanic-themed programming, covering a greater percentage of 
the Hispanic population in the United States is a really good 
thing because we will bring that commitment to those 
communities in the same we have brought it to the current 
Comcast footprint.
    So we have a significant commitment to carrying Hispanic 
programming. As I said, we carry 58 Hispanic or Hispanic-themed 
cable channels currently, and we have a long-term 
retransmission consent agreement with Univision. And we carry 
eight Univision networks, so----
    Mr. Farenthold. I guess, this kind of follows up on my 
overall concern about the difficulty for new programmers to 
break into the market. Univision's Sports Network is a perfect 
example. They are actually, I think, not on you all's stations, 
but they end up the number one Spanish language sports, so it 
kind of argues against being good business to have it on there. 
You hear Mr. Gottsch here testify about the fact that his 
ratings in markets where he was removed from your cable system 
were higher than some of the other channels that you won.
    So I guess the level of vertical integration there, the 
fact that NBC owned so many stations that would potentially 
compete with these----
    Mr. Cohen. So let me respond to that, and fortunately for 
us this is one of the most litigated issues that exists in 
antitrust law, and that is the percentage of the market that a 
single company can have before there is a risk that it can 
foreclose content to its consumers. Twice the FCC had extended 
proceedings to determine what was that percentage of the 
market. Twice they concluded that if one cable company had more 
than 30 percent of the market, there would be an undue risk of 
that company serving as a bottleneck or extorting improper 
pricing from channels.
    Mr. Farenthold. One of the--yes.
    Mr. Cohen. Twice the D.C. Circuit struck that down finding 
that there was no evidence that with a 30 percent share a cable 
company would be able to control the market. We are coming in 
below 30 percent, and the answer to the question is that any 
cable channel has more than 70 percent of the country to be 
able to go after.
    Mr. Farenthold. All right. I am running out of time. Okay, 
go ahead, but I am running out of time here.
    Mr. Cohen. One quick answer. One quick. The protection that 
exists is the program carriage rules. There are legal rules 
that prevent us from discriminating against a new channel or an 
existing channel in favor of content that we own. So that is 
something that already exists under the law. We are not allowed 
to do it.
    Mr. Farenthold. One of the mitigating factors I think that 
is actually going to gain you support in this is as new 
technologies are developing out and you are getting more cable 
companies, you have got FiOS competing.
    Mr. Cohen. Right.
    Mr. Farenthold. You have got Google Fiber coming in. There 
are going to be more options in the short term. But I am also 
concerned about the programming. I will use an example from 
Corpus Christie where I live. We have two cable companies. We 
have Time Warner and we have Grande. Comcast owns the rights to 
the Astros baseball games. I would assume there is not going to 
be a lot of incentive there for you to sell the rights to carry 
the Astros baseball for, you know, a few cents or a buck a 
subscriber to Grande when you can use it to bring in, you know, 
hundred-dollar Internet/cable/phone.
    How are we going to address the issue of fair access to 
your programs? And that could be taken to the extreme to say, 
all right, we are going to pull NBC and Bravo and E!, too, or 
we are going to jack them up to competing cable companies or 
FiOS in the same market.
    Mr. Cohen. So I smile only because I wish we had that 
problem with the Houston Regional Sports Net, and that your 
concern----
    Mr. Farenthold. Well, it is part of the Astros' fault. They 
are not doing very well.
    Mr. Cohen. If you really wanted to watch the Astros, that 
would, like, be good news for that network. But the Houston RSN 
is a perfect example really of why the fear about our control 
of this is overstated. That network is really controlled by the 
two teams, by both the Astros and the Rockets. We have a 
minority ownership interest in it. We manage it, but they 
control the pricing of the network. They control the 
distribution of it.
    But again, even if that were not true and we were 
controlling that, that is on the program access side, so you 
have the program access rules. And I would note that under the 
NBCUniversal order, a small cable company that does not like 
the terms that are being offered actually has a right of 
arbitration just on that regional sports net without any other 
cable channels bundled with it.
    Mr. Farenthold. Well, I have run the red light, so we will 
move along. And I will have a couple more questions in the 
second round of questioning----
    Mr. Cohen. Thank you----
    Mr. Farenthold [continuing]. For some of the other members 
of the panel. We will now go to the Ranking Member of the full 
Committee, the distinguished gentleman from Michigan, Mr. 
Conyers.
    Mr. Conyers. Thank you, Mr. Chairman, and I thank all the 
witnesses for their important contributions. I have a strong 
feeling that we may have to have another hearing on this 
because of the complexity of the material.
    I would like to start off with, well, just observing that 
Mr. Hemphill left out the consumer welfare is the key objective 
of antitrust law. You said the goal of antitrust is to ensure 
dynamic competition and open markets. But I did not hear a lot 
about keeping prices low and choices for the consumer.
    So I would like to turn to Mr. Grunes, who said that 30 
percent of the cable market share is not enough to be anti-
competitive. But really no court has ruled that 30 percent is, 
as a rule, not enough to be anti-competitive. And the Supreme 
Court has also ruled that 30 percent of a market was a 
troubling trend toward concentration. And also, what about the 
40 percent control of the broadband Internet? How do you see 
this as something that we may not overcome if this merger were 
to go through?
    Mr. Grunes. Thank you, Ranking Member Conyers. Two points. 
First of all, I did not advocate 30 percent as not being a 
problem. The merging parties----
    Mr. Conyers. Oh, Mr. Cohen was the one that made that----
    Mr. Grunes. Mr. Cohen, yes. And I would point out a couple 
of things. First of all, Judge Diane Wood of the 7th Circuit, 
who is also a former Antitrust Division lawyer and a University 
of Chicago professor, found that 20 percent was large enough in 
the Toys R Us case depending on the markets. The issue here is 
not simply numbers. A subscriber is not a subscriber is not a 
subscriber. When you have the top 10 or top 20 markets, that 
gives you power in each of those markets, and that is the power 
we should be concerned about.
    In terms of the broadband shares, I am not sure whether it 
is 40 percent, 50 percent. It could be as high as 60 percent. 
But the one thing I can say is that we have not heard Comcast 
or Time Warner Cable come into today and say we are going to 
get those shares down to 30 percent. They are talking about the 
video shares. They have not said a word about the broadband 
shares.
    Mr. Conyers. Thank you so much.
    Mr. Hemphill. If I might just add to clarify, if you do not 
mind, Mr.----
    Mr. Conyers. Well, I do mind right now because I am under a 
very tight time limit. Maybe on the second round.
    Mr. Hemphill. Maybe on the second round.
    Mr. Conyers. Let me turn now to Mr. Polka. Comcast is a 
cable company and a programmer, and that raises a double 
concern with me because of potentially higher prices and fewer 
choices, which is what we are concerned about. And I think the 
Department of Justice is going to take a little while sorting 
this out, and I do not know if it is resolvable to be honest 
with you at first blush. What are your cautionary comments to 
the Committee about this?
    Mr. Polka. Very cautionary. As I mentioned in my opening 
comments, these are really three separate mergers that we are 
talking about, not just a horizontal merger, because you have 
got the combination of programming assets of both Comcast and 
Time Warner Cable. You have got the combination of Comcast 
distribution and other programming assets that combine anti-
competitively. And, Mr. Chairman, I would note that Grande 
Communications is a member of ours and is very concerned about 
the nature of this big deal and prices that they will be 
charged ultimately that their consumers will have to absorb.
    And then the ability of the large company, even though it 
may not be 30 percent of the market, to be able to control and 
have influence over other programmers, other large media 
companies that they deal with in terms of what prices are 
charged to the Comcast/Time Warner Company, which ultimately 
affects the prices of our other member companies. So we are 
very concerned.
    Mr. Conyers. Let me just squeeze in here to Dave Schaeffer 
going out of the door. As the Comcast market power increases, 
so can the prices that they demand. Is that a point that you 
made in your discussion?
    Mr. Schaeffer. Yes, sir, Mr. Conyers. In fact, we have seen 
Comcast point to the fact that they have declined Internet 
pricing by 92 percent over a 15-year period. In fact, Internet 
pricing at the core of the Internet transit has gone down 99 
percent over that same period. So we have seen a decline of 
eight times as much as Comcast has passed on to its customers. 
Secondly, you know, a lot of the conversation here has been 
around video programming.
    Mr. Garcia. I am sorry. Could you explain that? I did not 
understand his response just about the percentages of Internet 
traffic.
    Mr. Conyers. Well, wait a minute. We----
    Mr. Garcia. No, I am not taking over. I just want him to 
explain.
    Mr. Conyers. Yes, I know, but let him finish, and we will 
get back to you. Yes?
    Voice. Go ahead.
    Mr. Schaeffer. I will try to answer that when we get there. 
But, you know, the ultimate way in which video content can be 
distributed to consumers is over the Internet. So today, 
American consumers use about 300 minutes a day per capita of 
video. Only 15 minutes of that is delivered over the Internet. 
Over time, the cost of publishing that content continues to 
decline, and if allowed to operate freely, probably somewhere 
between 220 and 250 minutes a day will eventually be delivered 
over the Internet.
    Comcast through its interconnection strategy is deciding to 
limit the ability of over-the-top video because it directly 
competes with its linearly programmed video and gives it an 
additional control point over the production of that video. So 
it is another way to increase pricing.
    Mr. Conyers. Thank you very much. And thank you, Mr. 
Chairman.
    Mr. Farenthold. Thank you very much. We will now go the 
gentleman from North Carolina, Mr. Holding, for his round of 
questioning.
    Mr. Holding. Thank you, Mr. Chairman. I am sure that my 
constituents back at home who are Time Warner customers want to 
cut right to the chase. So, Mr. Cohen, are my constituents who 
are Time Warner customers going to face higher prices for 
services post-merger?
    Mr. Cohen. So, Mr. Holding, there is nothing about this 
transaction that is going to lead to increased prices for 
consumers. I think there are significant consumer benefits that 
your constituents will see as a result of this transaction: 
faster Internet speeds, more video on demand choices, more free 
video on demand choices, the ability to watch more content on a 
streaming basis inside and outside the home, access to our X1 
video platform, which is truly a groundbreaking new way of 
watching television. But there is nothing in this transaction 
that will result in an increase in prices for any Time Warner 
Cable consumer.
    Mr. Holding. You said in the past that ``We're certainly 
not promising that customer bills are going to go down or even 
increase less rapidly.'' You would still stand by those 
comments, though?
    Mr. Cohen. What I said was, and I have a nasty little 
habit, which I hope no one wants to persuade me to stop, of 
telling the truth. So I was asked a question and I said I 
cannot guarantee that prices are going to go down, and I cannot 
guarantee that they are even going to increase at a lower rate. 
I think this transaction has the potential to slow the increase 
in prices because with our additional scale, our additional 
investment, and our ability to gain some purchasing advantages 
in the set-top box market, may be able to move the needle 
slightly on the programming side.
    What other benefits we can get as a result of the combined 
scale of the company, consumers will see in terms of impact on 
their bills. And for us, consumers are always front and center. 
I think consumers are going to be the big winners in this 
transaction, and any moderation that we can bring to increases 
in their bills will certainly be one of the benefits that we 
would love to be able to see.
    Mr. Holding. Mr. Schaeffer has made some fairly direct 
allegations, and even though the technical aspects of what Mr. 
Schaeffer is talking about are a little bit above me, I do get 
his point very clearly that the combined share of broadband and 
also the amount of share you have in top markets and so forth, 
you know, is powerful. So if you could take a minute and 
respond directly to the allegations that Mr. Schaeffer has 
made.
    Mr. Cohen. So thank you for that opportunity. I am going to 
try and bring this down to a level that I can understand, which 
really requires coming up a little to more of a 30,000-foot 
level.
    I think there are two different markets here that we need 
to consider. One is the broadband ISP market, what is called 
the last mile market, our delivery of broadband services to our 
customers. The second is the market in which Ms. Schaeffer and 
Cogent functions, which is the interconnection market, which is 
the first mile market, if you will. How Internet providers, how 
Google, Netflix get their content onto the Internet and into 
our ISP so that our customers can gain access to it.
    I do not believe, and I will be interested whether 
Professor Hemphill agrees with this, that the market share that 
we are achieving in the broadband ISP market, the last mile 
market, is close to the level that it has any impact whatsoever 
on the first mile market. That market is an intensely 
competitive market. It is a market with dozens of network 
operators, content delivery networks, peering organizations, 
transit providers. As Mr. Schaeffer has described, it is a 
market in which he has competed vigorously for 15 years trying 
to offer the lowest price and the highest quality. It is a 
market where pricing has dropped 99 percent over the last 15 
years.
    And as a result of that, the Netflixes of the world, the 
Googles of the world, the Internet content companies, the young 
man working in his garage in your district who wants to be the 
next Netflix has dozens and dozens of choices as to how get his 
or its content onto the Internet to enable them to deliver it 
to our customers. And we think that market is functioning 
extremely well. We do not think that market and the structure 
of that market is affected at all as a result of this 
transaction, and that the questions that have come up recently 
about that market are better looked at on an industry-wide 
basis, which is exactly what Tom Wheeler and the FCC have said 
that they are prepared to do.
    If you gave me the invitation, one thing I also want to 
reply to his description of our Netflix transaction, which as 
far as I know is wholly inaccurate. We did not force Netflix to 
enter into an interconnection deal with us. That was Netflix's 
idea. They came to us. It was their desire given the size of 
their traffic to cut out the middleman, their words--the 
middleman happened to be Cogent, by the way--and to deal 
directly with us.
    And although our agreement with Netflix is subject to a 
non-disclosure agreement, and I cannot disclose the terms of 
the agreement, which I would do willingly, by the way, with 
permission from Netflix, I can tell you that it has been 
publicly reported, contrary to what Mr. Schaeffer said, that 
Netflix is paying not more to us under this agreement, but 
less. And I think Netflix made a commercially reasonable 
decision that given the size of their traffic, they did not 
need to deal with a wholesaler. They could deal with us 
directly, and they came to us and asked us to do that deal, and 
we did. And I would note that they turned around 2 weeks ago 
and announced that they had done exactly the same type of deal 
with Verizon.
    Mr. Holding. Thank you, Mr. Chairman.
    Mr. Farenthold. Thank you. We will now go to the 
gentlelady, who has a child at the University of Texas, so I am 
sure she is looking for the Longhorn Network on her cable 
service, much like I am. Ms. DelBene? [Laughter.]
    Ms. DelBene. Thank you, Mr. Chair, and thanks to all of you 
for being here today. We appreciate you taking the time. You 
know, this merger obviously has the attention of many folks 
across the country, and my constituents are no different. They 
rely on cable access for TV as well as for broadband, and 
pricing is very, very important to my constituents. I hear 
about it from them on a regular basis, and their concerns about 
paying a higher price each year, many times beyond the rate of 
inflation for the same service they have had. And they are very 
concerned about the impact that this might have.
    Following up a little bit on Mr. Holding's questions, Mr. 
Cohen, you have said that you do not expect this transaction to 
have an impact on prices per se. But if this is not going to 
have an impact and economies of scale are not achieved to help 
lower prices, then what can be done to help lower prices for 
consumers?
    Mr. Cohen. I think that is a very good question, and I am 
not sure I have an answer to that. I think that when you look 
at the number one driver of cable pricing--by the way, this may 
come as a surprise. Mr. Polka has probably spoken more on this 
subject than anyone on the panel, and you might want to ask him 
the question as well. But the number one driver of cable 
pricing is the cost of programming, and the cost of programming 
is rooted ultimately--I think Mr. Polka would agree--in the 
cost of producing that programming and in the rights around 
programming, and, in particular, sports rights.
    So that if you look over the last decade, there has been a 
120 percent increase industry wide in the cost of cable 
programming. And yet the increase in the most common package of 
cable programming has risen at less than half that rate over 
that period of time. So cable operators large and small have 
been valiantly fighting to try and ameliorate the impacts to 
their consumers of the overall costs of programming. I am not 
sure what the answer is to being able to control the continual 
spiraling increases in programming and programming rights and, 
in particular, sports rights. But I think somewhere in that 
alchemy is the ultimate solution to at least moderating price 
adjustments.
    If I can do one other point, though, I want to say that 
when you look at what happens in the pricing of programming, 
the FCC statistics deal with a particular package. If you look 
at the cost of cable programming on a per channel basis, the 
increase has only been about .2 percent over the last decade 
where inflation has increased 2.4 percent a year over that 
period of time. So that is about one-12th of the rate of 
inflation.
    And if you look at promotional bundles, which is where the 
majority of our customers consume their content, the pricing of 
those bundles has been flat over the last 7 years.
    Ms. DelBene. Thank you. I want to ask Mr. Polka, though, 
the same question and also since you referred to him. So, Mr. 
Polka, what is your feedback?
    Mr. Polka. Sure. Thank you very much. David, you are 
correct that there are enormous sports rights costs as well as 
costs of production for programming that are paid by large 
companies that own content, such as Comcast/NBCUniversal. Large 
content companies, like Comcast/NBCUniversal, pay those rights, 
and then in turn pass those onto their customers who are cable 
operators, among which are the 850 members of the American 
Cable Association, whose median size is 1,500.
    The fact of the matter is that with that control of 
content, with the rights that these content companies have, and 
particularly in the context of this merger, there is the 
ability to be anti-competitive in the use of that programming. 
And I will give you an example.
    Our members purchase their programming through the National 
Cable Television Cooperative. It would be likely in this merger 
to see, and this is why we are asking for FCC and Department of 
Justice review, that Comcast/NBCUniversal as part of the larger 
transaction will seek to recover its programming and its sports 
rights costs, all right?
    One way that they can do that how NBCUniversal charges 
Comcast for programming. Well, it is sort of one pocket to the 
other, so if NBCUniversal charges Comcast a higher price and 
that price then is then transferred down to the smaller 
providers of the National Cable Television are members who buy 
programming there, our prices as member companies and as 
competitors to both Comcast and Time Warner will rise, which 
will ultimately lead to rising prices to consumers.
    So we are not convinced that this merger will lead to lower 
prices for consumers. In fact, to your point about choice, 
there really is no choice today because of how programming from 
companies like Comcast, Universal, and others, how programming 
is sold in bundles where bundles of programming must be 
purchased or no programming can be purchased at all. So 
ultimately, unless those bundles are broken up to consumers, 
all they are going to see if higher prices.
    Ms. DelBene. Thank you. And thank you, Mr. Chair. I yield 
back.
    Mr. Farenthold. Thank you very much. I see the next one up 
is the gentleman from Virginia, the Chairman of the full 
Committee, Mr. Goodlatte.
    Mr. Goodlatte. Thank you, Mr. Chairman. Let me direct my 
first question to you, Mr. Cohen. To the extent that Comcast is 
able to obtain discounts from programmers, is it likely that 
these programmers will seek higher payments from other video 
distributors to compensate for lost revenues?
    Mr. Cohen. So I will give a short answer to that, but might 
yield my time to Professor Hemphill who might comment more 
knowledgeably. I think the answer to your question is no, and 
the reason for that is that in my lay terms, if you can assume 
that if we got a bigger discount that that would cause a 
programmer to go to a smaller cable company and try and make up 
that discount by getting a higher rate from that programmer, 
that would assume that in its initial negotiation with a 
smaller programmer, it left money on the table. That is, that 
it charged them less than what they could otherwise get. And 
that now that they got less from us, they would have to go back 
and get more from the other programmer. And I do not think that 
that is the way that markets work, and I think the economics 
and antitrust law is pretty is well settled on that fact.
    Mr. Goodlatte. Okay. Before we go to Professor Hemphill, if 
I have time I will do that, but I have some other questions. So 
next I am going to go to Mr. Schaeffer on the issue of in your 
testimony you argue that Comcast will be able to prevent 
content from reaching customers over the last mile. Do the 
requirements contained in the NBC order--in other words, when 
Comcast acquired NBC, particularly the open-Internet 
requirement--adequately address your concerns?
    Mr. Schaeffer. So while Comcast has alleged that it is 
abiding by the net neutrality rules and not discriminating 
against content flowing over its network, it has refused to 
upgrade its connectivity to all of the major backbones 
globally. Comcast alleges in its written testimony that the 
vast majority of traffic reaching its customers goes through 
settlement free or non-payment peering connections. But then it 
also says that Netflix accounts for over 30 percent of the 
traffic going to its customers. So there is clearly an internal 
consistency since they are charging Netflix. They are not 
offering them a settlement free connection.
    What, in fact, Comcast has done is by refusing to upgrade 
those connections, two things. One, they have denied their 
customers who they are charging the highest quality service 
that they could possibly deliver because they know that the 
request bits that those customers send will not be answered as 
the bits cannot flow back to their network. And secondly, they 
have created an inferior quality of service----
    Mr. Goodlatte. So let me interrupt you because I do not 
want to give you the opportunity to repeat all of your 
testimony. My question was, does the NBC order, particularly 
the open Internet requirements, adequately address your 
concerns, yes or no?
    Mr. Schaeffer. No.
    Mr. Goodlatte. Okay. Next, let me turn to Mr. Polka and ask 
you, does the Comcast merger impact the cable hardware and 
software industry? In other words, does this transaction make 
the Comcast standard the industry standard, and does that have 
an impact on your cable provider members?
    Mr. Polka. I would say this, Mr. Chairman, and thank you 
for the question. I think that is a legitimate question that 
necessarily needs to be part of the review by the FCC and the 
Department of Justice. I have mentioned a number of video 
concerns today. There are many other aspects to this merger 
that do need to be reviewed, whether it is the cable 
advertising market, the broadband Internet competitive market, 
access to technology, development of technology, how that is 
used by the combined Comcast/Time Warner Cable, how that 
perhaps is meted out to other competitors. I think that is 
definitely a line of inquiry that the FCC and the DoJ have to 
pursue.
    Mr. Goodlatte. Okay. Let me hop back to Mr. Schaeffer and 
ask you, in your testimony you discuss how traffic delivery was 
congested as a result of delivering Netflix content. You also 
have stated that you asked Comcast to add additional ports to 
decrease congestion. What are ports, and are they expensive to 
add onto the network? And please be brief because I do want to 
come back to Mr. Hemphill to give him an opportunity to respond 
to some of these matters.
    Mr. Schaeffer. Yes, Mr. Goodlatte. The port is the physical 
location where the traffic flows between the two networks. The 
capital cost is trivial, and we have actually offered to pay 
not only our capital costs for our ports to be added, but also 
to pay Comcast. And to date, they have refused to accept that 
offer.
    Mr. Goodlatte. Thank you. Professor Hemphill, Mr. Cohen 
deferred to you to supplement his answer. And if there is 
anything Mr. Schaeffer or Mr. Polka have said that you wanted 
to respond to, have at it.
    Mr. Hemphill. Yes, sure. So I think on the first point, Mr. 
Cohen said, well, from an economic perspective, we would not 
expect some kind of shortfall in one market to be made up in 
another or vice versa; that a savvy company is going to 
negotiate it as best it can with all of its counterparties, and 
that there is not some quota it is trying to reach. It will 
think about each of those negotiations separately.
    I think with respect to the conversation we have been 
having about ports and peering and whether any of this raises a 
foreclosure concern, I think it is important to understand that 
payment for connectivity, payment for interconnection is not 
new. It is not a new fight. It has always been the case that a 
payment is either going to be made through cash or through 
reciprocal carriage.
    And so, to think about this as a foreclosure concern I 
think is wrong. I think what is really going on is a fight 
about who should pay for what in this, in a lot of ways, highly 
competitive business of interconnection.
    Mr. Goodlatte. Thank you. My time has expired. Thank you, 
Mr. Chairman.
    Mr. Farenthold. Thank you, Mr. Chairman. I will now go to 
the gentleman from New York, Mr. Jeffries.
    Mr. Jeffries. Well, thank you, Mr. Chairman, and let me 
thank the witnesses for your presence here today. Let me begin 
by just associating myself with the remarks, and observations, 
and concerns of Mr. Johnson connected to the implications of 
this merger on women- and minority-owned businesses within the 
cable and Internet video space.
    Let me also acknowledge that amongst the constituents that 
I represent, a substantial number of cable subscribers, as you 
know, obviously are Time Warner customers. And Time Warner has 
certainly been a very responsible corporate citizen in terms of 
its community engagement in Brooklyn and in Queens. And I have 
every reason to believe that that will occur given Comcast's 
track record, should this merger be approved, particularly as 
it relates to the expansion of Internet essentials.
    But there are some issues that they are concerned about 
that I want to explore. So let me begin with Mr. Cohen. Now, 
you testified that the merger will result in substantial 
benefits to consumers, correct?
    Mr. Cohen. Correct.
    Mr. Jeffries. And you indicated that Comcast can promise 
faster Internet speed as a result of the merger, true?
    Mr. Cohen. Correct.
    Mr. Jeffries. You also indicated, I believe, that greater 
customer choice is a likely benefit of the merger, correct?
    Mr. Cohen. Better customer choice in terms of on demand TV 
everywhere, correct. That is correct.
    Mr. Jeffries. Okay. And then I think you also indicated 
that innovation will result from the merger, and then that 
could translate into enhanced video, voice, and/or Internet 
opportunities for the consumer, correct?
    Mr. Cohen. Scale leads to investment in R&D and innovation, 
better networks, more secure networks, more reliable networks, 
and ultimately innovation of the future just like our larger 
global and national competitors are investing our need to be 
able to look around the corner and to develop products for 3 
years from now and 5 years from now that we are not imagining 
today.
    Mr. Jeffries. Okay. And I have no reason certainly to 
disagree with that, and I think that is a sound premise to 
operate under. However, as many of my colleagues have observed, 
there has been no commitment given today by either you or Mr. 
Marcus as it relates to the impact of this proposed merger on 
consumer price. And that, in fact, is the issue that the people 
I represent in Brooklyn and Queens, who are currently Time 
Warner subscribers, are most concerned about.
    So let us see if we can get a little bit of clarity on 
that. Comcast is a publicly-traded company, correct?
    Mr. Cohen. Correct.
    Mr. Jeffries. And as a result of Comcast being a publicly-
traded company, you have got a fiduciary obligation to your 
shareholders, true?
    Mr. Cohen. That is correct.
    Mr. Jeffries. And part of that fiduciary obligation, and I 
assumed connected to it you have concluded that this merger 
will likely result in greater profitability for Comcast if it 
were to be approved, correct?
    Mr. Cohen. I think the answer is basically yes, but I 
really want to say this: A couple of years ago we woke up and 
we realized that we are now competing in a different class. And 
I forget, a couple of Members have referenced this, this world 
is changing with explosive speed. And so, the business 
rationale underneath the merger really relates to our ability 
to innovate, invest, and to stay competitive.
    Mr. Jeffries. I understand.
    Mr. Cohen. All right, so----
    Mr. Jeffries. And I do not want to cut you off, but my time 
is limited.
    Mr. Cohen. Okay.
    Mr. Jeffries. You did acknowledge, though, basically, yes, 
you expect----
    Mr. Cohen. Well, it is more profitable compared to what it 
would be----
    Mr. Jeffries. Well, let me finish the question.
    Mr. Cohen [continuing]. If we were not able to innovate, 
invest, and continue to grow.
    Mr. Jeffries. Oh, I understand.
    Mr. Cohen. Okay.
    Mr. Jeffries. And that is a very sound point and consistent 
with your fiduciary obligations to your shareholders, and I 
would expect nothing less. I guess the question that my 
constituents would expect me to ask is, is it not reasonable 
for them to assume that pursuant to a merger likely to result 
in greater profitability and a bigger, better Comcast post-
merger, that there will be some positive benefits for them in 
terms of impact on price?
    Mr. Cohen. So I do not know whether it is appropriate for 
them to assume that. It is certainly our expectation that out 
of this transaction will come a significantly improved customer 
experience with customers more satisfied with their service. 
There is more to making customers happy than the just the price 
that we charge them. It is the value that we are delivering to 
them.
    And we believe very strongly that consistent with our 
fiduciary duty to shareholders, we have to focus on price, 
focus on customer satisfaction, focus on customer service as a 
way to preserve and grow our customer base in an intensely 
competitive market, and that all of those interests are 
aligned.
    Mr. Jeffries. Thank you.
    Mr. Bachus [presiding]. Thank you. And let me say this to 
the panel. After Mr. Smith of Missouri does his questions, we 
will take a 10-minute break because you all have been in the 
chair quite some time. Mr. Smith of Missouri is recognized for 
5 minutes.
    Mr. Smith of Missouri. Thank you, Mr. Chairman. My first 
question is for Mr. Cohen. You testified that Comcast and TWC 
currently serve different geographic areas and do not offer 
services to the same consumers. Yes or no, will the consumers 
in either company's geographic areas experience any decrease in 
competition for video broadband or voice service if this 
transaction is approved?
    Mr. Cohen. Unequivocally no, they will not.
    Mr. Smith of Missouri. Okay, thank you. Mr. Polka?
    Mr. Polka. Yes?
    Mr. Smith of Missouri. As you know, many of your member 
companies are in rural areas like the areas of Missouri that I 
represent. Though they do not in my area compete directly with 
Comcast or Time Warner, does this merger affect cable operators 
who do not directly compete with Comcast?
    Mr. Polka. Yes. Yes, they do, Congressman. And, in fact, 
our incoming Vice-chairman is one of your constituents, Patty 
Boyers from Boycom Communications. It does impact those 
companies that do not compete directly with Comcast and Time 
Warner in the acquisition of programming and in the acquisition 
of programming pricing.
    As I mentioned before, with the combination of Comcast 
distribution assets with Time Warner Cable assets, because of 
their size and ability to demand lower prices from other 
programming content providers, it also does have an impact on 
the prices charged by all other multi-video programming 
distributors like Boycom, which means if, to David's point, we 
may not see this yet until there is more that comes out from 
the merger review. Our prices to our members, our wholesale 
programming prices, might increase, but certainly because of 
the ability of Comcast/Time Warner combined to drive their 
wholesale programming pricing down, it will create a bigger 
disparity in pricing between Comcast, Time Warner, and all 
other multi-video programming distributors who buy programming 
primarily through the National Cable Television Cooperative.
    So the end result is Comcast will pay a lower rate, and the 
disparity in programming prices between Comcast and our members 
will increase.
    Mr. Smith of Missouri. So virtually the 10 or so small 
companies in my district probably would see an increase while 
Comcast may see a decrease.
    Mr. Polka. That is what we expect to occur, yes.
    Mr. Smith of Missouri. Okay. Mr. Schaeffer, as someone who 
has been involved in the Internet's backbone for some time, I 
would like to ask you a question about interconnection. What 
effect would the merged Comcast/Time Warner have in the 
marketplace negotiations with your company and other transient 
providers?
    Mr. Schaeffer. It would have a significant impact in that 
Comcast would now control access to a greater number of 
consumers and extract additional market power. For those 
consumers, when they enter into a contract to buy broadband, 
they do not really I think mortgage their eyeballs. And I think 
Comcast views that they do.
    Mr. Smith of Missouri. Okay, thank you. Mr. Patrick 
Gottsch, I was interested with your testimony about RFD-TV 
being dropped from Comcast in Colorado and New Mexico. What was 
the reason that they cited of why they dropped you?
    Mr. Gottsch. Well, Mr. Cohen's explanation today that it 
was a bandwidth issue, and they had to drop one channel, and 
they picked our channel. The thing that concerns me is that is 
it now the policy of Comcast going forward when they need 
bandwidth, are they going to just be dropping independent 
channels from those markets without any regard to support from 
the audience, without regard to price, without regard to 
anything that an independent channel has going?
    Mr. Smith of Missouri. Mr. Cohen, are there any reasons why 
RFD was dropped other than bandwidth?
    Mr. Cohen. The answer is it was primarily a bandwidth 
driven determination. There was a determination by the local 
market that the consumer demand for that particular channel in 
that market put it at the top of the list to be considered 
being dropped. It had nothing to do with the fact that it was 
independent. It certainly had nothing to do with our 8 percent 
ownership interest in Retirement Living TV, which is a 
completely unlike channel.
    Mr. Smith of Missouri. My concern is this is that it is a 
rural TV station, and folks in my area rely on it and watch it 
quite often. And if other people across this country in non-
urban areas want to watch it, I hope that they have the 
opportunity. My question is, can you give me any documentation 
showing, like, the 400,000 households in the Colorado area 
where there were other independent or other cable television 
networks that had lower viewership than RFD that you did not 
drop?
    Mr. Cohen. We can certainly follow up on that, and I will 
get back to you. We can put it in a QFR and address that in the 
QFR process.
    I do want to emphasize, we still carry RFD-TV to 600,000 or 
700,000 of our customers. And so, this is not a situation where 
we simply said this is a terrible channel and we do not want to 
have anything to do with it anymore. It was a local market 
decision. And again, I hear and I understand the content being 
rural content. I want to emphasize again we are primarily an 
urban cluster cable company. Even in western States, most of 
our consumers are in urban areas, so it is our goal to provide 
programming to our customers that they want to see, and we are 
not depriving anyone of access to RFD-TV because they have 
broad carriage on DISH and DirecTV, and all of the customers in 
those markets.
    Mr. Smith of Missouri. Just only to your consumers, the 
400,000 in Colorado and the 70,000 in New Mexico.
    Mr. Cohen. Right.
    Mr. Smith of Missouri. Thank you, Mr. Chairman.
    Mr. Bachus. I thank you. At this time, we are going to 
reconvene at about 8 minutes after. And I thank you for your 
patience, and will allow you to take a----
    [Recess.]
    Mr. Bachus. We will now resume our questioning under the 5-
minute rule. And at this time, I recognize Mr. Garcia for 
questions.
    Mr. Garcia. Thank you, Mr. Chairman. Mr. Hemphill--am I 
pronouncing that right? Yes, there you are. Much has been made 
about the size of the proposed Comcast/Time Warner merger 
leading some to compare this with the failed AT&T/T-Mobile 
deal. But unlike that case, Comcast and Time Warner do not 
compete head-to-head in local markets. So how important do you 
think that distinction is in this case, and do you see adverse 
impacts from that merger based on that?
    Mr. Hemphill. So size can be good. Size can be bad. It all 
depends on the transaction. So I think the size of the deal in 
itself does not tell us much about whether we should be 
concerned. As I mentioned before, I think the absence of head-
to-head competition in output markets or, for that matter, in 
input markets is crucial to understanding the deal. That does 
not mean that Department of Justice should just pack up and go 
home. They still need to pay attention.
    And we have heard a lot about at least conceivable or 
theoretical foreclosure effects, and I think it is important to 
take a close look at that. But that whole investigation, that 
whole way of thinking is quite a bit different from the usual 
merger analysis of output markets or, to a lesser degree, 
reduced competition in input markets.
    Mr. Garcia. As you are probably aware, I represent a very 
large Hispanic community, and so I have heard from some of my 
constituents who have a few concerns. I know some were 
addressed earlier today, and I was very satisfied with that. 
But I want to ask you, in my diverse community, a rapidly 
increasing part of the market with increasingly diverse and 
growing consumer needs, it is important that emerged Comcast/
Time Warner shows a strong commitment to ensuring that new and 
creative Latino programmers are provided with the opportunity 
to reach that growing consumer market.
    How do you think that can be achieved, and how can we make 
sure that what is I am sure one of the valued assets in this 
continues strong and continues providing the great service that 
it does?
    Mr. Cohen. So this something we have spent a lot of time 
discussing both on the distribution side as well as the content 
side of NBCUniversal because we have a strong commitment to 
making sure that we have outlets not only for existing diverse 
voices, but for new diverse voices. So I have talked about the 
new channels that we have launched. I have talked about 58 
channels of Hispanic and Hispanic-themed television. Let me 
talk about a few other things which I think is in the same 
space.
    So one of the best ways with evolving technology to reach 
customers is through our VOD service, and we have substantially 
expanded the number of VOD, video on demand, hours that are 
available and, in particular, for diverse audiences, including 
the Hispanic community. Similarly, there is a lot of content 
that we are now delivering online, and which may not be enough 
to make up a channel or even a whole program. And that online 
content is a great outlet for young, new diverse producers/
directors. They do not have to put a whole movie together to be 
able to get anyone to look at it. They can produce a 7-minute 
video, you know, on youth violence in South Miami, and that can 
be available for us to be able to put online.
    So we have created on the distribution side the Xfinity 
Latino website, and that features about 9,000 choices and 2,500 
hours of content that is available free to Xfinity Latino 
customers, and there is a great mix of content in that 
particular site. We also hosted the largest ever Hispanic video 
on demand event in 2013. It was called Xfinity Free View 
Latino, and we are going to do that again in September of this 
year.
    So these are some of the ideas that we have created. I 
should say on the NBC side, one of the things I would point to 
is what we are doing in the news space, that we created a news 
vertical on the new NBC.com website. So we have a Hispanic news 
vertical, which is providing an opportunity to be able to 
target news-related programming to the Hispanic community, and 
also to allow young and aspiring producers and on air talent to 
sort of try out their talent on a website basis before they 
would go to the broadcast network.
    Mr. Bachus. Thank you. At this time I recognize Mr. Collins 
for 5 minutes.
    Mr. Collins. Thank you, Mr. Chairman. Mr. Grunes, I am 
concerned about the impact of the merger, and we have had some 
conversations with both sides on this, on small businesses that 
advertise on cable television. Today small businesses are able 
to utilize cable television advertising to geo target their ads 
in a cost effective manner. However, an independent analysis by 
SNL Kagan has concluded that a merged company would control a 
very substantial share of this local cable spot advertising 
market, reducing competition and raising the cost of cable 
advertising for small businesses, which would affect my area in 
a big way.
    Can you provide information regarding the scope of 
Comcast's cable advertising business if this merger is 
approved?
    Mr. Grunes. Thank you for the question. And I will start by 
saying in the last merger, the NBCUniversal/Comcast 
transaction, advertising markets were not really as important 
because broadcasting and cable advertising are traditionally 
viewed as in different markets. This one is different, so there 
are a variety of ways that advertisers can get onto cable at 
this point. My understanding, it is about a $5 billion market, 
and that post-merger the combined company would dominate two of 
the three ways that advertisers can get on.
    The predictable result, in my view, is that smaller 
advertisers are simply not going to get access to local cable. 
That time will be sold elsewhere.
    Mr. Collins. Okay. So your understanding is it is a 
negative impact. Mr. Polka, in your testimony you argue that 
the Comcast merger could have a detrimental effect on the 
viability of online video competitors, such as Netflix and 
Amazon, as it was going along. I share the concerns. I am 
concerned that the traditional FCC assessment of potential 
implications of a merger may no longer be adequate to promote 
and competition on both the content side and the telecom side. 
I think there is an interesting argument that could be made 
that in certain situations consolidation is used a shortcut to 
growth. And instead of investing and competing directly for 
subscribers, they simply buy each other's subscribers.
    In your opinion, this merger in particular, does it remove 
the competitive dynamics that we are looking at here from the 
markets, that otherwise drive improved quality, increased 
choice, and lower costs, because it really seems that DoJ and 
FCC craft merger specific regulations to check the harms of 
really the competition and consumers and lose sight of 
promoting the competitive marketplace. So I am not as much 
antitrust. I am looking at the competitive marketplace. So, Mr. 
Polka, do you have a comment on that?
    Mr. Polka. Yes, sir. Yes, sir, we do. The fact of the 
matter is when a company like a Comcast and a Time Warner 
Cable, and particularly on the Time Warner Cable side where 
there are competitors such as an RSN or a Grande, which do 
compete with Time Warner Cable, there is an incentive to be 
anti-competitive and to charge higher prices. We do believe 
that there will be an impact on the competitive market for 
companies that are providing services competitively today to 
Time Warner Cable as a result of the combination with Comcast. 
So, yes, sir, we do believe that there will be an impact on 
competition.
    Mr. Collins. Do you have any examples that might have led 
you to that conclusion?
    Mr. Polka. The fact that we see price disparity today among 
our member companies that are in competition with Comcast and 
Time Warner. And what we expect will be even greater ability to 
leverage programming sources in ways that will raise prices to 
competitors. If you are in a marketplace today with a 
competitor, I mean, it just stands to reason that you have an 
incentive to be anti-competitive, and that is what we expect in 
this market. And we expect that that will be fully reviewed, 
and we certainly will be raising those concerns at the FCC and 
the Department of Justice.
    Mr. Collins. Okay. And that is fair. One of the things from 
my perspective is I believe, frankly, government should stay 
out of businesses except in a marketplace fairness kind of 
issue. And even then it should be at a very hands length. And 
we have had the conversation, and Mr. Cohen and I have 
discussed and others.
    But, Mr. Cohen, I have a question for you. Sometimes my 
questions actually come from the witnesses' testimony, and 
yours has driven a question. A few minutes ago, my friend from 
Missouri asked a question about RFD-TV in Colorado, and 
basically asked you what I consider--you knew he was going to 
be testifying today. It would seem like you would have probably 
have become very much of an expert on what happened.
    And you were asked a very direct question on the issue was 
there other independent channels or non-independent that had 
less than 400,000 subscribers than RFD on this dropping of 
them. Do you know if there less than 400,000 or are just 
withholding because of proprietary reasons? I am just curious 
as to why you would not know if there were other channels that 
had less subscribers.
    Mr. Cohen. I was not sure that was the question. It might 
have been.
    Mr. Collins. It was the question.
    Mr. Cohen. I thought the question was----
    Mr. Collins. Reclaiming my time. Reclaiming my time.
    Mr. Cohen. I thought----
    Mr. Collins. It was the question.
    Mr. Cohen. I thought the question was were there other 
independent channels that were lower rated than RFD-TV was. I 
thought that was what the question was, and I do not know the 
answer to that question. We will get the answer to that 
question and respond in a QFR to that question.
    Mr. Collins. Well, and I am glad you have QFR down. What is 
interesting to me is 400,000 in that market, even in an urban 
market, and I have both urban and rural, that seems pretty 
good. And to claim it is just an urban and rural kind of issue, 
that struck a little hollow because there are a lot of folks 
who have moved from the farm to the urban areas and still like 
to be connected to the farm. And so, that was just an 
interesting----
    Mr. Cohen. I want to be really clear because I said this, 
too. I personally, and our company just does not have a problem 
with RFD-TV. We think it is good content. We are carrying it to 
700,000 of our customers in multiple markets. There was a local 
market decision here that there was greater consumer demand to 
move to high definition for a number of other popular channels 
in the market. By the way, that is not a permanent decision. It 
was a decision that was made at the time based on bandwidth 
constraints as they existed at that time.
    Mr. Collins. I am not----
    Mr. Cohen. So I do not want to minimize the value of this 
network, the value of its content, its appeal to consumers, 
including our consumers. So I hope I am being very clear about 
that.
    Mr. Collins. Well, and I----
    Mr. Bachus. And thank you.
    Mr. Collins. Could I just have----
    Mr. Bachus. Yes.
    Mr. Collins. I am not questioning your commitment to RFD or 
anything. My question was just a concern on the specificity of 
your answers given the fact that they would be here and this 
would be an issue. And that was the only purpose of my question 
as we go forward. And, Mr. Chairman, I yield back.
    Mr. Bachus. Mr. Cicilline is recognized for 5 minutes or 5 
minutes and 30 seconds.
    Mr. Cicilline. Thank you, Mr. Chairman. I thank the 
panelists for being here, and I apologize for being in and out. 
I have a Foreign Affairs Committee hearing at the same time, so 
I apologize to the members of the panel. And if you have 
answered this question, I am happy to go onto my second one.
    Mr. Cohen and Mr. Marcus, I presume, are in the best 
position to answer this. But would you speak to what the impact 
is or the projected impact on jobs? I know it will impact 
different sectors of your workforce differently, but obviously 
in general we, I think, imagine that mergers result in 
efficiencies that result in job loss. And if you could talk a 
little bit about the workforces of the two companies and what a 
merged company's impact might be on jobs.
    Mr. Cohen. Okay. New question for the day, so happy to 
answer it. So I think you have to break the jobs down into two 
different categories here. The vast majority of cable industry 
jobs are local system jobs. There are local technicians or 
local management teams, local call centers, the local people 
who run the system. And in that area of jobs, we do not 
forecast any impact on jobs in this transaction at all for the 
same reasons that we continue to say that we do not compete in 
any market.
    When we take over a Time Warner Cable system in New York or 
in North Carolina, we do not have any employees there who are 
running cable systems. We will need their employees, and we 
will need approximately the same level of employment to operate 
the systems as existed before.
    In terms of corporate headquarters jobs, corporate 
headquarters type jobs, you know, we each have a legal 
department. We each have an investor relations department. I 
mean, those are jobs which in a transaction of this type you 
are likely to see some rationalization and some elimination of 
employment. But it is only at the headquarters level, which is 
a very small minority of the jobs in both of our companies.
    Mr. Cicilline. Thank you. I know it has been said many 
times during this hearing that Comcast does not compete with 
Time Warner in a single zip code. And one of the things that 
Mr. Grunes argues in his written testimony is that the lack of 
direct competition in local markets could also be used to 
justify Comcast's acquisition of other major cable companies 
like Cox and Charter. And so, I would like to ask you, Mr. 
Cohen, how would you respond to that argument that there would 
be little to prevent Comcast from acquiring other major cable 
providers based on the lack of direct competition? And what do 
you see as the effect that this merger would have on future 
mergers in the communications marketplace, and what would, for 
example, prevent a well-capitalized company from horizontally 
merging with any video or broadband provider that is not a 
direct competitor in a local market?
    Mr. Cohen. So as a former antitrust lawyer, a recovering 
former antitrust lawyer, I will give the only answer I can to 
that, which is that every transaction has to be viewed on its 
own merits. We have to look at each transaction as it comes 
along, and I do not think it is sound antitrust or economic 
theory to say you should not approve this merger because the 
next merger might not be able to survive antitrust scrutiny.
    So I am very focused on this particular transaction. I 
think this potential transaction has strong consumer and public 
interest benefits. I think it has minimal antitrust and 
competition policy risks. I do not think in making any of those 
arguments I am creating a precedent that we could acquire 
anything we wanted to acquire and there would be no problem 
under the antitrust laws. And I do not think that this 
transaction or the questions that you are asking are creating a 
precedent that any other transaction in the cable or broadband 
or telecom space would have to be approved if this transaction 
were approved.
    So I think you have to visit each transaction as it comes, 
and if this transaction is approved, that will result in a 
market that looks in a particular way. And when the next 
transaction comes along, it will have to be judged against that 
market on its own individual merits.
    Mr. Cicilline. I do not know if there are any of the other 
panelists who wanted to respond to that.
    Mr. Grunes. I just do not see a limiting principle, and 
that is something that I wrote about. Given the arguments we 
have heard here today, if they do not compete with somebody, 
then their argument is they are free to buy that company. And 
given the other argument, which is we get advantages of scale, 
well, you get advantages of scale if you buy everybody else as 
well. So it troubles me.
    My view is that DoJ is going to look harder at this merger 
because of that issue because 2 years from now Comcast could be 
sitting in this room again with a different series of arguments 
with a different merger in front of it.
    Mr. Hemphill. Just one quick thought about it. I completely 
agree with the earlier expressed point that you have to look at 
each transaction on its own merits. Two quick points. You could 
imagine an alternative transaction in which the foreclosure 
concerns that were raised--this case is not only about whether 
there is direct competition--where the foreclosure concerns 
were stronger than the ones that seem to be present here. And 
second, in which the existing prophylactic protection of the 
earlier NBCU consent decree and the continuing applicability of 
the open Internet rules to Comcast and post-transaction to Time 
Warner Cable where those were not present. So I think those are 
important distinctions here that you might not see in every 
transaction that comes down the pike.
    Mr. Grunes. And I think----
    Mr. Bachus. As you all testify, kind of pull that mic up a 
little bit because sometimes you turn away from them.
    Mr. Grunes. I think what Mr. Hemphill said is if we could 
see such a transaction, I think this is that transaction.
    Mr. Cicilline. Thank you, Mr. Chairman. I yield back.
    Mr. Bachus. Thank you. Mr. Issa for 5 minutes.
    Mr. Issa. Thank you, Mr. Chairman. Hopefully this late in 
the day there is some original work I can still bring to the 
Committee.
    I think in 2009 when the approved buying of content, a 
major amount, huge amounts of content, by a major force in 
cable occurred, we already passed a certain lexicon of where we 
are today. So I have less concerns specifically about the 
merger than I do about this Committee's role now and in the 
future.
    I also serve on Energy and Commerce even though I have been 
on a leave of absence for a number of years. And being on both 
Committees, Mr. Chairman, what I discover is we have got a bad 
set of questions, which is on one hand we regulate over at 
Energy and Commerce, and we are constantly talking about the 
competitive environment as though E&C should worry about 
competing, particularly through the FCC. And then over here we 
look at the Sherman Antitrust and say check the box, do they 
meet it. And then we find that the Justice Department is a 
hybrid of the two.
    So let me just state my concerns, and then hopefully we 
will get some question that may not apply only to today. I 
think we could agree that if the merger was all about an 
organization, Time Warner and Comcast, where they were going to 
combine and all they were going to do is supply data to anybody 
who wanted to put their entity onto the pipe and sell it to me. 
And if I was a cable customer and all I bought was a pipe that 
gave me data, and that is all of this is. We are no longer 
dealing in analog. Everything is data.
    So then we would only be saying as a public utility, are 
you a public utility because you have an exclusive or is there 
competition for data. We cannot have that debate because you 
have become too complex a company. You are a major buyer and 
reseller of content. You are a major owner and developer of 
content, and if your in-house product competes against products 
that you may choose to buy, you may choose to negotiate buying, 
and you may choose to put somewhere in your channel spectrum 
and your packages in a way that are adverse to the view of that 
content seller. Can we all agree on that? Have I mentioned 
anything that is controversial to any of you that are for or 
against?
    So if that is the case, then this Committee will have 
little choice but to see that, from what I can tell, you have 
met the basic criteria. You are dropping your percentage down 
to 30. You are not a new content entity. There is probably not 
going to be any credible argument before Justice that somehow 
things are changing in any particular market. And if there is, 
you are prepared to shed a market here, a market there in order 
to meet that. Does anyone disagree that that is probably where 
we are?
    [No response.]
    Mr. Issa. Do you believe that there is a specific event in 
this merger that clearly tips over based on precedent? Is that 
correct?
    Mr. Grunes. Yes, sir.
    Mr. Issa. What is that?
    Mr. Grunes. I think that we are at a point in the broadband 
market and where Comcast's power over innovative competitors, 
the same competitors----
    Mr. Issa. Name the competitor. Be quick. I do not have a 
lot of time. Name one.
    Mr. Grunes. Netflix, et cetera.
    Mr. Issa. You are afraid that the delivery of data for 
Netflix will be adversely affected by this.
    Mr. Grunes. I am afraid that Comcast as an incumbent has an 
incentive to stifle the next big thing, and the next big thing 
is Internet.
    Mr. Issa. Okay. Anyone have anything else? That pretty 
well--okay. Then I will direct my question particularly to Mr. 
Cohen. Mr. Marcus, you could weigh in. X1 is a delivery from 
the net cloud that you are rolling out and you are very proud 
of. You have rolled it out. Announced it pretty much today, 
right?
    Mr. Cohen. I mean, it is a video delivery system, cloud 
based. It is not an Internet delivery system. It is for our 
video product, not our broadband product.
    Mr. Issa. But it is a pay per view. It is an on demand.
    Mr. Cohen. It has on demand, pay per view, video.
    Mr. Issa. Okay. So not for antitrust purposes on this side, 
but over at E&C the FCC could say that that is a great product, 
but since Netflix could feed into the DVR and come through that 
pipe and be entitled to a no premium cost equal access to what 
you are delivering on your X1 platform, the case could be made 
that all video content large and small would be delivered 
exactly the same from this DVR/pay per view because whether I 
buy it and Netflix delivers it to the X1 or I record it off an 
equivalent off air and put it in the X1. When I ask for it, it 
would be delivered the same. Technologically, that is correct, 
right?
    Mr. Cohen. Theoretically, the FCC could open up our 
networks, could open up our user interface. We would obviously 
have serious objections to that, but theoretically the answer 
to your question is yes.
    Mr. Issa. But the FCC has said you have to give equal 
access and you cannot charge a premium for a non-in-house 
product versus an in-house product. That is already a given, 
right?
    Mr. Cohen. Well, the problem is X1 is delivering a Title 6 
cable service. The FCC could say that if we put, let us say, an 
Amazon app on our X1 platform, that having once decided to do 
that, we have to open that up and allow any competitor to have 
its app on our X1 set top.
    Mr. Issa. Okay. I want to close up because I only have one, 
but one is a lot to get in 5 minutes. What I see here today and 
what I am convinced that this Committee in its jurisdiction 
needs to do is we really need, Mr. Chairman, to have a pretty 
broad discussion about existing antitrust laws, the tie-ins, 
versus how the FCC, which does not fall under our jurisdiction, 
is creating or not creating competition using things both in 
the, if you will, the true data side and the video, which 
really is still true data these days. That, in fact, we really 
need to look at antitrust laws as the FCC implementation is 
going on because I am convinced today, Mr. Grunes, I am 
convinced today that the merger candidates have gone through 
the check the boxes necessary.
    What I am not convinced about, and I hope that this 
Committee will do, is that in this world of antitrust versus 
competition, that our reach into the guidelines and what the 
FCC can or must be required to do is something that between 
this Committee and primarily E&C, we need to have a robust 
discussion because pro-competition versus anti-competition is 
really a question that is linked inseparably to current 
antitrust laws, which talk about market power that distort. But 
they do not really talk about market access that promotes.
    And so, as somebody who looks at the cloud and its 
potential, I see your new product, Mr. Cohen, as a cloud that 
would say clearly to the FCC that they could create an 
environment in which all content would be delivered equally 
because once you have a pay per view or a non-pay per view, but 
a cloud product that delivers to me what I want to one unit, 
you can deliver anything video to that one unit. And there is 
really no difference in the bandwidth asked for. There is only 
a question whether I am using the product I recorded online so 
to speak, and now I want delivered or an alternate product.
    Mr. Bachus. Thank you----
    Mr. Issa. So, Mr. Chairman, I think this hearing is giving 
us a reason to do legislative and hearing reforms that really 
tie in what the FCC is doing under the competition, what they 
are doing under net neutrality in this Committee. And I hope we 
will seize the opportunity to expand our reach into that 
process because when we are done, I do think that we are not 
going to accomplish anything significant because I think you 
can check the box today. But I believe we should do more to 
make sure that there is access for the consumer. And I thank 
the Chairman and yield back.
    Mr. Bachus. Thank you, and we are hearing some of those 
concerns. At this time, I actually will go Mr. Johnson. We are 
going to go through the first, and Mr. Marino, and then Mr. 
Gohmert. Yes, Mr. Cicilline has already testified--I mean, 
already questioned. Mr. Marino is recognized for 5 minutes.
    Mr. Marino. Thank you. Gentlemen, I am a former prosecutor. 
I have six questions. I have 5 minutes. I would like yes or no 
answers with a brief description, if you would, please. Mr. 
Grunes--am I pronouncing that correctly?
    Mr. Grunes. Grunes.
    Mr. Marino. Grunes, thank you. I apologize. You said the 
next best Netflix could be stifled. Is that what you said, 
correct?
    Mr. Grunes. Innovation and----
    Mr. Marino. Innovation can be stifled.
    Mr. Grunes. Can be stifled, correct.
    Mr. Marino. Okay. Is that not what DoJ and the courts are 
for?
    Mr. Grunes. It is exactly what DoJ and the courts are for.
    Mr. Marino. Okay. Mr. Cohen, I am from Pennsylvania, and 
Comcast has a very large presence in Pennsylvania and in my 
district, which is the 10th Congressional District of 
Pennsylvania, my hometown of Williamsport. What will be the 
impact if this merger is concluded on present jobs and the 
prospect of future jobs--with an ``S''--expansion?
    Mr. Cohen. So the answer is in Pennsylvania, there is no 
job risks in this transaction. As I have said before and I will 
just briefly say it again, most of the jobs in cable are local 
system jobs, so the local Comcast system in Williamsport, there 
are no jobs at risk there. There are no Time Warner Cable 
employees anywhere near Williamsport that we would use instead 
of the employees in Williamsport. And obviously our 
headquarters is in Philadelphia, so----
    Mr. Marino. How about expansion?
    Mr. Cohen. I think, you know, I do not know. I mean, we are 
continuing to grow jobs in Pennsylvania today, so I think we 
are going to continue to expand jobs.
    Mr. Marino. I appreciate that.
    Mr. Cohen. But it does not have anything to do with this 
transaction, to be fair.
    Mr. Marino. All right. Now, I have heard from some of my 
constituents, independently operated opinion programs, and some 
of my Republic colleagues, that this merger will further expand 
more of an imbalance in opinion reporting with an already left 
of center media. What say you, Mr. Cohen?
    Mr. Cohen. So as a cable operator, if that question is 
directed to me as a cable operator.
    Mr. Marino. Yes.
    Mr. Cohen. We strive to provide diverse perspectives and 
diverse viewpoints across our entire platform. I think cable as 
an industry has been a huge enabler of the explosion of diverse 
viewpoints, and I would expect us to continue to enable diverse 
viewpoints to be expressed across our cable systems.
    Mr. Marino. I think you have answered my next question, 
which would be, what is Comcast's philosophy on delivering that 
political view, but we will go on to the subsequent. Please 
describe how Comcast decides to carry new programs, 
particularly if you are considering--well, it does not matter--
if you are considering a left or a right center opinion 
programming.
    Mr. Cohen. And so, we decide whether to carry programs 
based on our view of customer demand, customer interest, based 
on bandwidth needs, bandwidth constraints, based on financial 
viability of the networks. We never would make a decision about 
cable carriage for a channel based upon ideological perspective 
or viewpoint of that channel.
    Mr. Marino. And in conclusion, am I going to lose my local 
news service in Williamsport, Pennsylvania?
    Mr. Cohen. I am sorry. Say that again?
    Mr. Marino. Am I going to lose, because of this merger, my 
local news service?
    Mr. Cohen. So the local broadcast news?
    Mr. Marino. Local broadcasters.
    Mr. Cohen. No.
    Mr. Marino. All right. Thank you. I yield back my time.
    Mr. Bachus. Thank you. At this time I recognize the 
gentleman from Texas, Mr. Gohmert, for 5 minutes.
    Mr. Gohmert. Okay. Thank you, Mr. Chairman, and thank all 
of you for being here. I was part of a hearing some years back 
in California, a field hearing, before the NBC/Comcast merger. 
And there were questions raised, concerns about potential for 
hurting compatibility. But since then, more recently it was 
reported, of course, people took note that Al Gore was pushing 
the sale of Current TV, and Glenn Beck, TheBlaze, were trying 
to buy it.
    And it was reported that Al-Jazeera wanted to get their 
Sharia law pushed into the United States, and they were willing 
to pay big bucks, regardless of whether they had oil and carbon 
all over the money. They were willing to pay big dollars, but 
they would not do the deal unless Comcast was willing to keep 
them in its list of networks provided. So it was reported 
Comcast agreed, so Al Gore got all that oil and carbon-based 
money, and then that kept Glenn Beck off the air of Comcast.
    Then more recently, TheBlaze has been trying to purchase 
another network that was reported to owe $20 million to 
Comcast, but that the feeling by some within Comcast was so 
strong about keeping Glenn Beck off the air that some 
reportedly were willing to forego $20 million that TheBlaze 
offered to pay off this networks' debt owed to Comcast just to 
keep them off the air. Now, I have no idea who the network is. 
They will not say. They have some kind of deal about that. But 
I was given a blurb from an email that indicates, and this is 
an email from somebody at whatever network it is. It is 
somebody at TheBlaze that says, ``I want the ability to argue 
for Comcast''--he is trying to get the deal accepted by 
Comcast--``that they will not have to put 'Glenn Beck on the 
air prior to the 2014 election.' ''
    That may sound hard-nosed, but inside of that 
organization--talking about Comcast--there are some people who 
will see it that way. So December 1 accomplished that, so that 
would get the deal after the November elections. And this blurb 
was provided. There is too big a risk in my view of getting a 
flat no from Comcast if they smell the possibility that you 
intend to use the full Blaze platform to influence the American 
voters this November. Sorry, that is how they feel about you. I 
do not, but they do, and they are the ones who have to approve 
it.
    Now, we heard Mr. Jeffries, he is a smart guy. He brought 
up the issue of fiduciary duty. And I am wondering how strong 
the feeling within Comcast of their fiduciary duty to 
stockholders is for monetary gain as opposed to political 
achievements of keeping conservatives off the air. We have 
heard the discussion about rural not being part of the push by 
Comcast, and I get that. Why would Comcast want people that 
cling to God and their guns?
    But what we are talking about here is a very serious issue. 
If we are at the point where there is so much power within 
Comcast that they can say we are not going to accept the $20 
million that will help Comcast because we do not want 
Republicans having conservatives talking on the air between now 
and then. Mr. Cohen, do you have a comment?
    Mr. Cohen. Should I do Al-Jazeera first, and then I will do 
TheBlaze?
    Mr. Gohmert. No, I do not think you need to comment on 
that. Let us talk about TheBlaze and your feeling personally.
    Mr. Cohen. So I do not think I have a problem identifying 
the network I am using about this.
    Mr. Gohmert. Well, I have no idea who it is.
    Mr. Cohen. It is interesting. That network happens to be 
RLTV, which comes up in the discussion on RFD as well. That is 
a network in which have an 8 percent ownership interest. We 
have no management rights. We have no ability to control the 
sale of that network. Your reading of the email----
    Mr. Gohmert. Well, the issue is do you allow the purchaser 
to continue to be on Comcast, because that can kill the deal 
with Al-Jazeera----
    Mr. Cohen. The question is the content description under 
the RLTV contract with us, and that is a content description 
that does not include news coverage or political commentary. 
But let me be clear. You read an email presumably from someone 
at RLTV who is allegedly reflecting the position of someone at 
Comcast. I will represent to you and I will tell you right now. 
I am going to go back and I am going to confirm this. I will 
represent to you that there is no judgment being made about 
carriage of TheBlaze based upon political perspective, and 
certainly absolutely no judgment about whether that network 
should on our cable systems before or after the election.
    Mr. Gohmert. Mr. Cohen, you are a smart man and apparently 
a smart attorney. You understand the consequences of not 
speaking truthfully before Congress.
    Mr. Cohen. I do.
    Mr. Gohmert. Thank you. I see my time has expired, and I 
look forward to you having that conversation at Comcast.
    Mr. Cohen. And we will report back to you.
    Mr. Gohmert. Thank you. I look forward to that. Thank you.
    Mr. Bachus. We will thank both of you. [Laughter.]
    At this time, Mr. Johnson is recognized for 5 minutes. I 
understand you are going to yield part of your time to Ms. 
Jackson Lee.
    Mr. Johnson. Yes, I am. I am going to take the first minute 
to ask a question, and then I will yield the balance to my 
colleague from Texas, Ms. Sheila Jackson Lee.
    The latest impact of this merger would be the issue of 
broadband availability and the ability of every citizen to 
afford access to the Internet. Comcast has launched the 
Internet Essentials Program, which offers low income families 
affordable broadband and digital literacy training. That 
program is capped in terms of the number of years that a family 
can be a part of it, and then after that the market rate then 
applies. Is there anything that Comcast plans on doing for 
people who are still poor and still unable to afford the 
service after the qualifying period ends? And if you will 
answer that question for me, and at which time I will yield the 
balance of my time to Ms. Lee.
    Mr. Cohen. Okay. In deference to Congresswoman Lee, I will 
give a very short answer to a question about which I am 
incredibly passionate. We are totally, irrevocably committed to 
Internet Essentials. For those on the Committee who are not 
aware, in 30 months we have signed up 300,000 families, 1.2 
million low income Americans, to the Internet at home, most of 
them for the very first time in their lives. And we have 
trained 1.6 million low income Americans in basic digital 
literacy in-person training under that program.
    Congressman, if I can, one correction. For everyone who is 
signed up for that program to date, they will remain eligible 
for the program and will continue to get $9.95 a month Internet 
service for as long as they have a child living in their 
household eligible to participate in the National School Lunch 
Program. It does not have to be the same child they have today. 
So if it is a young mother and she has got an 8-year-old today 
and goes on to have three more children, 20 years from now she 
will still be eligible for that pricing and that program.
    And in terms of our plans for the program, our plans are to 
expand it to the entire Time Warner Cable footprint to bring 
the benefits of Internet Essentials to New York, to Los 
Angeles, to Dallas-Forth Worth, to Charlotte, to every 
community where Time Warner Cable does business today. And we 
are very excited about that, very passionate about it, very 
committed to it. And I would argue that it is another place 
where big is really good.
    Mr. Johnson. All right.
    Mr. Cohen. Having that expanded footprint will enable us to 
bring the benefits of that program to more low income 
Americans.
    Mr. Johnson. Thank you. I yield to Ms. Jackson Lee.
    Ms. Jackson Lee. Mr. Johnson, thank you so very much for 
your courtesy. As a Member of the full Committee, I appreciate 
Mr. Bachus and Mr. Johnson for their courtesies, and 
acknowledge the Ranking Member, Mr. Conyers. We worked on these 
issues, Mr. Conyers. And thank you for appointing me in a 
previous Congress to the task force that dealt with antitrust 
issues.
    We may have to look at a legislative construct that 
responds to all of the comments being made today, and I thank 
all the witnesses that are here. And, David, thank you so very 
much. I am going to join Mr. Gohmert to ask that we have an 
opportunity to meet one-on-one on a litany of issues that I 
have that I will not be able to ask here. So I look forward to 
getting us scheduled quickly.
    Innovation, greater customer choice--I am sort of following 
a line of questioning that we have heard and investment that 
will make a stronger infrastructure that I think that you and 
Time Warner are attempting to do. And we value that, just as we 
value the First Amendment and your privilege in the First 
Amendment. But all this ties to consumers. And so, I want to 
ask unanimous consent to put into the record a letter from the 
NAACP and NABOB and ask the question about stations like TV One 
that are not put on basic, but they are put on premium.
    Does that not raise the cost? I am concerned about the 
consumer. And two, what would be your view of spinning off, 
allowing a station like that, a network like that, to spin off 
before this gigantic merger, and buy themselves out so they can 
grow?
    Mr. Cohen. So thank you very much, Congresswoman. I would 
be happy to sit down with you and look forward to that. I 
answered part of these questions before----
    Ms. Jackson Lee. May I just pause for a moment? I know 
there is an ongoing matter on this issue, but I just want to 
put on the record----
    Mr. Cohen. That is okay.
    Ms. Jackson Lee. I just want to put on the record my 
concern about the lack of service regarding the Astros and the 
Rockets. I am not asking for an answer. If you can answer the 
other question.
    Mr. Cohen. I can answer that, too. So as a company, we are 
committed to providing diverse voices and diverse programming 
that represents the diversity of our customer base. We were 
very proud to have helped create TV One after the AT&T 
transaction. We remain a minority investor in it, as the 
congresswoman knows. TV One is actually carried on our most 
popular, lowest-cost digital tier to about 13 and a half 
million of our customers.
    Ms. Jackson Lee. Not on basic.
    Mr. Cohen. Basic is sort of an old construct. This would be 
the equivalent of digital basic if you will. And in addition, 
we carry 10 other African-American owned or African-American 
directed channels. Every one of them is on this digital basic 
tier of carriage. So we agree with the sentiment you express, 
and we agree with the need to be able to deliver diverse 
programming on an affordable basis to the populations who have 
the most interest in it.
    Ms. Jackson Lee. You would be open to them to spinning off?
    Mr. Cohen. That has been our commitment. In terms of TV One 
and their buy-out of us, I am not 100 percent sure they want to 
do that, but we have made quite clear that if they would like 
to buy us out, we will let them buy us out. We have reciprocal 
rights, as I think you know, and there has been a concern that, 
gee whiz, if we trigger our rights to buy you out, you have so 
much more money. You could just turn around and buy us out. We 
are prepared to work with Alfred Liggins and his mother to 
facilitate a buy out of our interest if that is what they are 
interested in pursuing.
    Houston Regional SportsNet, all I can say is it is not the 
best corporate governance structure and deal that Comcast has 
put together in its corporate history. A lot of dysfunction in 
that. The network is in bankruptcy. We are working to try and 
achieve a resolution that works for the Astros and the Rockets 
as well as us that may or may not involve us staying involved 
in the network.
    But consistent with our focus on consumers, you know, we do 
not want to stand in the way of consumers getting access to the 
Astros and the Rockets. We have tried very hard to make 
numerous creative suggestions to resolve those problem, and we 
are now doing that under the supervision of a bankruptcy judge. 
And I hope we will get to a satisfactory place for your 
constituents and all Rockets and Astros fans.
    Ms. Jackson Lee. If we can pursue this--I do not think you 
answered--thank you--the question on consumer price and your 
efforts to contain the price that the consumer has with this 
merger.
    Mr. Cohen. Okay. So again, we have a focus on consumer 
pricing. We have talked previously in the hearing that the main 
driver of consumer pricing are programming costs. They have 
gone up about 120 percent over the last 10 years. Cable pricing 
has gone up at less than half of that rate, so we are doing a 
marginally acceptable job of being able to control passing out 
all those pricing increases to our consumers. We have tried to 
construct packages that are set at a lower price. Obviously 
they have fewer channels. Pricing and customer service are two 
issues that we think are vital to the future of our company and 
industry, and we are focused as much as we can on both of those 
issues.
    Mr. Bachus. Thank you.
    Ms. Jackson Lee. Let me thank the Chair and Mr. Johnson in 
his absence for their courtesy. Mr. Cohen, thank you so very 
much.
    Mr. Cohen. Thank you.
    Ms. Jackson Lee. I look forward to us having the further 
conversation.
    Mr. Cohen. Thank you.
    Mr. Bachus. Well, and let me say this. There is some 
expectation that the witnesses will tell the truth, and, you 
know, I noticed that you said you are happy and look forward to 
sitting down with Congresswoman Sheila Jackson Lee. So I am not 
sure----
    Mr. Cohen. I really am. [Laughter.]
    We have been friends for a long time.
    Mr. Bachus. I will take your word for it.
    Mr. Cohen. And I do not know Mr. Gohmert that well, but I 
am looking forward to sitting down with him as well.
    Mr. Bachus. All right. Well----
    Mr. Cohen. I like this.
    Ms. Jackson Lee. I make people happy. You see my smiling 
face? [Laughter.]
    Mr. Bachus. Yes. Well, you are a better man than I am, Mr. 
Cohen.
    Mr. Farenthold?
    Mr. Farenthold. The gentlelady from Texas and I sit 
together often on the airplane.
    Ms. Jackson Lee. And we are friends. And, Mr. Bachus, we 
smile together, do we not? You have to clean that up.
    Mr. Bachus. No, I am kidding you.
    Mr. Farenthold. But I do join with the gentlelady from 
Houston in saying we are looking forward to getting our sports 
situation resolved. It bleeds down into Corpus Christie as 
well.
    You know, I am a customer of both Time Warner and of 
Comcast. Corpus Christie is Time Warner, and my apartment here 
in D.C. is Comcast. I am actually looking forward to the 
improved Internet performance in Corpus Christie, and these 
dropped packets and network resets I keep getting every few 
months. So that is one thing I am really looking forward to in 
this merger. And I do want to align myself with Mr. Gohmert. If 
it comes out you guys are making programming decisions 
politically based, I think there is going to be a problem, and 
I certainly hope that is not the case.
    I did want to talk about a couple of issues that were 
brought up. Mr. Schaeffer, you mentioned that the cost of 
adding additional ports, the hardware was trivial. But there is 
more to it than just hardware, is there not? I mean, you have 
actually got to get the pipes.
    Mr. Schaeffer. So Comcast has sold its customer service 
that if those customers actually use the service at the rates 
that Comcast has sold it, their network would fail to operate. 
So in order to mask that problem, they have limited the 
boundary capacity between their network and the public Internet 
to help reduce consumers' use of broadband.
    Mr. Farenthold. Right. So this actually, though, makes 
their deal with Netflix sound good. They have immediately 
opened up 30 percent more bandwidth at your peering points, 
right? Because Netflix is not coming through your peering 
points.
    Mr. Schaeffer. But there is so much additional traffic 
beyond Netflix that wishes to go to Comcast's paying customers 
that those ports still remain constrained.
    Mr. Farenthold. Mr. Cohen, I mean, that kind of makes you 
guys look like bad guys. You know, I am geek enough that I will 
run speed tests, and if I go to the Time Warner Roadrunner 
speed test I do much better than if I go somewhere else. Just 
the same happens if I stay on the Comcast network, I do better. 
In order to offer that high speed Internet, you have got to get 
your peering in order. Is that----
    Mr. Cohen. I mean, I want to say this again. I mean, our 
peering is in order. We are good citizens in the peering 
network and in the peering world. We work very hard to work 
with all peering partners, whether it is settlement free 
peering or paid transit. As Professor Hemphill said, this is 
not headline news. This is----
    Mr. Farenthold. You all actually do better than Time 
Warner. I am going to be honest about that. Apologies to the 
folks down in Corpus Christie.
    Mr. Cohen. I mean, I really think we are good citizens and 
we have good arrangements. And the issues that we have had have 
been truly isolated, and we have worked very hard to be able to 
resolve those without ever de-peering a partner of ours in the 
interconnection----
    Mr. Farenthold. I have got a couple of other questions, and 
I am running out of time. But you have your boxes, all your 
cable folks. I think you are almost entirely digital now where 
you have very few subscribers who do not have a cable box. Is 
that correct?
    Mr. Cohen. Well, we are 100 percent digital.
    Mr. Farenthold. Right.
    Mr. Cohen. So, yes, you need some type of a cable box----
    Mr. Farenthold. Cable card or box.
    Mr. Cohen [continuing]. Or a converter box for every 
television.
    Mr. Farenthold. Do you have the ability then to pull those 
boxes to see how many people are watching what channel for what 
time?
    Mr. Cohen. So with the advent of big data, this is 
beginning to be something that we are looking at and beginning 
to focus on. We probably do have the technological ability to 
do that. But as you may know, cable is subject to intense and 
restrictive privacy protections and privacy restrictions that 
go far beyond what applies on the Internet, for example, with 
what Google and Yahoo can do with the data that they obtain.
    Mr. Farenthold. But we can eventually get the data. You 
would know, so when Mr. Gottsch says he has got more viewers 
than some of your other people, you should have picked somebody 
else in Denver. I mean, the technology is to the point you just 
do not have it all implemented.
    Mr. Cohen. That is correct.
    Mr. Farenthold. All right. And then, I also wanted to go 
back to--actually I will stick with you for a second, Mr. 
Cohen. Do you see the increase in video traffic on the network 
going up? Do you see a shift from this model of where you are 
watching TV in real time to where you are pulling something 
from Netflix, and where the entertainment program becomes more 
on demand? And does this help or hurt your bandwidth issues?
    Mr. Cohen. All right. So, so far what we are seeing, we 
have to break this down in a slightly different way I think. We 
are seeing tremendously increased utilization of online video 
services, but we are not seeing a degradation in the amount of 
time that people watch television and watch video on demand, 
which is a part of our Title 6 cable service. So it has been--
--
    Mr. Farenthold. And I guess----
    Mr. Cohen [continuing]. More a growth of the pie than a 
difference in a share of the pie.
    Mr. Farenthold. And I guess my point is, in making program 
decisions and operating in the public interest, I know that is 
kind of an archaic term in FCC lingo. But sports programming, 
news programming, stuff that needs to be live, it seems like 
there ought to be more availability in bandwidth on your cable 
dedicated to that sort of programming as opposed to stuff that 
you could get through alternative methods on demand that is not 
as time sensitive.
    We could go into that, but I am out of time. I did want to 
suggest that that be something that would be considered, and it 
might be something that the FCC----
    Mr. Cohen. The very quick thing I will observe--it is the 
second time you made reference to this--is please do not 
underestimate the amount of sports programming in particular 
that is now available online. So Major League baseball has a 
package or online. You can watch any Major League baseball 
game. NBA, the same thing. NCAA playoffs was all available 
online as well as on television. So it is just something that 
goes into your thinking.
    Mr. Farenthold. I just love my Longhorn Network. I love my 
Longhorn Network. Thank you very much.
    Mr. Cohen. Thank you.
    Mr. Bachus. Thank you. There was some reference to speed, 
and of course that depends on the distance of that last mile. 
So, you know, sometimes you are comparing two different other 
type of wires. So what may be true in one case is not true in 
another. At this time, I recognize the Ranking Member, Mr. 
Conyers.
    Mr. Conyers. Thank you very much, Chairman. I wanted to 
remind Mr. Cohen that a few years back, I asked you at our 
hearings whether your merger with NBCUniversal would not result 
in the loss of jobs. Has that been proven true?
    Mr. Cohen. I was actually hoping you would ask me that 
question because we had a long discussion about it.
    Mr. Conyers. We did.
    Mr. Cohen. And I told you that it was a vertical 
transaction, and that there was no job loss to be expected. And 
I am very proud to report to you that if you look at the 
combined Comcast and NBCUniversal after 3 years, we are 
somewhere between 3,000 and 5,000 more jobs than we had at the 
time we did the transaction.
    Mr. Conyers. Excellent response, and I am happy that we had 
that discussion back then. It is still an important question. 
Attorney Grunes, in your view, how effective have the 
behavioral remedies imposed in the Comcast/NBCUniversal 
transaction been? And should similar remedies, in your view, 
apply in this case?
    Mr. Grunes. Thank you for the question. Generally speaking, 
behavioral remedies are like regulation, and just like 
regulation, behavioral remedies often do not work. Professor 
John Kwoka has done a study, a retrospective. It is the most 
comprehensive one. It looks at price increases. It looks at all 
the factors that go into the success of behavioral remedies.
    There are problems with them. The problems can include 
evasion by the parties who are being regulated. I am not going 
to get into an argument with Comcast about whether it has or 
has not evaded certain of those remedies, but that is a 
problem. There is a problem with unforeseen circumstances. We 
have heard a little bit about that today in the sense of the 
remedies appear to cover the FCC's open Internet order. But 
Comcast went outside of that allegedly and made issues out 
there.
    So my view is behavioral remedies generally are to be 
avoided. I am quite sure DoJ is going to look back since it has 
only been 3 years since the NBCU transaction and the behavioral 
conditions were put in. They will look back. They will see what 
worked and what did not work. And my guess is that at the end 
of the day, they are going to agree with me that the conditions 
they put in place were not adequate.
    Mr. Conyers. And they are difficult to enforce. Sometimes 
they are so broad in scope that it does not take much to 
circumvent them either.
    Mr. Grunes. They are difficult to draft. What is 
interesting to me is even in the recent airline merger, DoJ 
itself explained why behavioral remedies are not good when they 
explained why they would not accept some. It puts the 
government too much into a business. It puts the business at a 
different position than competitors. There are all those 
problems, including the drafting problem you have referred to.
    Mr. Conyers. Yes. Now, one of the witnesses--I think it was 
Professor Hemphill--said that the combined Comcast is not 
likely to foreclose online video distributors because online 
video is an increasingly valuable part of the broadband 
Internet business. What kind of a response do you have for that 
inquiry?
    Mr. Grunes. Well, Comcast is first and foremost a video 
company, and it is facing new competition from outside of its 
traditional business. According to the Department of Justice in 
the NBCUniversal complaint, Comcast took action against that 
new form of competition. And in my view, this merger only makes 
that more likely and likely to be worse.
    Mr. Conyers. Thank you. My last question to Mr. Schaeffer 
is, the suggestion that we have heard that Comcast Internet 
interconnection agreement with Netflix is a sign America is 
working well. Is that necessarily the case?
    Mr. Schaeffer. I would argue it is a market that was 
distorted due to monopoly power. Netflix entered that agreement 
because it was the only way it could provide connectivity and 
content to its customers. Comcast controls the only pipe to 
those customers, and Netflix had to pay the toll to get to 
those customers, ultimately raising its prices.
    Mr. Conyers. Thank you. Mr. Chairman, I appreciate the 
time.
    Mr. Bachus. Mr. Conyers, as always, I appreciate your 
thoughtful questions. At this time, we recognize the gentleman 
from Missouri, Mr. Smith, for 5 minutes.
    Mr. Smith of Missouri. Thank you, Mr. Chairman. Mr. Cohen, 
why does Comcast charge some parties for interconnection 
agreements and offer others transit without compensation?
    Mr. Cohen. So the structure of that interconnection market, 
which, by the way, I will answer the question, but the same 
answer would apply to everybody else in the ecosystem. So the 
structure of that market is that when traffic is in rough 
balance between an ISP like Comcast and a transit provider, 
then there is what is called settlement free peering. That is, 
if we are sending roughly the same amount of traffic to a Level 
Three as Level Three is sending to us, there is settlement free 
peering. When the traffic goes out of balance, the industry 
convention, and this is an international convention that 
applies among dozens and dozens--hundreds of transit providers 
and ISPs around the world, then there is cash compensation for 
the extra traffic.
    So just by way of example, Cogent and Comcast had a 
settlement free peering arrangement for many, many years. It 
was only when their traffic went out of balance--and it did not 
go out of balance by 5 percent or 10 percent. We were in 
roughly one-on-one balance in terms of the traffic we were 
sending to each other. It went out of balance by 500 percent. 
Cogent started sending us five times as much traffic as we were 
sending to them. And that triggered the need for a discussion 
of the negotiation about moving to a form of a paid peering 
relationship.
    Mr. Smith of Missouri. So it is only when it is out of 
balance.
    Mr. Cohen. Correct.
    Mr. Smith of Missouri. Okay. Mr. Schaeffer, some of your 
relationships with interconnection counterparties involve 
payment. Others do not. Is there a clear understanding 
regarding the degree of traffic flow that needs to change 
before a relationship switches from a free transfer to a paid 
transfer?
    Mr. Schaeffer. So, in fact, Cogent does not pay any party 
globally for connectivity. We have two forms of connectivity. 
We have approximately 40 settlement free peers in which no 
monies change hands. And secondly, we have approximately 5,100 
networks that buy full Internet transit from us. They are our 
customers. We do not sell a paid peering product. We do not buy 
a paid peering product.
    I would also like to respond to a comment that Mr. Cohen 
made. No traffic went to Mr. Cohen's network that was not 
requested by his customers. Secondly, his network is asymmetric 
in its architecture. He sells a product that has greater 
download speed than upload speed. So, therefore, it is 
virtually impossible for any network to be in balance.
    It was an interesting statement in Mr. Cohen's preparation 
that he claims that the overwhelming majority of traffic 
destined to Comcast customers goes through settlement free 
peering, but yet he outlines this requirement for ratios. It is 
impossible for our network or any network to meet that test.
    Mr. Smith of Missouri. Okay, thank you. Mr. Cohen, do you 
want to respond to that comment?
    Mr. Cohen. Yes. It is inaccurate. Comcast has settlement 
free peering arrangements with 40 companies, which means that 
for those 40 companies, the traffic roughly is in balance. And 
again, our traffic was roughly in balance with Cogent at one 
point in our business relationship.
    Mr. Smith of Missouri. Okay. Mr. Polka, can you explain how 
the National Cable Television Cooperative operates to purchase 
programming and how it may be impacted by the Comcast merger?
    Mr. Polka. Happy to. Thank you, sir. The National Cable 
Television Cooperative is a partner organization for our member 
companies, our 800 to 900 member companies in smaller markets 
in rural areas. And they operate by working together 
collectively for our members to negotiate programming 
agreements. Within that membership include companies that are 
competitive to both Comcast and Time Warner, such as RCN, 
Grande, Wave Broadband, Wide Open West, and others.
    What the coop does is it works to collectively negotiate a 
master programming deal for our members because otherwise if 
you have companies of 1,500 median size, it is very, very 
difficult as one small company to go out and negotiate major 
programming agreements with Viacom, Disney, Comcast, 
NBCUniversal, Fox, and otherwise. So the NCTC provides that 
benefit to smaller companies in the acquisition of programming, 
and that is basically the operation of the NCTC.
    Mr. Smith of Missouri. And how it will be impacted from the 
merger?
    Mr. Polka. How it will be impacted is as a result of the 
size of Comcast/Time Warner after the merger. When we talk 
about combining distribution assets of both Comcast Cable and 
Time Warner Cable, they will be a much larger cable company. 
And as a result they in their own negotiations with those same 
programming vendors that I mentioned will have the ability and 
the leverage in the marketplace to lower their wholesale costs 
of programming.
    That will impact the cost of programming to NCTC and our 
900 smaller member companies that purchase programming through 
NCTC in two ways. Number one, as Comcast/Time Warner is able to 
lower its wholesale price, the disparity between what Comcast/
Time Warner pays and what our members pay will be greater. 
There is also the possibility and the likelihood that as a 
result of this transaction, other programming providers may be 
asking for higher prices to offset lower prices paid by 
Comcast/Time Warner.
    Mr. Smith of Missouri. Thank you, sir. I see my time has 
expired. Thank you, Mr. Chairman.
    Mr. Bachus. Thank you. Thank you, Mr. Smith. At this time, 
Mr. Jeffries is recognized for 5 minutes.
    Mr. Jeffries. Thank you, Mr. Chair, and thank you for 
providing this opportunity for a second round of questioning. 
And thank you certainly to the witnesses for your patience, 
your thoughtful testimony, and your indulgence.
    I wanted to just explore some thoughts connected to the 
testimony provided by Mr. Hemphill. I believe that in your 
testimony you stated that the combined Comcast is not such a 
must-have that it gains a competitive advantage with 
programmers. Is that an accurate representation of what you 
testified to?
    Mr. Hemphill. It is that.
    Voice. Turn your microphone on, please.
    Mr. Hemphill. Nearly so. It is that the combined entity 
will not be such a must-have that it would generate the kind of 
bargaining power that would break a programmer's scale, and 
thereby give rise to concerns about losses on that side.
    Mr. Jeffries. So Comcast now has, I believe, 22 million 
subscribers, correct? And I gather----
    Mr. Cohen. That is correct.
    Mr. Jeffries. Thank you, Mr. Cohen. And Time Warner has 
about 11 million subscribers, is that correct?
    Mr. Marcus. Correct.
    Mr. Jeffries. And then if this transaction were to be 
approved, I believe because of the sell-off, there would be 
approximately 30 million subscribers with the combined entity?
    Mr. Cohen. Actually it will be 29 million given the 
divestiture announcement that we made last week.
    Mr. Jeffries. Okay, thank you. So I think one of the things 
that I am trying to work through and perhaps other Members of 
the Committee are trying to figure out is, what is the 
appropriate legal landscape through which we can interpret what 
an appropriate or an inappropriate market concentration may be. 
And as Mr. Cohen appropriately pointed out, you have got two 
D.C. Circuit Court opinions indicating that the 30 percent 
number was perhaps an arbitrary number, and that there was no 
reason for us to believe that the public interest may be 
adversely impacted. And then as Mr. Conyers correctly pointed 
out, there was a Supreme Court decision several decades ago, 
but it is still good law as far as we have been able to 
determine, albeit in the banking context, United States v. 
Philadelphia National Bank, that stated ``A merger resulting in 
30 percent of a market trending toward concentration in which 
four firms controlled 70 percent of the sale was presumptively 
illegal under Section 7 of the Clayton Act.''
    Could you provide us with some clarity as to where you 
think things stand, and perhaps Mr. Cohen can weigh in as well 
as Mr. Polka.
    Mr. Cohen. Why do you not go first, Professor?
    Mr. Hemphill. So I would be happy to react to that. I think 
Philadelphia National Bank, the old Supreme Court case, is a 
useful starting point. This is an opinion written by Dick 
Posner, my old boss, when he was a law clerk for Justice 
Brennan. In the 50 years since, we have learned a lot about how 
to think about market power both on the sell side and also as 
relevant here on the buying side.
    And so, one thing you need to recognize, I believe, is that 
the buying side is really different from the selling side. It 
is not a game where we are worried about changing the price and 
thereby changing the quantity. We are instead thinking about 
bargaining power, and the FCC spent a lot of time thinking 
about bargaining power in the context of programming markets. 
And although there is no hard and fast rule that we can hold 
onto and say with economic certainty this is the right answer, 
we do have from the FCC their best shot, which, one, the D.C. 
Circuit has said not merely is arbitrary, but was too 
aggressive, was too conservative, and which marks the time six 
or 7 years ago when the market was somewhat different. I think 
it is clear that the competition has increased.
    Mr. Jeffries. Thank you. Let me just let Mr. Polka react 
quickly to that.
    Mr. Hemphill. Sure.
    Mr. Polka. I would say this as it relates to the 30 
percent. I, like Mr. Cohen, am a recovering lawyer, so I cannot 
speak in detail about----
    Mr. Jeffries. As are many of us.
    Mr. Polka. Exactly. Proud to be one. Cannot speak directly 
to the antitrust implications specifically, but as I said in my 
testimony and in my oral comments, this merger is about three 
different parts. It is not just a horizontal merger. We have 
programming and programming assets being combined. We have 
Comcast programming combining with new distributions. And we 
have the impact of what happens when Comcast distribution is 
combined with Time Warner cable distribution.
    And as I was mentioning to Mr. Smith, there is an impact on 
the 30 percent approaching that where a company that approaches 
that size has enough leverage in the marketplace to be able to 
affect its wholesale programming costs that ultimately impact 
other direct competitors like RCN, Grande, and others.
    Mr. Jeffries. Thank you. Mr. Cohen?
    Mr. Cohen. So I am going to do quick things in respect of 
the time, which, first of all, I think Professor Hemphill made 
the basic point. I want to return to something that Mr. Grunes 
said earlier, which is it depends on the market. And the 
advantage we have with these two D.C. Circuit cases is that 
they dealt with this precise market. That is what they were 
looking at.
    And they were also dealing not with the horizontal issues, 
but with the vertical issues that Mr. Polka referred to. And in 
reaction to their decision, although I fully agree with what 
Professor Hemphill said, I want to quote what Professor 
Christopher Yoo from the University of Pennsylvania has 
observed about those decisions, which is that ``They represent 
a potentially insuperable obstacle to claims that allowing the 
transaction to proceed would adversely affect this market.'' 
``Potentially insuperable obstacle.''
    So I am very comfortable, and we are going to be under 30 
percent by the way, not 30 percent, not over 30 percent. I 
think the express concerns of the sky is falling and the world 
is going to end as we know it are simply not supportable under 
the law.
    The second things I just want to say quickly because I know 
folks were in and out. Mr. Polka continues to say that we are 
going to be able to extract lower programming costs. I wish we 
would. By the way, that would result in lower prices for 
consumers, which a lot of people are interested in. But that if 
we do that, competitors of ours are going to have to pay higher 
programming prices.
    I covered this earlier. Professor Hemphill covered this 
earlier. It is an attractive comment. It just does not have any 
support in antitrust law or antitrust economics. That is not 
the way the markets work.
    Mr. Jeffries. Thank you. I yield back.
    Mr. Bachus. Thank you. We are going to wrap this hearing up 
with Mr. Collins and me because we want to try to get out of 
here at 1:30. It may be two or 3 minutes past that. Mr. 
Collins?
    Mr. Collins. Thank you, Mr. Chairman. One of the best 
things about these hearings and especially ones like this, and 
some of the best results of the some of these hearings is 
actually having experts or ones who put themselves out as 
experts in certain areas. Being able to share not only with our 
questions that we have, but I like to put you basically, and I 
have to run for office and I have to do debates, so guess what? 
We are going to debate.
    Mr. Grunes and Mr. Hemphill, you are not off the hook. Mr. 
Grunes, would you please succinctly state or list specifically 
antitrust theory under why this merger may violate antitrust 
law? Mr. Hemphill, I would highly recommend you write these 
down because I am going to ask you to rebut them. [Laughter.]
    Input foreclosure, customer foreclosure, and bargaining 
theory.
    Mr. Collins. That is a little more succinct than I like, 
but we will go on from there. [Laughter.]
    So I may come back to you if he needs that.
    Mr. Hemphill. Right. So the more succinct from him, the 
harder for me I think.
    Mr. Collins. You are learning quickly. [Laughter.]
    Mr. Hemphill. With respect to the buyer power theory--that 
was one of your three, right? These are the three from the 
testimony, right?
    Mr. Collins. Right.
    Mr. Hemphill. Right. With respect to buyer power, I think 
that is wrong for the reasons we talked about before. The 
testimony itself--this is page 13--relies as its essential 
example on a quantity increase premised on a decrease in price. 
Unless you are in a market where you have a strategy of 
decreasing quantity in order to drop the price, this part does 
not hold. You know, there still might be a bargaining theory, 
but that is not an antitrust theory necessarily. You are going 
to need to do some more work to get there, and I do not hear 
that in the testimony itself, but we have already talked about 
that, I think, to some degree.
    With respect to input foreclosure, you know, ultimately 
this is a comment within the testimony I think on regional 
sports networks in the main. I have not made a close focus of 
the, I believe, four different narrow localities in which that 
particular form of input foreclosure takes place. I think there 
are some general economic reasons for skepticism. But in any 
event, I think there as a comment before about something not 
being a headline issue. I think that is not a headline issue.
    Finally, and I think most importantly, when we think about 
the antitrust issues, since there is not head-to-head 
competition, there is still a question of foreclosure. And we 
have spent a lot of time trying to think about the incentives 
and consequences of foreclosure incentives. The fact that the 
broadband is a profitable and increasing business reduces, 
though not to zero, it reduces the incentive to engage in 
foreclosure. And then you need to think through the very large 
number of different stories that an economic theorist can 
devise to tell a foreclosure story. You know, I get at a few of 
these in my testimony. Other folks have done exhaustive looks 
at that.
    I think the most important one that we have been talking 
about has been with respect to Comcast/Netflix, roughly 
speaking. The fact that they did a deal both illustrates the 
workings of the market and tends to undermine the worry that 
this would be an instrument of foreclosure.
    Mr. Collins. Thank you. Mr. Grunes, any rebuttal? Mr. 
Grunes?
    Mr. Grunes. I will submit something, if I may.
    Mr. Collins. Well, I am going to ask the question. Submit 
in oral at this point, if you would. And I am not trying---- 
[Laughter.]
    And I am not trying to be hard, but it is just very 
difficult because Members may or may not be able to see written 
response. They may be watching in their office right now, so 
even if it is brief. And if not, if you choose not to, I will 
not----
    Mr. Grunes. Okay. So just briefly to go back to the Netflix 
example, the argument there is, and Comcast has made the 
argument, the market is working because Netflix paid for 
interconnection. Netflix's response was we were getting so 
degraded on Comcast, and they have a nice visual on what was 
happening to the quality of their service, it was going down 
lower than HD, lower than DVD, down to the VHS level, that they 
felt they had to do something about that.
    And as a Netflix subscriber, I can tell you I would drop 
Netflix in a case like that before I would switch my Internet 
provider, and Netflix obviously understands that, okay? The 
fact that they paid and that their CEO then said Comcast is 
extracting a toll or a tax on us, we can afford it, others 
behind us cannot, I think tells a legitimate antitrust theory.
    Professor Hemphill and I may disagree on this, but I think 
it is very much a similar theory to the Microsoft theory that 
the DoJ litigated. The difference here, because this is a 
merger, is that under Section 7 we are under an incipiency 
standard. You do not wait until they are monopolist. If this 
merger looks like it may be anti-competitive, you nip it in the 
bud.
    Mr. Collins. Well, I do appreciate both of you. Thank you 
for your answers. I think it provides some insight that you do 
not normally get on direct questions, and I do appreciate it. 
Mr. Chairman, I yield back.
    Mr. Bachus. Thank you. Mr. Grunes, you are a Netflix 
subscriber. Do you watch House of Cards? [Laughter.]
    Mr. Collins. Mr. Chairman, are you going to imply something 
there? Do not go to the metro. [Laughter.]
    Some of the audience----
    Mr. Grunes. Under advice of counsel, I will not answer the 
question. [Laughter.]
    Mr. Bachus. We are waiting on Frank Underwood to get here, 
but I do not know. Two questions, and this will be the last two 
questions of the hearing. And I will ask Mr. Marcus or Mr. 
Cohen.
    Mr. Marcus. I was starting to feel neglected
    Mr. Bachus. There have been allegations that Comcast may 
exclude competitors from advertising interconnects that it 
operates. And after the merger, some commentators assert that 
Comcast will control approximately 82 percent of the top 50 
urban advertising areas in the country. Can you provide 
assurances that Comcast will not exclude competitors or 
advertising firms from the advertising interconnects that 
Comcast operates? And I think Mr. Issa also expressed some 
concern about that.
    Mr. Marcus. Clearly your question.
    Mr. Cohen. Thank you. So, Mr. Chairman, let me answer the 
question.
    Mr. Bachus. Well, that is just fine and probably better 
because Mr. Marcus----
    Mr. Marcus. I would be happy to give the assurance, but I 
am----
    Mr. Cohen. It sort of goes to our conduct.
    Mr. Bachus. Yes.
    Mr. Cohen. It also gives me an opportunity I think to 
correct the record on some of the things that have been said 
with respect to advertising. So I do not think it is relevant 
what the percentage of control of interconnects are that 
Comcast would have or of NCC, which is our national advertising 
cooperative. You usually have to start with the intensely 
competitive nature of the advertising market, so that 
advertising market is a $72 billion market, of which cable in 
the aggregate has about $5 billion. So we are about 7 percent 
of the advertising market.
    So even assuming that we are going to control 82 percent of 
the cable advertising market, which I do not think is accurate 
by the way, but we will be controlling 82 percent of 7 percent 
of the market. And I do not think that present serious or 
cognizable antitrust risks or harms. Advertisers have massive 
other opportunities to be able to reach their eyeballs what 
they need. We are in the business of selling advertising. We 
are not in the business of excluding businesses who want to buy 
advertising from us.
    And it also gives me an opportunity just to add two 
sentences on something in my oral testimony because the 
original question around this was a small business question, 
which is one of the huge pro-competitive impacts of this 
transaction is to make our combined company a much more 
effective business competitor in small- and medium-sized 
business sector. So we are going to bring big benefits to those 
businesses, and we are not going to take away any advertising 
opportunities that they have today.
    Mr. Bachus. So your short answer is that you are not going 
to exclude competitors or advertising----
    Mr. Cohen. Correct.
    Mr. Bachus [continuing]. From the interconnects.
    Mr. Cohen. Correct.
    Mr. Bachus. Okay. All right. You were considering whether 
to add an independent programmer to Comcast Network. Does 
Comcast consider whether the independent programming content 
would compete with Comcast-owned content? I know there was some 
mention that it was Rural Network, that you own 8 percent of 
them. You said that fact does not weigh in.
    But how can you ensure that that is not a consideration? I 
mean, it just seems like it has to be in your pecuniary 
interests as something you have an ownership in.
    Mr. Cohen. So I was going to say before you added that last 
comment, in view of the lateness of the hour, I am finally 
going to be able to give a succinct answer and say we do not, 
which is the answer to the initial question. We do not consider 
whether a new programmer is competitive with an existing piece 
of NBCUniversal programming. The way that is enforced is 
through the program carriage rules of the Federal 
Communications Commission, which legally prohibit us from 
discriminating against unaffiliated content because of 
affiliated content that we have.
    And in response to your last question, I mean, how is it 
possible to separate that, the reason we can separate it is 
because you cannot assume that any particular subject matter 
that a channel leads into is only a matter of further dividing 
the pie. So let us take news as an example. If you have 100 
people who watch news today, and we carry 10 news channels, and 
one of them is owned by us, and it is getting, let us say, 10 
viewers of those 100, if we were to add another news channel, 
it does not mean that only 100 people are still going to be 
watching news. Our goal is when we add channels that more 
people want to watch. And so now, maybe we have 110 people 
watching news, and we are not losing any viewers from the news 
channel that we own or from any other news channel that we have 
on the network.
    So we are trying to make our programming more attractive, 
more compelling, get more customers. It is not a zero sum game 
that if we put this network on that is sort of in the same 
genre as the network we have, we are going to lose customers.
    Mr. Bachus. Thank you. Would any of you gentlemen, Mr. 
Schaeffer, and Mr. Grunes, or Doctor, would you all like to 
respond? Any counter points on that?
    [No response.]
    Mr. Bachus. Okay. All right. That is a good place to stop. 
Mr. Gottsch?
    Mr. Gottsch. I would like to add one thing. Congressman 
Smith was asking about the ratings, and in the extended 
statement that we made, we have the ratings for all 288 Comcast 
channels as part of that record for the May period.
    Mr. Bachus. And Mr. Cohen did mention that some of those 
decisions are reconsidered, I do not know.
    Mr. Gottsch. We hope so. I mean, I came to Washington, D.C. 
here very concerned about Comcast's attitude toward rural 
America and independents, and I am even more concerned now.
    Mr. Bachus. I think that we are all problem solvers. We 
would not have gotten as far as we did. So I appreciate this 
hearing. This concludes today's hearing. I thank all our 
witnesses for attending and for your patience. It was cooler at 
the end of the hearing than at the beginning, which is unusual.
    Without objection, all Members will have 5 legislative days 
to submit additional written questions for the witnesses or 
additional materials for the record, and that includes Ms. 
Jackson Lee, who was going to introduce something. But any 
Member that wants to submit anything for the record, and if the 
panelists wish to submit additional information for the record.
    Thank you. This hearing is adjourned.
    [Whereupon, at 1:37 p.m., the Subcommittee was adjourned.]






                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

 Addendum to the Joint Prepared Statement of David L. Cohen, Executive 
 Vice President, Comcast Corporation; and Robert D. Marcus, Chairman & 
            Chief Executive Officer, Time Warner Cable Inc.


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