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






                  PROPOSED MERGER OF AT&T AND DIRECTV

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

                                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

                               __________

                             JUNE 24, 2014

                               __________

                           Serial No. 113-95

                               __________

         Printed for the use of the Committee on the Judiciary






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

                              ----------                              

                             JUNE 24, 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     2
The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Committee on the Judiciary     3
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Ranking Member, Committee on 
  the Judiciary..................................................     4

                               WITNESSES

Michael White, President, Chairman and CEO, DIRECTV
  Oral Testimony.................................................     8
  Prepared Statement.............................................    10
Randall Stephenson, Chairman, CEO and President, AT&T Inc.
  Oral Testimony.................................................    20
  Prepared Statement.............................................    22
Ross J. Lieberman, Senior Vice President of Government Affairs, 
  American Cable Association
  Oral Testimony.................................................    30
  Prepared Statement.............................................    32
John Bergmayer, Senior Staff Attorney, Public Knowledge
  Oral Testimony.................................................    44
  Prepared Statement.............................................    46

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, and 
  Ranking Member, Committee on the Judiciary.....................     5
Material submitted by 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...................................    58

                                APPENDIX
               Material Submitted for the Hearing Record

Response to Questions for the Record from Michael White, 
  President, Chairman and CEO, DIRECTV...........................    88
Response to Questions for the Record from Randall Stephenson, 
  Chairman, CEO and President, AT&T Inc..........................    90
Response to Questions for the Record from Ross J. Lieberman, 
  Senior Vice President of Government Affairs, American Cable 
  Association....................................................    93
Response to Questions for the Record from John Bergmayer, Senior 
  Staff Attorney, Public Knowledge...............................    99

 
                  PROPOSED MERGER OF AT&T AND DIRECTV

                              ----------                              


                         TUESDAY, JUNE 24, 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 10:31 a.m., in 
room 2141, Rayburn Office Building, the Honorable Spencer 
Bachus (Chairman of the Subcommittee) presiding.
    Present: Representatives Bachus, Goodlatte, Farenthold, 
Issa, Holding, Collins, Smith of Missouri, Johnson, Conyers, 
Garcia, Jeffries, and Cicilline.
    Staff present: (Majority) Anthony Grossi, Counsel; Austin 
Carson, Legislative Assistant to Mr. Farenthold; Jon Nabavi, 
Legislative Director to Mr. Holding; Jennifer Lackey, 
Legislative Director to Mr. Collins; Justin Sok, Legislative 
Assistant to Mr. Smith of Missouri; Ashley Lewis, Clerk; 
(Minority) James Park, Counsel; Slade Bond, Counsel; and 
Rosalind Jackson, Professional Staff.
    Mr. Bachus. Good morning. The Subcommittee on Regulatory 
Reform, Commercial and Antitrust Law hearing will come to 
order.
    Without objection, the Chair is authorized to declare a 
recess of the Committee at any time.
    I recognize myself for my opening statement.
    We are here today to examine the proposed merger between 
AT&T and DIRECTV. As I reminded our witnesses during the recent 
Comcast/Time Warner merger hearing, today's proceeding will not 
determine whether the proposed merger will be approved. Rather, 
this hearing provides an open forum to discuss the potential 
implications of the merger and allow publicly elected 
representatives an opportunity to pose questions to the leaders 
of the respective companies and hear a variety of viewpoints on 
the proposed transaction. The record created by today's hearing 
will assist the Committee in its ongoing oversight of the 
antitrust enforcement agencies and our Nation's antitrust laws.
    The proposed merger of AT&T and DIRECTV comes at a time 
when the structure of the telecommunications industry could be 
or is undergoing a rapid transformation in a relatively short 
period. The proposed merger between Comcast and Time Warner has 
already been announced, of course, and there have been reports 
of other potential mergers and acquisitions. The business of 
telecommunications increasingly requires significant investment 
to construct and update essential infrastructure and to provide 
innovative products and services to consumers. Merged companies 
may be able to achieve economies of scale and have better 
ability to access the large amounts of capital needed to build 
out systems.
    However, consolidation in an industry also raises issues of 
market power and the possibility for abuse of a firm's dominant 
competitive position. These are all issues that are appropriate 
for consideration in a hearing like this.
    For the most part, the companies before us today engage in 
very different businesses. AT&T is primarily a provider of 
voice and Internet services, while DIRECTV is almost 
exclusively a video service provider. AT&T recently has begun 
offering a video service referred to as U-verse, which is a 
competitor to DIRECTV in certain parts of the country. In 
addition to its video service, DIRECTV owns and manages a few 
regional sports networks in the Pittsburgh, Denver, and Seattle 
areas.
    Today's hearing will examine, among other things, how the 
proposed merger may impact the future of U-verse and its 
ability to provide video and Internet services to consumers 
following the proposed merger and the potential for vertical 
integration issues related to DIRECTV's ownership of certain 
sports networks.
    AT&T and Direct have submitted a public interest statement 
to the Federal Communications Commission arguing that this 
merger will allow the combined company to offer a bundled 
product that would enhance consumer choice by increasing 
competition in the market for bundled products and services. In 
addition, they contend that the cost savings resulting from the 
merger would allow additional resources to be deployed to 
expanding broadband access particularly in rural communities.
    Again, we have the chairman and CEO of both AT&T and 
DIRECTV with us today to answer any questions arising from the 
public interest filing.
    With that, I look forward to the testimony of our panel of 
esteemed witnesses on these and other issues related to the 
proposed merger.
    I now turn my Ranking Member, Mr. Johnson, for his opening 
statement.
    Mr. Johnson. Thank you, Mr. Chairman.
    Today's hearing concerns the proposed merger of AT&T, a 
global telecommunications company with approximately 11 million 
broadband subscribers, 5.6 million video subscribers, and 
246,700 employees, with DIRECTV the Nation's second largest 
video provider serving approximately 50 million customers.
    The core question at the heart of this merger is whether 
creating an integrated bundle of AT&T's broadband services and 
infrastructure with DIRECTV's popular video programming would 
serve the public interest without substantially lessening 
competition.
    According to a survey conducted by Consumer Reports last 
year, consumers are overwhelmingly one-stop shoppers who prefer 
to bundle phone, video, and broadband Internet into one 
package. Not only does bundling multiple services often save 
many consumers money at a time of increasing cable costs, but 
it also avoids the problems associated with multiple 
installation visits, service calls, and phone calls to resolve 
disputes.
    As a new entrant in the video marketplace with only 5.6 
million subscribers, there is little to suggest AT&T offers 
serious direct competition with DIRECTV's video services. 
Instead, the bulk of the evidence demonstrates that each 
company primarily serves different markets with different 
services.
    Although the proposed merger represents a concerning trend 
toward industry consolidation, there is ample evidence that 
this transaction would create considerable public interest 
benefits. AT&T argues that the improved bundle and cost savings 
generated by the merger will, quote, fundamentally and 
permanently improve the economics of AT&T's investment in 
broadband. End quote.
    Specifically, AT&T plans to deploy its fiber network to 2 
million homes with speeds up to 1 gigabyte per second and 
deploy high-speed broadband Internet over a fixed wireless 
local loop to 13 million homes in largely rural areas with 
average speeds between 15 and 20 megabits per second. For 
millions of homes, this Internet service will be the fastest 
ever improving high-speed access for millions while indirectly 
benefiting other competitors by bringing these homes online.
    As a strong advocate of digital inclusion, I commend this 
commitment to close the digital divide by bringing us 
measurably closer to the universal adoption of affordable high-
speed Internet. It is critical that people of color remain 
competitive in the Internet economy which starts with a fast 
and affordable Internet connection.
    Additionally, this merger would benefit the public by 
expanding AT&T's industry-leading standards for labor and 
corporate diversity to DIRECTV's employees and suppliers. Given 
the television industry's infamous reputation for opposing 
organized labor, this merger would have transformational 
benefit for thousands of employees in this industry, giving 
labor a strong foothold in the industry.
    I urge the Federal Communications Commission and the 
Department of Justice to view this merger in light of these 
public benefits and to strongly hold the merged company to 
these commitments.
    Lastly, as it eyes more than several dozen cities for 
deployment of its ultra-fast fiber network, I call on AT&T to 
deploy this advanced service in Atlanta, Georgia, which 
encompasses much of the district that I represent. Atlanta is 
swiftly becoming an innovation economy driven to create tinker 
and improve products and design. Deploying an all-fiber network 
in Atlanta would benefit many existing local startups, as well 
as untold entrepreneurs, app developers, and other innovators 
still emerging. As a former county commissioner who understands 
the power of big ideas, I stand ready to work with both AT&T 
and local government to make this happen.
    I thank the Chair for holding this important oversight 
hearing, and I look forward to today's testimony.
    And with that, I will yield back.
    Mr. Bachus. Thank you very much, Mr. Johnson.
    At this time, I recognize the Chairman of the full 
Committee, Mr. Goodlatte of Virginia.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Robert Bork famously said the only legitimate goal of 
antitrust is the maximization of consumer welfare.
    Depending on the actions of the antitrust enforcement 
agencies and the Federal Communications Commission, the 
telecommunications industry may experience significant change 
over the next year. As the Committee and the relevant 
government agencies examine the potential issues associated 
with the multiple proposed telecommunications mergers, we 
should be mindful that assuring the best interests of consumers 
is the ultimate goal. It has been demonstrated repeatedly that 
a free and competitive marketplace yields lower prices, greater 
innovation, increased investment, and better services. We 
should strive to ensure that proposed transactions result in 
enhanced competitive marketplaces so that the attendant 
benefits continue to run to consumers.
    Today's hearing allows a public forum to discuss the 
potential competitive impact of the proposed merger between 
AT&T and DIRECTV. The leaders of both companies are before us 
today to explain how the proposed transaction will increase 
competition for the benefit of consumers. We also have 
witnesses who will raise potential concerns about the merger. 
Through a fair and objective inquiry by the Committee, a record 
will be produced that will provide an important measure of 
transparency and thoughtfulness to the review of this proposed 
merger.
    I look forward to hearing from today's witnesses regarding 
their views on the proposed merger of AT&T and DIRECTV.
    Thank you, Mr. Chairman. I yield back.
    Mr. Bachus. And I thank you.
    At this time, I recognize the Ranking Member and former 
Chairman of our Committee, the gentleman from Michigan, Mr. 
Conyers.
    Mr. Conyers. Top of the morning, Mr. Chairman and my 
colleagues and our witnesses and our visitors that are here 
covering this potential transaction.
    Now, last month in May, we had a hearing that covered Time 
Warner and Comcast, and now this month, we are looking at 
DIRECTV and AT&T. And maybe even next month, depending on what 
happens in the intervening time, we may be looking at Sprint 
and T-Mobile. Question: where does this end?
    I am looking at a transaction that highlights the concern 
that there may be too much and too rapid a consolidation in 
telecommunications, especially when viewed in the light of a 
flurry of deals either announced or rumored.
    One rationale in favor of the merger is that it would 
create a strong competitor to large cable companies, may in 
fact spur further consolidation in the telecommunications 
industry as part of what might be viewed as a race to the 
bottom.
    The merger proposed may result in reduced competition for 
paid television services in many of our Nation's largest 
markets. The sheer size of a combined AT&T/DIRECTV entity could 
raise content prices for smaller video providers potentially 
driving some of them maybe out of business.
    And finally, there is a need to focus on whether behavioral 
remedies are in practice affected.
    So while neither we nor the competition enforcement 
agencies should prejudge this deal, there are several concerns 
that the witnesses to address, as well as the feelings that I 
have already expressed. That is the fact that we are concerned 
that there may be too much and too rapid consolidation in the 
telecommunications industry, and while I fully appreciate the 
goal of antitrust law is to protect competition and not 
competitors per se, this ongoing wave of consolidation will, 
without question, result in fewer firms and may harm consumers 
by limiting choices and also raising prices. After all, it is 
the very threat of losing business in the face of high prices 
or low quality products and services that drive competitive 
business practices.
    Now, one rationale in favor of the merger is that it would 
create a stronger competitor to large cable companies. Now, 
that may, in fact, spur further consolidation in the 
telecommunications industry. I do not doubt that the merged 
entity that is under consideration could be large enough to 
effectively compete against large cable companies, but what is 
to stop competitors from using the same argument to justify 
even further consolidation?
    So I will be looking and listening to make sure that we are 
not moving in the wrong direction. And I wanted to put my 
feelings out in front of you so that any of you can feel free 
to give me any consolation that you want about the concerns 
that I have.
    And I will put the rest of my statement in the record and 
thank the Chairman.
    [The prepared statement of Mr. Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative 
 in Congress from the State of Michigan, and Ranking Member, Committee 
                            on the Judiciary
    Today, we consider the proposed merger of AT&T, the Nation's 
second-largest seller of high-speed Internet and wireless telephone 
services, with DirecTV, the Nation's second-largest paid television 
provider.
    While neither we nor the competition enforcement agencies should 
pre-judge this deal, there are several concerns that I want the 
witnesses to address today.
    To begin with, this transaction raises the concern that there may 
be too much and too rapid consolidation in the telecommunications 
industry, especially when viewed in the light of other recently 
announced or rumored deals.
    I fear that the trend toward greater consolidation in this industry 
may ultimately benefit large corporations and their shareholders at the 
expense of consumers.
    While I fully appreciate that the goal of antitrust law is to 
protect competition and not competitors per se, this ongoing wave of 
consolidation will, without question, result in fewer firms and may 
harm consumers by limiting choices and raising prices.
    After all, it is the very threat of losing business in the face of 
high prices or low quality products and services that drives 
competitive business practices.
    The preeminent purpose of antitrust law is to protect consumers by 
ensuring that no one firm achieves market power such that it no longer 
risks losing business because it can force consumers to pay higher 
prices or accept lower quality goods and services in the absence of a 
competitive marketplace.
    I hope that the Justice Department and the Federal Communications 
Commission will carefully consider the overall impact of industry 
consolidation as they review the merits of this particular transaction.
    One rationale in favor of the merger--that it would create a 
stronger competitor to large cable companies--may, in fact, spur 
further consolidation in the telecommunications industry.
    I do not doubt that the merged AT&T-DirecTV entity could be large 
enough to effectively compete against large cable companies, but what 
is to stop competitors from using the same argument to justify further 
consolidation?
    After all, cable companies could point to the merged AT&T-DirecTV 
to justify further consolidation among themselves, which, in turn, 
could justify further consolidation by competitors to cable companies.
    As a result, we could have a ``race to the bottom'' whereby large 
companies seek more and more mergers and acquisitions in response to 
mergers and acquisitions by other companies, ultimately leaving fewer 
choices for all consumers.
    Turning to the specifics of the proposed transaction, I am 
concerned about the loss of a competitor for paid television services 
in many of the largest markets.
    As a national satellite-television provider, DirecTV is a 
competitor to AT&T's U-Verse video service in the 22 states where U-
Verse is offered.
    And, U-Verse currently competes with DirecTV in 10 of the 20 
largest metropolitan markets for paid television.
    The loss of a paid television competitor in those markets where 
AT&T and DirecTV directly compete with each other would reduce consumer 
choice and could have the potential to raise prices.
    Although AT&T has committed to continuing to offer DirecTV as a 
standalone option for three years after the acquisition, there are no 
guarantees that consumers will continue to have a such an option after 
that time.
    The burden remains on AT&T to show that this merger will not harm 
consumers.
    We should also consider whether smaller video providers, in the 
aftermath of the sheer size of a combined AT&T-DirecTV, could face 
increased content prices, potentially driving some of them out of 
business.
    In addition to being a video distributor, DirecTV is a video 
programmer that owns three regional sports networks and has interests 
in some national networks.
    Small competing video distributors fear that the size of a combined 
AT&T-DirecTV--as both a seller and a buyer of programming--could harm 
smaller competitors in two ways.
    First, a vertically integrated AT&T-DirecTV could discriminate 
against rival distributors by withholding or charging higher prices for 
its own programming.
    Second, such a combined entity would be a large enough distributor 
to command discounts from other programmers, potentially forcing 
smaller distributors to pay higher prices for content to make up the 
difference.
    Finally, we must consider whether imposing behavioral remedies 
would, in practice, be effective.
    As a condition for approval of the Comcast-NBC Universal 
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 interest.
    AT&T has indicated that it will voluntarily commit to similar types 
of commitments to its proposed acquisition of DirecTV.
    Some observers, however, are concerned that the behavioral remedies 
imposed in the Comcast-NBC transaction were ineffective and difficult 
to enforce.
    Accordingly, we should consider whether such commitments should be 
strengthened and made more enforceable to better protect the public 
interest in this case.
    I look forward to having a fruitful discussion of these issues so 
that all stakeholders, particularly consumers and the enforcement 
agencies, are better informed about this significant transaction.
                               __________

    Mr. Bachus. I thank you, Mr. Conyers.
    At this time, I would like to introduce our witnesses. We 
have a very esteemed and qualified panel of witnesses. We start 
by introducing Mr. Mike White, who is President, Chairman, and 
CEO--that pretty much covers everything, does it not--of 
DIRECTV, one of the world's leading providers of digital 
television entertainment services with more than 20 million 
customers in the United States and more than 15 million 
customers in Latin America. I am not sure that we realized that 
there are that many customers also in Latin America. Mr. White 
joined DIRECTV in January 2010 and also serves as the chairman 
of the company's board of directors. In addition to his 
position at DIRECTV, Mr. White also serves on Whirlpool 
Corporation's board of directors.
    Before joining DIRECTV, Mr. White was the CEO and vice 
chairman of PepsiCo International from 2003 to 2009. Prior to 
that role, Mr. White served as president and CEO of Frito-Lay's 
Europe, Africa, and Middle East Division. And that was part of 
Pepsi at the time. Did they spin it out at some point? They 
did? He also served as CEO of Snack Ventures Europe, PepsiCo's 
partnership with General Mills International.
    Before joining PepsiCo, Mr. White was the senior vice 
president and general manager for Avon Products. He also has 
worked as a management consultant for Bain and Company and 
Arthur Andersen and Company. Mr. White holds a masters degree 
in international relations from Johns Hopkins University and a 
bachelors degree from Boston College.
    We also have Mr. Lieberman who is a graduate of Johns 
Hopkins.
    Mr. White is also a Ford Foundation fellow at Leningrad 
State University in St. Petersburg, Russia.
    And I say to Mr. White on a personal nature, many of my 
constituents are very loyal customers of Direct.
    Our next witness is--we are glad to have you--Mr. Randall 
Stephenson is Chairman and CEO and President of AT&T. Mr. 
Stephenson--well, let me say this. AT&T is one of the world's 
largest telecommunications companies with nearly $129 billion 
in revenues last year. I note that over the past 6 years, AT&T 
has invested more capital into the United States' economy than 
any other public company and more than $140 billion invested in 
spectrum and wireless operations combined. That is a record to 
be proud of. I commend you for that.
    Prior to becoming CEO, he served as AT&T's Senior Executive 
Vice President and Chief Financial Officer from 2001 to 2004 
and then as the company's Chief Operating Officer from 2004 to 
2007. Mr. Stephenson was appointed to AT&T's board of directors 
in 2005.
    He began his long career in telecommunications in 1982 with 
Southwestern Bell Telephone in Oklahoma. In addition to his 
leadership of AT&T, Mr. Stephenson is chairman of the Business 
Roundtable, an association of chief executive officers of 
leading U.S. companies. He is also a member of the board of 
directors of Emerson Electric, a member of the PGA Tour Policy 
Board, and national executive board member of the Boy Scouts of 
America.
    He received his B.S. in accounting from the University of 
Central Oklahoma and his masters of accountancy from the 
University of Oklahoma.
    We welcome you. I think from that record, you are obviously 
plugged into rural consumers too with your background being in 
Oklahoma.
    Mr. John Bergmayer, we welcome you. He is Senior Staff 
Attorney at Public Knowledge, specializing in 
telecommunications, the Internet, and intellectual property 
issues. He advocates for public interest before courts and 
policymakers and works to make sure that all stakeholders, 
including ordinary citizens, artists, and innovators, have a 
say in shaping emerging digital policies.
    Mr. Bergmayer received his B.A. in English lit from 
Colorado State University and his J.D. from the University of 
Colorado Law School where he was elected to the Order of Coif.
    Our final witness is Mr. Ross Lieberman. Mr. Ross Lieberman 
is the Senior Vice President of Governmental Affairs of the 
American Cable Association, which represents 850 independent 
cable, broadband, and phone operators serving smaller markets 
in rural areas. He manages the formulation and implementation 
of the group's strategic initiatives on Capitol Hill and at 
Federal agencies, including the FCC.
    Prior to joining the American Cable Association, Mr. 
Lieberman handled government relations for EchoStar 
Communications Corporation where he, among other things, 
oversaw EchoStar's filings with the FCC for the 2004 Satellite 
Home Viewer Extension and Reauthorization Act.
    He received his B.A. in political science from Johns 
Hopkins University and his J.D. from American University, 
Washington College of Law.
    We welcome you, Mr. Lieberman.
    Each of the witnesses' written statements will be entered 
into the record in their entirety.
    At this time, we will ask each of our witnesses to 
summarize his testimony in 5 minutes or less. With that, now we 
proceed to hear from our witnesses. Mr. White, you go first. We 
will go from my left to right.

            TESTIMONY OF MICHAEL WHITE, PRESIDENT, 
                   CHAIRMAN AND CEO, DIRECTV

    Mr. White. Good morning. Thank you, Chairman Bachus, 
Ranking Member Johnson, and Members of the Subcommittee.
    My name is Mike White, and I am CEO of DIRECTV. Thank you 
for inviting me to testify on AT&T's proposed acquisition of 
DIRECTV.
    For any business to succeed in the long term, it must 
satisfy its customers' needs better than the competition day in 
and day out. This transaction will help DIRECTV and AT&T do 
exactly that. By combining complementary assets and products, 
we will be able to offer new services to customers at a better 
value. We will help consumers watch the video they want when 
they want it where they want it and on the devices of their 
choice. And we will be well positioned to compete long into the 
future.
    I would like to briefly describe DIRECTV's perspective on 
the transaction.
    Historically DIRECTV is a remarkable American success 
story. We have competed aggressively by delivering more high 
definition channels, a clearer picture, more advanced 
equipment, and better customer service than cable. And Congress 
has also had a lot to do with our success, making sure, 
particularly in the early years, that we could acquire the 
programming our subscribers demanded.
    In recent years, however, broadband is changing everything. 
If we want to continue to compete effectively in today's 
Internet-driven economy, we too must adapt.
    First, we must provide an integrated bundle of services 
because consumers are increasingly demanding better bundles of 
both video and broadband. And in fact, broadband is now the 
more important element of the two for many.
    Second, as we think about the future, we must serve those 
customers who want over-the-top video offerings. Young 
subscribers, in particular, want services like YouTube, 
Netflix, and Hulu, and we need a broadband platform if we are 
to meet their need.
    And third, as technology changes, we must continue to 
optimize our own video service. Cable's two-way infrastructure 
lets it offer features such as remote DVR's, video-on-demand 
programming stored in the cloud, and so on. And soon cable will 
offer cloud-based features such as lookback. In fact, cable 
operators are increasingly leveraging the cloud to improve 
their service more quickly and easily. We too will need to do 
all of that if we want to keep up and continue to compete 
successfully.
    And fourth and finally, we will have to continue to 
effectively manage content cost increases. Now, rising content 
costs challenge all video providers. Yet, bundled competitors 
can handle this somewhat better because they earn revenue from 
multiple sources.
    Historically, DIRECTV has attempted to remain competitive 
by offering what we call synthetic bundles in which the video 
and the broadband are provided by separate companies but 
marketed together. Synthetic bundles, however, make frankly for 
a bad customer experience. I hear it from our customers all the 
time. Customers have to talk to two sales representatives, wait 
for two different installers to arrive on two different 
appointments, pay two separate bills, and make two calls every 
time they have a problem.
    Synthetic bundles also tend to be more expensive for 
consumers because each company naturally seeks its own margin 
on its contribution to the bundled service.
    This transaction will help us meet all of those challenges 
head on. It combines DIRECTV's premier video assets with AT&T's 
unique broadband and wireless assets. It will mean better 
bundles, more Internet, particularly in rural areas. It means 
better video. It means lower content costs because of the 
additional value we can offer programmers, and it means more 
and better broadband to 15 million new locations predominantly 
in rural areas. And it will mean more innovation particularly 
combining our expertise in video with AT&T's expertise and 
capabilities in wireless.
    If you put it all together, you get a transaction that lets 
us better serve our customers, unlocks incremental job growth 
opportunities, and sustains our long-term competitiveness, a 
transaction, in other words, that opens up a new world of 
possibilities for DIRECTV subscribers.
    Thank you for inviting me to speak today, and I very much 
look forward to your questions.
    [The prepared statement of Mr. White follows:]



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                               __________
    Mr. Bachus. Thank you.
    Mr. Stephenson, we welcome you.

          TESTIMONY OF RANDALL STEPHENSON, CHAIRMAN, 
                  CEO AND PRESIDENT, AT&T INC.

    Mr. Stephenson. Thank you, Chairman Bachus and Ranking 
Member Johnson, Members of the Committee.
    I am Randall Stephenson, Chairman and CEO of AT&T, and I 
appreciate the opportunity to visit with you about what we 
think are the significant consumer and strategic benefits of 
this transaction.
    This transaction is unlike most mergers because it 
primarily combines companies with complementary products and 
capabilities: DIRECTV's premier pay-TV service and AT&T's 
broadband service. And the rationale for us coming together is 
really simple. It is about meeting consumer demand. Customers 
are looking for bundles that combine pay-TV and broadband 
service because of the greater value and the convenience that 
comes with that. And that is something that they can get from 
the cable providers today. And as Mike said, DIRECTV has the 
premier pay-TV service in the U.S., but it does not have a 
broadband product.
    To effectively compete against cable for broadband 
customers, AT&T markets bundles of services, most importantly, 
broadband and TV, and that is even though our video service is 
not profitable. In fact, fewer than 140,000 of our TV 
customers--that is less than 2 percent--purchase TV service on 
a standalone basis. We do not actively market standalone TV 
service because we do not make money on it. Today 60 cents of 
every video dollar that we earn goes straight to the 
programmers.
    In addition, we can offer video in only a small portion of 
the country, less than a quarter of U.S. households, and we do 
not even cover all of our broadband footprint with video. And 
that is due to technology and economic limitations.
    So as a result, there is no significant competitive overlap 
between AT&T and DIRECTV in the product that consumers are 
overwhelmingly demanding, and that is a broadband/video bundle.
    The consumer benefits of this transaction are significant. 
Being able to offer DIRECTV nationwide is a game-changer in 
terms of the economics for deploying broadband. It will allow 
us to expand and to enhance broadband service to at least 15 
million locations across 48 different States, and those are 
mostly in underserved rural areas. This is in addition to the 
broadband expansion plans that we have already announced, and 
it directly results from the synergies created by the 
transaction. This new broadband commitment includes 13 million 
locations, 85 percent of which are outside our traditional 
wireline footprint.
    We think this is big news for rural America. We estimate 
that nearly 20 percent of these consumers today have no access 
to broadband service and that another 27 percent are hostage to 
only one provider. For many of these 13 million consumers, 
AT&T's service will be the fastest available, and for some, it 
is going to be their first chance for truly high-speed 
broadband.
    The transaction also allows us to expand our 1 gigabit 
service to 2 million additional locations, and all told, we 
will now be able to serve 70 million customer locations with 
broadband.
    This transaction will allow us to price more competitively 
and provide consumers a higher quality experience which will 
result in cable companies pricing more competitively as well 
and that will include all of their products and services.
    Consumers will receive greater convenience with a single 
point of contact, as you heard Mike describe in terms of 
ordering, installation, billing, customer care.
    We will be able to accelerate the deployment of our new 
over-the-top video services that are offered by AT&T as well as 
those offered by Netflix and Amazon and Hulu. We will be able 
to deliver them to any screen, whether it be a mobile phone, a 
computer, a tablet, a car. We are even deploying this 
capability for airplanes now.
    We operate in a competitive environment that is only 
becoming more competitive. The cable companies already dominate 
both broadband and video today, and Google Fiber, Netflix, and 
ever-faster wireless services are really transforming 
competition daily. This transaction gives AT&T the capabilities 
to be a more effective competitor to cable.
    And I want to assure you and I also want to assure our 
customers that we will do all these things while meeting or 
exceeding the FCC's net neutrality standards and exceeding our 
best in class diversity and labor practices to the employees 
and suppliers of the combined company.
    So thank you for the opportunity. I look forward to your 
questions as well.
    [The prepared statement of Mr. Stephenson follows:]



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                               __________
    Mr. Bachus. Thank you.
    Mr. Bergmayer?

  TESTIMONY OF JOHN BERGMAYER, SENIOR STAFF ATTORNEY, PUBLIC 
                           KNOWLEDGE

    Mr. Bergmayer. Good morning, Chairman Bachus, Ranking 
Member Johnson, and Members of the Subcommittee. Thank you for 
the opportunity to participate in today's hearing.
    Today I am going to describe how AT&T's proposed merger 
with DIRECTV could harm the public.
    The legal standard is clear. First, antitrust authorities 
cannot allow this merger to proceed if it may substantially 
reduce competition in any market. Second, the FCC cannot allow 
this merger to proceed unless AT&T can show that it would 
benefit the public. Based on the record so far, AT&T has not 
met its burden.
    Additionally, policymakers should be aware of other 
dangers. As a result of this merger, AT&T may leave rural 
Americans behind by providing them with a wireless product that 
is not of the same quality as what is available in cities. 
Also, AT&T may plan to use the acquisition of DIRECTV to jump 
start an online video service. AT&T must offer any such service 
in a nondiscriminatory way.
    This merger would reduce competition in the pay-TV market. 
AT&T and DIRECTV compete head to head in the pay-TV marketplace 
in more than 60 local TV markets. If AT&T purchases DIRECTV, TV 
viewers in these markets will lose a competitive choice. In 
many of these markets, the level of market concentration would 
exceed the Department of Justice's guidelines. That means 
higher prices and more service for millions of viewers. 
Antitrust law exists to prevent mergers of these kinds.
    AT&T's proposal to fix this does not do enough. It only 
promises to keep DIRECTV prices in markets where it provides U-
verse TV on par with nationwide DIRECTV prices for 3 years. 
This does not address the structural problems AT&T would cause 
if it removes a competitor from the marketplace.
    AT&T's public interest commitments are less than meets the 
eye. In the first place, AT&T has a spotty record with regard 
to past merger commitments. For example, AT&T now claims that 
there are residences within its wireline footprint that 
currently have no AT&T broadband. Yet, it committed in 2006 to 
serve 100 percent of the residences in its footprint with 
broadband. Why are these people still unserved? And is it good 
policy to allow AT&T to make the same kind of promise this 
time?
    AT&T also has a history of using already planned build-out 
as a merger promise. For instance, AT&T promised a certain 
level of LTE coverage of it was allowed to buy T-Mobile, but 
after that merger was blocked, AT&T's build-out plans did not 
change.
    When you strip away previously announced plans, even AT&T's 
best case for this merger is less than it appears. For the most 
part, AT&T is simply stating that it will upgrade portions of 
its network. That is not much. For instance, adding a new kind 
of home wireless service to an existing wireless coverage area 
is not as significant an investment as an initial wireless 
build-out.
    There are further public interest harms. Our universal 
service laws state that consumers in all regions of the Nation, 
including those in rural areas, should have access to 
telecommunications services that are reasonably comparable to 
those services provided in urban areas. AT&T has not shown that 
its wireless home product is comparable to what it offers in 
urban areas, for example, its U-verse product or DSL. 
Policymakers should be concerned about this seeming shift away 
from the principles of universal service.
    Finally, AT&T plans to create a new online video service. 
AT&T should be free to enter this market, but it cannot take 
advantage of its position as an Internet service provider to 
favor its own services at the expense of competition. While 
AT&T has agreed to abide by the terms of the FCC's 2010 open 
Internet order, those rules provide a lesser degree of 
protection for wireless users.
    Thank you. My written testimony contains a more detailed 
analysis of these points, and I look forward to your questions.
    [The prepared statement of Mr. Bergmayer follows:]



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                               __________

    Mr. Bachus. Thank you, Mr. Bergmayer.
    Mr. Lieberman?

   TESTIMONY OF ROSS J. LIEBERMAN, SENIOR VICE PRESIDENT OF 
         GOVERNMENT AFFAIRS, AMERICAN CABLE ASSOCIATION

    Mr. Lieberman. Thank you.
    An unprecedented wave of consolidation is occurring within 
the video programming and distribution industries that will 
transform the competitive market and consumer experience. This 
is cause for concern. Congress and regulators, therefore, must 
not only review the pending deals. It must also examine and act 
to address the underlying market problems fueling them.
    Focusing on AT&T's deal, it is important to realize DIRECTV 
is not only a nationwide provider of pay-TV service, it is also 
a programmer with interests in three regional sports networks 
and national programming. This gives DIRECTV an economic 
incentive and ability to charge its rivals higher fees for its 
programming, especially its regional sports networks.
    Smaller cable operators are concerned that this deal will 
lead DIRECTV's programmers to hold out for even higher rates. 
With 26 million subscribers, AT&T and DIRECTV combined will 
command better programming deals than DIRECTV would alone. This 
means higher video profits for both DIRECTV and U-verse 
services. Regulators have accepted that as the per video 
subscriber profits of a vertically integrated pay-TV provider 
rise, so does its interest in boosting its rivals' costs for 
its programming. Accordingly, pay-TV providers will feel the 
pinch when negotiating for DIRECTV's programming and their 
customers will pay.
    Regulators should not approve the merger without addressing 
this matter. While DIRECTV remains subject to program access 
rules as an FCC condition from a prior deal, it is no longer 
subject to an arbitration condition. However, re-adopting this 
arbitration condition is not enough. It had design flaws that 
left smaller cable operators under-protected. To shield these 
operators fully, these defects must be eliminated.
    Congress and regulators must also look at the bigger 
picture by reviewing existing rules to ensure that industry-
wide problems, particularly those driving consolidation, are 
addressed. This will ensure consumers continue to benefit from 
a competitive pay-TV market that includes smaller operators. 
ACA members have long raised alarms about large broadcasters 
and programmers increasing rates and carriage demands and their 
discriminatory pricing practices. The programming costs for a 
smaller provider is significantly higher than for a larger 
provider. The spread, thought to average about 30 percent, puts 
my members at a substantial disadvantage to bigger competitors 
like DIRECTV, DISH Network, and Comcast.
    AT&T's desire to acquire DIRECTV does not surprise smaller 
cable operators. Even though AT&T's subscriber base nearly 
exceeds that of all smaller cable operators combined, its 
motives for buying DIRECTV point to it facing similar market 
problems. Like ACA's members, AT&T also understands its 
competitive standing is likely to worsen if the Comcast/Time 
Warner Cable and Comcast/Charter deals are approved. While AT&T 
can lower its programming costs and better compete by 
purchasing DIRECTV, smaller cable operators cannot because they 
lack AT&T's financial resources and scale. Unable to spend 
their way out of trouble, these video providers will struggle 
increasingly to remain viable.
    Some critics of AT&T's deal raise concerns about the number 
of pay-TV providers decreasing from four to three in U-verse 
territories. In rural areas where three video service providers 
typically exist, programming cost issues have driven some 
smaller cable operators to close systems, leaving consumers 
with only two satellite TV providers.
    Although the slow but steady decrease in competition in 
rural areas has not generated much concern from Washington, it 
should because it is harmful to rural America and often signals 
wider market problems. These trends are not irreversible. 
Congress and regulators can take action to prevent my members 
and their customers from simply being unreasonably 
disadvantaged compared to their larger competitors.
    In conclusion, there are three areas where oversight and 
action would be meaningful.
    First, by examining and addressing programmers' 
discriminatory pricing practices against smaller pay-TV 
providers.
    Second, by modernizing program access rules by updating the 
FCC's definition of a buying group.
    And third, by updating the FCC's outdated regulatory fee 
categories so all pay-TV providers, including DIRECTV and DISH, 
pay their fair share.
    Thank you and I look forward to your questions.
    [The prepared statement of Mr. Lieberman follows:]



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                               __________

    Mr. Bachus. I thank you, Mr. Lieberman.
    At this time, I will recognize the Chairman of the full 
Committee, Mr. Goodlatte, for 5 minutes for the purpose of 
questioning the witnesses.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Thank you all for your testimony.
    Mr. Stephenson, I noted you taking some notes during Mr. 
Bergmayer's testimony and maybe Mr. Lieberman's. I do not have 
a lot of time here, but are there one or two points you want to 
make in response to their criticisms of your merger?
    Mr. Stephenson. Yes. Actually it was not a criticism of the 
merger. It was he was citing a blog that a gentleman wrote 
where the blogger stated that we had not fulfilled merger 
conditions associated with the Bell South deal. And I would 
just like to make sure the Committee hears that blog was 
patently inaccurate. The data was false. We fully complied with 
every single condition imposed in that merger. In fact, what 
that merger required was that we provide 100 percent coverage 
of broadband, 85 percent with the fixed line broadband 
services. What one has to remember is at that time----
    Mr. Goodlatte. I have very limited amount of time. So I get 
your response to that point.
    Let me go on to my main----
    Mr. Bachus. We have all been blogged before.
    Mr. Goodlatte. We understand that.
    Let me go on to my main point in my opening statement, 
which is this is all about what happens to the consumer. And 
let me talk about my consumers in my district. In my hometown 
of Roanoke, Virginia, the bundled package that you referred to 
right now is available for Verizon customers with DIRECTV. So I 
and others can get that package that you referred to.
    What will happen to that package that I have or someone 
else might have with Verizon and DIRECTV under this merger?
    Mr. Stephenson. My expectation is nothing should change.
    Mr. Goodlatte. Well, what about AT&T? Do you offer those 
kind of packages right now as well in other parts of the 
country?
    Mr. Stephenson. Yes, we do. Mike referred to those as 
synthetic bundles.
    Mr. Goodlatte. Why is it necessary to acquire DIRECTV to 
continue to have that bundle that you are referring to that we 
already enjoy?
    Mr. Stephenson. If you are okay with it, I would like for 
Mike to address that for doing this in the marketplace and he 
has some very good data.
    Mr. Goodlatte. That would be fine.
    Mr. White. So, Congressman, we measure customer 
satisfaction on everything we do, and when we measure the 
satisfaction of a bundle experience versus someone who is just 
buying DIRECTV solo, it is dramatically poorer. And it is two 
calls on two different days, two different installations, two 
bills.
    Mr. Goodlatte. So how does Verizon solve that problem? Do 
they acquire DISH? Is that what we are talking about here? 
Because I am not sure what I have available to me with AT&T, 
but I know what is available with Verizon. And that does not 
solve the complaint you just outlined there with regard to 
Verizon, although I am not familiar with the complaints. We 
like the service we get.
    Mr. White. Right.
    Mr. Goodlatte. But I am not sure why one of the two 
companies should own DIRECTV and the other should continue to 
have the bundle experience that was referred to.
    Mr. White. The only way for us to get a seamless integrated 
bundle--we have had discussions for many years about trying to 
find a way that would have a better value for customers when 
you have got two separate companies chasing margin as opposed 
to one integrated company that can spread the costs over that 
one install. So for us, every time we sign up a new customer, 
we spend $850. We can probably reduce that by 20 percent with 
one call, one truck roll, build the router into the set-top 
box----
    Mr. Goodlatte. Is that savings going to get on to the 
consumer?
    Mr. White. Yes. We have had an economist study it. The 
bundles would be a better value for consumers. Absolutely.
    Mr. Goodlatte. Since my time is limited, let me ask you 
about another issue related to this. DIRECTV does not provide 
local Harrisonburg, Virginia--this is the northern part of my 
district--ABC. It does not provide that local channel in Page 
County, Virginia, which is right next to Rockingham County 
where Harrisonburg is located, despite being legally able to do 
so. Rather, DIRECTV beams in content from Washington, D.C., 
which is many hours away from my district.
    Can you explain why DIRECTV has opted to not provide this 
valuable local content to my constituents? And can you commit 
to resolving this situation so that my constituents can receive 
local content rather than Washington, D.C. content?
    Mr. White. Certainly.
    Mr. Goodlatte. Nothing against this place where we work, 
but my folks back home--they live in a different world than 
here and they want to watch that world on TV.
    Mr. White. We have been working on our system for many 
years. We now serve 99.4 percent of American households with 
their local channels. We still have a few gaps and you have 
pointed out one of them.
    Mr. Goodlatte. There are more, though, because I have heard 
from other Members of Congress who have other gaps in other 
parts of the country.
    Mr. White. There are and we are continuing to build out as 
we get satellite capacity. We have got two more satellites 
going up in the next 12 months. For instance, Charlottesville, 
Virginia is on the list for later this year. The others would 
be on the list as well.
    In addition to that, there are orphan counties. We would 
certainly be happy to work with you on coverage of some of the 
orphan counties, provided we do not have to pay retransmission 
fees twice. It kind of comes back to the rules that we have to 
abide by relative to the broadcasters and assuming the spot 
beam that comes from the satellite can reach those rural areas.
    Mr. Goodlatte. Thank you.
    My time has expired, Mr. Chairman. I appreciate it. I yield 
back.
    Mr. Bachus. Thank you.
    At this time I recognize Mr. Johnson, the Ranking Member of 
the Subcommittee.
    Mr. Johnson. Thank you, Mr. Chairman.
    As I noted in my opening statement, this transaction 
presents substantial opportunities for transforming labor 
standards in the telecommunications industry. The 
Communications Workers of America noted in a letter that AT&T 
has the largest full-time union workforce of any company in 
America. And I know everybody does not agree that that is 
something that is worthy, but I think it is very worthwhile.
    And with that, I would ask unanimous consent to make a part 
of the record a letter from the Communications Workers of 
America in support of this merger.
    Mr. Bachus. You are offering something. Right?
    Mr. Johnson. Yes, sir.
    Mr. Bachus. Without objection. I am sorry.
    [The information referred to follows:]



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                               __________

    Mr. Johnson. Thank you.
    Now, Mr. Stephenson, many of your employees, including 
workers in union positions in my district, enjoy great 
benefits. How would AT&T plan to extend this industry-leading 
respect for the rights of employees to DIRECTV as a result of 
the proposed merger?
    Mr. Stephenson. As you mentioned, Congressman, we have the 
largest full-time union in the United States. We have a long 
history of working with our union members and doing collective 
bargaining. We have always been open to card check neutrality 
and we have always allowed our employees to make that choice as 
to whether they wanted to be represented in collective 
bargaining or not. And so with DIRECTV, you should assume that 
the DIRECTV employees will be offered that same option to 
collectively bargain or not. It will be their choice.
    Mr. Johnson. Thank you.
    Mr. White?
    Mr. White. I agree. We certainly welcome the opportunity. I 
think there is some fabulous talent that AT&T brings, and we 
think DIRECTV has some great talent as well. And I think their 
world-class benefit programs for our employees will be a good 
thing.
    Mr. Johnson. Thank you, sir.
    All right. Mr. Stephenson and Mr. White, I would like to 
ask you both to talk a little bit about the company's 
commitment to diversity, the merged company's commitment to 
diversity in a number of different contexts. I know everyone 
will agree that having a diverse group of individuals as real 
partners both inside and outside of the company is important. 
AT&T's public interest statement pledges that AT&T's diversity 
best practices will be applied to DIRECTV. Such action would be 
laudable given AT&T's history in promoting supplier diversity 
and inclusion.
    Mr. Stephenson, please describe the best practices 
referenced in the public interest statement.
    Mr. Stephenson. Yes, sir. First, I will start with 
employees. We have a strong belief that our employees ought to 
reflect the markets we serve. I frankly do not believe you can 
be successful in the marketplace if you do not have employees, 
executives, all the way up through a board that reflect the 
markets we serve. We think we have a very good track record in 
that regard, again all the way from our board down to our 
frontline employees in the market.
    We also extend, as you pointed out, that commitment and 
that expectation to our supplier community, and in fact, in 
2013 our supplier community, when you look at the total spend 
external to AT&T, over 25 percent of our spend is with diverse 
suppliers. That is in excess of $15 billion in AT&T spend that 
was invested with diverse suppliers.
    I would also suggest that one of the things Mike and I have 
come to realize is that our cultures are very, very compatible. 
We look at DIRECTV. We see very comparable practices, and we 
are actually enthusiastic. This will be a very seamless 
integration in that regard.
    Mr. Johnson. Anything to add, Mr. White?
    Mr. White. Sure. I think from our side 40 percent of our 
workforce are people of color. 43 percent of our new hires were 
people of color. 42 percent of our summer interns were people 
of color. Having spent most of my career in consumer products, 
I passionately believe you cannot understand customers if your 
employee base and your management base and your board--and our 
board does as well--reflects that diversity. So we are proud of 
our commitment to diversity and inclusion at DIRECTV.
    I would say I look forward to leveraging some of the supply 
chain work that I think AT&T has done, which is best in class 
in this area that we will be able to take advantage of.
    Mr. Johnson. All right. Well, that is great to hear.
    And do these best practices for diversity apply to banking 
and finance?
    Mr. Stephenson. Yes, for AT&T. It is through all the 
disciplines, our external spend. I will not represent that it 
is 25 percent across all disciplines. That is something we will 
always work towards, but across all disciplines, we impose 
these diverse supply requirements.
    Mr. Johnson. All right. Thank you.
    And I yield back.
    Mr. Bachus. Thank you.
    My first question is something that concerns Members on 
both sides, and that is how the proposed merger will affect 
Americans' jobs. And let me go further than that and say also 
the prices that constituents pay for both video and Internet. 
In other words, how will customers benefit and will this create 
jobs? And I will start with Mr. Stephenson or Mr. White, 
whichever.
    Mr. Stephenson. Mike made this comment in his opening 
statement. It is about growth. I am very enthusiastic about 
this for a couple of reasons. First of all, as we both stated, 
these are complementary assets. You are not going to have the 
significant overlap of responsibilities like you do in a 
traditional merger because they are not overlapping. In fact, 
in 75 percent of the United States--we do not even compete to 
any degree. So that is going to mitigate a lot of the 
overlapping relationships.
    To the extent that there are overlapping jobs that need to 
be taken care of, I think at AT&T we have a very good track 
record on very elegantly working our way through those using 
attrition and placing people in other assignments. So I will 
stand on our record in terms of what we have accomplished 
there.
    Third, this deal has a lot of investment tied to it. 
Building out 15 million or enhancing 15 million homes with new 
broadband is a significant capital outlay in spite of some of 
the earlier comments. This is significant capital. These are 
hard-hat jobs that will be out deploying this capital. It 
involves fiber to cell sites. It involves putting new antenna 
arrays on top of cell site structures. It involves 
installations in the home. And so there is a lot of capital 
investment tied to this, and in our industry, capital 
investment is synonymous with jobs. And so from a jobs 
standpoint, I feel very good about what this will do.
    Mr. Bachus. Mr. White, do you have anything to add?
    Mr. White. I would only echo what Randall said. I recognize 
the concerns about consolidation. I think of this as more 
complementary combination, taking the best assets of two. And 
oftentimes in a merger of this size, there are significant job 
losses. That is not the case. This is a very different 
transaction. In fact, with the investments that Randall is 
talking about, it is going to create job growth. It is going to 
create significantly better broadband access for rural America, 
and it is a true win-win I think from both sides.
    Mr. Bachus. And I will say this. We are talking about two 
service calls on two different days, substituting that, having 
one. Obviously, customers benefit from that. And that is not 
the kind of job consolidation that I think any are concerned 
about. To have new services offered and capital outlays and new 
jobs created is what we are looking for, not duplication of the 
same job.
    This has been described as a merger between a broadband 
provider and an Internet provider. And I think that is somewhat 
true. I mean a video provider--I am sorry--and a broadband 
provider. Except that U-verse--you do have a video offering at 
AT&T. It is very popular in my area. I want to know whether 
that is going to go forward, whether it is going to slow that 
deployment or increase it, exactly the effect it will have on 
U-verse.
    Mr. Stephenson. Yes, sir. To answer the question directly, 
yes, U-verse will continue and, in fact, we will continue to 
expand our U-verse offering. One of the advantages of this 
transaction I referenced in my opening comments is that 
DIRECTV, because of their content and programmer 
relationships--we feel very good about what it will do to our 
overall content costs, including on the U-verse platform. And 
as I mentioned, we are losing money on the TV platform on U-
verse. This combination will allow us to take that from a 
money-losing proposition to a profitable operation. And 
therefore, what that does is it allows us to expand U-verse 
because it changes the economics. And so with the change in 
economics, we can expand U-verse. In fact, we have an 
opportunity. We have committed to expanding that platform by an 
additional 2 million homes passed by our U-verse platform with 
a full 1 gigabit per second broadband capability.
    Mr. Bachus. Thank you.
    My final question is this. It came up in the Comcast/Time 
Warner hearing. Many of our rural members were concerned. I 
raised issues related to rural programming and the importance 
to customers in really both rural and urban areas to get that 
rural programming because many of them have connections or 
farms or interest in their rural communities.
    And I will ask you a similar question. Is rural America 
important to AT&T? I know it is to Direct, but what is your 
commitment to carry programming that is important and directed 
at rural America?
    Mr. Stephenson. Yes, sir. Rural America is very important 
to us. We had opportunities in the past to sell off our rural 
assets. We have chosen not to. We have been working diligently 
to try to find a broadband solution for rural America. One of 
the things I am most enthusiastic about with this transaction 
is now when you have a profitable TV product that reaches rural 
America, it changes the economics for rural broadband 
deployment.
    And what this is going to allow us to do is build out a 
rural broadband footprint using new wireless technology. It is 
called fixed wireless local loop. This is one of the more 
exciting technologies I have been a part of in quite some time, 
and we are committing to building out 13 million homes in rural 
America with this technology. They will get 15 to 20 megabit 
per second services. It is adequate for video streaming. It 
will be priced like a landline service, not like a traditional 
wireless service. So we think this transaction gives us the 
opportunity to really do some things exciting for rural 
America.
    Mr. Bachus. Thank you. For rural content.
    At this time, I will recognize the full Committee Chairman, 
Mr. Conyers, for questions.
    Mr. Conyers. Thank you, sir.
    Mr. Bachus. Ranking Member. I am sorry. Former Chairman.
    Mr. Johnson. Well, perhaps the gentleman has that vision 
for the future. [Laughter.]
    Mr. Conyers. You can leave it like that. It is all right.
    I just wanted to ask Mr. Bergmayer to comment about 
anything that he has heard during the questioning period so far 
with our two distinguished witnesses.
    Mr. Bergmayer. Yes, thank you.
    I think when it comes to the investment promises that AT&T 
is making, I would urge the Subcommittee to basically put them 
in context. I think it is important to distinguish upgrades 
from new build-out, and I think a lot of AT&T's numbers consist 
of upgrades, consist of adding a fixed wireless product to an 
existing wireless coverage area. Now, that might be some amount 
of investment, but it is less than an initial build-out. And I 
think it is important to just put it in context in that way and 
also put it into the context of AT&T's existing upgrade plans.
    AT&T already has a fairly ambitious build-out plan. It has 
something called Project VIP which talks about a lot of the new 
build-out and coverage that AT&T plans to do. AT&T has an 
initiative where it wants to upgrade a number of cities to a 
gigabit wired broadband. However, it is not exactly clear the 
scope of AT&T's existing plans. We know that they are ambitious 
based on AT&T's statements, but it is hard to quantify them. 
Therefore, it is difficult to compare any new commitments that 
they may be making today to those existing plans.
    And when it comes to broadband coverage, I will just make 
the point that broadband is an evolving standard. So if we 
expected AT&T to provide a certain level of service in 2006, 
you would hope that they would meet any commitment and then 
continue to upgrade that service as the definition of broadband 
continues to be reworked by the FCC and by policymakers. And 
that is my concern. It is not enough to simply meet a certain 
commitment and then stay there, but we expect a continuing 
level of investment.
    Mr. Conyers. Do you generally agree with those comments?
    Mr. Stephenson. No, sir, I generally do not agree with the 
comments.
    The commitments we have made--I think they are very well 
documented, and we have laid them out in public filings on our 
VIP project that we will build broadband to 57 million homes, 
that we will expand our video footprint by 8 million homes 
passed, and that we will pass 1 million business locations with 
fiber, and that we will pass 300 million people with our mobile 
broadband LTE service. Those are all documented. They are all 
in the public record. They are in our financial filings, and we 
are fulfilling those. The commitments that we have made here, 
the 15 million new or enhanced broadband connections, are all 
on top of that commitment that is already out in the public 
domain. So all of that is incremental.
    And the capital requirements to do that--I mean, just 2 
million households with fiber to the home is a significant 
capital investment. The 13 million fixed wireless local loops--
that is a massive geography that we are talking about passing, 
and while it may be incremental to some investment that is 
already there, for a company that is investing $21 billion a 
year, it is a significant amount we are taking out of that.
    Mr. Conyers. Okay.
    Well, now, do we have a consensus here, Mr. Bergmayer, of 
his rebuttal? Does that work out with you?
    Mr. Bergmayer. I understand that AT&T has a very ambitious 
build-out plan, but I mean, some of the numbers in question 
that are supposedly in AT&T's public filing somewhere are 
redacted and confidential in the FCC filings. So I have not 
looked at them. So it is difficult for me to see how the 
numbers are simultaneously public and redacted.
    My overall point, however, is to put AT&T's incremental 
promises in context of its existing build-out plan and for the 
Committee to really question how merger-specific these promises 
are or whether, as happened in the T-Mobile merger, AT&T 
already has build-out plans and they are simply restating them 
for the purposes of getting a merger approved.
    Mr. Conyers. Mr. Stephenson, how would allowing this 
transaction to go forward result in putting downward pricing 
pressure on cable products?
    Mr. Stephenson. It is interesting. When you heard Mike 
describe the process by which he sells video services and we 
do, it is kludgey process to try to get to the market with a 
bundled broadband and satellite TV service. You put the two 
together. You have a lot of customer efficiencies that come as 
a result of that. It is cheaper. The customer experience is 
better. And we had an economist study this. It is in our filing 
with the FCC. He did a very detailed econometric model, and he 
said before even the merger synergies, the cost synergies were 
incorporated, this would have not only a downward pricing bias 
on our prices but also the prices of cable companies who will 
have to respond.
    Mr. Conyers. Let me get a response in from Mr. Lieberman 
before we close out.
    Mr. Lieberman. Thank you. I just want to say Mr. Stephenson 
and Mr. White are very polished in talking about the benefits 
that will come through this deal, the commitments that they are 
willing to make. But we have not heard them talk about the 
concerns that the programming, particularly the regional sports 
networks that are owned by DIRECTV, are not subject to any 
arbitration conditions and that they will have an incentive and 
ability to increase the prices for that programming for smaller 
cable operators. If they are going to be making public interest 
commitments, it would be nice to hear them talk about a 
commitment to address that problem as well.
    Mr. Collins [presiding]. Thank you. The distinguished 
Ranking Member's time has expired.
    The Chair now recognizes himself for his questions.
    I want to go back to something that is just off a little of 
my other question--statements to Mr. White. It happened to come 
from my friend from Georgia. But I want to make it clear. 
DIRECTV will not be forced to unionize. Correct?
    Mr. Stephenson. Oh, no, sir. We leave it up to the 
employees to make that decision.
    Mr. Collins. And this will be a request for them to vote to 
join the union, or will there be a required vote for them to go 
to?
    Mr. Stephenson. The union has to go in and solicit and see 
if they can hold a vote.
    Mr. Collins. Good.
    Mr. Lieberman, as you may know, I have previously expressed 
concerns about the impact of the proposed Comcast/Time Warner 
merger on the ability of small businesses in my district to 
advertise on cable television when the Subcommittee held a 
hearing on that merger earlier this year. Could you give me 
your view on this issue in light of the merger before us today 
and especially any difference in the impact of the Comcast/Time 
Warner merger compared to the AT&T/DIRECTV proposed merger?
    Mr. Lieberman. Gladly. ACA is concerned that Comcast/Time 
Warner Cable would be able to exclude MBPD's, their agents and 
advertisers from regional advertising interconnects, while this 
would not be the case with AT&T/DIRECTV which do not control an 
advertising interconnect.
    Mr. Collins. Good.
    I always like to open it up. Mr. White, would you like to 
talk about that?
    Mr. White. Yes. I would just make two comments. On the 
advertising, we are quite a different business model. Most of 
our advertising is national. We are less than 1 percent of the 
advertising. I do not think it affects the market at all. In 
fact, I think it will open up opportunities for small 
businesses to advertise.
    And as it relates to the regional sports networks, we have 
three of them: one in Denver, one in Seattle, and one in 
Pittsburgh. AT&T does not even have a footprint in those three 
States. So it does not have any impact on those regional sports 
networks. And we are subject to the program access requirements 
of the FCC.
    Mr. Collins. I believe that vigorous competition helps 
consumers get a good deal no matter where it may be. 
Competitive markets as this when there is genuine choice for 
consumers in terms of who supplies the good services that they 
demand. In both AT&T and DIRECTV--your written testimony--it 
has been stated that this merger will increase competition. But 
competition is not an end, however. It should be a mechanism by 
which consumers realize actual benefits. I am going to open 
this up to everyone.
    I would like to open this question and say can you say with 
certainty, or at least as is possible in a business world, that 
this merger will or will not directly result in more choice and 
lower cost to consumers both in the short term and the long 
term and to what extent. It is often portrayed in these mergers 
that this is what will happen. The reality is life changes. 
Hearings are over. Spotlights are off, and this does not 
happen. And I would like to hear each of you, as best you can, 
concise as you can, answer that question.
    Mr. White. I will take the pay-TV side and Randall can talk 
to the broadband benefits.
    But from a customer standpoint, we believe in choice. We 
have to. We sell a pure play offering. It is going to be like 
vanilla, chocolate, and strawberry. We will have the pure play. 
We will have a bundle together with the AT&T capability, 
particularly with the 15 million homes they are going to build 
out, which will be a new benefit for consumers.
    In terms of the overall value to consumers, today those 
bundles are not very competitively priced. When you make one 
company, as our modeling shows, you will see a better value 
bundle offering to those customers.
    Mr. Collins. Just a quick question. Let us just say for 
full disclosure for folks like me who have Direct and have AT&T 
for two different services, is that going to become a bundle 
opportunity for us, or are we stuck within the packages that we 
currently have until they are over?
    Mr. White. Congressman, that will be your choice. I mean, 
we believe in choice. The way we have built our business, it is 
up to the customer to decide. So we are going to give that 
choice. As I said, you can choose A, B, or C or you can stay 
where you are.
    Mr. Collins. Mr. Stephenson?
    Mr. Stephenson. There is another facet to this. When you 
ask about consumer benefits, the over-the-top model is evolving 
very, very quickly. We also have 100 million wireless 
subscribers at AT&T who are demanding access to the types of 
content that Mike has on the DIRECTV product. One thing you 
should expect to see us do is begin to integrate those 
offerings and begin to deliver that content seamlessly across 
mobile devices. That is one benefit in accelerating the OTT 
model.
    The second is, in terms of consumer benefits, the 15 
million additional broadband homes passed is a significant 
consumer benefit that would not happen but for this 
transaction. We think that is significant.
    And then obviously the pricing implications. And I will not 
go into the econometric model, but it is really compelling what 
happens to pricing not just with us but across the industry as 
a result of this transaction.
    Mr. Collins. I may have made a Freudian slip and said more 
choice and more cost. That may be just what I have experienced 
in the past.
    I would assume the other two disagree with that. And I will 
have to--because of time, I have to because I do want to go 
back to this issue the Chairman brought up. It is an issue for 
me. It is the orphan county issue. It is not just me. There are 
other Members. Mr. White, I have had conversations with your 
folks. I want to continue to make this. I am going to continue 
to harp on this until we get this fixed both with the 
broadcasters--this is just not an issue that I am going to let 
go of. There are some in the audience. They are going their 
head down. You know, when I get on something, I really do not 
leave it until I get an answer. So at this point, I have 
encouraged that.
    My time has expired. We will go to the gentleman from New 
York, Mr. Jeffries.
    Mr. Jeffries. Thank you, Mr. Chair.
    Let me thank the witnesses for your testimony here today.
    There has been some discussion about the workforce 
transition. I just want to go over some of that ground again.
    Mr. Stephenson, AT&T has the largest unionized workforce in 
the country. Correct?
    Mr. Stephenson. Full-time union.
    Mr. Jeffries. And I commend you for that and for 
demonstrating that you have been able to be an incredibly 
successful company with that workforce composition.
    Now, your employees are represented by the Communications 
Workers of America. Correct?
    Mr. Stephenson. That is correct.
    Mr. Jeffries. Mr. White, what is the percentage of 
unionization of your current workforce at DIRECTV?
    Mr. White. With DIRECTV, we have outsourced partners, but 
specifically as it relates to DIRECTV, in terms of owned 
employees, it is de minimis. It is mostly a non-union 
workforce. Some of our, however, installers in the Northeast 
and elsewhere are union.
    Mr. Jeffries. Have there been efforts to unionize the 
workforce in the past?
    Mr. White. I think we have had a vote in one geography in 
California, yes.
    Mr. Jeffries. And what was the outcome of that result?
    Mr. White. That result was in favor of unionizing, and I 
think we have had some questions from our standpoint that we 
are going through with the commission about challenging that. 
But we are waiting for the ruling from the NLRB I believe.
    Mr. Jeffries. Thank you.
    Now, Mr. Stephenson, in terms of legacy DIRECTV employees, 
I believe you have indicated that they will have an opportunity 
to join CWA. Is that correct?
    Mr. Stephenson. We have a policy of open card check 
neutrality.
    Mr. Jeffries. So the process of facilitating that potential 
transition will be through neutrality in terms of card checks.
    Mr. Stephenson. Yes, we have a long track record in this 
regard. When we bought AT&T Wireless, for example, we opened up 
the workforce to card check. The union came in and held a vote, 
and across many of the locations, they voted to join or to 
become part of the collective bargaining process, some places 
not. But we leave that up to the employees to make that 
decision.
    Mr. Jeffries. Now, you expect the merger to create jobs. I 
believe, both Mr. White and Mr. Stephenson, you testified in 
that regard. Correct?
    Mr. Stephenson. Yes. We actually are enthusiastic about it. 
First and foremost, we are investing to build out 15 million 
additional homes with broadband. Those are hard-hat jobs to go 
build out these capabilities.
    Mr. Jeffries. So both in terms of the ambitious capital 
build-out program and, I gather, as a result of the 
complementary nature of the company--and there does not seem to 
be much disagreement about that--there is an expectation that 
you would create jobs now.
    Mr. Bergmayer, is there reason for you to disagree with 
that assertion?
    Mr. Bergmayer. I think it is usually the case that in 
mergers, there are job redundancies. It is not the focus of my 
concern here. Today I am focused more on the consumer side.
    Mr. Jeffries. Okay.
    Now, Mr. Stephenson, in terms of the potential creation of 
jobs, is there a specific regional distribution that you would 
anticipate would receive any job growth more so than other 
parts of the country?
    Mr. Stephenson. Yes. The places that come to mind first are 
the 2 million homes that we are passing with our gigabit 
technology for really high-speed broadband capability. That 
involves taking fiber all the way to the home, putting 
electronics in the field. That is a very significant build. 
That will be within what I will call our old traditional 
franchise landline territory, so the 22 States where we operate 
today.
    The rural broadband build, which is the wireless 
deployment, will hit 48 States. And so that is going to be a 
fairly broad-based deployment.
    And in our company, jobs align with capital. I mean, they 
are perfectly correlated. As you invest, you hire more people. 
Now, I do not want to mislead. There will be places, to Mr. 
Bergmayer's comment, where there are redundancies in jobs, but 
we do have a very good track record on how to address those 
situations, and we use very extensively attrition. And I feel 
good about our track record in that regard.
    Mr. Jeffries. Now, you do not currently offer video 
services in the New York City market. Is that right?
    Mr. Stephenson. In what market?
    Mr. Jeffries. In the New York City market.
    Mr. Stephenson. We offer wireless services and we offer 
service to large corporate businesses.
    Mr. Jeffries. But not video.
    Mr. Stephenson. Not video. Not today.
    Mr. Jeffries. Now, Mr. White, DIRECTV does offer video in 
the New York City market. Is that right?
    Mr. White. We do.
    Mr. Jeffries. And how do you expect the potentially merged 
entity, AT&T/DIRECTV, to impact the nature of the services that 
would be offered by a combined company?
    Mr. White. Well, I think in urban markets like New York, 
there would not be any change frankly in general from a pay-TV 
standpoint. We will continue to compete hard for customers in 
those geographies. I would say we will have an opportunity to 
bundle with the wireless side. And that is something different 
that we have not done before.
    Mr. Jeffries. So there is no current bundle offered in the 
New York City market.
    Mr. White. We might with Verizon and with slower speed 
Internet service, but not high-speed. FiOS is very competitive 
in New York.
    Mr. Jeffries. Thank you. I yield back.
    Mr. Bachus [presiding]. Thank you, Mr. Jeffries.
    At this time, I recognize the gentleman from Texas, Mr. 
Farenthold for 5 minutes.
    Mr. Farenthold. Thank you, Mr. Chairman.
    Mr. Bachus. He is the Vice-Chairman of the Subcommittee.
    Mr. Farenthold. Thank you.
    I would like to follow up with you, Mr. White, on a 
question that Mr. Collins asked about local broadcasters. And 
as the satellite technology is adopted in homes, how does the 
local car dealer reach that market outside of the local 
broadcast station that you carry? A car dealer or whomever can 
go to a cable company and buy some of the local avails on those 
channels, and with satellite, it does not. I would assume U-
verse had an ability to buy local adds on cable as well. If you 
did not, you should have.
    Mr. White. Yes, you are absolutely right. U-verse, because 
it is a local product, does have local advertising.
    As far as DIRECTV is concerned, the nature of the 
satellites in the sky is they are kind of national. So our 
advertising business grew up as a national business competing 
with the large media companies who are much larger than we are.
    More recently, we have got a new technology that is 
enabling us to do some targeted advertising. We have done a 
joint venture with DISH for political advertising. This is a 
new technology leveraging the Internet, which is enabling us to 
target homes, and we are hopeful to be able to grow the local 
advertising. But historically I think $70 million of our 600 in 
advertising is local advertising. It is very small.
    Mr. Farenthold. We may actually have a technology that is 
helping local broadcasters and then potentially hurting them.
    I wanted to talk now, Mr. Stephenson, a little bit about 
your fiber build-out. Common sense to me dictates that the 
driving force behind broadband right now is video, and if you 
have got a cheap way to deliver video via satellite as opposed 
to broadband, there is a discouragement in rolling out your 
fiber network. And I read an article in the ``Dallas Morning 
News,'' though, about how you are actually still rolling it out 
because you are competing with Google Fiber.
    So how are we going to see the rollout of fiber affected in 
markets that Google is not entering yet? When is it going to 
filter down to the mid-sized cities and then eventually to the 
smaller towns?
    Mr. Stephenson. That is one of the, I guess, interesting 
things about this transaction, and I have referenced it a 
couple of times now. But our video service, whether it be over 
fiber or over our fiber-to-the-node technology--we lose money 
on the video service because 60 cents of every dollar goes to 
the programmers. Combining with DIRECTV and creating the 
opportunity to make our programming costs look like DIRECTV's 
programming costs makes our fiber-based TV product profitable. 
And once the TV product becomes profitable, it fundamentally 
changes the economics of a fiber build.
    And so when we announced the deal and that we were going to 
expand our fiber-to-the-home footprint by 2 million homes, it 
is because of the economics of a more profitable video product. 
In fact, in your district I think Corpus Christi, 16,000 homes 
will get fiber to the home as a result of this transaction. 
Victoria County, out and around that area, a fairly significant 
number will get fixed wireless local loop broadband coverage 
where they do not have any today. So it just changes the 
economics of a broadband build and actually makes a fiber 
deployment more compelling, not less compelling.
    Mr. Farenthold. All right. So you are willing to tell me 
under oath here that this is not going to slow down your fiber 
deployment.
    Mr. Stephenson. This will what? I am sorry.
    Mr. Farenthold. Not slow down your fiber deployment.
    Mr. Stephenson. This will actually cause us to do more 
fiber deployment.
    Mr. Farenthold. You talk about lowering programming cost 
and the buying power you get with this merger. And I see how 
that is a competitive advantage. What about making space 
available for new television networks? You see a huge growing 
market in Spanish language networks. You see a growing market 
in sports and news for these sort of things. What is going to 
happen with respect to if I, God forbid, do not get reelected 
next year and decide to start Blank TV?
    Mr. White. Well, as you can imagine, Congressman, we get 
requests for new channels all the time. I think right now we 
are considering 50. I do not have satellite capacity for 50, 
but we do have two new satellites going up over the next year. 
So we have a process internally where a couple times a year I 
sit down with all the requests. We already have 152 independent 
channels. We welcome that as an important part of the diversity 
of our offerings. So I would expect with our new satellite 
capacity and with things like the gigabit to the home where you 
can do affordably--you can do video, that we would have more 
diversity of independent channels.
    Mr. Farenthold. Thank you very much.
    I see my time has expired.
    Mr. Bachus. Thank you.
    At this time, Mr. Cicilline is recognized for 5 minutes.
    Mr. Cicilline. Thank you, Mr. Chairman.
    Thank you to the witnesses for being here.
    I would like to start with Mr. Stephenson. Mr. Bergmayer 
has said that AT&T has failed to demonstrate any public 
interest benefits from this transaction, and in large part, he 
argues that the build-out that you are speaking about of 15 
million customers is, in fact, enhancements rather than build-
outs and may have actually been something that was part of your 
capital investment anyway and is something that is not 
reflected in your public filings and not really specific to 
this merger.
    So could you speak to that, first of all? Can you tell us 
of that 15 million, how many are enhancements for people who 
have existing service, how many are build-outs for new 
customers? Is it in fact something you plan to do anyway and is 
not specific to this merger, not to say it is not a good thing, 
but in evaluating this, could you respond to that?
    Mr. Stephenson. Yes, I will be glad to.
    I went through earlier specifically what commitments we 
have made, and they are in our public financial filings where 
we have committed fiber, where we have committed IP broadband 
to 57 million homes, a million businesses passed with fiber, 
300 million people covered with LTE. All of that is just kind 
of baseline. We made those commitments and we are finishing 
that construction now.
    The 15 million broadband either enhancements or additions 
are all incremental to that. The 15 million is split. And 13 
million is a technology that we are very enthusiastic about. It 
is called fixed wireless local loop, a very interesting name 
for the technology. But what it is is taking advantage of areas 
where we have significant spectrum, and it tends to be rural 
America. In fact, it is almost all rural America where we have 
20 megahertz of spectrum. We are deploying this technology and 
using wireless to deliver 15 to 20 megabit per second service 
to those homes.
    Now, to Mr. Bergmayer's point, yes, we are going to use 
existing cell site infrastructure to put up these capabilities, 
but we are going to go in and put antennas into homes, a lot of 
installation required. That is 13 million.
    There are 2 million homes where it is called ``enhanced,'' 
but what we are doing is deploying fiber to the home, literally 
going up, digging up streets, and putting fiber into the home. 
That is a significant incremental commitment to what we have 
already made.
    Mr. Cicilline. Thank you.
    Now, several witnesses, both in their testimony and in the 
written testimony, have raised issues with respect to net 
neutrality. Should part of the remedy to address some of the 
issues that have been raised with the transaction include 
extension of the net neutrality rules to wireless? Should we do 
that as part of this process, or should it be done, I should 
say?
    Mr. Stephenson. We have been very, I believe, constructive 
in the net neutrality debate. The rules that went in in 2010--
we worked extensively with the FCC to design those rules and 
make sure that they accomplished what the tech industry needed, 
the content people, and all. And we think those rules landed at 
the right place.
    Those rules were very cautious to tread into the wireless 
area because wireless networks are not like fixed line 
networks. We have limited spectrum that this Congress is 
working aggressively to try to deal with. When you have limited 
spectrum and limited capacity, doing things where it constrains 
what you can do to deliver traffic can be very hazardous, if 
you will, to service quality in general. So we felt we ought to 
walk very cautiously and be very, very delicate in how we deal 
with the wireless situation.
    Mr. Cicilline. Thank you.
    Mr. White, could you talk to me a little bit about what 
DIRECTV is either committed to doing or what will be part of 
the terms of this merger agreement to ensure that smaller, 
independent channels will be paid a fair rate, given that 
DIRECTV already is the second largest video distributor and 
will, presumably, only have its market position enhanced as a 
result of this merger? What commitments have you made or what 
terms will be part of this merger agreement that would protect 
that?
    Mr. White. So I do not think we have yet put in anything 
specific to the merger agreement. Clearly, every distributor of 
video right now is struggling with rising content costs, which 
are 60 percent of our costs, and they are growing at far in 
excess of consumer incomes, high single digits, 8 to 10 percent 
a year, which has put tremendous pressure on the business and 
our need to raise consumers' prices. I would say certainly that 
colors how we look at all negotiations with big and small.
    And by the way, we have taken on the big guys. I think we 
have probably been a leader in the industry in battling to try 
and keep costs lower. It is a tough battle. But as it relates 
to independent channels, we have both our public interest 
obligations that we continue to live with. 4 percent of our 
channels would be PIO's. We have, I think, 26 of those. We have 
152 independent channels. In today's world with over-the-top as 
an option as well with broadband, we can put things up as an 
application just like we have done with Pandora and YouTube so 
we can expand even beyond that and would certainly look to if 
consumers want it.
    Mr. Cicilline. Mr. Chairman, if I might just ask the final 
between witnesses if they would submit written answers to this 
question. If there are things that you suggest we could do that 
would allay some of the concerns you both have raised, short of 
an outright opposition to the merger, but actions we could take 
as a Congress that will respond to some of the very important 
issues you raised, if you could answer that in writing, I would 
be grateful.
    And I yield back, Mr. Chairman.
    Mr. Bachus. Thank you, Mr. Cicilline.
    At this time, I recognize Mr. Issa for 5 minutes.
    Mr. Issa. I thank you, Mr. Chairman.
    Gentlemen, as the Chairman next door, I am used to going 
first so all the material is mine. When you get down this far, 
usually most of the good questions have been asked, and this is 
no exception.
    But I just want to run a concept by you because I serve on 
this Committee. I also am a member of the Energy and Commerce 
Committee that often looks at the other side of your issue in 
the FCC.
    So when I say, for example, Comcast/Time Warner/NBC, AT&T/
DIRECTV, Verizon/Fox, DISH Network/CBS, Spring/T-Mobile/ABC, 
and Google and everyone else, are we looking at a future in 
which in order to be competitive, companies have to find these 
partnerships, these allies, these mergers in order to be able 
to create real viable competitors in this case AT&T/DIRECTV to 
some of those other hypothetical and not-so-hypothetical names 
that I mentioned? Mr. Stephenson, Mr. White?
    Mr. White. Well, certainly for anyone distributing the pay-
television piece--I will let Randall speak to the broadband 
aspect, but I think there is a story there as well. When 60 
percent of your costs are the content that you distribute--I 
mean, we are just a distributor--and seven companies control 75 
percent of our content costs, so we are already in the world of 
dealing with big-scale providers of content. They are tough 
negotiations, big and small. In our case, we have had our 
battles with big ones on behalf of our customers. So I think as 
a reality to do the kind of investments that we are talking 
about in broadband--and I think Mr. Bergmayer referred to it 
earlier. To me the exciting thing about this is not just the 
commitments we are making today, but the fact of AT&T having a 
profitable video business will support them to continue to 
invest in increasing speeds and broadband, which we know that 
is where the future is going for the long term.
    Mr. Issa. Randall?
    Mr. Stephenson. I do not know where future industry moves 
go and what consolidation transpires. Mike and I--we view this 
as very different. This is not Comcast/Time Warner. This is not 
two cable companies getting together. It is not Sprint/T-
Mobile----
    Mr. Issa. And you do not have a major content element. Some 
of the other names and hypothetical names I mentioned do have, 
and that is why I asked the question that way.
    Mr. Stephenson. Yes, so you are exactly right because we 
are putting his TV product with our broadband and wireless 
product and creating a unique value proposition in the 
marketplace. But there is not a content play per se in this 
transaction.
    Mr. Issa. Mr. Bergmayer, in your opening statement you were 
very concerned, but I would presume you would have been equally 
or more concerned when major cable companies and content 
providers join. Right?
    Mr. Bergmayer. Yes, sir.
    Mr. Issa. Okay. Mr. Lieberman, the same thing.
    Mr. Lieberman. Yes. There is definitely a concern.
    I just want to say it is not only content providers merging 
with distributors. It is also just distributors getting larger. 
When they get larger, they get more influence over programmers. 
That drives programmers to want to get larger as well. As a 
small provider who does not have the financial resources to get 
larger themselves, they suffer. If we want to have a market 
that is dominated by larger players, where consumers in rural 
areas do not have options, then that may be the market that we 
are going to look at.
    Mr. Issa. And this is the reason I started this way. On 
this side of the Rayburn Office Building, we deal in the 
antitrust question, but antitrust, since the dawn of antitrust 
since Teddy Roosevelt, has been about recognizing that 
companies naturally compete if not for a trust situation that 
gives them an unfair advantage. Do you all agree to that, that 
that is really what antitrust is about, is maintaining the 
opportunity for real competition?
    So now I go back to my basic question which is not just for 
your merger, but in my mind for how this Committee deals with, 
if you will, the promoting of competition. In fact, do we not 
have a problem that if we do not create certain large entities 
that can deliver product and compete to my household to make 
sure that I have multiple choices to my household wherever I 
live, that in fact we will not have competition either for 
delivery of content or, quite frankly, we have a problem with 
delivery of content being at a good value? Is that not true?
    Mr. White. We think it is certainly true. And I think this 
merger creates a greater opportunity for us to combine with 
AT&T's broadband capability. For us, every satellite costs $400 
million. On his wireless business, Randall is spending $10 
billion, $15 billion, $20 billion a year in capital spending. 
It is expensive to rewire America, and that is kind of what we 
are about collectively. And that is how we compete.
    Mr. Issa. Thank you.
    Mr. Chairman, fortunately, Viasat is in my congressional 
district. So the good news is that those launches tend to cost 
a similar amount, although SpaceX is reducing the cost of the 
launch. But those satellites are transmitting so many more 
channels and so much more bandwidth that I am confident that in 
fact competition from space becomes one of the competitions 
that hopefully this Committee will realize needs to be viable 
to maintain an antitrust environment.
    I thank you and yield back.
    Mr. Johnson. Will the gentleman yield?
    Mr. Issa. I yield such time as the Chairman may give me.
    Mr. Bachus. I will yield you 15 seconds. Is that good?
    Mr. Johnson. Yes.
    I just want to make a statement about Government investment 
in infrastructure, the space program, the hundreds of millions 
of dollars that the Federal Government, through taxpayer money, 
spent to prepare to turn that industry over to the private 
sector, of which Mr. Issa is so proud and justifiably I think 
is a tribute to Government spending.
    With that, I will yield back.
    Mr. Bachus. Thank you.
    Mr. Holding, the gentleman from North Carolina, is 
recognized for 5 minutes.
    Mr. Holding. Thank you, Mr. Chairman.
    Of course, the folks that I represent back in North 
Carolina want to know in real terms what it means to them--the 
merger. We have lots of good conversation in this hearing. And 
so I would like for you all to succinctly boil it down and 
answer this question.
    So 3 years from now, what are the top two things that you 
think that my constituents who are your customers will 
appreciate or dislike about this merger? And I will ask Mr. 
Stephenson, Mr. White, and then I will ask Mr. Bergmayer, Mr. 
Lieberman to hit their top two points. So starting with you, 
Mr. White, two things that you think my constituents will 
appreciate about this merger in 3 years' time.
    Mr. White. 15 million more rural Americans will have 
Internet service that do not have high-speed Internet today, 
and I think up to 70 million homes in America out of 115 
million will have a much better bundle offer to compete with 
the cable companies.
    Mr. Holding. Mr. Stephenson?
    Mr. Stephenson. And as that plays itself out, what the 
econometric model will show and we firmly believe is there will 
be downward pricing pressure in this industry as we become a 
more viable competitor, as our programming costs begin to climb 
at a lower rate. We think it is beneficial to consumers from a 
pricing standpoint.
    We think also more broadband is very, very good for the 
over-the-top content distribution models. So more broadband 
will help accelerate the over-the-top models and bring more 
choices for customers on content.
    Mr. Holding. Mr. Lieberman, maybe the top two things that 
they will not appreciate in 3 years.
    Mr. Lieberman. Yes. I think that the rising prices that 
they will see. Their service providers who are not DIRECTV have 
to pay for DIRECTV programming. And I think the number two 
concern that they would have is just the increasing pressures. 
The decreasing competition that smaller providers can provide 
as a result of the increasing consolidation that is happening 
in the marketplace not only due to AT&T/DIRECTV, but also 
Comcast/Time Warner Cable.
    Mr. Holding. Mr. Bergmayer?
    Mr. Bergmayer. If I was a rural resident, I would be 
wondering whether I was resigned to only having wireless 
choices or whether I had some future prospect of getting the 
same sorts of fiber and high-speed broadband options that are 
available to people in more densely populated areas. I agree 
that over-the-top video is a great benefit to consumers, and I 
think what people benefit from is a choice of a variety of 
over-the-top video providers. So I would hope that in the 
future, customers are not driven toward using just one or 
another over-the-top video provider. For example, if AT&T 
operates its own over-the-top video service and it does not 
discriminate in favor of that service and discourage people 
from using competing services, for example, by exempting only 
its own services from data caps but not those of its 
competitors.
    Mr. Holding. Thank you.
    Mr. Chairman, I yield back.
    Mr. Bachus. Thank you, Mr. Holding.
    At this time, I will recognize the gentleman from Missouri, 
Mr. Smith, for 5 minutes.
    Mr. Smith of Missouri. Thank you, Mr. Chairman. Thank you 
for holding this hearing.
    My first question is for Mr. White. Mr. White, the American 
Cable Association states that reductions in programming costs 
that AT&T and DIRECTV may receive as a result of the proposed 
merger, which may lead to higher programming costs for their 
members. How do you respond to that?
    Mr. White. First of all, the reduction in programming costs 
that we have referred to is a reduction in the costs that 
currently AT&T pays. So we did not make any assumptions that 
DIRECTV's costs would go down necessarily, but it is all 
related to the cost of content that AT&T pays today. Our belief 
is that, as we look at that, frankly all of us battle in these 
negotiations every day. The cable operators do as we do as 
distributors. And there is a significant amount of leverage. 
But it is hard for me to see in a world where there are over 
$40 billion of affiliate fees that our billion dollars in 
savings out of the $40 billion would make that much difference 
over time to what they would charge the small operators.
    Mr. Smith of Missouri. So do you think this merger will 
increase the cost of your competitors by any means?
    Mr. White. That has got nothing to do with our thinking on 
it. This was all about getting a capability to service the 75 
percent of customers that leave DIRECTV because they cannot get 
a bundle right now and has nothing to do with that. So I do not 
accept that all.
    Furthermore, I think some of our smaller operators--you got 
to remember in a local market, they are very, very powerful in 
terms of their coverage, and they negotiate very tough. And I 
do not expect them to want to see their prices increase any 
higher than they already are.
    Mr. Smith of Missouri. Thank you.
    Mr. Stephenson, I have a very rural congressional district 
in southeast Missouri, and it is an unserved population. AT&T 
and many other wireline providers, as well as cable operators, 
have made significant investments to reach my constituents, 
many of whom struggle to get dial-up. Can you explain how this 
transaction will result in increased broadband services for 
rural communities like mine?
    Mr. Stephenson. Yes. In fact, I just am looking at a list 
here. In Missouri, the fixed wireless local loop deployment 
that this transaction will accommodate is significant. Again, 
we have a profitable TV product that we now pair with a 
broadband technology, and it makes the economics for deploying 
broadband look really attractive. We are going to use a 
wireless technology which will give 15 to 20 megabits per 
second, build 13 million households in rural America. In 
Missouri, that is 340,000 households we pass with this 
technology. And this is one of the areas we are most 
enthusiastic about. We have been looking at this technology a 
long time, trying to get the economics to work, and it works 
once you put a profitable video product, which DIRECTV brings 
to bear, with this technology. So that is what Missouri should 
see.
    Mr. Smith of Missouri. Thank you.
    You know, representing a very rural congressional district, 
with your statements there, I want to point out that the only 
way that I can get Internet service at my house, which is 13 
miles from Rolla, Missouri, a community of 25,000 people, is 
through wireless or satellite. So that is extremely important 
for rural America.
    Mr. Lieberman, larger sized competitors typically have an 
advantage relative to their small rivals as a result of 
economies of scale. Smaller sized competitors can outperform 
their large rivals on service and product quality. What other 
competitive advantages, aside from size, will the combined 
entity of AT&T and DIRECTV have?
    Mr. Lieberman. Thank you. As you know, consumers do benefit 
from having independent distributors in the market, companies 
like Boycom and NewWave are just important in their 
communities, and these are often in areas where larger players 
do not want to invest and do not want to serve.
    With regard to your question, first and foremost, I cannot 
discount the importance of just being large when you are 
negotiating for programming costs. Even AT&T, DIRECTV have said 
that 60 percent of their costs go to programming. That is to 
deliver their video service. That is the same for smaller 
operators as well.
    I think being large has other advantages of just having 
more financial resources whether or not it is marketing to your 
customers, for instance. These things give great advantages to 
DIRECTV in a lot of their competition with smaller operators.
    Mr. Smith of Missouri. Will the ACA members that are 
present throughout my district be able to compete with the 
combined entity of AT&T and DIRECTV on the basis of better 
service and higher product quality?
    Mr. Lieberman. They will compete. They will do what they 
can to overcome the significant disadvantage that they face in 
paying programming fees that are significantly higher than 
DIRECTV, but that competitive ability is getting more and more 
difficult over time. And if your customers enjoy having a 
competitive choice between two satellite providers and a local 
cable operator, then I think we need to look at the underlying 
rules that are in the market that are driving these 
consolidations to ensure that consumers can continue to benefit 
from that in the future.
    Mr. Smith of Missouri. Thank you, Mr. Chairman.
    Mr. Bachus. Thank you.
    We are going to have a second round for Members who are 
here if they desire it. So, Mr. Smith, if you want a second 
round, you can.
    Mr. Johnson, do you have other follow-up questions? I will 
go and then you if you have any.
    Let me start. Mr. Bergmayer, Mr. Stephenson has already 
mentioned net neutrality and that they were committed to the 
FCC's--some of their guidance. I am not sure what the FCC's 
position on net neutrality is. It seems to me they are backing 
away from what was originally conceived as net neutrality.
    Mr. Bergmayer. As I understand it, AT&T has committed to 
follow the 2010 open Internet order. Those rules are partly 
vacated by the D.C. Circuit, but as part of a merger condition, 
certainly AT&T might promise to abide by those rules even if 
they are no longer in force for some of the industry.
    I think there is a question about the extent of the 
protection they offer to wireless users. For example, while 
they provide less protection for wireless users than for 
wireline broadband users, they do not provide no protection. 
And one of the areas where they offer protection for wireless 
users is for services that the provider itself offers. There 
are some cases where it cannot discriminate against competing 
services. Now, if AT&T does offer a new over-the-top video 
service, those provisions of those rules might kick in where 
previously AT&T did not offer such a video service. So they 
might not. So that is sort of an interesting point with the 
2010 rules.
    Mr. Bachus. I think most Americans and most Members of 
Congress are very concerned. The Internet has sort of been a 
gateway not a gatekeeper. I know as a telephone company, you 
are subject as a common carrier. We have seen reports of fast 
lane, slow lane, and if there is a reason not to have that, it 
is concerning.
    Mr. Bergmayer. Well, Public Knowledge is working at the FCC 
now for strong net neutrality rules that would apply to the 
entire industry not just one company. I mean, I question 
whether it makes a lot of sense to have rules that apply to 
just one company and not others. I would prefer them to be 
industry-wide. I would presume, if we succeed in our effort to 
get rules that are even better than the 2010 rules in place, if 
they go beyond the 2002 rules' level of protection, then AT&T 
would be subject to them. But if they go not as far as the 2010 
rules, we would still hold AT&T to the 2010 rules.
    Mr. Bachus. I know there is some discussion about what is a 
common carrier. I will not get into all of that. But I think it 
is something the Committee ought to look at.
    Mr. Lieberman, discriminatory pricing obviously is a 
concern. We want to preserve the competition we have. And you 
have talked about a differential of 30 percent in your 
testimony. You said the proposed transaction will increase 
DIRECTV affiliate programmers' incentive to charge higher 
prices to AT&T/DIRECTV rivals. And then you say regulators 
should adopt to eliminate the ability of DIRECTV affiliated 
programmers to charge higher prices to AT&T/DIRECTV rivals. I 
think the same thing would apply to Comcast/NBC and, you know, 
obviously others. It would not be just DIRECTV.
    I know there was some arbitration that expired and DIRECTV 
had to submit to arbitration. I think Comcast still does. I 
think you said in your statement that you did not feel like 
that was sufficient. Do you want to comment further on that or 
on discriminatory pricing?
    Mr. Lieberman. Yes. Let me start with, I think, the issue 
that is most directly tied to the AT&T/DIRECTV deal, which is 
DIRECTV's incentive to charge its rivals higher prices for its 
programming, which will get greater as a result of this deal. 
Currently there is not enough protections to avoid that 
problem. I think Mr. White has explained that the program 
access rules are subject to them currently. However, those 
rules themselves are not enough. Even DIRECTV has suggested in 
cases, mergers, where program access rules already exist, that 
there should be heightened protections and has argued for 
arbitration conditions. FCC has asked for that same condition.
    So DIRECTV, as part of a 2008 merger, had arbitration 
conditions opposed to them. Baseball style arbitrations. That 
was based on coming up with a rate that was based on fair 
market value for the programming. That has expired. And we 
believe that a similar condition should be adopted to address 
that harm. However, the one that was previously adopted had 
some flaws. It remained too expensive for smaller operators to 
use. So if you have a remedy that is too expensive for a cable 
operator with 1,000 subscribers to use, you pretty much have no 
remedy. So we need to relook at this type of remedy, put some 
modifications to it to make sure it works for all providers 
that need it.
    Mr. Bachus. Just to eliminate the ability altogether.
    Mr. Lieberman. Excuse me?
    Mr. Bachus. Just to eliminate the ability altogether.
    Mr. Lieberman. Yes. What we should do is eliminate their 
incentive to increase the prices for their rivals more than the 
price that they would charge to non-rivals.
    Mr. Bachus. And I think you all support creation of a fee 
category to include DBS?
    Mr. Lieberman. Yes.
    Mr. Bachus. An also AT&T has. So that will be interesting 
as you go forward there.
    Let me close by saying what some Members of Congress--I 
guess this is the most frequent question I was asked. And I do 
not think anyone has asked this. One of the principal 
components of the proposed AT&T/DIRECTV merger is DIRECTV's 
continuing relationship with the NFL. What can you share with 
us regarding that relationship and your customers' ability to 
continue to get a package which they very much value?
    Mr. White. Well, thank you for the question, Congressman. 
As you can imagine, the NFL content all of our customers are 
very excited about each year when we kick off the new season. 
We have had a longstanding, actually a 20-year relationship 
this year with the NFL. We very much value that relationship. 
Our relationship is excellent. Our current deal--it was a 
multiyear deal--expires at the end of this coming season. So we 
are in active discussions with the NFL about renewing our NFL 
Sunday ticket product, and we are very hopeful and optimistic 
that that will happen. And I am confident, based on the 
discussions, that we will get that done before the end of the 
year.
    Mr. Bachus. Thank you.
    Mr. Johnson will close the hearing with his questions.
    Mr. Johnson. Thank you.
    As part of its merger with NBC Universal, Comcast pledged 
to partner with schools to teach digital literacy and encourage 
adoption among low-income families. Comcast likewise committed 
to offering certain low-income families broadband Internet 
access at affordable rates. And as a result of this program, 
nearly 1.2 million Americans have joined the program, 86 
percent of whom now use the Internet daily, 21,00 which are in 
my home State of Georgia, with just over 17,000 families in the 
City of Atlanta alone.
    Will AT&T commit to a similar program to advance the public 
interest through affordable broadband access and digital 
literacy training?
    Mr. Stephenson. I am not intimately familiar with it, 
Congressman, but I will commit to you we will look at it. I 
think it is probably not only in the communities we serve, but 
probably in our self-interest. We are doing a lot in terms of 
nano degrees trying to help with low-cost education for people 
to get degrees that would equip them to do things in the 
digital world, and we are very, very excited about it. We also 
have made a number of investments to ensure that we can address 
that end of the market and ensure that customers at that end of 
the market are getting really robust broadband capabilities.
    Our experience, in terms of getting good penetration of 
broadband into lower-income communities, is not the access to 
broadband. It is the access to computers. And what is happening 
and is happening at a very quick pace are these devices. These 
are very low-cost computers that are wirelessly connected and 
giving really low cost for people in lower-income communities 
to gain access to the Internet and the digital economy. And so 
we are focused in this. But I will be glad to look at the areas 
you addressed and evaluate it.
    Mr. Johnson. Thank you.
    As part of its rollout of a fiber network in Kansas City, 
Google includes a free monthly service with basic Internet 
service if consumers pay a one-time construction fee to connect 
their home to the network. Does AT&T offer a similar service 
for its fiber networks?
    Mr. Stephenson. Google did some very creative things in 
Kansas City, and I take my hat off to them. They then modified 
their approach and took it to Austin. What they received in 
terms of permitting to build out a fiber network in Austin from 
the municipalities was very interesting. And in fact, as soon 
as they announced it, we told the Austin community if you will 
make the same concessions to us, we will build a fiber network 
as well.
    We launched our fiber network back in November. Google has 
yet to launch theirs in Austin. But it is a good indication of 
competition and the robustness of fiber deployment in these 
communities and different business models that are emerging 
like the one you mentioned in Kansas City, a different one in 
Austin. We have announced one in North Carolina as well.
    Mr. Johnson. What other outreach programs does AT&T offer 
to unconnected homes, specifically those in low-income 
neighborhoods and in rural areas?
    Mr. Stephenson. So what programs?
    Mr. Johnson. Yes. What outreach programs does AT&T offer to 
unconnected homes, specifically those in low-income 
neighborhoods or rural areas?
    Mr. Stephenson. I apologize. I do not know off of the top 
of my head, but we can get that to you.
    Mr. Bachus. You know, they do have AT&T Aspire, which I 
think is a very valuable program. It may not get to all. It 
certainly keeps students from dropping out of school. And that 
is a very large program. And when they do not drop out of 
school, they get a good job and they have the ability to use--
--
    Mr. Stephenson. We have a multiple hundred million dollar 
commitment to the high school dropout crisis focused 
particularly on Hispanic, African Americans, and Native 
Americans. The dropout crisis was an epidemic, and so we have 
made a major commitment of money to address this; it has moved 
the needle in a lot of areas, and that has continued.
    Mr. Bachus. And was that not $300 million and something?
    Mr. Stephenson. The first one was $200 million. The second 
was $250 million I think.
    Mr. Johnson. That is commendable. But in terms of outreach 
to enable families, low-income and also rural folks, of what 
the opportunities are in terms of what you offer and how it can 
benefit the people. So in terms of just outreach, not so much 
the programming itself, but what do you do in order to make 
people aware of the benefits of Internet connection and the 
other services that you provide?
    Mr. Stephenson. It is a good challenge, and like I said, I 
cannot give you specifics of what we are doing there. If 
nothing, I will let you know and we will take it under 
consideration of what we can do and do better.
    Mr. Johnson. Thank you.
    Mr. Bachus. Of course, Aspire is an outreach program. Our 
biggest program in education is our dropout rate.
    Mr. Johnson. You are to be commended for that.
    Mr. Stephenson. I would say in that regard one of our 
biggest issues as a company is----
    Mr. Bachus. It is a tremendous problem. [Laughter.]
    Mr. Johnson. You all agree?
    Yes, sir?
    Mr. Stephenson. I was just going to say one of our biggest 
issues as a company over the next 6 years is access to what I 
would call computer- and digital-literate employees. We are 
going to need a significant number of them, and we are doing a 
lot of creative things, not the least of which we are fully 
funding for any of our employees who can qualify a masters in 
computer science at Georgia Tech University purely online. It 
has been certified by the Governor and by the Board of Regents 
as a fully accredited degree, and AT&T is committing to pay 
anybody who can qualify and make it into that program. Those 
who cannot qualify to get into it--we are bringing it in house 
and we will do AT&T certifications to begin to build these 
skill sets for people.
    Mr. Johnson. Okay. Well, that is great.
    Digital literacy training. Do you have any programs that 
enable those without that skill to learn about it and take 
advantage of it? Any programs that you might have?
    Mr. Stephenson. So we have a number of digital literacy 
programs. And in fact, the Aspire program that the Chairman 
referenced--we have actually done some things with the Aspire 
program where we have invested in companies who do digital 
literacy training and then do things in schools to develop 
digital curriculum and so forth. So we have made some 
investments in these areas. That continues to be a focus of 
ours. I would be glad to give you a full detailed listing of 
all the efforts that we have going on in that area.
    Mr. Johnson. Okay. That would be great. And I just look 
forward to you all thinking outside of the box and coming up 
with some new attractive ways of making your services available 
to those who cannot afford it or who just simply do not know 
about it. You have already covered the fact that those without 
access--you are going to take care of that. But there is that 
other more softer component of it also.
    Mr. Stephenson. Noted.
    Mr. Johnson. Thank you.
    I yield back.
    Mr. Bachus. I thank the gentleman.
    This concludes today's hearing. I thank all of our 
witnesses for attending and answering the questions. I thought 
you all gave excellent testimony.
    Without objection, all Members will have 5 legislative days 
to submit additional questions for witnesses or additional 
materials for the record.
    This hearing is adjourned, and now you can go over to the 
Senate.
    [Whereupon, at 12:59 p.m., the Subcommittee was adjourned.]









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