    [Senate Hearing 113-682]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 113-682

                              AT A TIPPING POINT:
                         CONSUMER CHOICE, CONSOLIDATION
                        AND THE FUTURE VIDEO MARKETPLACE

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

                                    HEARING

                                   before the

                             COMMITTEE ON COMMERCE,
                          SCIENCE, AND TRANSPORTATION
                              UNITED STATES SENATE

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 JULY 16, 2014

                                   __________

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

           SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                               U.S. GOVERNMENT PUBLISHING OFFICE

      95-652 PDF                       WASHINGTON : 2015
     _________________________________________________________________________________
     For sale by the Superintendent of Documents, U.S. Government Publishing Office,
           Internet:bookstore.gpo.gov. Phone:toll free (866)512-1800;DC area (202)512-1800
         Fax:(202) 512-2104 Mail:Stop IDCC,Washington,DC 20402-001

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 SECOND SESSION

                JOHN D. ROCKEFELLER IV, West Virginia, Chairman
    BARBARA BOXER, California            JOHN THUNE, South Dakota, Ranking
    BILL NELSON, Florida                 ROGER F. WICKER, Mississippi
    MARIA CANTWELL, Washington           ROY BLUNT, Missouri
    MARK PRYOR, Arkansas                 MARCO RUBIO, Florida
    CLAIRE McCASKILL, Missouri           KELLY AYOTTE, New Hampshire
    AMY KLOBUCHAR, Minnesota             DEAN HELLER, Nevada
    MARK BEGICH, Alaska                  DAN COATS, Indiana
    RICHARD BLUMENTHAL, Connecticut      TIM SCOTT, South Carolina
    BRIAN SCHATZ, Hawaii                 TED CRUZ, Texas
    EDWARD MARKEY, Massachusetts         DEB FISCHER, Nebraska
    CORY BOOKER, New Jersey              RON JOHNSON, Wisconsin
    JOHN E. WALSH, Montana
                        Ellen L. Doneski, Staff Director
                         John Williams, General Counsel
                  David Schwietert, Republican Staff Director
                  Nick Rossi, Republican Deputy Staff Director
       Rebecca Seidel, Republican General Counsel and Chief Investigator

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on July 16, 2014....................................     1
    Statement of Senator Rockefeller.................................     1
    Statement of Senator Thune.......................................     3
    Statement of Senator Booker......................................    48
    Statement of Senator Nelson......................................    51
    Statement of Senator Markey......................................    53
    Statement of Senator Heller......................................    56
    Statement of Senator Ayotte......................................    58
    Statement of Senator Blunt.......................................    60
    Statement of Senator Blumenthal..................................    62
    Statement of Senator Klobuchar...................................    65

                                   Witnesses

    David L. Cohen, Executive Vice President, Comcast Corporation....     5
        Prepared statement...........................................     6
    Justin (Gus) Hurwitz, Assistant Professor of Law, University of
      Nebraska College of Law........................................    21
        Prepared statement...........................................    23
    John T. Stankey, Group President and Chief Strategy Officer, AT&T
      Inc............................................................    24
        Prepared statement...........................................    26
    Jeffrey H. Blum, Senior Vice President and Deputy General
      Counsel, DISH Network L.L.C....................................    28
        Prepared statement...........................................    30
    Shawn Ryan, Member, on behalf of Writers Guild of America, West..    32
        Prepared statement...........................................    34
    Gene Kimmelman, President and CEO, Public Knowledge..............    39
        Prepared statement...........................................    41

                                    Appendix

    Response to written questions submitted to David L. Cohen by:
        Hon. John D. Rockefeller IV..................................    79
        Hon. Barbara Boxer...........................................    80
        Hon. Mark Pryor..............................................    85
    Response to written questions submitted by Hon. Mark Pryor to:
        Justin (Gus) Hurwitz.........................................    86
        John T. Stankey..............................................    88
        Jeffrey H. Blum..............................................    89
        Gene Kimmelman...............................................    90

                              AT A TIPPING POINT:

                         CONSUMER CHOICE, CONSOLIDATION

                        AND THE FUTURE VIDEO MARKETPLACE

                                  ----------

                            WEDNESDAY, JULY 16, 2014

                                           U.S. Senate,
            Committee on Commerce, Science, and Transportation,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 2:40 p.m. in room
    SR-253, Russell Senate Office Building, Hon. John D.
    Rockefeller IV, Chairman of the Committee, presiding.

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

        The Chairman. Welcome all. The attendance does not
    represent on our part so far the interest in this subject. We
    just were finishing up a vote. Sometimes people tarry just a
    bit when that happens.
        But this is a very serious hearing and a very important
    hearing. So, I am going to make my opening statement and then
    turn it over to Senator John Thune.
        Today we are here to discuss the future of the video
    marketplace. We are continuing a conversation which the
    Committee began several years ago, 2 years ago, I think, on an
    examination of the emergence of online video.
        I produced a bill, which caused some angst on K Street, but
    obviously opened up a conversation, which we are going to be
    continuing today. This bill asks whether it has the ability to
    bring more quality content and more choice to consumers.
        The past 2 years have confirmed from my perspective the
    ability of online video to resonate with consumers and to
    generate critical acclaim.
        In fact, just last week an online video provider--to be
    precise, Netflix--whose CEO declined to be here today, which I
    cannot figure out because I am trying to help him, I think, but
    he did not want to be here--anyway, the provider got 30 Emmy
    nominations and produced two online-only TV shows that are
    generally recognized by some to be the best TV shows airing
    today. Whether that is true or not, I just do not know.
        It remains an open question whether online video can become
    the driving force of a consumer-centric revolution in the video
    marketplace, a matter which interests me greatly.
        While it is true that at least one online video provider,
    that being Netflix, has more subscribers today than any one
    cable or satellite provider, combine those two categories
    together, and they have more.
        No online video platform has emerged that can compete on
    equal footing with traditional cable or satellite service. It
    is important to remember that these online providers are
    reliant on broadband providers to reach consumers, and hence,
    the complexity of our discussion.
        Last November, as I guess I already said, I introduced the
    ``Consumer Choice in Online Video Act.'' That legislation is
    designed to start a real conversation about how to foster the
    growth of online video services. My bill provides them the
    breathing room necessary to compete on a level playing field
    with tradition pay TV services.
        I continue to believe that one of the core policy questions
    that the Congress must grapple with as it looks to reform video
    policy is how to nurture new competitive technologies and
    services, and make sure that incumbents cannot simply
    perpetuate the status quo of ever increasing pay TV bills
    rising at a rate faster than inflation and limited programming
    choice.
        This is particularly true when we have real world examples
    of at least one former cable CEO announcing to the world that
    his company actively tried to prevent the growth of new
    competitive online video services.
        I know everybody says that and you are probably tired of
    hearing it, but it does kind of make a point because he was
    head of a cable service. Make no mistake, the video marketplace
    is at a tipping point. That is why there are so many of you
    here and that is why this is such a crucial point.
        The video marketplace--the two proposed mergers could
    fundamentally reshape the marketplace. As press reports as
    recently as today indicate, there could be significant media
    mergers on the horizon.
        More importantly, these mergers create even larger
    companies that combine high speed broadband and extensive media
    holdings. These proposed combinations of video, broadband and
    content have real implications for the future viability of
    competitive online video services.
        As the current--this is sort of obnoxious as I say it, so
    please forgive me. As the current longest serving member of
    this committee, I hope that is true, I have had before me many
    CEOs. I am very serious about this, many CEOs and other company
    representatives touting the consumer benefits of ever larger
    companies in various industries.
        In other words, you let us merge, prices are going to go
    down and trucks are going to arrive on time. They will tell you
    exactly what the guy is going to look like, you know, all this
    stuff.
        Yet these mergers, essentially media mergers and
    telecommunications, railroads and airlines, just to name a
    few--a lot of folks around here do not like the word
    ``regulation,'' but I suspect some folks who come from rural
    states recognize that the deregulation of the airline industry
    was a massive assault on rural America and small town America.
    Yet in most cases these benefits never come to pass. All the
    promises made are not the promises kept.
        Of course, each of these mergers deserves to be judged on
    the merits. There is no theology here. This is a merit based
    discussion. But doing so cannot and should not ignore what they
    could mean for the future of video.
        Regulators must be vigorous in their review on the impacts
    of these transactions on competition and on consumers, what
    they have to pay, and what they have to see. Do people really
    want to see 500 channels when all they ever look at is eight,
    like me, or is it something different.
        Our video marketplace stands at a crossroads today. I think
    I just said that. I just used different words. One path could
    lead to a perpetuation of the status quo into the online world,
    which I think is upon us, big time, and consumers left worse
    off than they were before.
        The other path, the brighter path, is one where broadband
    facilitates a new evolution in video services as it has done in
    other markets. This evolution brings with it more consumer
    choice, more competitive alternatives, more high quality
    content, and for heaven's sake, lower rates.
        Consumers clearly prefer the second path. They have an
    appetite for the types of service and choices that online video
    can bring. Policymakers in my judgment must respond to that
    desire. If that is what consumers want, then we need to respond
    to that, responsibly, and make sure that online video has the
    room needed to flourish and push towards a consumer-centric
    video marketplace.
        That is the shortest opening statement I have ever given, I
    think, Senator Thune, but I want to thank our witnesses for
    being willing to come, and to the head of Netflix, we will see
    him, too, but it will be later, I guess.
        So, I look forward to the discussions and I look forward to
    anything that my Co-Chair has to say.

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

        Senator Thune. Thank you, Mr. Chairman, for holding today's
    hearing, and thank you to all our panelists as well for being
    here.
        Mr. Chairman, the title of this hearing suggests that we
    have reached a tipping point in the video marketplace and that
    we may have arrived at a foreboding precipice for the future of
    video.
        While the mergers proposed between Comcast and Time Warner
    Cable and between AT&T and DIRECTV involve some of the largest
    American telecommunications firms and tens of millions of
    American households, I am not convinced it will necessarily
    change the market in a permanent or a negative way.
        That said, there is no doubt that these transactions are
    quite significant, and we are rightly here to discuss them and
    their potential impact on the marketplace, and most
    importantly, on our constituents.
        The marketplace for video services is dynamic and appears
    increasingly robust. It was not that long ago when meaningful
    competition to cable companies simply did not exist. Today,
    nearly all homes have three pay TV providers competing for
    their business, and that number is unlikely to be reduced by
    the pending mergers.
        In addition to the current facilities-based competition,
    there is a growing class of video services we call ``over-the-
    top.'' While this market is still nascent, it is also
    ascendant. Many of the companies driving it are household names
    that dwarf many traditional pay TV providers. Google, Amazon,
    Microsoft, Apple, Yahoo, and Netflix are all investing
    tremendous resources in unique and previously impossible ways
    to capture a greater share of the video marketplace.
        Consumer choice for video delivery and video content is
    greater today than ever before. The continued promise of
    increasing choice and consumer empowerment, however, will need
    an ever more capable broadband infrastructure, both wired and
    wireless.
        So, Mr. Chairman, I am eager to hear how these mergers may
    improve the broadband network infrastructure on which our
    digital economy and video services increasingly rely. I am
    particularly interested in what benefits these mergers would
    provide to people in rural areas, like in my home state of
    South Dakota, and yours of West Virginia.
        It is also important for the Committee to understand how
    competitors and other market participants may respond to these
    mergers if they are approved. Smaller video providers and
    content creators fear that they will get further squeezed as
    the big companies get bigger. Are these fears legitimate, and
    if so, can they be assuaged?
        Another aspect that should be discussed is the role of
    content creators and video programmers in shaping the future of
    the video marketplace. As large as some pay TV companies may
    grow, none will succeed in the marketplace without securing the
    rights to carry high quality content created and owned by
    others. Bill Gates once said, and I quote, ``Content is king,''
    unquote. That is certainly true for video.
        It is even more true for online video. So, while a
    broadband connection is essential, ultimately it is the content
    delivered by that connection that drives demand and competition
    in the online video marketplace.
        In future hearings and outreach to stakeholders, we should
    solicit the input of online video providers and major
    unaffiliated video programmers to provide perspectives and
    insights into the dynamic interplay between content, platform,
    and infrastructure.
        I know the promise of online video is a subject you deeply
    care about, Mr. Chairman, and I look forward to continuing to
    build the Committee's record and exploring ways to work
    together to ensure that consumers ultimately realize that
    promise.
        Thank you again for holding today's hearing, Mr. Chairman.
    I look forward to hearing from our witnesses. Thank you.
        The Chairman. Thank you, sir. Let's go right to our opening
    statements, and there are seven of you.
        Senator Thune. Six.
        The Chairman. Six; yes. So, please do not talk more than
    half an hour.
        [Laughter.]
        The Chairman. If you want the hearing to be interesting,
    make it about five, and I know you can do that, David, you can
    do that.
        So, David Cohen is recognized. He is Executive Vice
    President for the Comcast Corporation. I look forward to what
    you have to say.

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

        Mr. Cohen. Thank you very much, Mr. Chairman, Ranking
    Member Thune, and members of the Committee. I appreciate the
    opportunity to testify today about the robust state of
    competition in the video marketplace.
        As I entered this hearing room, I was reminded of the
    determined efforts of this committee over the past two decades,
    including you, Mr. Chairman, and a bipartisan group of past
    chairs of this committee, to support video competition and
    greater programming choices for the benefit of consumers.
        I would be remiss if I also did not recognize Senator
    Markey's work in the House on that same subject, and I think we
    are all benefiting from that two decades of work that all of
    you have been engaged in.
        America has indeed reached a tipping point in those
    efforts, and it is tipping decidedly in the favor of consumers,
    who are now enjoying what many rightly call ``a new golden age
    of video services,'' more choices, new technologies, and
    incredible content, and this is the direct result of thoughtful
    government policies that remove barriers to competitive entry,
    reduce regulation, and allow the marketplace to grow and
    flourish.
        More companies than ever before, both large and small, old
    style and new style, are producing high quality and diverse
    programming, competing to deliver that programming using an
    unprecedented array of innovative technologies and business
    models, and experimenting and competing in both the production
    and delivery of content.
        During a typical week, nearly a quarter of adults watch
    downloaded or streaming video through their smartphones, and
    nearly half of game console users stream and watch video over
    those devices. 7.6 million U.S. homes are now considered cord
    cutters or cord nevers, meaning they have high speed Internet
    but no cable or satellite television service.
        Nielsen reports that YouTube reaches more U.S. adults ages
    18 to 34 than any cable network, and Netflix, as the Chairman
    observed, has over 35 million domestic subscribers, and if I
    can slightly adjust the comparison, that is more than Comcast
    and Time Warner Cable combined.
        Amazon, Hulu, Netflix, Yahoo! and other websites are
    developing their own original series, including such successful
    shows as House of Cards, Orange is the New Black, and Alpha
    House.
        And notwithstanding this explosion of alternative video
    consumption models, traditional television viewing has remained
    essentially constant, with the average adult consuming more
    than 5 hours a day of television.
        This new golden age is made possible in large part by the
    $1.2 trillion that cable companies, phone companies, and
    wireless companies have invested to bring broadband Internet to
    every corner of America since the passage of the 1996
    Telecommunications Act.
        Comcast alone offers high speed data services to tens of
    millions of households. We have increased speeds 13 times in
    the last 12 years. We invest billions to double the capacity of
    our network every 18 months, and we have driven the price per
    megabit of data consumption down 92 percent since 2002, and it
    is thanks to this investment in broadband networks that online
    video distribution has flourished. The number of online video
    subscribers more than tripled, from 18.2 million in only 2010,
    to 54 million in 2013.
        The video viewing options are going to continue to grow as
    even more companies, including such power houses as AT&T,
    Verizon, DIRECTV, DISH, Amazon, Apple, Sony, Google, Netflix,
    and Facebook, to name a few, compete for their attention and
    loyalty.
        The increasing rivalry and experimentation among these
    national and global companies is a primary business driver for
    the Comcast/Time Warner Cable transaction. It will give Comcast
    the increased geographic reach and economies of scale necessary
    to compete in this capital intensive, rapidly evolving
    industry, where continued research and development and
    innovation are essential, allowing us to invest the billions of
    dollars required for next generation technologies and services,
    and when we invest and innovate, so do our competitors.
        The mere announcement of our transaction has already caused
    other companies across the country to accelerate and expand
    their investment plans. All of this is great for consumers and
    our economy, and it will ensure that this new golden age of
    television extends well into the future.
        As I noted in my opening, the massive investment and robust
    competition that has brought us to this tipping point is in
    large part a result of the pro-investment/deregulatory policies
    that this committee and others set in motion, especially
    through the 1996 Act.
        So, at this time of extraordinary disruption in innovation,
    it would not benefit consumers or businesses to add significant
    legislative uncertainty into the mix. Congress should instead
    continue to allow this dynamic and evolving video marketplace
    to continue to grow.
        Thank you, and I look forward to your questions.
        [The prepared statement of Mr. Cohen follows:]

        Prepared Statement of David L. Cohen, Executive Vice President,
                              Comcast Corporation
        Mr. Chairman, Ranking Member Thune, and members of the Committee, I
    appreciate this opportunity to testify today about the state of
    competition in the video marketplace.
    I. The Video Marketplace Is Robustly Competitive
        The title of this hearing is apt--we are at a notable tipping point
    in the development of the video marketplace, and it is tipping
    decidedly in favor of American consumers.
        They are enjoying what many are rightly calling a ``golden age'' of
    video services thanks to an exceptionally dynamic and competitive
    marketplace. As David Carr of The New York Times has observed, ``[t]he
    vast wasteland of television has been replaced by an excess of
    excellence.'' \1\
    ---------------------------------------------------------------------------
        \1\ David Carr, Barely Keeping Up in TV's New Golden Age, N.Y.
    Times, Mar. 9, 2014, http://www.nytimes.com/2014/03/10/business/media/
    fenced-in-by-televisions-excess-of-excellence
    .html.
    ---------------------------------------------------------------------------
        A growing number of companies are producing significantly more
    high-quality and diverse programming than ever before. And more
    companies are competing to deliver that programming using a greater
    array of technologies and business models than ever before. And even
    more companies are experimenting and competing in both the production
    and delivery of content than at any time in our history.
        All of this competition is great for American consumers, giving
    them access to more of the content they want, whenever and wherever
    they want it. This competition has flourished largely because Congress,
    led by the bipartisan efforts of this Committee in the 1980s and 1990s,
    dramatically reduced the role of regulation in the video marketplace,
    facilitated intermodal competition, threw open the opportunity for
    investment in broadband Internet, and let the marketplace thrive.
        In fact, it is fair to say that the Telecommunications Act of 1996
    (``1996 Act'') \2\ worked better than could have been imagined to
    create competition, choice, and innovation--in some expected ways and
    in some unexpected ways.
    ---------------------------------------------------------------------------
        \2\ Telecommunications Act of 1996, Pub. L. No. 104-104 (1996).
    ---------------------------------------------------------------------------
        Consider all of the diverse methods that consumers are now
    accessing video content in its many forms. In addition to traditional
    broadcasting and multichannel video programming distributor (``MVPD'')
    services, which now include cable, satellite, telephone companies, and
    others, there is an astonishing proliferation of new sources of video
    content--most of them using the broadband Internet that cable companies
    helped lead the way in providing to American consumers. As reported by
    the White House last year, ``[s]ince 2009, the percentage of American
    homes reached by high-speed broadband networks have more than
    quadrupled (from less than 20 percent to more than 80 percent) and
    average broadband speeds have doubled.'' \3\
    ---------------------------------------------------------------------------
        \3\ See Press Release, White House, Fact Sheet: Administration
    Provides Another Boost to Wireless Broadband and Technological
    Innovation (June 14, 2013), http://www.whitehouse.gov/the-press-office/
    2013/06/14/fact-sheet-administration-provides-another-boost-wireless-
    broadband-and-.
    ---------------------------------------------------------------------------
        The power of technology and free markets continues to radically
    transform how consumers access video. Now, virtually any device with a
    screen and an Internet connection delivers video. Indeed, in 2013, 66
    percent of all Internet traffic was video. This number is projected to
    increase to 79 percent in the next five years.\4\
    ---------------------------------------------------------------------------
        \4\ Cisco, Visual Networking Index: Forecast and Methodology, 2013-
    2018 (June 10, 2014), http://www.cisco.com/c/en/us/solutions/
    collateral/service-provider/visual-networking-index-vni/
    VNI_Hyperconnectivity_WP.html.
    ---------------------------------------------------------------------------
        Americans are increasingly turning to devices other than their
    televisions for consuming video content, such as iPads, smartphones,
    and laptops. And when they use their TVs, they are increasingly
    connecting them to new intermediate devices like Apple TV, Roku, TiVo,
    and Google Chromecast to stream or download video; or watching content
    on entertainment apps on Smart TVs. A recent study found that, during a
    typical week, nearly a quarter of all adults watch downloaded or
    streaming video through their smartphone, making it the top device for
    consuming that type of content. And in the same study, nearly half of
    game console users reported that they primarily use those devices to
    stream and watch video.\5\
    ---------------------------------------------------------------------------
        \5\ Experian Marketing Services, Cross-Device Video Analysis
    (2013), http://www.experian.com/marketing-services/cross-device-video-
    analysis.html.
    ---------------------------------------------------------------------------
        YouTube alone registers more than 1 billion unique user visits each
    month; over 6 billion hours of content are watched each month; and more
    than 100 hours of content is uploaded to YouTube every minute.
    According to Nielsen, YouTube reaches more U.S. adults ages 18 to 34
    than any cable network.\6\
    ---------------------------------------------------------------------------
        \6\ Follow the audience . . ., YouTube Official Blog (May 1, 2013),
    http://youtube-global.blogspot.com/2013/05/yt-brandcast-2013.html.
    ---------------------------------------------------------------------------
        Streaming services have similarly surpassed traditional MVPDs in
    customers. Netflix has approximately 44 million subscribers worldwide--
    35.7 million domestic subscribers (greater than the number of
    subscribers of any MVPD, including Comcast and Time Warner Cable
    combined)--and announces services to new countries every month.\7\
    Amazon Prime, which launched its Prime Instant Video service just two-
    and-one-half years ago, already has approximately 20 million
    subscribers worldwide.\8\
    ---------------------------------------------------------------------------
        \7\ See Netflix Inc., Quarterly Report (Form 10-Q), at 16 (Apr. 23,
    2014), http://files
    .shareholder.com/downloads/NFLX/3300463643x0xS1065280%2D14%2D12/
    1065280/filing.pdf; Netflix Inc., Annual Report (Form 10-K), at 1 (Feb.
    3, 2014), http://ir.netflix.com/common/download/
    sec.cfm?companyid=NFLX&fid=1065280-14-6&cik=1065280.
        \8\ See Jay Yarow, Amazon Says It Has At Least 20 Million Prime
    Members, Business Insider, Jan. 6, 2013, http://
    www.businessinsider.com/amazon-prime-members-2014-1.
    ---------------------------------------------------------------------------
        With this rapid transformation in the way video content is
    distributed has come even more investment and innovation in content
    production.
        Online video distributors (``OVDs'') are producing their own
    content and curating other programming. Netflix, for example, has
    developed highly successful original series, such as House of Cards and
    Orange is the New Black, and now has a $3 billion annual programming
    budget that exceeds the programming budgets of many cable networks.\9\
    In addition, Netflix has established an exclusive ``next season''
    window for valuable television content, including Mad Men, Breaking
    Bad, Revolution, and Pretty Little Liars, and has announced exclusive
    deals for content from Disney, DreamWorks, and The Weinstein
    Company.\10\ Similarly, Amazon Studios created a half-hour political
    comedy, Alpha House, and has ordered full seasons of six more original
    series.\11\ Amazon also recently announced an exclusive streaming
    arrangement for HBO's library of productions, including The Sopranos
    and The Wire.\12\
    ---------------------------------------------------------------------------
        \9\ See Lacey Rose, Netflix's Original Content VP on Development
    Plans, Pilots, Late-Night and Rival HBO (Q&A), The Hollywood Reporter,
    June 18, 2014, available at http://www.holly
    woodreporter.com/news/netflixs-original-content-vp-development-712293.
        \10\ See Netflix Q3 2013 Investor Letter (Oct. 21, 2013); Netflix
    Q2 2013 Investor Letter (July 22, 2013); Netflix Q4 2012 Investor
    Letter (Jan. 23, 2013).
        \11\ See Joan Solsman, Amazon Renews ``Alpha House,'' Picks Up 6
    Series, CNET, Mar. 31, 2014, http://www.cnet.com/news/amazon-renews-
    alpha-house-picks-up-6-new-series/.
        \12\ Liana Baker & Lisa Richwine, Amazon Grabs Tights to Stream
    Older HBO Shows, Reuters, Apr. 23, 2014, http://www.reuters.com/
    article/2014/04/23/us-hbo-amazon-idUSBREA3M14
    J20140423.
    ---------------------------------------------------------------------------
        Last year, Hulu launched five original series, Moone Boy, East Los
    High, Quick Draw, Behind the Mask, and The Awesomes, and announced
    plans to expand its slate of originals this summer. Hulu also has
    exclusive subscription video-on-demand (``VOD'') rights to over 5,300
    episodes from the CBS library, including current hits Blue Bloods and
    Elementary, as well as popular series such as Everybody Loves Raymond
    and Survivor.\13\ Yahoo! has announced plans to produce two original
    TV-length comedy series and to live-stream via Live Nation one concert
    per day for a year on Yahoo!'s websites and apps, plunging Yahoo!
    ``directly into the increasingly competitive world of high-quality
    digital video.'' \14\ And just last month, Yahoo! struck a deal with
    Sony Pictures Television to stream a 13-episode season of the sitcom
    Community.\15\
    ---------------------------------------------------------------------------
        \13\ See Meredith Blake, Hulu Expands Original Content, Boasts 6
    Million Hulu Plus Subscribers, L.A. Times, Apr. 30, 2014, available at
    http://www.latimes.com/entertainment/tv/showtracker/la-et-st-hulu-
    upfront-originals-6-million-hulu-plus-subscribers-20140430-story.html.
        \14\ See Vindu Goel & Bill Carter, Yahoo to Offer TV-Style Comedy
    Series on the Web, N.Y. Times, Apr. 28, 2014, available at http://
    www.nytimes.com/2014/04/29/technology/yahoo-to-offer-two-tv-length-
    comedy-series-on-web.html?hpw&rref=television&_r=0.
        \15\ See Josef Adalian, Community Moving to Yahoo for Sixth Season,
    Vulture, June 30, 2014, http://www.vulture.com/2014/06/community-
    moving-to-yahoo-for-sixth-season.html.
    ---------------------------------------------------------------------------
        And what I have just described only scratches the surface of the
    content explosion being driven by new technology. There are literally
    millions of viewing options, offerings thousands upon thousands of
    hours of long-and short-form content, being offered by dozens of other
    websites such as Vimeo, DailyMotion, Vube, Twitch, LiveLeak, UStream,
    Break, MetaCafe, Viewster, and Crackle, attracting millions and
    millions of viewers.\16\
    ---------------------------------------------------------------------------
        \16\ See, e.g., Top 15 Most Popular Video Websites/July 2014, eBiz/
    MBA, www.ebizmba.com/articles/video-websites (last visited July 12,
    2014).
    ---------------------------------------------------------------------------
        In the face of all of this new competition, MVPDs are working
    harder than ever for consumer attention and loyalty with one another
    and with these new online competitors.
        Cable operators currently compete against DirecTV and Dish in every
    market in which cable provides service. In many of those markets, cable
    companies also face competition from telephone companies like AT&T and
    Verizon, as well as overbuilders like RCN, WOW!, and Google Fiber. In
    fact, in 2011, 98.6 percent of homes in America had access to at least
    three MVPDs and 35.3 percent had access to at least four. Cable
    operators' collective share of MVPD subscribers has plummeted from 87
    percent in 1999 to 55.7 percent in 2012.\17\ And that percentage has
    further declined as telephone competitors continue to invest in
    upgrading their networks to deliver video:
    ---------------------------------------------------------------------------
        \17\ Annual Assessment of the Status of Competition in the Market
    for the Delivery of Video Programming, Fifteenth Report, 28 FCC Rcd.
    10496,  3 (2013).

        MVPDs are also responding to new competing video devices and
    interfaces by accelerating their own pace of pro-consumer innovations.
    Comcast, in particular, has made major investments to develop and
    deploy X1, its nationally acclaimed entertainment operating system with
    cloud technology, to provide its customers with greater access to more
    content on a variety of devices inside and outside the home. The X1
    platform provides an unmatched interactive TV experience featuring a
    state-of-the-art user interface and other product features that
    transform our customers' viewing experiences.\18\ Comcast has also
    launched its new X1 cloud DVR, which enables customers to watch their
    DVR recordings on computers and mobile devices in the home, and to
    download recorded content to take on-the-go. In addition, Comcast has
    launched a live in-home streaming feature in certain markets that
    allows customers on the X1 platform to stream practically their entire
    TV channel lineup to computers and mobile devices in the home at no
    extra cost.
    ---------------------------------------------------------------------------
        \18\ Praise for the value and innovation of the X1 platform has
    been widespread. See, e.g., Todd Bishop, Xfinity X1: How Comcast Roped
    Me Back into Cable, GeekWire, Aug. 22, 2013, http://www.geekwire.com/
    2013/xfinity-x1/ (``I have been testing this sleek black cable box for
    the past three weeks, but to call it a cable box really doesn't do it
    justice. It is a nice blend of Internet content, live television, apps,
    a multi-tuner DVR and on-demand programming, in one of the cleanest
    user interfaces that you'll find from a cable company.''); Tim Carmody,
    Comcast's New X1 UI Integrates Real-time and Streaming TV with News and
    Social Apps, The Verge, May 21, 2012, http://www.theverge.com/2012/5/
    21/3033972/comcast-ui-platforms-video-news-social-apps (``[X1] feels
    like a genuinely 21st-century way to use a widescreen television set--
    like a smart TV inside your cable box.'').
    ---------------------------------------------------------------------------
        Comcast has likewise led the cable industry in going all-digital,
    dramatically improving the video experience while simultaneously
    freeing up valuable bandwidth for enhanced data, video, and voice
    services. Comcast customers now have more cable channel viewing and
    Xfinity On Demand choices, offering over 55,000 programming options,
    including the most current TV shows and movies; 80 percent of this
    content is free of charge. Xfinity On Demand also has the best new
    release movies from all the major studios, and one of the broadest
    selections of independent films. Through XfinityTV.com and Xfinity TV
    mobile apps, for example, Comcast cable customers can access more than
    four dozen live TV channels, and over 25,000 movies and TV shows that
    can be watched anytime, anywhere, including by downloading programming
    to watch offline later.
        All of this competition, investment, and innovation is great for
    consumers. And it is the direct result of government policies that
    removed barriers to competitive entry, reduced regulation, and allowed
    the marketplace to flourish.
    II. The Broadband Marketplace Is Also Robustly Competitive--And It's
            Driving Even More Video Competition
        The innovations in the video marketplace are made possible in large
    part by the $1.2 trillion that cable companies, phone companies, and
    wireless companies have invested to bring open and competitive
    broadband Internet to every corner of America.\19\ The dramatic growth
    of Internet video has driven the rapid growth in demand for broadband
    Internet services, and the companies that build broadband networks have
    been highly responsive to that growing demand.
    ---------------------------------------------------------------------------
        \19\ Broadband Investment, United States Telecom Association,
    http://www.ustelecom.org/broadband-industry/broadband-industry-stats/
    investment (last visited July 9, 2014).
    ---------------------------------------------------------------------------
        Comcast and other cable operators, along with other wireline and
    wireless broadband providers, have played a leading role in making this
    transformation of the video world possible, empowering greater
    innovation. Comcast alone has made broadband Internet available to tens
    of millions of households, increasing speeds 13 times in 12 years,
    driving prices per Mbps down 92 percent over that same period, and
    leading the way for Internet adoption in low-income households with our
    acclaimed Internet Essentials program.\20\
    ---------------------------------------------------------------------------
        \20\ Since Comcast launched Internet Essentials during the 2011
    back-to-school season, more than 1.2 million Americans, from 300,000
    families, have been connected to the power of the Internet at home. We
    have also sold more than 23,000 low-cost, subsidized computers to
    program families.
    ---------------------------------------------------------------------------
        Comcast's investments have spurred intense competition from other
    companies. Today, telcos, cable, overbuilders, satellite providers, and
    wireless broadband providers compete with traditional cable providers
    to serve the needs of broadband Internet consumers across America. For
    example, nearly half of the homes in Comcast's current footprint have
    access to AT&T's U-verse and/or Verizon's FiOS.\21\
    ---------------------------------------------------------------------------
        \21\ As of June 2013, about 99 percent of households are located in
    census tracts where three or more fixed or mobile broadband providers
    reported offering at least 3 Mbps downstream and 768 kbps upstream; and
    over 92 percent of households are located in census tracts where two or
    more providers reported offering at least 10 Mbps downstream and at
    least 1.5 Mbps upstream. FCC, Internet Access Services: Status as of
    June 30, 2013, at 9-10 (June 2014), http://transition.fcc.gov/
    Daily_Releases/Daily_Business/2014/db0625/DOC-327829A1.pdf.
    ---------------------------------------------------------------------------
        DSL is increasingly competitive with cable, as a result of ongoing
    investments in next-generation DSL technology--including fiber-to-the-
    node (``FTTN''), IP-DSLAM, VDSL2, and pair bonding. In fact, AT&T's U-
    verse currently delivers speeds up to 45 Mbps and will deliver speeds
    up to 100 Mbps to FTTN-based locations; CenturyLink offers speeds up to
    40 Mbps; Frontier offers speeds up to 25 Mbps; and Verizon DSL offers
    speeds up to 15 Mbps.\22\ These speeds are no less than five times
    greater than the speeds that Netflix tells users they need to stream
    videos in full DVD quality.\23\ The FCC's latest ``Measuring Broadband
    America'' report shows that these newer DSL technologies are very
    competitive for broadband consumers.\24\ Moreover, contrary to the
    false picture some have painted of DSL as a moribund service, between
    December 2008 and December 2012, DSL-based broadband connections grew
    at an average annual rate of 25 percent, exceeding cable broadband's 18
    percent annual pace of growth.\25\
    ---------------------------------------------------------------------------
        \22\ As the head of MLB Advanced Media recently stated, in response
    to the claim that ``[t]he cable guys pretty much control broadband'':

        How? We have telcos now. You've got wireless. The only pay TV
    business that's growing now is U-[v]erse and FiOS. They're owned by
    AT&T and Verizon. I don't think you should discount what AT&T and
    Verizon can do without a landline--what they can do through the air.
    Who knows what this is going to look like? * * * A lot of our people
    watch our live games in 4G. . . . If you watch [a] live baseball game
    in 4G it looks pretty good and 5G is just round the corner.

        David Lieberman, Q&A: MLB Advanced Media CEO Bob Bowman on WWE
    Network, Sony's Virtual Pay TV Plans, and What's Next for Streaming
    Video, Deadline, Jan. 21, 2014, http://www.deadline.com/2014/01/qa-mlb-
    advanced-media-ceo-bob-bowman-on-wwe-network-sonys-virtual-pay-tv-
    plans-and-whats-next-for-streaming-video/ (quoting Bob Bowman).
        \23\ See Internet Connect Speed Recommendations, Netflix, https://
    help.netflix.com/en/node/306 (last visited July 10, 2014) (stating that
    users can stream Netflix videos at speeds as low as 0.5 Mbps, and can
    stream them in full-DVD quality with speeds of 3 Mbps).
        \24\ FCC, 2014 Measuring Broadband America--Fixed Broadband Report,
    Charts 9.4 & 9.5 (June 2014), http://data.fcc.gov/download/measuring-
    broadband-america/2014/2014-Fixed-Measuring-Broadband-America-
    Report.pdf. Despite recent media stories suggesting otherwise, the
    FCC's report shows that when the data for traditional DSL (or
    ``ADSL'')--i.e., downstream speeds generally of 1 to 6 Mbps--are
    separated out from the data for next generation DSL (known as
    ``VDSL'')--i.e., downstream speeds generally from 6 to 40 Mbps--there
    is no doubt that newer DSL technologies are very competitive. It is
    only traditional ADSL that is ``lagging'' behind cable broadband. For
    example, in the 18 to 25 Mbps tier, the tests were all of VDSL, cable,
    and fiber. The FCC's data show that, at these speeds, VDSL performs at
    the same levels as cable (i.e., at or above 100 percent).
        \25\ See Applications of Comcast Corp. and Time Warner Cable Inc.
    for Consent to Transfer Control of Licenses and Authorizations, MB
    Docket No. 14-57, Applications and Public Interest Statement, at 48
    (filed Apr. 8, 2014).
    ---------------------------------------------------------------------------
        Importantly, these current measures of broadband competition are
    already becoming stale. Almost daily, companies are announcing new
    plans and breaking ground to deliver faster speeds and expanded
    services across the country.
        For example, just last week, Alcatel-Lucent reported that it has
    achieved data transmission speeds of 10 Gbps over a 30-meters length of
    bonded copper using a next-generation DSL technology it is calling XG-
    FAST. The technology is an extension of G.fast ``that promises
    theoretical speeds of up to 1 Gbps over the copper connection to a
    broadband user's premises.'' \26\
    ---------------------------------------------------------------------------
        \26\ See Ray Le Maistre, Bell Labs Claims Copper Speed Record,
    Light Reading, July 9, 2014, http://www.lightreading.com/broadband/dsl-
    vectoring-gfast/bell-labs-claims-copper-speed-recor
    d/d/d-id/709846.
    ---------------------------------------------------------------------------
        AT&T is expanding U-verse, a service based primarily on FTTN
    technology, as part of its ``Project VIP'' investment plan. This will
    enable AT&T to offer FTTN-based U-Verse services to 33 million customer
    locations, and ``U-Verse IP-DSLAM'' services to an additional 23
    million customer locations, by the end of 2015. AT&T also announced
    plans for potential expansion of its 1 Gbps fiber-optic service to up
    to 21 new metropolitan areas. On top of these expansion plans, and as
    part of its proposed acquisition of DirecTV, AT&T has announced that it
    will use the merger synergies to build and enhance high-speed broadband
    service to 15 million customer locations utilizing a combination of
    technologies, including fiber-to-the-premises and fixed wireless local
    loop capabilities.
        CenturyLink is on a similar path, with announced network
    investments that include gigabit fiber, VDSL2, and pair bonding
    deployments to efficiently enable higher speeds.
        Google Fiber is planning to launch its competitive broadband
    services in nine new metro areas, which will include expansive Wi-Fi
    service.\27\
    ---------------------------------------------------------------------------
        \27\ See James O'Toole, People in Overland Park, Kansas, May Soon
    Have 100 Times Faster Internet Than You, CNNMoney, July 8, 2014, http:/
    /money.cnn.com/2014/07/08/technology/innovation/google-fiber-overland-
    park/index.html.
    ---------------------------------------------------------------------------
        Mobile wireless is also a bona fide competitor in delivering all
    broadband services, including high-quality video. Mobile wireless data
    speeds and capacity continue to increase rapidly with next-generation
    services like LTE/LTE-Advanced and radio technology (i.e., beaming data
    via satellite over 40 MHz blocks of spectrum). Between June 2012 and
    June 2013, mobile connections offering 3 Mbps downstream or faster more
    than doubled, increasing from 43 million to 93.2 million.\28\ Recently,
    Masayoshi Son of SoftBank (which owns Sprint) noted that he intends to
    outstrip typical cable broadband speeds by building a wireless
    broadband network offering up to 200 Mbps.\29\
    ---------------------------------------------------------------------------
        \28\ See FCC, Internet Access Services: Status as of June 30, 2013,
    at 2 (June 2014), http://transition.fcc.gov/Daily_Releases/
    Daily_Business/2014/db0625/DOC-327829A1.pdf.
        \29\ See Presentation by Masayoshi Son, The Promise of Mobile
    Internet in Driving American Innovation, the Economy and Education, Tr.
    at 12 (Mar. 11, 2014), available at http://cdn
    .softbank.jp/en/corp/set/data/irinfo/presentations/vod/2013/pdf/
    press_20140311_02.pdf.
    ---------------------------------------------------------------------------
        Looking ahead to 2018, SNL Kagan predicts that there will be 224
    million 4G subscriptions active in the United States, up from 22.6
    million at year-end 2013.\30\ This alone will easily surpass the rate
    of growth of cable broadband service during the past five years and
    over the next five. The FCC will contribute significantly to that
    growth story as it moves forward with its upcoming spectrum auctions.
    ---------------------------------------------------------------------------
        \30\ See SNL Kagan, Covered Pops & Subscribers by Technology in
    U.S. Wireless (July 2013). Similarly, Cisco predicts the number of 4G
    connections in North America in 2018 to be 372 million. Cisco Visual
    Networking Index: Global Mobile Data Traffic Forecast Update, 2013-
    2018, at 36 (Feb. 5, 2014), http://www.cisco.com/c/en/us/solutions/
    collateral/service-provider/visual-networking-index-vni/
    white_paper_c11-520862.html.
    ---------------------------------------------------------------------------
        As a result of all of this investment, innovation, and competition
    in broadband networks, OVDs have flourished in the last several years.
        According to a recent SNL Kagan report, the number of online video
    subscribers has increased from 18.2 million in 2010 to approximately
    53.9 million at the end of 2013. Revenue for subscription services
    alone reached nearly $3.67 billion at year-end 2013, up over 35 percent
    from $2.7 billion in 2012. Total online video revenue grew 32 percent
    in 2013, topping nearly $5.45 billion and up from $4.12 billion in
    2012. SNL Kagan predicts that figure will more than double in the next
    decade. Between 2012 and 2013, the number of online movie and
    television show purchases also nearly doubled, while the number of
    online movie and television show rentals more than doubled.\31\
    ---------------------------------------------------------------------------
        \31\ SNL Kagan, Internet VOD Revenues, 2010-2023 (June 30, 2014),
    http://www.snl.com/interactivex/doc.aspx?ID=28510695&KeyFile=24251620.
    ---------------------------------------------------------------------------
        Furthermore, according to recent estimates, nearly 6.5 percent of
    U.S. households--or 7.6 million homes--are now considered ``cord-
    cutters'' or ``cord-nevers,'' meaning they have high speed Internet but
    no cable or satellite television service--a dramatic 44 percent
    increase since 2010.\32\ (The percentage of 18 to 34 year olds--a key
    demographic for advertising purposes--in this category is 12.4 percent,
    nearly double the 6.5 percent nationwide rate. And if the household has
    either a Netflix or Hulu subscription, the percentage nearly triples,
    from 6.5 percent to over 18 percent.)
    ---------------------------------------------------------------------------
        \32\ Experian Marketing Services, Cross-Device Video Analysis
    (2013), http://www.experian
    .com/marketing-services/cross-device-video-analysis.html.
    ---------------------------------------------------------------------------
    III. The Proposed Comcast-Time Warner Cable Transaction Will Spur Even
            Greater Innovation And Competition In The Industry, Bringing
            More Consumer Benefits
        Americans will continue to benefit from the dynamic growth in video
    and broadband services as more and more companies, including such
    powerhouses as AT&T, Verizon, DirecTV, Dish, Amazon, Apple, Sony,
    Google, Netflix, and Facebook, compete for their attention and loyalty.
    The increasing rivalry and experimentation among these national and
    global companies is a primary business driver for the Comcast/Time
    Warner Cable (``TWC'') merger.
        The proposed transaction will give Comcast the increased geographic
    reach and economies of scale necessary to compete in this capital
    intensive, rapidly evolving industry, where continued research and
    development and innovation are essential. By combining with TWC,
    Comcast can also achieve the increased geographic reach and economies
    of scale necessary to invest the billions of dollars required for next-
    generation technologies, greater service reliability, secure networks,
    and faster Internet speeds. This will let us drive more innovative
    products and services into the marketplace, allowing us to meet the
    needs of American consumers, businesses, and institutions in ways
    better than the two companies could do separately.
        For example, TWC customers will immediately benefit from Comcast's
    commitment to invest continuously in high-speed data services, as well
    as Comcast's next-generation products like the X1 operating platform,
    greater cable channel and VOD choices, best in-home Wi-Fi, and superior
    TV Everywhere services. The transaction will also enable Comcast to
    accelerate and expand the availability of Wi-Fi ``hotspots'' across the
    combined footprint, which will provide greater mobile access to
    Internet content. In less than three years, Comcast has deployed over
    one million Xfinity WiFi access points in its current footprint--and
    seen a significant spike in usage. And, on April 30, 2014, Comcast
    unveiled plans to reach eight million Xfinity WiFi hotspots in major
    cities coast to coast by the end of this year.\33\
    ---------------------------------------------------------------------------
        \33\ See Press Release, Comcast Corp., Comcast to Reach Eight
    Million Xfinity WiFi Hotspots in 2014 (Apr. 30, 2014), http://
    corporate.comcast.com/news-information/news-feed/comcast-to-reach-8-
    million-xfinity-wifi-hotspots-in-2014.
    ---------------------------------------------------------------------------
        With larger scale and network coverage, Comcast will also have the
    capability to deploy other new products and technologies more quickly
    and efficiently than either company could do on its own, such as IP
    cable and related technologies. Accelerating the IP cable transition
    will yield a number of consumer and public interest benefits. Among
    other things, IP cable will:

       Enable consumers to access their cable and advanced video
            services in their homes on an even greater variety of IP-
            enabled retail devices--such as video game consoles, tablets,
            and other connected devices;

       Shift more of the network intelligence to the cloud,
            allowing Comcast to rapidly roll out new functionalities to
            consumers;

       Simplify its existing distribution networks by relying on IP
            technology to transport all of its services and relying on
            innovative off-the-shelf IP-based retail devices, thereby
            reducing home equipment and inventory costs; and

       Reduce energy consumption for consumer set-top boxes.

        The transaction will further enable Comcast to provide more
    accessible services and features for disabled Americans. For example,
    Comcast is leveraging the X1 cloud-based platform to deliver the first
    ``talking guide'' in the MVPD industry. The remote control for the X1
    platform--known as the XR2--also includes ``soft keys'' that a customer
    with a disability will be able to configure to enable quick access to
    the talking guide and other accessibility features, such as closed
    captioning and video description.
        Furthermore, because Comcast and TWC serve separate and distinct
    geographic areas and do not compete for video, broadband, or other
    services, the proposed combination of the two companies will not reduce
    consumer choice in any market. This transaction is not a horizontal
    merger and there will be no loss of competition anywhere.
        Nor will the transaction harm competition in other markets where
    the combined company is involved. The transaction will leave Comcast,
    after planned divestures, with about 29 million subscribers in systems
    it manages. Comcast's share of the MVPD market will be below 30
    percent--around the same share that Comcast had after the AT&T
    Broadband (2002) and Adelphia (2006) transactions. This will also be
    below the 30 percent ``ownership cap'' that the FCC had adopted based
    on a stated intention to prevent a cable operator from exercising
    bottleneck or monopsony control over programmers. The D.C. Circuit
    twice rejected the ownership cap, finding, among other things, that
    ``the record is replete with evidence of ever increasing competition
    among video providers. . . . Cable operators, therefore, no longer have
    the bottleneck power over programming that concerned the Congress in
    1992.'' \34\ Of course, the MVPD marketplace is even more competitive
    now than it was five or more years ago.
    ---------------------------------------------------------------------------
        \34\ See Comcast Corp. v. FCC, 579 F.3d 1, 8 (D.C. Cir. 2009)
    (emphasis added).
    ---------------------------------------------------------------------------
        Far from harming competition, the greater investment and innovation
    resulting from the transaction will spur other companies to respond to
    consumer demands with their own investments and innovations. The mere
    announcement of our transaction has already created a ``heightened
    sense of urgency'' at AT&T to accelerate investments in its broadband
    networks.\35\ Other companies are also speeding up and expanding their
    plans for further investments in broadband infrastructure.\36\
    Verizon's CFO, for example, expressed the same eagerness to compete,
    stating: ``I compete against Time Warner Cable today. I compete against
    Comcast today. I'll just compete against Comcast tomorrow [by offering]
    a superior product to any of them. . . .'' \37\
    ---------------------------------------------------------------------------
        \35\ See Randall Stephenson, Chairman & CEO, AT&T, Inc., Morgan
    Stanley Technology, Media & Telecom Conference, Tr. at 3 (Mar. 6,
    2014).
        \36\ Since this transaction was announced, numerous companies have
    reported plans for major investments in infrastructure, as well as the
    deployment of new technologies and services for video content and
    delivery. See Exhibit 1 (Timeline of Technology and Communications
    Investment and Innovation Since Comcast-TWC Merger Announcement).
        \37\ See Fran Shammo, EVP & CFO, Verizon, Deutsche Bank Media,
    Internet and Telecom Conference, Tr. at 13 (Mar. 10, 2014); see also
    Gautham Nagesh, Comcast Sees Time Warner Cable Deal Boosting Broadband
    Competition, Wall St. J., Feb. 21, 2014, http://online.wsj.com/news/
    articles/SB10001424052702304275304579397541413329198 (``Verizon has a
    history of introducing the next big thing for our video and Internet
    customers. This [transaction] just changes the name of the competitor
    in some of our markets.'') (quoting Verizon spokesman Ed McFadden).
    ---------------------------------------------------------------------------
        This heightened competition, which AT&T's CEO Randall Stephenson
    has aptly described as ``a dogfight,'' will result in even greater
    video and broadband choices and services for American consumers,
    extending the new ``golden age'' of television well into the
    future.\38\
    ---------------------------------------------------------------------------
        \38\ See Shalini Ramachandran & Thomas Gryta, Cutting the Cable and
    Getting ``Phone TV'', Wall St. J., Nov. 1, 2013, http://online.wsj.com/
    news/articles/SB100014240527023038431045
    79169971029572160.
    ---------------------------------------------------------------------------
    IV. Further Regulation Is Unnecessary And Could Risk Disrupting Today's
            Dynamic Video Marketplace
        As I stated earlier, the massive investment and robust competition
    in the video marketplace can be largely attributed to the deregulatory
    policies that this Committee and others set in motion, most notably
    through the 1996 Act. Although the passage of time alone may justify a
    review of the law, Congress should continue to let the video
    marketplace grow and evolve without further regulation. If anything,
    Congress should re-examine and eliminate regulatory burdens that only
    apply to some of the companies competing in today's marketplace, so
    that all providers have a level playing field to invest, innovate, and
    serve consumers.
        I will briefly touch upon some of the proposals that have been made
    to ``rewrite'' the current regulatory landscape, and why these are
    unnecessary and could have unintended, adverse consequences for
    consumers.
    A. OVDs Do Not Face Barriers To Accessing Video Programming.
        The nearly ubiquitous availability of online content for American
    consumers proves that OVDs face no meaningful barriers to accessing
    video programming. The online video marketplace has grown exponentially
    in the past several years. OVDs are licensing from the widest
    imaginable range of programming sources as well as producing more of
    their own content. While some insist that the programming marketplace
    needs to be heavily regulated to the benefit of OVDs, the facts show
    that is not necessary.
        Video content producers have no economic incentive to block access
    to their programming. That is because it is in the content provider's
    economic interest to license programming broadly to gain as much
    revenue as possible from expensive-to-produce content.\39\
    ---------------------------------------------------------------------------
        \39\ Programming costs are the single biggest driver of cable
    prices. From 2004 through 2013, Comcast's programming costs per video
    subscriber have cumulatively increased by over 120 percent, an
    astonishing amount. Our prices to customers have risen at about half
    that rate. (The average Comcast customer bill increased by only 2
    percent this year, with no price changes for Limited Basic, Digital
    Preferred, or DVR services.)
    ---------------------------------------------------------------------------
        In the case of NBCUniversal, for example, agreements with OVDs are
    now a regular part of our licensing business. Since the Comcast-
    NBCUniversal transaction alone, NBCUniversal has worked aggressively to
    free up content rights for online distribution and entered into or
    renewed agreements with dozens of OVDs, including Amazon, Netflix, and
    YouTube,\40\ as well as with several MVPDs that include online access
    to linear channels across multiple platforms and devices through our
    industry-leading TV Everywhere service. Similarly, early this year, not
    only did CBS extend its streaming deal with Amazon so that CBS's
    current catalogue of shows remains available to Amazon Prime
    subscribers, but it also added more series to Amazon's library
    including Medium and Criminal Minds: Suspect Behavior. CBS also
    announced that episodes of its new summer series Extant will be
    exclusively available on Amazon four days after they premiere on
    CBS.\41\
    ---------------------------------------------------------------------------
        \40\ For example, in 2011, NBCUniversal renewed a multiyear deal
    with Netflix to stream TV shows ranging from Leave it to Beaver to 30
    Rock and Keeping Up with the Kardashians. See Paul Bond, Netflix Renews
    Deal With NBCUniversal for Streaming TV Shows, Movies, The Hollywood
    Reporter, July 13, 2011, http://www.hollywoodreporter.com/news/netflix-
    renews-deal-nbcuniversal-streaming-210792. In 2013, NBCUniversal struck
    a deal with Amazon to stream the first seasons of Grimm and Suits, and
    children's programs such as Curious George and Land Before Time. See
    Jeff Chabot, NBC Shows Added to Amazon Prime Instant Video, HD Report,
    May 16, 2013, http://hd-report.com/2013/05/16/nbc-shows-added-to-
    amazon-prime-instant-video/. Hulu has exclusive rights to prior seasons
    of popular shows from NBC's vault, including Brooklyn Nine-Nine and The
    Mindy Project (both of which air on Fox), and reality shows from Bravo
    and E!, such as Top Chef. See Ryan Waniata, Hulu Secures a New
    Licensing Deal With NBC In Pursuit of `Bingers', Digital Trends, Apr.
    2, 2014, http://www.digitaltrends.com/home-theater/hulu-secures-new-
    licensing-deal-nbc-pursuit-bingers/#!bbJB18.
        \41\ See Michael O'Connell, CBS Extends Streaming Deal with Amazon
    Prime, The Hollywood Reporter, Jan. 29, 2014, available at http://
    www.hollywoodreporter.com/news/cbs-extends-streaming-deal-amazon-
    675295.
    ---------------------------------------------------------------------------
        In 2013, Netflix received nine Emmy nominations for its House of
    Cards original drama series, winning three of them, and three
    nominations for Arrested Development. Netflix ``will once again have a
    big presence at the Emmys'' in 2014, having recently received
    nominations for ``a wide array of awards . . . including outstanding
    drama series for House of Cards and outstanding comedy series for
    Orange is the New Black.'' \42\
    ---------------------------------------------------------------------------
        \42\ See Jacob Kastrenakes, Netflix Scores Top Emmy Nominations for
    `House of Cards' and `Orange is the New Black, The Verge, July 10,
    2014, http://www.theverge.com/2014/7/10/5886937/netflix-emmy-
    nominations-2014-house-of-cards-orange-new-black.
    ---------------------------------------------------------------------------
        Given consumers' seemingly insatiable demand for online access to
    video, content providers will continue to have strong incentives to
    make their programming available to OVDs. There is no need for
    government intervention into this increasingly dynamic and competitive
    marketplace. It is thriving without intrusive regulation and should be
    permitted to evolve.
    B. The FCC Is Taking Appropriate Action To Ensure An Open Internet For
            The
            Benefit Of American Consumers
        Consumers should have the right and ability to access whatever
    legal content they desire using the broadband services they purchase,
    without any improper blocking or discrimination and with appropriate
    transparency, over the ``last-mile'' connections between their ISP
    network and their homes.
        Comcast has always been for a free and open Internet. We support
    the FCC putting in place reasonable and legally enforceable industry-
    wide rules to ensure a free and open Internet for all Americans,
    including transparency, no blocking, and anti-discrimination
    protections.
        Comcast was a strong proponent of the FCC's 2010 Open Internet
    Order because it struck a proper balance between consumer protection
    and reasonable network management rights for ISPs. The 2010 Order also
    maintained the right incentives for Comcast and other ISPs to invest
    and thereby empower more and more innovation on the Internet.\43\
    ---------------------------------------------------------------------------
        \43\ Comcast has built its business on delivering the highest
    quality Internet access, and we have every incentive to keep doing so.
    We have no interest in degrading our broadband services to disadvantage
    OVDs or providers of other content and services; doing so would only
    harm our fastest-growing business, which makes no sense. If we were to
    try to limit our subscribers' ability to access content from legitimate
    sources, they would use the power of the Internet to excoriate us for
    placing limits on their enjoyment of content and even leave us for a
    competitor's service.
    ---------------------------------------------------------------------------
        Comcast was sufficiently comfortable with the 2010 Open Internet
    Order that, as part of the NBCUniversal transaction, we agreed to be
    bound by it even if the courts later struck it down. As a result, today
    Comcast is the only ISP in the country that is legally bound by the
    FCC's original Open Internet rules.\44\
    ---------------------------------------------------------------------------
        \44\ Approval of the Comcast-TWC transaction will extend these open
    Internet protections to millions of current TWC customers.
    ---------------------------------------------------------------------------
        Comcast continues to advocate for reasonable and legally binding
    rules that protect all Internet users, not just our customers. We
    believe the D.C. Circuit has, for the first time, laid out express
    authority and a clear path under Section706 of the 1996 Act for the FCC
    to adopt those rules. But we do not support reclassification of
    broadband as a telecommunications service under Title II, and believe
    that any attempt to do so would cast a huge cloud of uncertainty over
    the marketplace and create significant and immediate disincentives to
    further investment and innovation in this vital segment of our economy.
        The FCC has issued a Notice of Proposed Rulemaking and is currently
    collecting comments to develop new open Internet rules based on its
    Section 706 authority. And FCC Chairman Tom Wheeler has expressed his
    commitment to complete the task by the end of this year. Comcast
    supports the FCC's ongoing process and continues to advocate for the
    prompt adoption of appropriate, legally enforceable open Internet
    rules.
        In short, we believe that the FCC is taking the appropriate steps
    to ensure that all American consumers enjoy an open Internet. While
    Congress should certainly continue to oversee the agency's activities,
    there is no compelling justification for legislative intervention into
    this area at this time.
    C. Comcast Supports Reauthorization Of The Satellite Television
            Extension And
            Localism Act (``STELA''), But Does Not Support Changes To The
            Current
            Retransmission Consent Regime
        Comcast generally supports a ``clean'' reauthorization of STELA and
    believes a five-year extension is an appropriate length of time.\45\ A
    shorter extension of only two or three years could cause unnecessary
    disruption to the industry.
    ---------------------------------------------------------------------------
        \45\ To the extent that the Committee considers any changes to
    STELA, the National Cable Television Association has suggested
    revisions in three areas: elimination of the integration ban;
    prohibition of JSA stations in retransmission consent negotiations; and
    elimination of the must-carry buy through requirement.
    ---------------------------------------------------------------------------
        The vibrancy of today's video marketplace, as highlighted above,
    refutes any notion that there is a general ``market failure''
    warranting government intervention in the wholesale programming
    business or further regulation of contractual arrangements between
    MVPDs and programmers. Similarly, the online video segment of the
    marketplace is flourishing without regulation and should be allowed to
    continue to grow and evolve.
        Comcast also does not support addressing issues or concerns
    associated with the current retransmission consent regime as part of
    STELA reauthorization or through other legislative action. We enjoy
    positive relationships on all sides in retransmission consent
    negotiations. We have not lost the signal of any major local
    broadcaster in a dispute over retransmission consent fees.\46\
    ---------------------------------------------------------------------------
        \46\ Further, as part of the NBCUniversal transaction, Comcast
    agreed it would not seek repeal of the retransmission consent regimen
    in existence as of June 2010.
    ---------------------------------------------------------------------------
        Consumers today have access to an unprecedented number of video
    programming choices, and broadcast television continues to be a
    significant source of programming for tens of millions of households.
    Broadcasters and MVPDs have, in the vast majority of cases, succeeded
    in negotiating retransmission consent agreements that allow for the
    carriage of broadcast programming to MVPD households across the
    country. We believe that most parties involved in such negotiations
    will continue to act responsibly and bargain in good faith and in a
    manner that reflects consumers' best interests. And when parties fail
    to do so, consumers can switch--and have switched--to other providers.
    The marketplace thus remains the best forum where any disputes can and
    should be resolved, without further regulatory intervention.
    D. Congress Can Best Serve Consumers By Paring Back On Stale, Monopoly-
            Era Regulations That Distort Fair Competition
        Rather than imposing new regulations, Congress can best serve
    consumers by paring back and eliminating monopoly-era regulations that
    only impede healthy experimentation and innovation. Comcast and other
    MVPDs operate under burdensome outdated regulations that do not apply
    to our DBS competitors, while DBS providers in turn operate under rules
    that do not apply to our mutual OVD competitors.
        For example, the time for regulation of cable rates has long since
    come and gone. Today's cable rate regulation regime was established in
    1992, before the emergence of the Internet and prior to the entry into
    the video marketplace of DBS, telephone companies, over-the-top video,
    and other non-cable video providers. The two DBS providers are now the
    second and third largest MVPDs in the nation; tens of millions can
    obtain video from Verizon or AT&T; and, as my statement demonstrates,
    consumers across the Nation enjoy a wealth of additional choices from
    online and mobile platforms. Rate regulation inhibits investment,
    stifles innovation, and imposes regulatory compliance costs and burdens
    that are unnecessary and unfair in a competitive marketplace. It is
    time to let this unbelievably robust video marketplace work.
        Similarly, the integration ban should be repealed. The principal
    effects of the integration ban have been to increase costs for set-top
    devices leased to cable consumers, while needlessly intruding upon the
    design and functionality of converter boxes offered by cable operators.
    There is a large and growing number of video reception devices in the
    retail marketplace that do not depend on using a cable-provided device.
    These devices have been developed entirely outside the context of the
    integration ban, and this marketplace growth shows how unnecessary it
    is to continue to regulate cable set-top boxes.
        In summary, to the extent that Congress takes any legislative
    action involving the video industry, Congress should level the playing
    field across all content providers and allow the dynamics of the
    marketplace to evolve.
    V. Conclusion
        The state of the video marketplace is extraordinary--some have
    rightly dubbed today the ``true golden age of television.'' \47\
    ---------------------------------------------------------------------------
        \47\ See Marcus Wohlsen, When TV Is Obsolete, TV Shows Will Enter
    Their Real Golden Era, Wired.com, May 15, 2014, http://www.wired.com/
    2014/05/real-golden-age-television/ (``Streaming video as offered by
    Netflix and Amazon Instant Video are not constrained by any of the
    commercial or technical boundaries of traditional broadcast television
    or cable. There aren't schedules. There aren't channels. The only
    limitations are how much bandwidth their data centers and the Internet
    itself can support. . . . Welcome to the real new golden age of
    television--television without limits.''); Todd Leopold, The new, new
    TV golden age, CNN, May 6, 2013, http://www.cnn.com/2013/05/06/showbiz/
    golden-age-of-tv/ (``We are living in good TV times. . . . With more
    channels and more choices, there are also more creative voices being
    heard.''); Brett Martin et al., Stop Flipping! The New Rules of TV,
    GQ.com, June 2012, http://www.gq.com/entertainment/movies-and-tv/
    201206/new-rules-of-tv#slide=1 (``Nearly everything about how we watch
    television has changed. For starters, we can do it anytime we want. . .
    . And yes: The shows are a whole lot sexier, more terrifying, complex,
    and hilarious than the ones we grew up with. It is, as people like to
    say, a new golden age of television.'').
    ---------------------------------------------------------------------------
        Investment is flowing into the video marketplace, and consumers are
    reaping an amazing harvest of entertainment and information. Consumers
    are benefitting from more and faster broadband from more competitors,
    wireline and wireless, providing the platform for massive consumption
    of video. The FCC is on track to ensure that all Americans continue to
    enjoy an open Internet as they do today. Video competitors successfully
    conclude business agreements every day and are able to work out any
    differences without regulatory intervention. New video competitors are
    growing at extraordinary rates, readily obtaining immense amounts of
    content from third parties (and producing more and more of their own),
    and benefitting from existing regulatory backstops to guard against any
    market malfunction. And Americans are enjoying an excess of high
    quality video programming, as Comcast and other video providers compete
    intensely to offer the best value proposition to consumers, with
    greater choices that encourage more--not less--video consumption.
        In this increasingly competitive marketplace, at this
    extraordinarily disruptive time, it would not benefit consumers or
    businesses to add significant legislative uncertainty into the mix. We
    urge Congress to tread extremely carefully, and not to inadvertently
    place the dynamism and innovation in today's video marketplace at risk.
        Thank you.
                                   Exhibit 1

    Timeline of Technology and Communications Investment and Innovation
            Since Comcast-TWC Merger Announcement

        i Press Release, Comcast Corp., Time Warner Cable to
    Merge with Com cast Corporation to Create a World-Class Technology and
    Media Company (Feb. 13, 2014), http://corporate
    .comcast.com/news-information/news-feed/time-warner-cable-to-merge-
    with-comcast-corporation.
        ii Cheryl Conner, Google Fiber Plan Expansion to 34 New
    Cities, Forbes, Feb. 20, 2014, available at http://www.forbes.com/
    sites/cherylsnappconner/2014/02/20/google-fiber-plans-expan
    sion-to-34-new-cities-lncluding-salt-lake/.
        iii Randall L. Stephenson, Chairman & CEO, AT&T, Inc.,
    Morgan Stanley Technology, Media & Telecom Conference (Mar. 6, 2014);
    see also Thomas Gryta, Comcast Has AT&T Worrying About the US, Wall St.
    J., Mar. 6, 2014, available at http://blogs.wsj.com/corporate-intelli
    gence/2014/03/06/comcast-has-att-worrying-about-the-us/.
        iv Sean Buckley, Verizon's Shammo: We'll Look at FiOS
    Expansions Once It Returns the Cost of Capital, FierceTelecom. Mar. 10,
    2014, http://www.fiercetelecom.com/story/verizons-shammo
    -well-look-fios-expansions-once-it-returns-cost-capital/2014-03-10.

        v Press Release, RCN Telecom Services, LLC, RCN
    Increases Internet Speeds at No Additional Cost (Mar. 11, 2014), http:/
    /www.rcn.com/about-rcn/newsroom/rcn-increases-internet-speeds.

        vi Press Release, Cox Communications, Inc., Cox Media to
    Launch Addressable TV Advertising Trial (Mar. 26, 2014), http://
    cox.mediaroom.com/index.php?s=43&item=732.

        vii Press Release, Amazon.com, Inc., Introducing Amazon
    Fire TV: The Easiest Way to Watch Netflix, Prime Instant Video, Hulu
    Plus, WatchESPN, and More on Your Big-Screen TV (Apr. 2, 2014), http://
    phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-
    newsArticle&ID=1915168&
    highlight=.

        viii Jeff Baumgartner, AT&T Eyes San Antonio for
    `GigaPower' Expansion, Multichannel News, Apr. 8, 2014, available at
    http://www.multichannel.com/news/news-articles/att-eyes-san-
    antonio-gigapower-expansion/373723.

        ix Press Release, Charter Communications, Inc., Charter
    Announces Launch of Charter TV App (Apr. 8, 2014), http://
    phx.corporate-ir.net/phoenix.zhtml?c=112298&p=irol-newsArticle&ID
    =1916892&highlight=.

        x Thomas Gryta, AT&T to Build Out Ultrafast Internet in
    North Carolina, Wall St. J., Apr. 10, 2014, available at http://
    online.wsj.com/news/articles/SB1000142405270230387360457949210
    3338327532; see also AT&T, Cable, and Google Fiber: Spending Other
    People's Money, Moffett
    Nathanson Research (Apr. 10, 2014).

        xi Press Release, DIRECTV, LLC, DIRECTV's New Wireless
    Genie Mini Now Available Nationwide (Apr. 10, 2014), http://
    investor.directv.com/press-releases/press-release-details/2014
    /DIRECTVs-New-Wireless-Genie-Mini-Now-Available-Nationwide/
    default.aspx.

        xii Press Release, Charter Communications, Inc. ,
    Charter Announces Launch of 802.11ac WiFi Router Capable of Providing
    the Fastest WiFi (Apr. 17, 2014), http://www.prnewswire.com/
    news-releases/charter-announces-launch-of-80211ac-wifi-router-capable-
    of-providing-the-fastest-wifi-255648271.html.

        xiii Yun-Hee Kim & Jonathan Krim, Samsung Is Developing
    Its Own Platform, Apps, Wall St. J., Apr. 20, 2014, http://
    online.wsj.com/news/articles/SB100014240527023043112045795065
    31408901234?mod-ST1.

        xiv Grant Gross, AT&T's Expanded 1 Gbps Fiber Rollout
    Could Go Head to Head with Google, Network World, Apr. 21, 2014, http:/
    /www.networkworld.com/news/2014/042114-atampt39s
    -expanded-1-gbps-fiber-280882.html.

        xv Thomas Gryta, AT&T Expands High-Speed Internet
    Rollout, Wall St. J., Apr. 21, 2014, available at http://
    online.wsj.com/news/articles/SB100014240527023040499045795157905084
    91128.

        xvi Press Release, Limelight Networks, Inc., Limelight
    Partners with NeuLion to Deliver OTT and TVE Solutions (Apr. 22. 2014),
    http://www.businesswire.com/news/home/20140422005335
    /en/Limelight-Partners-NeuLion-Deliver-OTT-TVE-Solutions.

        xvii Todd Spangler, AT&T, Chernin Group Invest $500
    Million in Over-The-Top Video Venture, Variety, Apr. 22, 2014,
    available at http://variety.com/2014/digital/news/att-chernin-group
    -invest-500-million-to-form-over-the-top-tv-venture-12011608761#.

        xviii Kyle Russell, Dish Network Is Partnering With This
    Startup To Make Cellphone Internet 1,000 Times Faster Than 4G, Business
    Insider, Apr. 22, 2014, http://www.businessinsider.com/
    dish-network-and-artemis-partnering-to-make-cell-phone-internet-1000-
    times-faster-than-4g-2014-4.

        xix Jeff Baumgartner, Report: Dish Eyeing Summer Launch
    of OTT TV Service, Multichannel News, Apr. 23, 2014. available at
    http://www.multichannel.com/news/technology/report-dish
    -eyeing-summer-launch-ott-tv-service/374044.

        xx Liana B. Baker & Lisa Richwine, Amazon Grabs Rights
    to Stream Older HBO Shows, Reuters. Apr. 23, 2014, available at http://
    www.reuters.com/article/2014/04/23/us-hbo-amazon
    -idUSBREA3M14J2014Q423.

        xxi Brian Fung, Netflix to Become Real TV and Get Its
    Own `Cable Channel' Next Week, Wash. Post, Apr. 24, 2014, available at
    http://www.washingtonpost.com/blogs/the-switch/wp/2014/04
    /24/netflix-to-become-real-tv-and-get-its-own-cable-channel-next-week/.

        xxii Hayley Tsukayama, The Switchboard: Google May be
    Giving Free WiFi to Fiber Cities, Wash. Post, Apr. 25, 2014, available
    at http://www.washingtonpost.com/blogs/the-switch/wp
    /2014/04/25/the-switchboard-google-may-be-giving-free-wifi-to-fiber-
    cities/.

        xxiii Janko Roettgers, Verizon Inks Paid Peering Deal
    with Netflix, Gigaom, Apr. 28, 2014, https://gigaom.com/2014/04/28/
    verizon-inks-paid-peering-deal-with-netflix/.

        xxiv Vindu Goel & Bill Carter, Yahoo to Offer TV-Style
    Comedy Series on the Web, N.Y. Times, Apr. 28, 2014, available at
    http://www.nytimes.com/2014/04/29/technology/yahoo-to-offer
    -two-tv-length-comedy-series-on-web.html?hpw&rref=television&_r=0.

        xxv Jeff Baumgartner, Cable Show: Cox to Offer 1-Gig to
    All, Multichannel News, Apr. 30, 2014, http://www.multichannel.com/
    news/technology/cox-offer-1-gig-all/374284.

        xxvi Amol Sharma, Netflix Reaches Pact With U.S. Cable
    Provider Suddenlink, Wall St. J., May 6, 2014, available at http://
    online.wsj.com/news/articles/SB1000142405270230341710
    4579545764019069966?mg=reno64-wsj.

        xxvii Wireless Needs Strong No. 3 to Compete: Sprint
    CEO, Bloomberg TV, May 6, 2014, http:://www.bloomberg.com/video/
    wireless-needs-strong-3-to-compete-sprint-ceo-gctbwYN8RtWMlneDS0
    u9AQ.html.

        xxviii Roger Yu, AT&T Buys DirecTV for $48.5 billion,
    USA Today, May 19, 2014, available at: http://www.usatoday.com/story/
    money/business/2014/05/18/att-buys-directv/9247795/.

        xxix Press Release, XLTE: America's Best Network Gets
    Even Better (May 19, 2014), http://newscenter.verizon.com/corporate/
    news-articles/2014/05-19=verizon-announces-xlte/.

        xxx Alistair Barr & Andy Pasztor, Google Invests in
    Satellites to Spread Internet Access, Wall St. J., June 1, 2014,
    available at http://online.wsj.com/news-article_email/google-invests-
    in-
    satellites-to-spread-internet-access-1401666287-
    IMyQjAxMTAOMDwMTEwNDEyWj.

        xxxi Press Release, Samsung Electronics Co., Ltd.,
    Samsung Improves Development Environment and Announces Tizen-based
    Samsung TV SDK (June 1, 2014),http://www.samsung.com/
    us/aboutsamsung/news/
    newslrRead.do?news_ctgry=irnewsrelease&page=2&news_seq=23207&
    rdoPeriod=ALL&from_dt=&to_dt=&search_keyword.

        xxxii Press Release, New Faster Speeds Without Any
    Additional Costs on the Way to Mediacom High Speed Customers (June 1,
    2014), https://mediacomcable.com/site/about_news_01_
    06_2014.html.

        xxxiii Press Release, Verizon Rolls Out FiOS Quantum TV
    Service to New York, Connecticut and New Jersey; Redefines Customers'
    TV Viewing Experience (June 3, 2014), http://newscenter.verizon.com/
    corporate/news-articles/2014/06-03-fios-quantum-tv-ny-nj/.

        xxxiv Press Release, RCN Delivers Its Most Powerful DVR
    to Date (June 3, 2014), http://www.rcn.com/about-rcn/newsroom/rcn-
    delivers-most-powerful-dvr.

        xxxv Comm Daily Notebook, Communications Daily, June 4,
    2014.

        xxxvi Press Release, AT&T Adds HP to Network-Enabled
    Cloud Ecosystem (June 9, 2014), http://about.att.com/story/
    att_adds_hp_to_network_enabled_cloud_ecosystem0.html.

        xxxvii Press Release, Level 3 Communications, Inc.,
    Level 3 to Acquire tw telecom (June 16. 2014), http://
    investors.level3.com/investor-relations/press-releases/press-release-
    details/2014/
    Level-3-to-Acquire-tw-telecom/default.aspx.

        xxxviii Press Release. AT&T U-verse Arrives in
    Montgomery, AL (June 16, 2014), http://about.att.com/story/
    att_u_verse_arrives_in_montgomery_al.html.

        xxxix Mike Robuck, Cox Business Debuts Dual Wi-Fi
    Router, Access to Cable Wifi Hotspots, CED Magazine, June 17, 2014,
    available at http://www.cedmagazine.com/news/2014/06/cox-
    business-debuts-dual-wi-fi-router-access-to-cablewifi-hotspots.

        xl Press Release, Century Link, Inc., Centurylink Brings
    Pay-By-The-Hour Managed Services to Centurylink Cloud Platform (June
    18, 2014), http://ir.centurylink.com/file.aspx?IID=40571
    79&FID=24100050.

        xli Press Release. DISH Eliminates Wire Clutter with New
    Wireless Joey (June 23, 2014), http://about.djsh.com/press-release/
    products-and-services/dish-eliminates-wire-clutter-new-wire
    less-joey.

        xlii Press Release, AT&T and Town of Chapel Hill Reach
    Agreement to Deploy Up to 1 Gigabit Network (June 24, 2014), http://
    about.att.com/story/att_uverse_with_gigapower_fiber
    _network_coming_to_chapel_hill_html.

        xliii Press Release, Facebook, Facebook to Acquire
    LiveRail (July 2, 2014), http://investor.fb.com/
    releasedetail.cfm?ReleaseID=857644.

        xliv Press Release, Level 3 Communications, Inc., Level
    3 Launches Channel Origination Solution to Address Demand for
    Simplified Global Delivery of Broadcast Content (July 8, 2014), http://
    investors.level3.com/investor-relations/press-releases/press-release-
    details/2014/Level-3-
    Launches-Channel-Origination-Solution-to-Address-Demand-for-Simplified-
    Global-Delivery-of-Broadcast-Content/default.aspx#sthash.O3uznzJt.dpuf.

        xlv Ray Le Maistre, Bell Labs Claims Copper Speed
    Record, Light Reading, July 9, 2014, http://www.lightreading.com/
    broadband/dsl-vectoring-gfast/bell-labs-claims-copper-speed-recor
    d/d/d-id/709846.

        The Chairman. Thank you, Mr. Cohen, very much. And now I am
    happy to bring forward Justin Hurwitz, Assistant Professor of
    Law, University of Nebraska College of Law. That would make
    sense. We look forward to hearing from you, sir.

                   STATEMENT OF JUSTIN (GUS) HURWITZ,

                      ASSISTANT PROFESSOR OF LAW,

                 UNIVERSITY OF NEBRASKA COLLEGE OF LAW

        Mr. Hurwitz. Chairman Rockefeller, Ranking Member Thune,
    and members of the Committee, it is a privilege to be before
    you today.
        My comments today will focus on the future of the video
    market, tying its current state to other ongoing issues that
    face this committee and the market generally.
        The future of the video market is easy to predict and
    concise to state: the Internet. The question is how we get
    there; when, that is, not whether, the majority of video
    consumed in the United States will be consumed online.
        For this committee, however, the question may be what is
    holding us back. There is no lack of interest in developing
    innovative new online video platforms. ``Tech titans,'' we have
    heard much of this language before already today, like Google,
    Apple, Netflix, Amazon, have shown great interest in online
    video.
        Entrants like Aereo, FilmOn, and similar startups have
    attempted to bring a cable-like television experience to the
    Internet. Major news and sporting events are now routinely
    streamed online and most traditional video outlets have
    Internet-based streaming video offerings.
        Yet today's video marketplace does still look like the
    marketplace of a decade ago more than one of the future. I
    would suggest two factors that contribute to this. First, the
    continuing dominance of the linear channel, where programming
    is delivered as a continuous 24 hour feed, 24 hours a day, for
    consumers to tune in to watch.
        This model continues to dominate in part because better
    models have yet to be developed, and in part because existing
    regulations have ossified it. And second, the existing
    regulatory regime more generally ossifies traditional business
    models and stifles entry by new firms.
        The problems with the existing regulatory regime cannot be
    understated. It involves multiple statutes implemented by
    multiple agencies to govern technologies developed in the
    1960s, 1970s, and 1980s, according to policy goals from the
    1950s, 1960s, and 1970s.
        We are no longer living in a world where the Rube Goldberg
    of compulsory licenses, must carry and retransmission consent,
    financial interest, and syndication exclusivity rules, and the
    panoply of Federal, state, and local regulations make sense,
    yet these are the rules that govern today's video industry.
        The discussion we are having today should involve many
    current issues--the pending mergers; the Supreme Court's recent
    Aereo decision; spectrum policy; interconnection disputes
    between ISPs and edge providers; retransmission consent
    disputes, and the FCC's ongoing network neutrality and video
    regulation efforts. Time prevents me from discussing any of
    these in detail, so I will leave you with a few specific
    thoughts.
        First, consolidation is not necessarily bad. To be sure,
    consolidation can raise very serious antitrust concerns, but
    theory and empirics tells us that consolidation can in many
    cases benefit consumers, and I commend you, Chairman
    Rockefeller, for focusing us on consumer welfare as a primary
    standard by which we should judge success.
        In any event, consolidation must be measured in terms of a
    properly defined relevant market. This is especially true in
    today's video marketplace where traditional MVPDs increasingly
    compete with firms like Netflix, Apple and Google. This new
    competition must be considered as part of the relevant market.
        Indeed, traditional MVPDs may need to consolidate if they
    are to compete with these new firms. I want to emphasize this
    point. The greatest challenge to the development of a modern
    video marketplace is not the development of new technologies.
    That is the easy part. The challenge is how new and existing
    firms, business models, and consumers transition to use these
    new technologies.
        Staying on the topic of consolidation, vertical
    integration, in particular, is more often good for consumers
    than bad. This is one of the enduring lessons from the break-up
    of the vertically integrated film industry of the 1940s, and
    one that has been consistently demonstrated in the economics'
    literature.
        What happened after the Supreme Court approved the break-up
    of the film industry? Ticket prices for consumers went up,
    quality and variety of films went down, and the industry as a
    whole went into a multi-decade slump. Decades of subsequent
    research suggest that vertical integration helps firms to
    develop and implement new technologies.
        At the same time, progress toward an Internet-based video
    marketplace has been slower than many would like. Chief among
    the reasons for this is regulatory uncertainty. It is entirely
    unclear today how online video fits into the current regulatory
    regime.
        This uncertainty makes entry by new firms difficult and
    decreases existing firms' ability to innovate. Updating the
    ``Copyright and Communications Act'' is one of the best things
    that Congress could do to promote video in the marketplace.
        Finally, any discussion of the video marketplace needs to
    consider spectrum policy. Much of today's video marketplace is
    shaped by pre-cable broadcast policy. We will likely never move
    away from broadcast television entirely. Many Americans rely on
    it. It is essential in emergency situations, and it is an
    important competitive constraint on other television services.
        But existing rules treat broadcast television as the basic
    unit by which content is delivered to consumers. This does not
    make sense in the Internet era. Rather than struggle with how
    to fit online video into the traditional television model, we
    should be thinking about how to allow traditional television to
    operate more like online video.
        I believe that is the perfect point on which to end my
    comments. I look forward to answering your and the Committee's
    questions.
        [The prepared statement of Mr. Hurwitz follows:]

    Prepared Statement of Justin (Gus) Hurwitz, Assistant Professor of Law,
      University of Nebraska College of Law and Visiting Fellow, American
        Enterprise Institute, Center for Internet, Communications, and
                               Technology Policy
    The views expressed in this testimony are those of the author alone and
    do not necessarily represent those of the University of Nebraska
    College of Law or the American Enterprise Institute.

        Chairman Rockefeller, Ranking Member Thune and members of the
    Committee, it is a privilege to be before you today. My comments today
    will focus on the future of the video market, tying its current state
    to other ongoing issues that face this Committee and the market
    generally.
        The future of the video market is easy to predict and concise to
    state: the Internet. The question is how we get there; when, that is,
    not whether, the majority of video consumed in the United States will
    be consumed online.
        For this Committee, however, the question may be ``what is holding
    us back?'' There is no lack of interest in developing innovative new
    online video platforms. Tech titans like Google, Apple, Netflix, and
    Amazon have shown great interest in online video. Entrants like Aereo,
    FilmOn, and similar startups have attempted to bring a cable-like
    television experiences to the Internet. Major news and sporting events
    are now routinely streamed online. And most traditional video outlets
    have Internet-based streaming video offerings.
        Yet today's video marketplace looks more like the marketplace of a
    decade ago than one of the future. I would suggest two factors that
    contribute to this. First, the continuing dominance of the linear
    channel--where programming is delivered as a continuous feed, 24 hours
    a day, for consumers to ``tune in'' to watch. This model continues to
    dominate in part because a better model has yet to be developed, and in
    part because existing regulations have ossified it. And, second, the
    existing regulatory regime more generally ossifies traditional business
    models, and stifles entry by new firms.
        The problems with the existing regulatory regime cannot be
    understated. It involves multiple statutes implemented by multiple
    agencies to govern technologies developed in the 60s, 70s, and 80s,
    according to policy goals from the 50s, 60s, and 70s. We are no longer
    living in a world where the Rube Goldberg of compulsory licenses, must
    carry and retransmission consent, financial interest and syndication
    exclusivity rules, and the panoply of Federal, state, and local
    regulations makes sense--yet these are the rules that govern the video
    industry.
        The discussion we are having today should involve many current
    issues--the pending mergers; the Supreme Court's recent Aereo decision;
    spectrum policy; interconnection disputes between ISPs and edge
    providers; retransmission consent disputes; and the FCC's ongoing
    network neutrality and video regulation efforts. Time prevents me from
    discussing any of these in detail, so I will leave you with a few
    specific thoughts.
        First, consolidation is not necessarily bad. To be sure,
    consolidation can raise serious antitrust concerns. But theory and
    empirics tell us that consolidation can in many cases benefit
    consumers, and in any event must be measured in a properly defined
    relevant market. This is especially true in the video marketplace,
    where traditional MVPDs increasingly compete with firms like Netflix,
    Apple, and Google. This new competition must be considered as part of
    the relevant market.
        Indeed, traditional MVPDs may need to consolidate if they are to
    compete with these new firms. I want to emphasize this point: the
    greatest challenge to the development of a modern video marketplace
    isn't the development of new technologies--that's the easy part--the
    challenge is how new and existing firms, business models, and consumers
    transition to use these new technologies.
        Staying on the topic of consolidation, vertical integration, in
    particular, is more often good for consumers than bad. This is one of
    the enduring lessons from the breakup of the vertically-integrated film
    industry of the 1940s, and one that has been consistently supported in
    the literature. What happened after the Supreme Court approved this
    break-up? Ticket prices for consumers went up, quality and variety of
    films went down, and the industry as a whole went into a multi-decade
    slump. Decades of subsequent research suggest that vertical integration
    helps firms to develop & implement new technologies.
        At the same time, progress toward an Internet-based video market
    has been slower than many would like. Chief among the reasons for this
    is regulatory uncertainty. It is entirely unclear how online video fits
    into today's regulatory regime. This uncertainty makes entry by new
    firms difficult, and decreases existing firms' ability to innovate.
    Updating the Copyright and Communications Acts is one of the best
    things this Congress could do to promote the video marketplace.
        Finally, any discussion of the video marketplace needs to consider
    spectrum policy. Much of today's marketplace is shaped by pre-cable
    broadcast policy. We will likely never move away from broadcast
    television entirely--many Americans rely on it; it is essential in
    emergency situations; and it is an important competitive constraint on
    other television services. But existing rules treat broadcast
    television as the basic unit by which content is delivered to
    consumers; this doesn't make sense in the Internet era. Rather than
    struggle with how to fit online video into the traditional television
    model, we should be thinking about how to allow traditional television
    to operate more like online video.
        I believe that that is the perfect thought on which to end my
    comments. I look forward to answering your questions.

        The Chairman. Thank you very much, Mr. Hurwitz. It was very
    interesting and precisely timed.
        We now go to John Stankey. John Stankey, I want to tell you
    that on my sheet here, it says ``John Stankey,'' and then it
    says ``(pronounced Stankey).''
        [Laughter.]
        Mr. Stankey. You have good help, sir.
        The Chairman. Yes, that is potentially true there. In any
    rate, you are the Executive Vice President and Chief Strategy
    Officer at AT&T, a large company and a good company, and we
    welcome your statement, sir.

             STATEMENT OF JOHN T. STANKEY, GROUP PRESIDENT
                 AND CHIEF STRATEGY OFFICER, AT&T INC.

        Mr. Stankey. Thank you, Chairman Rockefeller, Ranking
    Member Thune, and members of the Committee. I am John Stankey
    with AT&T. I appreciate the opportunity to visit with you
    today.
        The name of today's hearing suggests we are at a tipping
    point in the future of video. I really could not agree more. It
    is a tipping point. It is a tipping point for more consumer
    choice, more programming innovation, and more options for video
    delivery.
        Video competition today is strong, it is dynamic, and it is
    increasing. Incumbent and new providers are satisfying consumer
    demands in ways we could barely imagine just five years ago.
    This increased video competition is being driven by advances in
    broadband, both mobile and fixed, and by flexible and
    innovative software architectures.
        Consumers increasingly want their traditional TV service
    integrated with broadband. As a result, it has never been
    easier for consumers to access the video they want, when and
    how they want it.
        We are in the early innings of this evolution of video
    consumption and competitive alternatives. Not so long ago
    consumers watched video almost exclusively on a TV using over-
    the-air broadcast, cable or satellite service. Today, consumers
    are increasingly accessing video via broadband, on multiple
    screens, Smartphones, Tablets, PCs, and TVs.
        New programming choices, new devices, and higher speed
    broadband are improving the customer experience exponentially.
    Unlike traditional pay TV delivery systems, broadband allows
    anyone to reach anyone else. That means any programmer with
    great content can find an audience across TV, mobile, and
    broadband platforms.
        Consumer choice is vast and of high quality services like
    YouTube, Netflix, Amazon, Hulu, and many more. Original
    programming from Netflix, as the Chairman mentioned, last week
    received 31 Emmy nominations.
        The rise of over-the-top video made possible by broadband
    has special importance for competition. Video represents an
    increasing percentage of traffic on broadband networks. This
    makes the competitive implications of over-the-top considerably
    different than is often portrayed.
        Although over-the-top programming often competes with
    traditional cable TV as a substitute, it is also a complement
    to traditional pay TV for the majority of people. For broadband
    providers, giving consumers access to over-the-top content is a
    critical component of why they offer broadband.
        This is especially true for AT&T because our core business
    is broadband. The central role of broadband in the new video
    environment underpins our acquisition of DIRECTV. Unlike many
    mergers, our transaction does not combine two companies that do
    the same thing. Rather, it combines companies with
    complementary capabilities--DIRECTV's pay TV service with
    AT&T's broadband service.
        As a result, there is no significant competitive overlap
    between us in the product that consumers overwhelmingly
    demand--a broadband and video bundle. Combining with DIRECTV
    will enable us to be a much more effective nationwide
    competitor with cable companies.
        It gives us strong relationships with programmers producing
    significant cost and quality improvements in our video service.
    It gives us the scale to work with programmers to develop new
    business models that give consumers what they want where they
    want it.
        Most importantly, being able to offer DIRECTV nationwide is
    a game changer in the economics of deploying broadband. It will
    allow us to expand and enhance broadband to at least 15 million
    locations across 48 states, 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 this transaction. This new broadband
    commitment includes 13 million high speed fixed wireless local
    loop locations, 85 percent of which are outside our wireline
    footprint.
        This is big news for rural America. We estimate that nearly
    20 percent of these consumers today have no access to wire line
    broadband, and another 27 percent are served by just one
    broadband provider.
        The transaction also allows us to expand our one gigabit
    service to two million additional locations. Combining with
    DIRECTV allows us to offer content owners even more value and
    distribution points across the nationwide pay TV network,
    nationwide mobile network, and a broadband network covering 70
    million locations. It strengthens our video engineering and
    software expertise, enabling us to accelerate the development
    of new over-the-top video delivered to any screen.
        As video competition continues to accelerate, we look
    forward to meeting consumers' demands for integrated broadband
    and video services, all while complying with the FCC's 2010 net
    neutrality standards.
        Thank you, and I look forward to your questions.
        [The prepared statement of Mr. Stankey follows:]

            Prepared Statement of John T. Stankey, Group President
                     and Chief Strategy Officer, AT&T Inc.
        Thank you, Chairman Rockefeller, Ranking Member Thune, and Members
    of the Committee.
        I am John Stankey, Group President and Chief Strategy Officer of
    AT&T, and I appreciate this opportunity to address the state of video
    competition and the benefits that competition is bringing to consumers.
        Video competition today is strong and dynamic. Competition is
    increasing sharply as both incumbent and new providers find new ways to
    satisfy video demand and to deliver a multitude of new services that
    benefit consumers in ways we could barely imagine five or ten years
    ago.
        This increased competition is being driven by broadband advances
    and investments. National wireless broadband networks can now deliver
    video quickly and efficiently. Advanced wireline connections to the
    home have more capacity and are becoming more widely available. As a
    result, it has never been easier for consumers to find the video
    programming they want to watch, when and how they want to watch it.
    Traditional video services are increasingly integrated with broadband
    offerings that give consumers access to the full range of these
    interactive and next generation services.
        AT&T is proud to be at the center of these competitive
    developments. We remain a company focused on wireless and wireline
    broadband services, and on ensuring that consumers can use those
    networks to reach each other and access the full scope of video and
    information sources that are becoming available to them. We are
    confident that we are seeing only the beginning of the consumer
    benefits emerging from this new and increasingly competitive
    environment, and we look forward to driving it forward through new and
    expanded networks and services.
    Technology and Consumer Demand Is Evolving
        Not so long ago, consumers watched video almost exclusively on a
    television set, using over-the-air broadcast, traditional point-to-
    multipoint delivery systems like cable or satellite, and packaged
    products like DVDs. Now, consumers are increasingly using advanced
    wireless and wireline broadband networks to reach video providers.
    Consumers are watching video on their smartphones, tablets, and
    computers as well as televisions. They watch a broader variety of
    programming, including the many short, long, and interactive forms of
    programming the Internet enables. New, high-definition programming and
    devices, supported by even higher-capacity broadband networks, will
    create a new level of customer experience.
        With this change in technology, consumer demand is changing.
    Consumers increasingly expect to be able to watch video when they want,
    where they want, and on whatever device they want. They want access to
    interactive, crowd-sourced, short-form, and traditional long-form
    services. And consumers are increasingly making clear that if service
    providers cannot provide their video of choice, they will find other
    providers that can.
    Advanced, Interconnected Broadband Networks Are Driving New Video
            Competition
        Recent improvements in the capacity and capabilities of broadband
    networks are driving this increased competition in video. For example,
    the newest, most advanced generation of wireless networks now supports
    the delivery of high-quality video. Those networks, in turn, have
    enabled a new generation of mobile devices designed to provide both
    interactive and traditional video viewing experiences. IP-based
    wireline broadband services have also reached important capacity
    thresholds that enable high-quality video streaming and delivery
    services, and broadband providers have been expanding those networks to
    an increasing number of the Nation's households. Those providers are
    not just the traditional telephone companies. They include Google and a
    host of other companies taking advantage of the latest technologies.
        Unlike traditional broadcast video delivery systems, today's
    broadband systems allow anyone to reach anyone else. That means any
    programmer that has great video content can find its audience.
    Programmers can use those broadband networks to make their video
    available directly to consumers, and consumers can choose from among a
    vast range of services to find those video offerings. YouTube, Netflix,
    Amazon video, and Hulu are only the beginning of this evolution.
        In this new broadband world, consumers increasingly want their
    traditional video services integrated with broadband services to enable
    a richer experience. And the consumer benefits of broadband and video
    integration and bundling extend well beyond passive video viewing to a
    broad and increasing range of interactive communications, home
    security, and home automation, monitoring and control systems.
    Consumers Today Have More Choice
        These developments are shifting the relationship between consumers
    and aggregators of video programming. Traditionally, Americans could
    choose only among the ``linear'' programming provided by broadcast
    television networks or later cable television networks. Consumers might
    choose between the ABC or NBC program on a given evening or, later,
    among the television and cable network programs available on their
    cable television system.
        Increasingly, however, consumers can choose among many more sources
    of programming, and their choices drive what survives in the
    marketplace. Many still choose from the television and cable networks,
    and traditional providers now offer both on-demand and online viewing.
    But broadband networks have expanded the choices. Streaming services
    have libraries of available programming and increasingly commission new
    programming. Social media and other emerging sites generate short-form
    and independent programming, and the line between traditional and
    emerging video programmers is blurring and will continue to do so.
        As a result, consumers are able to find great programming in many
    more ways. To retain customers, video content aggregators will have to
    find superior programming and improve the seamlessness and efficiency
    of how they deliver it. As competition increases among content
    aggregators, and programmers are able to reach consumers more directly
    on different networks, programming improves, consumer choice
    proliferates, and consumers benefit.
    Consumers Today Have Alternative Sources of Programming
        The rise of these non-traditional, ``over-the-top'' programming
    sources has special importance for competition. As I have explained,
    these services have been able to flourish because of improvements in
    broadband networks, and consumers have benefited tremendously as a
    result. As demand for streaming and other innovative services grows,
    video traffic represents an increasing percentage of the overall
    Internet and data traffic on today's broadband networks.
        This makes the competitive implications of over-the-top programming
    considerably different than is often portrayed. Although online
    programming often competes with traditional cable television as a
    substitute, such programming is also a complement and an important
    component of the services offered by broadband network operators.
    Broadband competitors must work hard to ensure that they can provide
    their customers with as rich and as integrated a video environment as
    possible, drawn from all the programming sources consumers may want.
        For these reasons, companies that provide bundles of broadband and
    video will foster, rather than impede, the emergence of over-the-top
    programmers. This is especially true for providers like AT&T whose core
    business is mobile and wireline broadband services. If those companies
    do not provide that rich and varied video environment, they risk losing
    their broadband customers and their wireless customers as well. Only by
    embracing the reality that over-the-top services are complements of
    their own services, just as traditional video can be a complement, will
    broadband providers retain and grow their relationship with their
    customers.
    Expanding Broadband Networks and Their Capabilities
        The central role of broadband in the new video environment,
    described above, also underpins AT&T's acquisition of DIRECTV and
    explains why the combination is good for consumers.
        DIRECTV is the premier video provider in the United States. AT&T
    has robust, market-leading wireline and wireless networks throughout
    the country. By adding DIRECTV's video capabilities to our strength in
    fixed and mobile broadband delivery, we will create a new, unique
    competitor with unprecedented capabilities in mobility, video, and
    broadband services.
        Today, consumers value a seamlessly integrated broadband access and
    video offering. Because of this, combining with DIRECTV will enable us
    to be a much more effective, nationwide competitor with traditional
    cable television companies. We can integrate the DIRECTV video offering
    with our national wireless broadband network services, as well as home
    services and customer support offered on a national basis. And, because
    we can offer broadband services far more widely than our U-Verse video
    service area, we will be able to offer the integrated offering of video
    and broadband access service to many more customers--AT&T customers,
    DIRECTV customers, and new customers--than is possible today.
        The transaction also enables us to grow and add to the capabilities
    of our core broadband business. With relationships to many more current
    and potential video customers, we will have stronger relationships with
    programmers, producing significant cost and quality improvements in our
    video offering. Those and other cost synergies and quality improvements
    from this transaction fundamentally change the business case for
    expanding our broadband infrastructure. Along with the strength of the
    new integrated video/broadband bundles the transaction enables, these
    synergies will make it economic to deploy infrastructure to millions of
    additional customer locations and will justify billions of dollars of
    additional broadband investment.
        As a result, AT&T is committing to building and enhancing high-
    speed broadband service to at least 15 million customer locations, most
    of them rural, within four years of the transaction closing. This
    expansion is in addition to the broadband expansion plans that AT&T has
    already announced, and it directly results from the synergies created
    by the transaction.
        First, AT&T will use its wireless spectrum to bring a fast,
    innovative broadband Internet access service to 13 million customer
    locations in rural areas in 48 states. This new service is not simply
    mobile LTE service on our wireless network. This is a new ``fixed
    wireless'' service that uses advanced technology, dedicated spectrum,
    and professional home installations to provide a consistent and
    reliable high-speed broadband experience. Second, AT&T will be able to
    build out its newest ``GigaPower'' broadband infrastructure to more
    customer locations. GigaPower relies on fiber all the way to the home
    and offers speeds of up to 1 gigabit per second. The transaction will
    allow AT&T to upgrade at least 2 million additional customer locations.
    Most of those locations are likely today to be in areas that have no
    AT&T broadband infrastructure or only slower forms of DSL
    infrastructure that do not support video service.
        In these ways, DIRECTV enables AT&T to meet consumer's ever-
    increasing demands for integrated broadband access and video services--
    all while meeting or exceeding the FCC's 2010 net neutrality standards.
    And, as more consumers want access to the most advanced, highest
    capacity broadband networks, the transaction will enable AT&T to build
    out its broadband infrastructure to homes and businesses that we could
    not reach otherwise. As competition in the video industry continues to
    accelerate, AT&T looks forward to bringing the benefits of innovation
    to consumers.
        Thank you, Mr. Chairman.

        The Chairman. Thank you very much, Mr. Stankey. Now, Jeff
    Blum of Dish Network. We welcome you.

          STATEMENT OF JEFFREY H. BLUM, SENIOR VICE PRESIDENT

            AND DEPUTY GENERAL COUNSEL, DISH NETWORK L.L.C.

        Mr. Blum. Thank you. Chairman Rockefeller, Ranking Member
    Thune, and members of the Committee, my name is Jeff Blum. I am
    the Deputy General Counsel of DISH, the second largest
    satellite TV provider in the country, with over 14 million
    subscribers. I am pleased to have the opportunity to testify
    today.
        DISH agrees with the title of this hearing. We are at a
    tipping point. The decisions that the FCC, DOJ, and Congress
    make over the next 12 to 24 months will determine whether a few
    large companies control what Americans watch and how they do
    so. The future of video is broadband, and the unprecedented
    consolidation looming in the high speed broadband access market
    will shape video consumption for years to come.
        Now more than ever a competitive video market needs high
    speed, high capacity broadband services. Allowing the broadband
    access market to consolidate down to a few powerful
    gatekeepers, each of which also has video services to sell,
    will hurt competition and consumers.
        Online video can take many forms, be it a library of on-
    demand movies and shows that you can order through a broadband
    connected DISH set-top box, or a streaming video subscription
    service like Netflix, and more competitive innovations are
    coming, but without a high speed broadband pipe, consumers
    cannot fully take advantage of these services.
        A combined Comcast and Time Warner would not only control
    nearly half of the broadband pipe in the U.S., it would have a
    greater incentive to harm competing online services in order to
    protect its own turf, its own linear TV packages, its own
    online video services, and its own linear and online in-house
    programming.
        For our part, DISH increasingly offers broadband-enabled
    services to compete in the video market. We are investing to
    provide more video on demand and Internet stream programming.
        Today, for example, we offer an Internet only foreign
    language channel package called ``DISH World.'' We recently
    announced a first of its kind deal to distribute live and on-
    demand Disney programming over a new DISH over-the-top or OTT
    service, where no satellite dish is required.
        A broadband connection makes these innovations possible,
    but because innovative online video services, like ours, are
    powered by other companies' broadband connections, we are very
    concerned about the threat to competition posed by the Comcast/
    Time Warner merger.
        We believe that the FCC and the DOJ should reject it
    outright. There are no conditions or divestitures that would
    offset the harms, and you do not need to be an economist or
    antitrust expert to understand why. Given its control over the
    broadband pipe and its own suite of linear and online video
    products, a combined Comcast/Time Warner would have a
    dramatically increased incentive to protect its business model
    by thwarting the broadband-enabled video services of other
    companies, like DISH or Netflix.
        This presents a serious threat to competition, because
    Comcast and Time Warner together would control close to 50
    percent of all residential high speed broadband connections,
    and would pass more than 60 percent of the homes in America.
        Comcast will also be able to wield its greater market power
    in another way, by restricting third-party programmers' digital
    rights, licenses to compete in pay TV, and over-the-top
    providers. They will tell programmers if you want carriage on
    our giant network, you cannot grant DISH online rights to your
    content.
        Too much power in the hands of too few. That is really what
    the Comcast/Time Warner merger would produce.
        When we filed a letter last week announcing our opposition
    to the merger, Comcast said we were just trying to win an edge
    against a competitor. That is simply not true. We welcome
    healthy competition. Being a disruptive competitor is in our
    DNA. We are not here to complain about Comcast competing with
    us on service quality, value, or technology, but we will raise
    a red flag when a market participant seeks to abuse its market
    power.
        I also want to express DISH's concerns about the proposed
    AT&T/DIRECTV merger. Among other things, AT&T and DIRECTV will
    be able to combine their power to raise the cost of programming
    content for smaller TV providers to the potential detriment of
    consumers.
        Finally, Congress has an opportunity to improve video
    competition right now. This committee soon will consider
    reauthorizing STELA. DISH, along with many other pay TV
    providers, consumer groups, and independent programmers urge
    you to seize this opportunity to enact real reforms to the
    broken retransmission system.
        We understand that Chairman Rockefeller and Ranking Member
    Thune and their respective staffs have been working on a
    bipartisan STELA bill. We applaud that effort.
        Thank you.
        [The prepared statement of Mr. Blum follows:]

    Prepared Statement of Jeffrey H. Blum, Senior Vice President and Deputy
                      General Counsel, DISH Network L.L.C.
        Chairman Rockefeller, Ranking Member Thune, Members of the
    Committee:
        My name is Jeff Blum. I am the Senior Vice President and Deputy
    General Counsel of DISH Network L.L.C. (``DISH''), the second largest
    satellite TV provider in the U.S. with over 14 million subscribers
    located across every state.
        DISH agrees with the title of this hearing: we are at a tipping
    point. The decisions that the Federal Communications Commission
    (``FCC''), Department of Justice (``DOJ''), and Congress make over the
    next 12 to 24 months will impact the future of the video market in
    determining whether a few large companies will have ultimate control
    over what Americans watch and how they do so. The future of video is
    broadband; and the unprecedented consolidation looming in the high-
    speed broadband access market will shape video consumption for years to
    come.
        We at DISH know a thing or two about healthy competition. We
    launched our satellite TV service when cable enjoyed near monopoly
    status in the pay-TV market. When our original big-dish business
    started to decline, we invested in a new, small-dish service. And now
    that satellite and pay-TV generally have matured, we are again
    investing in the next transformation of the market, namely broadband
    and online video.
        Now more than ever, a vibrant, competitive video market relies upon
    high-speed, high-capacity broadband services. This is because consumers
    increasingly want on-demand and Internet-delivered content. Allowing
    the broadband access market to consolidate down to a few powerful
    gatekeepers, each of which also has video services to sell, will hurt
    competition and consumers.
        For our part, DISH increasingly relies on broadband to compete in
    the video market. We do so in two ways.
        First, satellite TV can only be a competitive alternative to cable
    if our subscribers can utilize a broadband connection. DISH's newest
    set-top boxes connect to a consumer's broadband service, often provided
    by cable ISPs like Comcast and Time Warner Cable. The broadband
    connection makes possible the innovations that we need in order to stay
    competitive, such as video-on-demand, DISH Anywhere, Sling, various
    apps, and Internet-streamed programming.
        Let's take the example of video-on-demand. Cable offers thousands
    of titles on demand, delivered through the two-way cable connection
    into the home. Our satellites and set-top boxes cannot serve the same
    volume of content on demand. In order to offer a comparable experience,
    we store titles on servers throughout the country and deliver them over
    a consumer's home broadband connection. When a DISH subscriber selects
    a movie on demand, she may be accessing the video file from one of our
    servers, transmitted to her set-top box over a broadband connection,
    and viewed on the TV.
        Without such broadband-enabled features, DISH would fall behind our
    pay-TV competitors like Comcast, Time Warner Cable, AT&T, Charter, and
    others. Without broadband connections often provided by our pay-TV
    competitors, we cannot stay competitive in the traditional pay-TV
    market.
        The second way DISH relies on broadband is when we provide a so-
    called ``Over the Top'' or ``OTT'' service. These services will play a
    large role in the future of video. Just like Netflix and Amazon, among
    others, DISH offers an Internet-only video product. For these services,
    all you need is a broadband connection; no satellite or set-top box is
    required.
        For example, we offer DISH World, a foreign language OTT video
    service available over the Internet, using a broadband connection. This
    OTT service provides programming in Hindi, Mandarin, and dozens of
    other foreign languages. And, it is growing at a faster rate than our
    foreign language services on satellite.
        We also recently announced a first-of-its kind deal to distribute
    live and on-demand Disney programming (such as ESPN and the Disney
    Channel) over a new forthcoming DISH OTT service. For the first time,
    consumers with a broadband connection will be able to subscribe to a
    smaller package of channels at a lower price than what is available
    today over traditional pay-TV. We are now talking to other major
    content companies about joining Disney on our forthcoming OTT service.
    We hope to launch the service later this year. These types of OTT
    services, however, require high-speed and high-capacity broadband
    connections.
        Given our reliance on broadband to compete in the video market, we
    are very concerned that the proposed merger between Comcast and Time
    Warner Cable threatens competition as we know it in the video space,
    especially in the traditional pay-TV market, where satellite relies so
    heavily on a broadband connection, and in the emerging OTT video space.
        The FCC and DOJ should reject this merger. There are no conditions
    or divestures that would offset the harms. You don't need to be an
    economist or antitrust expert to understand why. A competitor offering
    pay-TV at a lower price, or with more on-demand titles, or OTT services
    that cost less, is a company that can provide a different--or better--
    alternative to Comcast and Time Warner Cable. A combined Comcast/Time
    Warner Cable would have plenty of incentive to protect its business
    model by thwarting the broadband-enabled services of competitors like
    DISH.
        The combined companies would control more than 47 percent of all
    the residential high-speed broadband connections in America, and would
    pass more than 60 percent of homes in America. These broadband
    connections are necessary to power the type of video services I just
    mentioned.
        Comcast would like you to believe that the market for broadband is
    full of choices. But the truth is that DSL in most cases does not offer
    enough speed and capacity to support a typical household's streaming
    video usage. Just look at AT&T and Verizon. When they provide video for
    U-Verse or FiOS subscribers, they do not use their DSL networks.
    Instead, they use newer, high-speed fiber networks.
        With such vast broadband market share under its control, the new
    Comcast will have at least three ``choke points'' in the broadband pipe
    where it will have the ability to harm competing video services like
    those provided by DISH:

      1.  First, the broadband connection to the consumer. This is often
            called the ``public Internet.'' Comcast can prioritize its own
            services before those of DISH and other competitors, rendering
            services like ours less competitive;

      2.  Second, the interconnection point, where competitors' video
            services enter the Comcast broadband network. Comcast controls
            this critical point of interconnection, as it can close ports
            or refuse to open enough ports to allow competing content onto
            the ``public Internet.'' If we pose too much of a competitive
            threat, we could suddenly find it more expensive, or even
            impossible, to reach our customers who use Comcast broadband;
            and

      3.  Third, any managed or specialized service channels, which can act
            as high speed lanes and squeeze the capacity of the public
            Internet portion of the pipe. Comcast's own services may enjoy
            the fast lane, while DISH's and all other competitors' data may
            get squeezed onto the ever more crowded public Internet lane.

        Each of the above three ``choke points'' provide the ability for a
    combined Comcast/Time Warner Cable to downgrade the online video
    offerings of its competitors, all to the detriment of consumers.
        The combination of Comcast and Time Warner Cable also would present
    a larger competitive threat than the companies standing alone, without
    a merger.
        Take, for example, DISH World and the new DISH OTT service
    discussed above. DISH World offers programming in Hindi. Hindi speakers
    in the United States are concentrated in markets served by Comcast and
    Time Warner Cable broadband, such as New York City, Chicago, and Los
    Angeles.
        Put all of those broadband markets under one roof and it becomes
    clear how Comcast would be the primary gatekeeper for DISH World
    reaching the Hindi-speaking community. It is also clear how Comcast
    easily could degrade DISH World in favor of its own foreign language
    service, perhaps to the point of eliminating the competition
    altogether.
        Regarding our forthcoming OTT service with Disney and other
    programmers, a combined Comcast/Time Warner Cable will similarly be
    able to slow down or degrade the quality of service over its broadband
    pipe. But it will also be able to wield its greater leverage in another
    way--to restrict third-party programmers' digital rights licensed to
    competing pay-TV and OTT video providers. If you want carriage on our
    giant network, they'll say to a programmer, you cannot grant DISH or
    Netflix, for example, OTT rights to your content.
        Too much power in the hands of too few--that's really what the
    Comcast/Time Warner Cable merger would produce.
        I should note that Comcast reacted to DISH's recent opposition to
    its merger by characterizing us as a company just out to win an edge
    against a competitor. To the contrary, DISH is all in favor of healthy
    competition. You do not hear us complaining about Comcast competing on
    service quality, value, or technology features. But, we will take issue
    when a market participant seeks to abuse its market power to the
    detriment of healthy competition. We want to win when the game is
    played on an even playing field.
        I also want to express DISH's competitive concerns about the AT&T/
    DIRECTV merger. Among other things, AT&T and DIRECTV will also be able
    to combine their market power to leverage programming content, to the
    potential detriment of consumers.
        Finally, while merger reviews are mostly under the jurisdiction of
    agencies like the DOJ and FCC, Congress has an opportunity to improve
    video competition right now. This Committee soon will consider
    reauthorizing the Satellite Television Extension and Localism Act of
    2010 (``STELA''). DISH and our fellow members of the American
    Television Alliance urge you to seize this opportunity to enact real
    reforms to the current laws governing how pay-TV and broadcast
    companies negotiate deals. We understand that Chairman Rockefeller,
    Ranking Member Thune, and their respective staffs have been working on
    a bi-partisan STELA bill. We applaud that effort. As Chairman
    Rockefeller said at the last video hearing, consumers cannot wait for
    the ``mythical'' re-write of the communications law.
        Specifically, it is time do something to fix the broken
    retransmission consent system as part of STELA. Escalating programming
    costs are the number one source of rising pay-TV rates and one of the
    reasons we are seeing industry consolidation. The number of harmful
    programming blackouts has skyrocketed as broadcasters seek to drive up
    the amount of money they collect. Consumers are being negatively
    impacted from coast to coast, but with a few simple changes to the law,
    Congress can help to mitigate this harmful trend. DISH has submitted
    many concrete legislative proposals in writing to this Committee, and I
    am happy to answer any questions you might have about those ideas.
        Thank you, and I look forward to the discussion today about the
    industry consolidation we're seeing and other trends and problems
    currently impacting the video industry.

        The Chairman. Thank you, sir, very much. You are right
    about the good Senator on my left and I. We try to cooperate as
    much as possible.
        Mr. Blum. Wonderful.
        The Chairman. There are limits, he says.
        [Laughter.]
        The Chairman. So far, it is a wonderful relationship, which
    is very key to undoing gridlock.
        Let me see. I will turn to Mr. Ryan, the artist, the
    writer, the creator, the innovator of The Shield. You present
    the perspective of content creators and owners, and I am very
    happy you are at the table and look forward to your testimony.

             STATEMENT OF SHAWN RYAN, MEMBER, ON BEHALF OF
                  WRITERS GUILD OF AMERICA, WEST, INC.

        Mr. Ryan. Chairman Rockefeller, Ranking Member Thune,
    members of the Committee, thank you for the opportunity to
    appear before you today. My name is Shawn Ryan. I am a member
    of the Writers Guild of America, West.
        My Guild represents more than 8,000 writers of television
    series and feature films. We are the creators of television
    comedies and dramas, and as the custodians of this uniquely
    America art form, I want to outline for you and Americans
    watching today online what is at stake for the future of the
    video marketplace.
        Although an abundance of outlets and new technologies has
    made original video content both more robust and accessible,
    the reality of American media is it is controlled by a handful
    of companies formed through two decades of consolidation. These
    companies own the television networks, the production studios,
    and almost all the scripted content that is available on
    television and in movie theaters.
        The cable companies that distribute this content are even
    more concentrated. In this market, independent programming has
    been all but eliminated. Only 10 percent of the broadcast
    networks' fall schedule in 2013 was independently produced.
    Writers effectively have six companies they can sell to.
    Because we have so few alternatives, the media companies take
    the content we create, require us to relinquish ownership
    rights, and then reap the monopoly profits.
        Consumers fare no better in this equation as monopoly power
    restricts viewpoint diversity, limits content choices, and
    drives up cable bills.
        Programming decisions in this environment are not the
    result of a competitive market where the American public
    decides what it wants to watch. Rather, they are made to
    advance the economic interest of a handful of large companies.
        I served as Executive Producer on a television series
    called The Unit, a drama about American Special Forces soldiers
    and the families back home who supported them. This program was
    produced by Fox Television Studios and aired on CBS from 2006
    to 2009. In 2009, the network canceled The Unit and picked up
    Medium, a series produced by a CBS affiliated studio that aired
    on NBC for five seasons.
        The reasoning behind this decision, I believe, was that CBS
    did not own The Unit, and would not benefit from secondary
    market revenue earned by making additional episodes. Because
    the network had an ownership stake in Medium, it chose to air
    another season of it because of a syndication deal that would
    generate additional revenue, despite the fact that The Unit was
    routinely drawing over two million more viewers an episode that
    season than Medium was.
        Now Internet video distribution has the potential to
    restore some measure of competition, the Internet's low entry
    barriers have given us new content choices from outside the
    tightly controlled cable bundle. We now have original online
    series competing with television programming, what began with
    House of Cards, a Netflix series that last week garnered 13 TV
    Emmy nominations, is spreading to other online services.
        This year Amazon and Netflix combined may spend close to $1
    billion on original programming, and 20 original television
    like series will be released online. These developments
    represent meaningful change for providers and consumers alike.
        The promise of vibrant video competition is once again
    threatened by those who control distribution. The same
    companies that control cable television also control Internet
    distribution. They would like nothing more than to take their
    content distribution monopoly and apply it now to the Internet.
        The proposed Comcast/Time Warner Cable and AT&T/DIRECTV
    mergers are designed to do just that. The open Internet has the
    potential to create a video marketplace that is more
    competitive, diverse, and independent, but it is clear that
    action is needed to fulfill this promise.
        The Internet is an information highway, and just as
    Congress does not allow a handful of private companies to erect
    toll booths on our Nation's actual highways, it cannot allow a
    few ISPs to set arbitrary rates and decide which businesses,
    video providers, or political organizations can have
    prioritized delivery, and which are relegated to a slow lane.
        Internet providers would be allowed to strangle innovation
    in the cradle. Can we really expect the next Netflix, Amazon,
    or Crackle to emerge under these circumstances?
        Strong net neutrality rules that ban paid prioritization
    and other discriminatory practices must be enacted. We also
    need effective antitrust enforcement. The fundamental question
    raised by mergers--concentration and the resulting monopoly
    power--is are they good for society or not? The answer in
    economic theory is a resounding ``no.''
        Further market concentration simply means that writers will
    be paid less to innovate and create and consumers will have to
    pay more for our content.
        Our country from the time of the founding fathers has been
    defined by a struggle to eliminate concentrations of power that
    harm both democracy and basic economic fairness.
        As the creator of The Shield and its lead character, Vic
    Mackey, I understand something about abuse of power and what
    happens when proper oversight goes lacking. It may make for
    great entertainment, but it makes for bad public policy.
        We once again have an opportunity to serve the interest of
    many rather than the few by stopping these mergers and by
    keeping the Internet free and open.
        Thank you for the opportunity to testify. I look forward to
    your questions.
        [The prepared statement of Mr. Ryan follows:]

    Prepared Statement of Shawn Ryan, Member, on Behalf of Writers Guild of
                              America, West, Inc.
    Introduction
        Chairman Rockefeller, Ranking Member Thune and members of the
    Committee, thank you for the opportunity to appear before you today. My
    name is Shawn Ryan; I am a member of the Writers Guild of America,
    West, Inc. (WGAW) and a working television writer for the past 25
    years.
        WGAW is a labor organization that represents more than 8,000
    professional writers of film, television and online video programming.
    Guild members write feature films, dramas and comedies for broadcast,
    cable and pay TV networks, local news, documentary programs and the
    original series that are now available online through services such as
    Netflix, Amazon, Hulu and Crackle. Virtually all of the entertainment
    programming and a significant portion of news programming seen on
    television and in film are written by WGAW members and the members of
    our affiliate, Writers Guild of America, East (jointly, ``WGA'').
        Turn on a television today and the amount of original content
    offered has never been more plentiful. Broadcast networks, basic cable
    networks and pay television channels all offer original programming,
    year round. Dramas and comedies, the primary work of Guild members, can
    be found on almost three dozen of these networks. Viewers have never
    had more control over what they watch. Using digital video recorders
    (DVRs), video on demand (VOD) and online streaming, consumers can watch
    almost any program at almost any time. Television is not even confined
    to the TV set anymore. Tablets and smartphones have become portable
    televisions and online video has expanded the definition of television
    programming. Consumers can stream thousands of television episodes on
    Hulu, Netflix and Amazon Prime and now these sites have begun to
    program their own original comedy and dramas series, adding much needed
    new competition.
        But at odds with this proliferation of outlets is a disturbing
    truth about American media. It is controlled by only a handful of
    companies, formed through two decades of vertical and horizontal
    integration. These companies--CBS, Comcast-NBCU, Disney, Fox, Time
    Warner and Viacom--own the television networks, the studios and almost
    all of the scripted content that is available on television and in
    movie theaters. While the number of outlets has exploded, the number of
    people deciding what Americans can watch has contracted. The market of
    multichannel video programming distributors (MVPDs) is even more
    concentrated, with four companies controlling two-thirds of the
    market.\1\ Through monopoly power, these large corporations profit by
    underpaying those who are actually responsible for content creation and
    by overcharging consumers who have few alternative video choices.
    ---------------------------------------------------------------------------
        \1\ SNL Kagan, ``U.S. Multichannel Industry Benchmarks,'' 2013 and
    ``U.S. Cable Subscriber Highlights,'' 12/13Q, http://www.snl.com.
    ---------------------------------------------------------------------------
        TV comedies and dramas, the programs that Guild members create, are
    an integral part of American culture. Writers are the custodians of
    this uniquely American art form, and in that capacity I am here today
    to talk about the choice we face as a society. The addition of Internet
    distribution has made possible once again a media landscape that more
    closely reflects our Nation's ideals: one of a free market in which the
    American public, not a few powerful gatekeepers, decides what content
    it wants to watch. If the open Internet is preserved, if competition is
    enhanced, and if the media companies are restrained in their efforts to
    monopolize, then diverse and independent content will flourish. But to
    fulfill this promise requires action: we must have strong Net
    Neutrality rules, effective antitrust enforcement, and legislation that
    both expands competition and reins in discriminatory Internet Service
    Provider (ISP) practices, such as paid prioritization and data caps
    that apply only to unaffiliated video content.
    Television
        When I began in the television business, there were only four
    broadcast networks airing original scripted programming. Ironically, in
    that world of few outlets, the media business was far more competitive
    than it is today. Because of the Federal Communication Commission's
    Financial Interest and Syndication Rules (Fin-Syn), the networks were
    not allowed to own the content they aired in primetime. The rules were
    designed to serve the public interest by increasing viewpoint diversity
    and competition in program supply. The result was a thriving
    independent production sector. In 1989, 76 percent of the Fall
    primetime schedule on the broadcast networks was independently
    produced. This was a heyday for television writers as studios competed
    for their services. And, because the networks were prohibited from
    owning this content, writers and independent producers had more control
    over content.
        When Diane English, the creator of Murphy Brown, first pitched the
    show to CBS, the network did not want a main character who was a
    recovering alcoholic returning from rehab. The network, instead, wanted
    to soften the storyline by having Brown return from a spa. Because CBS
    couldn't own the show, English and her producing partners could have
    taken the project elsewhere rather than compromise its integrity. The
    result of that power--the product of a competitive market for content--
    was that CBS acquiesced and English got to make the show she wanted and
    the one the public loved. The Fin-Syn rules attenuated the power over
    media granted to the broadcast networks by virtue of their control of
    the airwaves. Television programming that resulted from the separation
    between networks and studios promoted a diversity of voices and
    viewpoints.
        But with the advent of cable, the broadcast networks successfully
    argued for the repeal of the Fin-Syn Rules, claiming the regulations
    were no longer necessary to ensure competition. The decades that
    followed saw consolidation on an unprecedented scale. It began with
    Viacom's 1994 purchase of Paramount and the subsequent merger in 1999
    with CBS, and continued with Disney's acquisition of Capital Cities/ABC
    in 1995, Time Warner's purchase of Turner Broadcasting in 1996, and
    NBC's combination with Universal in 2003 and acquisition by Comcast in
    2010.\2\ At the same time, the broadcast networks used retransmission
    consent to gain control of the basic cable market, requiring carriage
    of basic cable networks they owned as a condition for local station
    retransmission. The product of this consolidation is a basic cable
    market where five companies account for 74 percent of basic cable
    viewers.\3\
    ---------------------------------------------------------------------------
        \2\ CBS and Viacom split in 2005 with Paramount film production and
    distribution remaining with Viacom and Paramount television production
    with CBS; both remain controlled by Sumner Redstone through National
    Amusements.
        \3\ WGAW Analysis of Nielsen data. Average P2+ viewers in
    primetime, 2013.
    ---------------------------------------------------------------------------
        In today's consolidated market, independent programming has been
    all but eliminated. According to a WGAW analysis of the broadcast
    network schedules, only 10 percent of the 2013 Fall primetime schedule
    was independently produced, almost all of which was reality
    television.\4\ Basic cable networks air a similarly anemic proportion
    of independent programming. Only 15 percent of basic cable comedies and
    dramas in the 2012-2013 season were independently produced. The decline
    in independent programming has reduced the number of employers for
    writers. In 1989, 89 percent of TV writing jobs came from independent
    producers. By 2013, the figure had dropped to only 25 percent.\5\
    ---------------------------------------------------------------------------
        \4\ WGAW defines independent producers as studios or production
    companies that are not owned or affiliated with a major broadcast or
    cable network or an MVPD provider. Such a definition is essential
    because it exposes the true amount of programming that reaches the air
    without the market power or guaranteed distribution provided by
    vertical integration.
        \5\ These figures include all broadcast, cable and pay TV
    programming written by WGAW members, not just prime time.
    ---------------------------------------------------------------------------
        This excessive concentration has benefitted the bottom lines of
    these Fortune 500 companies at the expense of actual content creators.
    With tight control over both production and distribution, the
    vertically integrated media companies possess all the power as
    employers of talent. To be hired on a television writing staff often
    requires writers to give the employer an exclusive first look on any
    idea they may have. Writers, who are the R&D of this industry, bear all
    the risk of developing new creative works while the media companies,
    through their control of distribution, reap the rewards. If a
    television series creator and a network experience creative
    differences, it is the writer who is replaced, not the network.
    Consumers fare no better in this equation as monopoly power restricts
    creative expression, limits content choices and drives up prices.
        In my career I have had the opportunity to work on a series made by
    a studio not vertically integrated with the network which it aired on.
    I served as executive producer on a television series called The Unit,
    a drama about American special forces soldiers and the families back
    home who supported them. This program was produced by Fox Television
    Studios and aired on CBS from 2006 to 2009. In 2009, the network
    cancelled The Unit and replaced it with Medium, a series produced by a
    CBS-affiliated studio that had aired on NBC for five seasons. The
    reasoning behind this decision I believe, was that CBS did not own The
    Unit and would not benefit from secondary market revenue earned by
    making additional episodes. Because the network had an ownership stake
    in Medium, it chose to air another season of that series because of a
    syndication deal that would generate additional revenue. This
    experience highlights the truth about the programming on our airwaves:
    decisions about what to air are made to advance the economic interests
    of a few large companies. The programming watched by millions of
    Americans every day, therefore, is not the product of a competitive
    market where the best ideas win out.
    Online Video
        It is into this world that Internet video distribution has now
    emerged, with the potential to restore some measure of competition in
    the marketplace for content. Until recently, much online video content
    was short-form or reuse of film and television content. While this gave
    consumers new ways to view content and expanded who could create, it
    did little to challenge media company hegemony. The game changer was
    House of Cards, a television series from an independent producer that
    debuted online. This series represented what was previously
    unimaginable: online content that rivals television in terms of
    popularity, acclaim and production value. It was followed in short
    order by the release of three more original Netflix series and two from
    Amazon. The growth of this market is sudden. Our research indicates
    that, this year, 20 original television-like dramatic series will be
    released online.\6\
    ---------------------------------------------------------------------------
        \6\ See Comments of WGAW In the Matter of Protecting and Promoting
    the Open Internet, GN Docket No. 14-28, July 15, 2014.
    ---------------------------------------------------------------------------
        Consumers have demonstrated a pent up demand for new content
    offered in new ways. The number of online videos viewed each month by
    Americans has increased from 7.2 billion in January of 2007 to 52.4
    billion in December of 2013.\7\,\8\ The segment of Americans
    who watch or download videos has grown from 69 percent of adult
    Internet users in 2009 to 78 percent in 2013.\9\ YouTube and Netflix
    now make up half of all downstream Internet traffic in North
    America.\10\ The number of people signing up for online video
    subscriptions is yet another indicator of consumer demand for new,
    innovative video offerings. Hulu Plus counts more than 6 million paying
    subscribers and Netflix has nearly 36 million customers in the
    U.S.\11\,\12\ The Interactive Advertising Bureau and Price
    Waterhouse Cooper report that advertisers spent almost $3 billion on
    online video advertising.\13\ And consumers spent another $3 billion on
    subscriptions to Netflix and Hulu Plus.\14\
    ---------------------------------------------------------------------------
        \7\ comScore, ``Primetime' U.S. Video Streaming Activity Occurs on
    Weekdays Between 5-8 P.M.'' March 21, 2007, http://www.comscore.com/
    Insights/Press-Releases/2007/03/Primetime-US-Online-Video.
        \8\ comScore, ``comScore Releases December 2013 U.S. Online Video
    Rankings,'' January 10, 2014, http://www.comscore.com/Insights/Press-
    Releases/2014/1/comScore-Releases-December-2013-US-Online-Video-
    Rankings.
        \9\ Kristen Purcell, ``Online Video 2013,'' Pew Research Center,
    October 10, 2013, http://www.pewinternet.org/2013/10/10/online-video-
    2013/.
        \10\ Sandvine, Global Internet Phenomena Report: 2H 2013, https://
    www.sandvine.com/downloads/general/global-internet-phenomena/2013/2h-
    2013-global-internet-phenomena-report.pdf. Downstream traffic refers to
    data received by Internet users.
        \11\ Mike Hopkins, ``Welcome Jenny Wall, SVP Marketing, Hulu Blog,
    May 13, 2014, http://blog.hulu.com/2014/05/13/welcome-jenny-wall-svp-
    marketing/.
        \12\ Rob Golum, ``Netflix Rises to Record as Analyst Predicts
    Viewer Gains,'' Bloomberg, July 1, 2014, http://www.bloomberg.com/news/
    2014-07-01/netflix-rises-to-record-as-analyst-predicts-viewer-
    gains.html.
        \13\ Price Waterhouse Cooper, ``IAB Internet Advertising Revenue
    Report: 2013 Full Year Results,'' April 2014, http://www.iab.net/media/
    file/IAB_Internet_Advertising_Revenue_
    Report_FY_2013.pdf and Marina Lopes, ``Videos may make up 84 percent of
    Internet traffic by 2018: Cisco,'' Reuters, June 10, 2014, http://
    www.reuters.com/article/2014/06/10/us-internet-consumers-cisco-systems-
    idUSKBN0EL15E20140610
        \14\ Netflix, Inc. Form 10-K (2013) and WGAW estimates of Hulu Plus
    subscription revenue.
    ---------------------------------------------------------------------------
        In response to this growth in demand, online platforms are making
    significant investments in original programming. Netflix spent $100
    million on the first two seasons of House of Cards.\15\ It is estimated
    that Netflix will spend $400 million on original series in 2014. Amazon
    reportedly will spend as much as $500 million.\16\ Hulu has committed
    to increasing the number of original shows on its service with six new
    series scheduled to debut in 2014. More online platforms are entering
    the original video market with Yahoo, Xbox and Playstation set to
    become the next providers to offer TV-length series from professional
    writers.\17\
    ---------------------------------------------------------------------------
        \15\ Brad Reed, ``Netflix has already recouped its $100 million
    House of Cards investment,'' BGR.com, April 23, 2013, http://bgr.com/
    2013/04/23/netflix-subscriber-growth-analysis-459720/.
        \16\ Bookman, Samantha. ``A closer look at the billions of dollars
    Netflix, Amazon and Hulu are spending on original content.''
    FierceOnlineVideo, June 4, 2014. Available at http://
    www.fierceonlinevideo.com/special-reports/closer-look-billions-dollars-
    netflix-amazon-and-hulu-are-spending-original.
        \17\ Nellie Andreeva, ``XBox Develops Pro Skater Comedy Series,''
    Deadline Hollywood, December 6, 2013, http://www.deadline.com/2013/12/
    xbox-develops-pro-skaters-comedy-series/, and Marc Graser, ``Microsoft
    to Launch First Original Shows on Xbox in Early 2014,'' Variety,
    December 13, 2013 http://variety.com/2013/digital/news/microsoft-to-
    launch-first-original-shows-on-xbox-in-early-2014-1200953110/#, and
    Nellie Andreeva, ``Xbox Developing 1990s Music Series Based on Rapper
    Nas' Life,'' Deadline Hollywood, February 11, 2014, http://
    www.deadline.com/2014/02/xbox-developing-1990s-comedy-series-based-on-
    rapper-nas-life/, and Bryan Bishop, ``Sony's first original TV series
    for Playstation will be `Powers,' '' The Verge, March 19, 2014, http://
    www.theverge.com/2014/3/19/5527878/sonys-first-original-tv-series-for-
    the-playstation-will-be-powers, and Douglas MacMillan, ``Yahoo Bets on
    Two New Web Comedy Series,'' Wall Street Journal, April 28, 2014,
    http://blogs.wsj.com/digits/2014/04/28/yahoo-bets-on-two-new-web-
    comedy-series/.
    ---------------------------------------------------------------------------
        Much of the original content produced for these new outlets comes
    from independent producers, including Media Rights Capital, Lionsgate,
    Sony and Gaumont International Television. Online platforms have
    created much needed new space for independent producers, which have
    demonstrated a willingness to explore innovative formats and subjects.
        As a result of new online video services, more than two hundred
    professional writers have worked on original online video programs,
    generating almost $10 million in income. Writers have also benefited
    from services that offer consumers online availability of television
    series and feature films. Millions of consumers visit Hulu each month
    to catch up on recent television episodes. Subscription services such
    as Netflix and Amazon Prime offer hundreds of complete television
    series and movies for an affordable monthly price. Amazon and iTunes
    also offer consumers the ability to rent or purchase individual titles.
    Writers have earned almost $70 million in residual income from online
    services licensing or selling the content they wrote.
        But the promise of vibrant video competition is threatened by
    incumbent control of distribution. Our nation's largest ISPs are also
    MVPDs, offering cable television service. These companies, which
    include Comcast, Time Warner Cable and AT&T, have both the means and
    incentive to stifle emerging online video alternatives. Online video
    services such as Netflix and Amazon do not own distribution facilities
    and, as such, must rely on ISPs to reach consumers. What's more,
    competition is extremely limited in the Internet service market: two-
    thirds of U.S. households have access to only one or two ISPs with
    service fast enough to stream video.\18\ ISPs, as a result, have
    tremendous power as content gatekeepers. With this power ISPs intend to
    erect tollbooths and arbitrarily decide what to charge for access.
    Comcast, for example, has already demonstrated how it will use such
    power--by instituting data caps that exempt its own content and
    allowing interconnection ports to become congested in order to demand
    compensation from online video competitors, as the company recently did
    with Netflix.\19\ AT&T has come out in favor of paid prioritization. If
    Comcast is allowed to acquire Time Warner Cable and AT&T is allowed to
    acquire DIRECTV, two companies will control more than half of the MVPD
    market and half of the wired Internet access market.\20\ They will
    undoubtedly use their control to foreclose online competition, harming
    content creators and viewers alike.
    ---------------------------------------------------------------------------
        \18\ FCC, Industry Analysis and Technology Division, Wireline
    Competition Bureau, Internet Access Services: Status as of December 31,
    2012, December 2013, p 9.
        \19\ Christopher Libertelli, Vice President, Global Public Policy,
    Netflix, Inc., ``Letter to Senator Al Franken,'' April 23, 2014.
        \20\ Leichtman Research Group, ``2.6 Million Added Broadband from
    Top Cable and Telephone Companies in 2013,'' March 17, 2014, http://
    www.leichtmanresearch.com/press/031714
    release.html. Subscriber information from company filings and SNL
    Kagan.
    ---------------------------------------------------------------------------
    The Future of Video
        Without the necessary interventions to ensure that the free market
    works as intended, the future of video is all too predictable. In this
    industry, every time a new platform has emerged that promises to
    enhance competition and choice, the response of incumbents has been to
    engulf and devour. Comcast, which was allowed to buy NBC Universal, now
    wants to add Time Warner Cable to its media stable. AT&T has its sights
    set on DIRECTV, and at the same time, they jointly advocate for the
    weakest possible Net Neutrality rules.
        But what is good for these companies is not necessarily good for
    society. We need a video marketplace that more closely embodies the
    American values of free speech, fair competition and the rewarding of
    creativity and innovation. To protect nascent online video competition
    and enhance consumer choice, we must enact strong Net Neutrality rules.
    The Internet is an information highway, and just as Congress does not
    allow a handful of companies to erect tollbooths on our Nation's actual
    highways, it cannot allow a few ISPs to set arbitrary rates and decide
    which businesses, video providers or political organizations can have
    prioritized delivery and which are relegated to a slow lane. Such power
    would allow ISPs to strangle innovation in the cradle. Can we really
    expect the next Netflix, Amazon or Crackle to emerge under these
    circumstances? Net Neutrality rules, therefore, must ban paid
    prioritization and other discriminatory practices that favor content
    affiliated with an ISP, as Chairman Rockefeller's Consumer Choice in
    Online Video Act would do. We should also, as Chairman Rockefeller's
    bill proposes, expand the definition of an MVPD to include providers
    that do not own distribution facilities, enabling new online video
    offerings.
        The FCC and the Justice Department should block both the Comcast-
    Time Warner Cable and the AT&T-DIRECTV mergers. There is a fundamental
    political and economic question raised by mergers, concentration and
    the resulting monopoly power. Are they good for society or not? The
    answer in economic theory is a resounding no. Every economic textbook
    makes clear that the result is a misallocation of resources and an
    unfair distribution of income. So why do we, as a society, allow
    corporations to make arguments about merger effects that contradict
    economic theory?
        What will the result be of further mergers and market
    concentration? Writers will be paid less to create and innovate, even
    though our national political rhetoric exalts the importance of
    creators and innovators. And, consumers will pay more, just as economic
    theory and history have made clear that they will.
        This is the quintessential political and economic question for
    America in the 21st Century: Will we continue to allow unchecked
    concentrations of power that result in a widening gulf of income and
    wealth? Or, will we seize the opportunity to say no? I hope we will
    serve the interests of the many rather than the few, as classic
    economic theory suggests we should, by stopping these mergers and by
    keeping the Internet free and open.

        The Chairman. Thank you, sir, very much. And finally, Gene
    Kimmelman, President and CEO of Public Knowledge.

        STATEMENT OF GENE KIMMELMAN, PRESIDENT AND CEO, PUBLIC
                               KNOWLEDGE

        Mr. Kimmelman. Thank you, Mr. Chairman, Senator Thune,
    members of the Committee. On behalf of Public Knowledge, a non-
    profit that promotes freedom of expression and an open non-
    discriminatory Internet, I appreciate the opportunity to
    testify today.
        I want to start off by thanking all of you for unanimously
    voting to protect consumers last night by passing the cell
    phone unlocking bill, which will enable consumers to unlock
    their cell phones and take them to whichever service provider
    they want. I am hoping the House will take up your legislation
    and we will have this protection for consumers in the near
    future. Wonderful to see the Senate move forward unanimously.
        Mr. Chairman, on a personal note, as you indicated your
    long service on the Committee, I am kind of hoping this is the
    last time you will haul me up here before you leave. I do not
    know for sure but I want to take a moment just to reflect back.
    Because even before you started, over here in the Russell
    Building, at a table like this, I sat before Senator Packwood
    as he tried to work with the Democrats to figure out how to
    deal with the break-up of AT&T, the old AT&T, in a bipartisan
    fashion.
        Recalling your tenure when you started and going forward, I
    remember working closely with Senator Danforth and then Senator
    Hollings as they grappled with what to do with the skyrocketing
    cable rates of an unregulated industry, and worked amazingly in
    a bipartisan fashion to actually re-regulate the industry and
    create the opening for Mr. Blum's company to actually exist,
    for the satellite industry to develop and to begin to compete.
        Then Senator Pressler grappled with the 1996 Act, and
    during all this time, Senator Markey was doing the same things
    in the House. Senator McCain, Senator Inouye were all
    wonderful, fabulous leaders. But I have to say, Senator
    Rockefeller, nobody was a bigger consumer champion than you
    have been during your time in this committee and leading this
    committee. You will be sorely missed when you retire, so we
    thank you for everything you have done.
        You picked the title of the ``tipping point,'' and I note
    that everyone has dutifully agreed in some fashion with what
    that is all about, and I am particularly happy that Mr. Cohen
    agrees because I think it is the tipping point to Comcast.
        That is where we are today, with a proposed merger that
    would put almost half of all consumer high speed broadband
    connections in the hands of one company. I think it is worthy
    of this committee's time to know what that means for all the
    wonderful things we have out there, all the wonderful companies
    that have been mentioned this afternoon, from Amazon, to
    Google, to Microsoft, to Netflix. They all have to connect
    through that broadband wire or some broadband connection.
        I give AT&T credit for trying to play catch up here. Are we
    tipping toward AT&T as well? Well, they are trying to combine a
    technology satellite they could never offer effectively, the
    broadband connection, with their own. They are going to need
    new equipment; more power to them.
        We go from four competitors to three in some markets, and
    the question is whether they can make up for it and whether
    they can actually take that on at a cost disadvantage to
    Comcast and other cable companies. Maybe. We will see, but they
    have not made that case yet.
        Are we tipping toward the next wireless merger that is
    right around the corner? Are we tipping toward a major content
    merger that there were rumors of already this morning?
        One thing we know is we are tipping toward a lot of power
    in the hands of one major cable company, and why would that
    matter? For a fundamental reason. As AT&T tries to play catch
    up, the problem is the best competitor today to the cable wire
    is the cable wire. It is called ``broadband.'' It is the other
    part of the same wire.
        With almost half of the customers in the country, why would
    that matter? Because every Amazon, every Google, every Netflix,
    everyone who wants to make that online service work will need
    interconnection with Comcast/Time Warner. Can that be
    manipulated? That would be an issue.
        Connection to their customers, the last mile, part of the
    net neutrality debate that has unfolded. Could that be
    manipulated to favor the company that owns the wire? Massive
    control in the hands of a company, the great NBC.
        These are all wonderful NBC products. It is not a problem
    for consumers to want NBC, want all the sports, all the
    regional sports. The issue is whether it costs $50, $100, $150.
        The issue is whether that choke point control inflates the
    price, blocks the innovation, prevents new players from
    reaching the customer first at all, or at a price competitive
    level, or with the incentive to continue to innovate.
        With that many customers, every programmer needs to be on
    those Comcast systems. Under whose terms and conditions?
    Comcast terms and conditions. Would Comcast want that broadband
    service to compete against its own service? Any logical
    business would not want that, would not want to be undermining
    its own core business.
        These are the dangers. These are the concerns. There may be
    more to come because Comcast started the ball rolling, and it
    appears from today's news story we do not even know where this
    will end.
        So, Mr. Chairman, I want to commend you, not just for your
    long service, but for also the shot across the bow--your
    legislation to identify for everyone on this committee and in
    the body the importance of online video competition and the
    dangers of discrimination.
        I want to conclude by reminding everyone that during your
    tenure when others were chairing, the most pro-business Senator
    that I dealt with in my tenure, Senator Danforth, led the
    charge to re-regulate, not because he wanted to, but because he
    felt there was no other choice given what cable was doing in
    1992.
        Today is a time in which I hope that strong law enforcement
    which you can help promote and support, will prevent us from
    having to go back to that kind of a solution again. But I
    appreciate your effort to identify what the issues are and
    where the Congress may need to go if that strong law
    enforcement does not actually take hold.
        Thank you so much.
        [The prepared statement of Mr. Kimmelman follows:]

           Prepared Statement of Gene Kimmelman, President and CEO,
                              Public Knowledge \1\
    ---------------------------------------------------------------------------
        \1\ Public Knowledge is a public interest nonprofit dedicated to
    the openness of the Internet and open access for consumers to lawful
    content and innovative technology. Public Knowledge has a long history
    of opposing mergers and other transactions that reduce choice and
    competition in the telecommunications sphere, including those between
    Comcast and NBCU-Universal, AT&T and T-Mobile, and Verizon and
    SpectrumCo.
    ---------------------------------------------------------------------------
        After years of suffering from enormous rate increases and poor
    service from incumbent cable providers,\2\ a vibrant broadband economy
    is just beginning to show that there can be alternatives to
    subscription television.\3\ Everything from new devices--like Roku,
    Xbox, Amazon's Fire, and AppleTV--to new video services--like Amazon
    Prime, YouTube, Netflix, and Aereo--are demonstrating that online video
    can compete with some elements of traditional cable TV.
    ---------------------------------------------------------------------------
        \2\ See Free Press, Comcast Gets Bigger, You Get Poorer, http://
    www.freepress.net/sites/default/files/resources/Free_%20Press_Comcast-
    TWC%20Infographic_Video_Price_Hikes_0
    .pdf; see also Bureau of Labor Statistics, Consumer Price Index.
        \3\ While some consumers have the option to choose between cable
    and satellite providers, very few have viable options if they wish to
    bundle both television and broadband services. At one time, wireline
    telecommunications companies appeared to be a potential competitor in
    the combined subscription TV and broadband space, but both Verizon's
    FiOS and AT&T's U-Verse are currently offered in a relatively small
    geographic area. Even if AT&T and DirecTV merged, the combined entity
    would gain only a marginally improved ability to compete with Comcast
    due to substantial labor and equipment costs related to installing new
    customer equipment of combined services. Satellite continues to lack a
    meaningful broadband option to make it a competitor to cable broadband.
    Google has only committed to a limited number of small experiments.
    Finally, mobile broadband is a complement, not a substitute.
    ---------------------------------------------------------------------------
        These new competitors may begin to help consumers avoid overpriced
    large ``tiers'' or bundles of channels, many of which force customers
    to purchase access to channels they do not want simply to access the
    channels they do want.
        But while online video and connected devices are a success story,
    their competitive effect is still somewhat limited. At the moment, they
    are not driving down cable prices because anti-competitive practices
    and outdated policies have relegated them to being a supplement to
    cable and satellite, not a replacement. Incumbent providers control
    both the content and the infrastructure that new competitors need to
    provide service to viewers. Incumbents either control video content
    outright or are able to use most-favored nation (MFN) contracts to
    limit the independent content that can appear on online services.
    Online video is often tied to a cable subscription--for instance, it's
    impossible to pay HBO directly for an HBO Go subscription; viewers must
    first pay for an entire pay TV package before adding HBO. Incumbents
    can use data caps and, possibly, interconnection deals to disadvantage
    online video as a whole. Incumbents even control the devices people can
    use with their TVs--for example, by only supporting their proprietary
    set-top boxes, or by failing to ``authenticate'' certain applications
    on third-party devices.\4\
    ---------------------------------------------------------------------------
        \4\ Certain online video (e.g., ``TV Everywhere'') is only
    available to customers of traditional pay TV providers. This alone
    makes it a supplement to, rather than competitor to, pay TV.
    Compounding this, it is only available through apps that the customer's
    pay TV provider has specifically white-listed, or ``authenticated.''
    This means, for example, a customer of one pay TV provider might be
    able to watch online video on an Apple TV and a web browser but not a
    Roku or a game console. It might be the opposite for customers of
    another pay TV provider. This is not a technological limitation; it is
    solely in a pay TV provider's discretion to allow or not allow its
    customers to use particular devices for particular content. This has
    competitive implications.
    ---------------------------------------------------------------------------
        New video services and their investors are also carefully watching
    the national policy debate over maintaining strong rules to protect an
    open Internet, which they need to thrive. A new wave of broadband and
    media company mergers threatens to further limit the few choices
    consumers have to access the Internet, while giving just a handful of
    companies gatekeeper power over content, infrastructure, and devices.
    In a world of limited access choices, strong open Internet rules become
    dramatically more important to protect the ongoing virtuous cycle of
    investment and growth of Internet Protocol based networks.
        The current structure and dynamics of the video marketplace didn't
    happen on their own. They are the result of decades of legislative and
    regulatory policy choices. In order for the marketplace to realize the
    potential for competition from online video both the Congress and
    regulatory agencies must act. Public Knowledge has supported (in whole
    or part) various proposals for video reform including aspects of former
    Senator DeMint's Next Generation Television Marketplace Act in 2011 and
    Senator Rockefeller's Consumer Choice in Online Video Act at the end of
    last year. We are also encouraged by the bipartisan approach that
    Senators Rockefeller and Thune have taken to approaching video reform
    issues by jointly asking for public comment from stakeholders. It is
    through the hard work of policy making that we can provide online video
    creators, investors, and consumers with the certainty needed to build
    greater competition.
    The Dangerous Wave of Consolidation
        The current proposed Comcast-Time Warner Cable merger and the AT&T-
    DirecTV merger have placed the issue of the future of the video
    marketplace squarely in front of the Federal Communications Commission
    (FCC) and the Department of Justice (DOJ). American consumers are
    watching as these merger proposals foreshadow even greater mergers and
    consolidation to come, in order for the few existing broadband and
    video distributors to match the market power these mergers represent.
        Public Knowledge believes the proposed acquisition of Time Warner
    Cable, the Nation's second largest cable company, by Comcast, the
    Nation's largest cable company and owner of all NBCU content, will
    threaten the viability of nascent competitors and endanger the
    emergence of innovative new video and other types of services delivered
    over the Internet. The proposed transaction is inconsistent with
    antitrust policy, the goals of the Communications Act, and the broader
    public interest. Therefore, it should not be approved.\5\
    ---------------------------------------------------------------------------
        \5\ Public Knowledge testified in fuller detail on the specific
    statistics and market concerns around the Comcast-Time Warner Cable
    merger in a hearing specifically on that merger before the Senate
    Judiciary Committee, April 9, 2014.
    ---------------------------------------------------------------------------
        As a result of the merger, Comcast will control nearly 50 percent
    of high speed Internet access in this country, over 30 percent of
    Multi-Channel Video Programming Distributor (MVPD) subscribers and
    almost 60 percent of cable subscribers.\6\ Comcast will also have a
    significant presence in 16 out of 20 of the largest DMAs in the
    country.\7\ This unprecedented accumulation of market power, combined
    with Comcast's vertical integration into content, creates the incentive
    and enormous leverage for Comcast to:
    ---------------------------------------------------------------------------
        \6\ Mark Cooper, Buyer and Bottleneck Market Power Make the
    Comcast-Time Warner Merger ``Unapprovable'', Consumer Federation of
    America, at 6 (Apr. 2014), available at http://www.consumerfed.org/
    pdfs/CFA-Comcast-TW-Merger-Analysis.pdf.
        \7\ Filing by Comcast Corporation, SEC File No. 001-32871, at 5
    (Feb. 13, 2014), available at http://www.sec.gov/Archives/edgar/data/
    1166691/000095010314001082/dp44005_425-it.htm (``Comcast SEC Filing'').

      (1)  stifle slowly emerging competition from rivals such as Netflix
            and Amazon that require high speed Internet access to deliver
            quality service to their customers, thwarting not only
            competition from existing rivals but discouraging investment in
    ---------------------------------------------------------------------------
            new innovative services delivered over the Internet;

      (2)  slow the pace and dictate the direction of equipment, device,
            and service innovation to lock in maximum revenue for Comcast's
            own infrastructure and business model;

      (3)  pay content suppliers less than the market value of their
            products and services, driving up the cost of programming to
            other distributors and increasing prices to consumers;

      (4)  artificially raise the prices of Comcast-owned programming to
            Comcast rivals hampering their ability to compete and raising
            prices to consumers; and

      (5)  position itself as the dominant gatekeeper for all new services
            (both video and non-video) that rely on fast, reliable
            broadband connections to reach customers.

        The Department of Justice (DOJ) recognized the competitive dangers
    inherent in Comcast's vertical integration into content with its merger
    with NBC-Universal:

            Comcast has an incentive to encumber, through its control of
            the [Joint Venture], the development of nascent distribution
            technologies and the business models that underlie them by
            denying OVDs access to NBCU content or substantially increasing
            the cost of obtaining such content. As a result, Comcast will
            face less competitive pressure to innovate, and the future
            evolution of OVDs will likely be muted. Comcast's incentives
            and ability to raise the cost of or deny NBCU programming to
            its distribution rivals, especially OVDs, will lessen
            competition in video programming distribution.\8\
    ---------------------------------------------------------------------------
        \8\ United States v. Comcast, Case No. 11-cv-00106, Compl. at  54
    (D.D.C. Jan 18, 2011), available at http://www.justice.gov/atr/cases/
    f266100/266164.htm.

        That transaction proceeded after Comcast committed not to unfairly
    discriminate against either traditional video distributors or emerging
    online competitors. The proposed merger of Comcast and Time Warner
    Cable, however, presents competitive dangers that far exceed
    traditional regulatory policing practices. As new threats arise to
    Comcast's business interests, it has at its disposal myriad ways of
    slowing down its competitors, degrading their services, and increasing
    their costs in ways that cannot be effectively monitored and prevented.
        By expanding its customer base to control almost one-third of all
    subscription TV households in the country and almost one-half of all
    the high speed broadband customers in the U.S., Comcast would position
    itself to dictate how much consumers must pay, determine what packages
    of services customers must buy, and influence what devices people can
    use to receive the type of video content they want. Through vertical
    control of NBCU's ``must have programming'' and its enormous customer
    base, a combined Comcast-Time Warner Cable could become the dominant
    Internet gatekeeper and choke point for innovative video services and
    products, inflating prices and preventing millions of consumers from
    receiving these services and products at competitive market prices.\9\
    ---------------------------------------------------------------------------
        \9\ See Cooper, supra note 4, at 6 (HHI analysis showing Comcast-
    Time Warner Cable firm share of True Broadband at 49 percent, Wireline
    Cable of 54 percent, and MVPD of 35 percent).
    ---------------------------------------------------------------------------
        While the Comcast-Time Warner Cable merger is the more dangerous of
    the two mergers, AT&T-DirecTV raises concerns as well. AT&T and DirecTV
    claim their proposed merger may in a limited fashion enhance the
    combined company's ability to compete with Comcast and Time Warner (or
    Comcast/Time Warner) in the market for video, broadband, and voice
    bundles. Yet thus far, AT&T and DirecTV have failed to make a
    compelling case that their proposal will not harm competition or that
    it will result in significant public interest benefits.\10\ Public
    Knowledge therefore, based on the current record, recommends that the
    DOJ and FCC reject this proposed transaction.
    ---------------------------------------------------------------------------
        \10\ Testimony of John Bergmayer, Public Knowledge, U.S. House of
    Representatives Committee on the Judiciary, June 24, 2014.
    ---------------------------------------------------------------------------
    Congress Has The Power To Promote Competition
        Congress and the American public faced a marketplace challenge over
    two decades ago when satellite television became a viable competitor.
    The technology was there, but the existing regulations did not allow
    for new entrants to compete with local cable monopolies. The 1992 Cable
    Act opened up the market for satellite to compete by ensuring access to
    ``must see'' programming at a reasonable rate. The benefits are evident
    today with Dish and DirecTV attracting about 34 million subscribers.
        This moment in time is similar to what we faced in 1992, but with
    greater potential for true competition. Congress and the FCC can help
    online video develop into a full competitor in three ways. First,
    Congress can clear away some of the outdated rules that slow down the
    evolution of the video marketplace. Examples of outdated rules include
    the dysfunctional retransmission consent system, as well as
    protectionist policies like the prohibition on distant signal
    importation.
        Congress should be cautious not to eliminate parts of statute that
    promote competition and choice. For example, section 629 of the
    Communications Act allows for the FCC to enforce rules that create
    innovation in set-top boxes and competition against high priced cable
    boxes. Congress and the FCC should continue to enforce the current
    CableCARD implementation of that statute while moving to a more modern
    implementation that fixes some of CableCARD's shortcomings.
        Second, Congress can extend the successful policies that protect
    providers from anticompetitive conduct to certain online providers. For
    example, if a large cable system would be prohibited by law from acting
    anti-competitively towards a satellite provider, there is no reason why
    it should be able to take the same actions against an online video
    provider. We are pleased to see a section of Senator Rockefeller's
    Consumer Choice in Online Video Act devoted to updating the program
    access rules in order to include protections for online video as a
    competitor to traditional Multichannel Video Programming Distributors
    (MVPD). This includes the requirement that television broadcasters
    negotiate with online video distributors.
        Measures such as program access and program carriage rules are
    designed to mitigate this form of market power by certain large video
    providers. These rules should be extended to online video and should
    not be repealed until effective competition develops. In light of the
    Supreme Court's Aereo decision, which found that an online video system
    such as Aereo bears an ``overwhelming likeness'' to traditional cable
    systems, it has become increasingly untenable to afford online systems
    that offer linear channels an entirely different regulatory treatment
    from traditional pay TV providers. However, Senator Rockefeller's bill
    provides an alternative and simpler approach to new technologies such
    like Aereo. This approach recognizes the obvious differences between
    cable systems and antenna rental services, legally clearing the way for
    the new distribution model to flourish.
        Third, Congress and the FCC can protect Internet openness and
    prevent discriminatory billing practices that hold back online video.
    In addition to supporting the FCC in preserving Open Internet rules,
    Congress should encourage the FCC to examine whether discriminatory
    data caps hold back online video competition. This will increase
    competition, meaning lower prices, better services, and more
    flexibility and control for consumers.
    Conclusion
        The technology exists that could eliminate the physical, bottleneck
    control of video distribution that has existed in various forms for
    decades. If policymakers have the courage to reject anti-competitive
    merges, and take some simple steps to facilitate the development of
    competitive online video now, Congress may eventually be able to
    disengage from regulations that were designed to counter the effects of
    this bottleneck control. However, if we fail to do this, it is likely
    that incumbents will be able to continue to shape the development of
    the video market and extend their current dominance indefinitely. While
    the Internet provides grounds for hope that the future of video will be
    better for consumers, policymakers have to make the policy choices to
    create this reality.

        The Chairman. Thank you, sir, very much. That was a heck of
    a year, was it not, 1992? That was a brawl.
        I thank you for your comments and your wisdom, and I am
    going to proceed to the first question. We have very, very good
    people here. We will try to make it 5 minutes or 6 minutes.
        Let me start with you, sir. This is about the value of
    online video. I know DISH is in the process of developing an
    online cable service that would compete directly with
    traditional pay TV offerings.
        Your company has acquired some programming from ABC-Disney,
    and I understand you are negotiating similar carriage
    arrangements with other cable networks.
        Now, that is easily said. However, it is an extraordinary
    difficult process, where leverage becomes everything.
        So, my question to you is why has DISH chosen to develop an
    online video platform? What are the biggest challenges to the
    development of that platform, and are there elements of my
    online video legislation that if enacted would help alleviate
    these challenges for a DISH network? In other words, an
    entirely self serving question.
        [Laughter.]
        Mr. Blum. Chairman Rockefeller, DISH recognizes that the
    younger generation does not want to have to spend $120 for 500
    channels, as you note. They want a smaller package. They want a
    less expensive package.
        DISH and our founder, Charlie Ergen, spent 6 months
    negotiating with Disney for this ground-breaking deal.
        We are the first to get the rights to stream ESPN live, and
    you are correct, we have to get other rights from other
    programmers in order to be able to offer that package, and we
    hope to launch the service later this year, and in many ways,
    it will compete against traditional MVPD providers because it
    is going to be an Internet only, leaner, cheaper package. We
    think that is a good thing for consumers.
        The threat and the challenge is when we launch that product
    it will compete with Comcast's XFINITY product and their online
    offerings. Comcast does not necessarily want us to succeed
    because we are competitors.
        The problem is they control post-merger almost 50 percent
    of the broadband pipe. Our great over-the-top service when we
    launch it will pass over their pipe, and we are very concerned
    that a combined Comcast/Time Warner will have an incentive and
    ability to stifle our service, to slow it down, to block it, to
    make it jittery, so our customers do not like it. That is bad
    for consumers and that is bad for competition.
        In terms of your bill, Senator Rockefeller, there is a lot
    in it that we like. The recognition of the growing importance
    of over-the-top, that is something that two years ago people
    were not talking about. You have been a leader on that issue,
    and your engagement on these issues and hopefully work with
    Senator Thune is enormously important.
        Congress has an opportunity to encourage innovation, to
    promote competition, and to protect consumers, and we hope they
    do so.
        The Chairman. I thank you, sir. This next question is for
    you also, and for Mr. Kimmelman, and it is about access to
    content.
        When it comes to traditional television, the FCC has long
    had rules to prevent certain anticompetitive activity between
    cable and satellite companies, and why is it the 1992 Cable Act
    comes to mind.
        [Laughter.]
        The Chairman. With respect to online video, in its approval
    of the Comcast/NBC Universal merger several years ago, the FCC
    required Comcast to offer its video programming to certain
    online video distributors on the same terms and the same
    conditions that would be available to traditional pay TV
    providers.
        So, my question to you, and first to Mr. Kimmelman, is is
    there evidence that companies are in fact locking up content,
    or demanding exclusive deals as a condition of carriage on
    line, i.e., leverage? Have the Comcast/NBC Universal merger
    conditions been effective, and how do you react to reports even
    today suggesting a merger st between two large cable
    programmers, to wit, 21 Century Fox and Time Warner, would have
    enormous consequences?
        So, I would ask each of you.
        Mr. Blum. So, Senator Rockefeller, I am not aware of
    Comcast granting over-the-top rights to anyone yet. I can say
    we are in current negotiations with NBC and we hope that we can
    get those rights.
        As you noted in your opening remarks, often times promises
    of a merger do not come to fruition, and often times conditions
    that were put in place to remedy the harms of the proposed
    merger do not work.
        I can point to one condition as part of the Comcast/CNBC
    deal where Bloomberg, a competitor to Comcast/CNBC got a
    condition where Comcast agreed to put the Bloomberg channel
    next to CNBC. It took 2 years of litigation for that to happen,
    and when we are talking about over-the-top rights and the choke
    point that Comcast will have over the pipe, the Bloomberg
    dispute is so simple, broadband and all the ways they could
    engage in anticompetitive behavior are complex. It is a cold
    comfort, you have the best conditions in the world. I do not
    think that is going to be able to ameliorate the harm of their
    anticompetitive behavior post-merger.
        Mr. Kimmelman. Mr. Chairman, the announcement this morning
    that there could be discussions of another transaction, I
    think, really indicates the nature of the problem in this
    marketplace, and it is not a problem that antitrust enforcers
    can address directly. They have to accept the business model as
    is, you know, short of finding anticompetitive behavior within
    it.
        We are in an arms' race. It is transmission companies bulk
    up, and then no surprise, content companies would want to bulk
    up.
        The problem is the consumer is squeezed. The consumer is
    between a rock and a hard place because that is just price
    increases. If the company is allowed to own the content and
    then charge others the same price, they can charge themselves a
    high price, they can charge their customers a high price, but
    if they charge DISH or DIRECTV the high price, too, everybody
    is paying the high price. It is passed on to the consumer.
        So, there is no competition there for lowering the price to
    consumers unless you can use something like broadband with an
    opportunity to unbundle and pick what you want, just what you
    want, to at least be able to have more choices.
        So, I think the problem is now a new problem. At the time
    of the 1992 Act, satellite could not get the programming at
    all, and Congress stepped in and said you have to make it
    available, and we saw investment flow and an enormous
    explosion, and it was the explosion of that satellite product
    that led to digital, which led to cable moving to digital, and
    all the benefits of competition.
        But now we are kind of stuck again because the cost of the
    content keeps going up, and if you just pass it along to
    everybody, you are not solving the problem for the consumer.
        So, it is a question of whether you can do something to
    break that cycle. I think your legislation identifies the need
    to prevent discrimination. The question is whether enforcement
    of the law, avoiding anticompetitive transactions that
    consolidate beyond a reasonable level, can further that goal.
        But we are in a bad place and it is important for the
    Congress to consider this, that it is not just what you charge
    someone else now, if you are charging yourself, if that is just
    a higher price, everybody is paying a higher price. It does not
    solve the problem.
        That is why I said it is not that Comcast will not offer
    wonderful things. XFINITY has wonderful services. I commend Mr.
    Cohen and his company. The prices are high. Anyone trying to
    buy his product is going to pay high prices, too.
        That is why the issue is whether you can actually use
    broadband to break that choke hold and give people at least
    more choices to pick what they want.
        The Chairman. I thank you, sir. My time is up, and I
    recognize my distinguished Ranking Member, Senator Thune.
        Senator Thune. Thank you, Mr. Chairman. Mr. Stankey, my
    understanding is that South Dakota will benefit from AT&T's
    commitment to deploy fixed wireless local loop service to 13
    million customer locations across the country.
        Can you please tell me a little bit more about the specific
    plans for this new service, and perhaps, for instance, how soon
    those services could be deployed after the merger closes, and
    what kinds of speeds customers might expect?
        Mr. Stankey. Certainly. South Dakota, specifically,
    probably in the neighborhood of 135,000 new customers would get
    access to fixed wireless local loop.
        The technology will deliver a service of 15 to 20 megabits
    per second, and in these rural and underserved areas, that is a
    meaningful step forward, and as I mentioned earlier, 20 percent
    of these customers only have satellite based broadband service
    today, and 27 percent only have a single broadband provider, so
    this will be a nice step forward for them.
        This is a different technology than our mobile technology.
    It is specific spectrum that we dedicate to a fixed solution.
    It requires us to do unique things on the cell tower to put in
    special antennas that transmit in the manner that achieves
    those higher speeds, and it requires us to do unique work at
    the customer's premise or location to put a fixed antenna in to
    achieve those speeds and those capabilities.
        It is a professional installation, and one of the benefits
    of doing this in the combination of this merger is that as you
    know, rural customers often times have an affinity for
    satellite television, and when we are out installing a
    satellite dish, we can now do the work to enable the broadband
    connection at the same time, on one dispatch, consolidated on
    one bill.
        We think that is a good customer experience, and obviously
    it is attractive because it puts more broadband in the market
    and opens up opportunities for over-the-top distribution into
    these customers that really do not have that kind of a robust
    solution today.
        Senator Thune. How soon might that come along?
        Mr. Stankey. We will start activity on actually
    constructing it the year the transaction closes. We are
    expecting that will be some time next year. It will take us a
    full 2 years to complete the build-out after that point. So, it
    will take some time to get it done, and we will introduce it in
    a rolling fashion. It will not be all one state at one time,
    but it will roll through the state.
        Senator Thune. Professor Hurwitz, the closing thought from
    your testimony is, and I quote, ``We should be thinking about
    how to allow traditional television to operate more like online
    video,'' unquote.
        So, when Chairman Rockefeller retires and he is sitting
    back and watching a few of his cable favorites, like Fox News.
        [Laughter.]
        Senator Thune. And MTV.
        [Laughter.]
        Senator Thune. I assume the goal is to get more options,
    more opportunities available. Could you explain that statement
    and offer thoughts about what role this committee and Congress
    might play in that pursuit?
        Mr. Hurwitz. Absolutely. This ties into the beginning of my
    testimony where I note the continuing dominance of the linear
    channel model, and this is an area--I note Mr. Kimmelman just
    complimented Comcast's XFINITY and X1 platform. I am going to
    do the same.
        This is an area where Comcast has made some really
    interesting innovations, I think, to try and move the
    consumer's viewing experience on the MVPD platform away from
    channel 11, channel 12, channel 13, what are the neighborhoods,
    does it matter if CNBC and Bloomberg are right next to each
    other? No. It matters that you can go to your remote control,
    you can go to your computer, your device, and you can see the
    content of whatever you want to see.
        There is a lot of implicit market power, a lot of implicit
    regulatory ossification and structure built into the
    traditional linear channel model. That is something that we are
    seeing consumers able to escape from in the online world.
        It is something that creates a lot of opportunity for
    programmers, for writers and creators, and is something that I
    think this committee and Congress should do everything it can
    to enable and promote.
        Senator Thune. Mr. Kimmelman, do you believe Americans have
    meaningful choice today for video services, and if the answer
    to that question is no, what is your definition of what
    ``meaningful choice'' is?
        Mr. Kimmelman. I think they have more choices than they
    have had before at higher price points. I think we have not
    been able to succeed at getting the kind of full package
    choices or the opposite, the kind of unbundled choices.
        You cannot just buy Netflix without buying the broadband
    connection first, and you cannot get a lot of individual
    channels you may want, even if you just want five plus Netflix,
    without paying a large price.
        So, the issue is not choice in the sense of is it available
    in any form at all, for most people it is, although I commend
    the effort to do more in rural America because that is clearly
    where the choices are more limited for broadband, not as much
    for video.
        What we do not have is the broader individualized selection
    driven by the consumer. It is driven by a packager right now,
    and that is our big problem.
        Senator Thune. OK. Mr. Chairman, we have lots of people who
    want to ask questions, so I will yield back my time. Thank you.
        The Chairman. Thank you, Senator Thune. Senator Booker?

                    STATEMENT OF HON. CORY BOOKER,
                      U.S. SENATOR FROM NEW JERSEY

        Senator Booker. Thank you very much, Mr. Chairman and
    Ranking Member. I just want to jump right in in the limited
    time that I have.
        Comcast has stated and advertised that there should not be
    any broadband concerns when it comes to the merger because
    Comcast is willing to agree and abide by the FCC's former net
    neutrality rules.
        Mr. Kimmelman, can I just ask you real quick, what is your
    response to this? I have some concerns about issues related to
    Internet peering and interconnection. In many ways, this is a
    way to create fast lanes de facto, what I consider de facto
    ways that people can pay for better service or better
    connectivity.
        I would love to hear sort of your thoughts on that, and I
    would like Mr. Blum and DISH also to weigh in on that as you
    look at over-the-top cable service.
        We will start with Mr. Kimmelman.
        Mr. Kimmelman. Thank you, Senator Booker. I commend
    Comcast's commitment, as well as AT&Ts. I think it is a step in
    the right direction. The problem is I am not sure it is
    anywhere near enough because Mr. Cohen has already indicated
    even with those commitments, there could be certain prioritized
    services, there could be certain preferential treatments that
    he thinks are legal under the law--I am not sure exactly what
    he is referring to.
        But if we do what my organization thinks is necessary, to
    go back to a traditional non-discrimination rule under Title II
    of the Communications Act structure, we should not have to deal
    with those kinds of fast lanes and that kind of preferential
    treatment.
        It can happen on the interconnection side. If you are a
    video provider and a broadband provider, it is not particularly
    helpful to your business to have Netflix pulling a lot of
    eyeballs, or Amazon or Google's YouTube, or anyone else.
        So, there is a natural incentive, and unfortunately an
    opportunity to take advantage of that positioning of
    controlling both broadband and the video platform, and that is
    the concern here, and it is what should be looked at in terms
    of FCC and DOJ enforcement, and in terms of the broader rules
    of the road for the industry.
        Senator Booker. Thank you. Mr. Blum?
        Mr. Blum. Comcast's net neutrality commitment is not nearly
    enough to protect consumers. They have at least three choke
    points, the public Internet, interconnection, as Mr. Kimmelman
    mentioned, and managed services.
        Those last two choke points are complex, not easy to
    understand, but they are just as threatening to competition as
    the open Internet portion of it.
        On interconnection, Senator Booker, Comcast has said there
    is so much competition amongst these content delivery networks,
    you know, competition is good and nothing bad will happen from
    that, but the reality is all those content delivery networks,
    they are delivering Netflix content, DISH content, to the point
    of interconnection----
        Senator Booker. So, Mr. Blum, let me cut you off because I
    want to try to get another question in, but I would be remiss,
    David, if you want to just say something really quick.
        Mr. Cohen. I will try to do it really quick. Let me just
    say I think all this reasoning that you have heard on this just
    really misses the point about the way in which the Internet
    works.
        So, let me talk about interconnection really briefly first.
    Totally different market than broadband market share. There are
    dozens of content delivery networks and transit providers who
    interconnect Internet edge provider content to Comcast and many
    other companies.
        So, if you want to interconnect to our backbone, you have
    dozens of choices in a highly competitive market, where pricing
    has dropped 99 percent in the last 15 years, and there simply
    is no example anywhere of anyone not being able to----
        Senator Booker. I get that, just for my own sake, I have a
    minute left, just quickly, that is the Internet peering then?
        Mr. Cohen. That is peering and interconnection. On the DISH
    point--and there are so many misrepresentations in the DISH
    testimony, which I would love to have a chance to address if
    someone wants to let me do that.
        Senator Booker. Well, do not take----
        Mr. Cohen. On the one point, I will not do it here, the
    only point I will say is that under the 2010 Open Internet
    Order, under any Open Internet Order that is going to be put in
    place, it is absolutely crystal clear that we would be
    prohibited from blocking or degrading a DISH over-the-top
    service to our customers.
        I do not think we have the incentive to do that anyway, but
    even if you do not believe that, it is clearly legally
    prohibited and would----
        Senator Booker. I hear you. I wish I could get back to
    Internet peering and just one differentiating question, but
    just while I have the moment, I am very concerned about sort of
    independent channels that offer sort of niche services being
    squeezed out of the market as a whole.
        These are channels that serve, you know, rural audiences,
    Latino audiences, black African-American audiences, Asian-
    Americans. They are a very important part.
        So, just real quick, Mr. Cohen and Mr. Stankey, how can we
    assure this situation will not get worse when consolidation
    happens and that we are not squeezing out certain niche markets
    that are a very important part of the American cultural fabric,
    and what are you going to do to make sure that these viable
    independents have a long-term role in the video marketplace?
        Mr. Cohen. There is nothing more important for maintaining
    the future vitality of cable and diversity of voice than
    protecting these independent voices. Comcast is already the
    largest multi-channel video distributor in the country, and we
    are the most independent channel friendly.
        We carry 160 different independent channels, six out of
    every seven channels we carry is unaffiliated with Comcast. In
    the last 3 years, we have expanded carriage for 120 independent
    channels.
        We have launched five brand new independent channels since
    the NBC Universal transaction, four of which are minority owned
    and controlled, and I do not think there has been a period of 3
    years in the history of cable where four brand new minority
    owned and controlled cable channels have been launched in this
    country.
        So, we are going to stand by that commitment. We think this
    transaction is great for independent channels and independent
    programmers because of the track record that we have in
    protecting those voices and in carrying those channels.
        Senator Booker. Mr. Stankey, briefly.
        Mr. Stankey. Senator, I would echo the same. The reality is
    that the marketplace responds to what competitors do, and you
    heard Comcast describe their push in this area.
        All operators need to put relevant content out that people
    want to watch, and we have a great track record, and I know
    DIRECTV has a great track record of putting that content in
    place. I expect nothing to change post-transaction.
        If the content is something people want to watch, it will
    be out there, and further, the push on the broadband side
    allows for a lot more new programming models to emerge, and
    especially when it is content that starts to address unique and
    niche models. Some of these independents will have new models
    that will be more effective in this marketplace, and an OTT
    model, and we expect that is going to emerge going forward as
    well.
        Senator Booker. Thank you, Mr. Chairman.
        The Chairman. Thank you, Senator Booker. Senator Nelson, to
    be followed by Senator Markey, to be followed by Senator
    Heller. Senator Nelson?

                    STATEMENT OF HON. BILL NELSON,
                       U.S. SENATOR FROM FLORIDA

        Senator Nelson. In an abundance of fairness, I want to get
    some counterpoint between Mr. Kimmelman and Mr. Cohen.
        Mr. Kimmelman, you believe it is important to view this
    potential merger in the context of a broadband merger instead
    of just a TV/video merger. Tell us why, and then I want Mr.
    Cohen to give his point of view.
        Mr. Kimmelman. Well, to be clear, Senator Nelson, I believe
    that there are two separate markets and then there is a
    combined service market, and they are all relevant here.
        There is the video market, traditional video and MVPD
    service that Comcast is in the business of, and then there is
    the broadband product, which increasingly is the best
    alternative way to get something as a competitive alternative
    to the cable product because it has developed with high speed
    capacity and great ability to offer the video service.
        So, these are both important markets to look at.
        Mr. Cohen has indicated they have been willing to divest
    some properties to get down to a level of about 30 percent of
    the MVPD market, he can correct me if I am wrong, consistent
    with what were the original proposals from the FCC of a
    horizontal limit in that market.
        The problem is, and maybe it is a good problem for them,
    they have been extremely successful with their broadband
    product, it is very, very popular, and in many markets there is
    no good alternative to it, or the one that is there is much
    slower and cannot offer as good a video product, and therefore,
    they have more than 40 to 50 percent when you combine the two
    properties together of that market.
        That is a huge market share. It will be the way in which
    many content companies will want to compete against Comcast's
    product.
        Senator Nelson. OK. Let me get Mr. Cohen's response.
        Mr. Cohen. Mr. Kimmelman and I testify a lot together and
    as usual, I actually agree with some of the things he says,
    particularly on the video market, in that--I am not even going
    to address that.
        We will be below 30 percent. The D.C. Court of Appeals has
    ruled twice that having a less than 30 percent share for an
    MVPD does not present significant risk of disruption of the
    programming market. I will just leave that where it is.
        In the high speed data market, I am always reminded of one
    of my favorite expressions. I have a number of them, but one of
    them is that ``You are entitled to your own opinions but you
    are not entitled to your own facts.''
        So, let's get the facts on the table. Under current Federal
    definitions of broadband, according to data released by the FCC
    in the last month, as of June 2013, the combined Comcast/Time
    Warner Cable will control 35 percent of the fixed wire line
    broadband market, and if you factor in wireless, we will
    control 15 percent of the combined market.
        I am not going to advocate for 15 percent because I do not
    think wireless is a perfect substitute for wireline yet, but as
    you heard from Mr. Stankey, as AT&T rolls out new advanced
    wireless services in rural America and elsewhere, and he did
    not address the U-verse product which is also rolling out
    around the country, wireless is beginning to be a real
    competitor for many uses of broadband.
        So, the scare tactic of half of broadband connections is
    just not true. It may sound good but it is not true period.
        Second, in the broadband space, I am not sure what the
    relevance is of a national market share, because the fact of
    the matter is, and no one has bothered to mention this, the
    fact of the matter is Comcast and Time Warner Cable do not
    compete in a single market in America.
        This is not a washing machine manufacturer combination
    where you put two manufacturers together, they are selling in
    the national market. You used to have two competitors. Now you
    have one.
        If you want to buy broadband in New York, in Philadelphia,
    in Los Angeles and San Francisco, you do not have a choice
    today between Comcast and Time Warner Cable. You only have one
    choice, whichever one of those companies--you only have one
    choice in cable, which is whichever one of those companies is
    in your market, you can buy from them, and after this
    transaction, there is not going to be any reduction in choice
    in the broadband market in any market in America.
        And by the way, it is not that depressing a market because
    again under the current FCC definition, 99 percent of the
    households in America are located in census tracts where there
    are three or more fixed or mobile broadband providers.
        So, this is just not the woe is me market concentration
    terrible loss of choice and competition that some of the
    opponents to this transaction would like to put forth.
        Senator Nelson. Mr. Stankey, if your merger goes through,
    is the U-verse build-out going to continue in Florida and other
    states if your merger goes through?
        Mr. Stankey. We have made public commitments around how we
    are building U-verse, as I indicated. Comments I made about
    additional broadband are in addition to that. We have no
    intentions of backing off any of our other public commitments
    of what we are building, and our plans in Florida remain
    unchanged.
        Senator Nelson. And other states?
        Mr. Stankey. That is correct.
        Senator Nelson. Thank you.
        The Chairman. In my many years of service here, I have
    never found a questioner on the Committee who more skillfully
    works in the interest of the state than the inimitable Senator
    Nelson, who I dearly love.
        [Laughter.]
        The Chairman. Senator Markey?

                   STATEMENT OF HON. EDWARD MARKEY,
                    U.S. SENATOR FROM MASSACHUSETTS

        Senator Markey. That is why he keeps getting re-elected by
    overwhelming margins.
        Professor Hurwitz said earlier that you have to understand
    this involves multiple statutes implemented by multiple
    agencies to govern technologies developed in the 1960s, 1970s,
    and 1980s, according to policy goals from the 1950s, 1960s, and
    1970s.
        Just the opposite. We still have a stagnated marketplace.
    So, we created new policies in the 1990s, the 1992 Cable Act.
    We went over 200 megahertz in 1993 to create the third, fourth,
    fifth and sixth cell phone license, so that people were not
    carrying around a brick size cell phone that cost 50 cents a
    minute, and then the 1996 Telecom Act.
        And then we saw an unleashing of these technologies in the
    21st Century. There was no Hulu. There was no YouTube. There
    were no Netflix. It is the 21st century unleashing of
    technology based on 1990s policies. That is what we are
    debating here today.
        So, a kid today who is 14 thinks they have a constitutional
    right to a 50 inch screen, broadband, and a smartphone that
    they are watching at the same time. That was not possible
    before we created the new policies in the 1990s.
        So, this is a relatively recent phenomenon and it has all
    been caused by decisions that we made in the very recent past,
    and has unleashed a massive amount of competition, Darwinian in
    some ways, but deficient in others. We still do not have real
    competition on price, so consumers keep paying more and more.
        So, there is a deficiency actually in public policy because
    consumers feel they are being tipped upside down and having
    dollars shaken out of their pockets at the end of each and
    every month. So, we have to discuss that as well.
        Now we have merger mania. We have company after company
    seeking to merge with other companies all based upon what has
    been happening in the 21st century, not in the 1960s, 1970s,
    1980s, because the technologies were not there.
        So, this is a big moment for us because we now have to
    determine the extent to which we are going to allow the
    consolidation that was undone actually by the policies of the
    1990s. We had pretty much one telephone company, not that much
    cable competition, no satellite dishes at all, and a couple of
    phone companies, cell phone companies, that really were not
    providing high quality service at all.
        So, let me do the same thing you did, Senator Nelson. Let
    me say to you, Mr. Blum, I want to give you an expanded shot at
    explaining why you think this Comcast/Time Warner merger is bad
    for the marketplace, bad for consumers, bad for innovation, and
    then give Mr. Cohen a chance to come back and explain why he
    thinks it is good.
        Mr. Blum. Senator, it is really about broadband. All these
    great innovations that are happening, our attempts to enter the
    over-the-top business and Netflix's, those are wonderful things
    that are good for consumers. Those services compete with
    Comcast/Time Warner.
        The problem is they control the road which all those cars
    go on. They control the point of entry, called ``the
    interconnection.'' They control the open Internet, the right
    side of the road, and they have the ability to create super
    fast lanes for their own content, so you could have an eight
    lane highway, seven are super HOV lanes, and then all this
    great content that all of us are praising squeezed down to the
    right lane.
        That is not good for consumers and that is why we are so
    concerned that a combined Comcast/Time Warner will leverage its
    control over the pipe to the detriment of consumers.
        The notion that the FCC's broadband speeds of four megs
    down, one meg up, is sufficient to watch House of Cards in 4K,
    it is not. In order to take advantage of all these great
    services, you need a really high speed connection and you need
    a really high capacity connection.
        When Mr. Kimmelman and I talk about 50 percent under the
    control of Comcast/Time Warner, it is 50 percent control of
    high speed/high capacity.
        Senator Markey. You are saying you would have no protection
    against anticompetitive activity.
        Mr. Blum. We would not.
        Senator Markey. You would not. Let's go back to you then,
    Mr. Cohen. Can you respond to that?
        Mr. Cohen. Well, I am going to respond on a couple of
    levels. First of all, according to Netflix, which I believe is
    the producer of House of Cards, a four meg connection is
    sufficient to watch full DVD quality of an episode of House of
    Cards. In any event, it is the current FCC definition of what
    ``broadband'' is.
        Even if you move that definition to ten meg down, then 91
    percent of the people living in America live in census tracts
    where there are at least two choices of a broadband provider,
    and again, the market share at 10 meg down, after transaction,
    would be 40 percent of wireline and 20 percent of wireless. You
    have heard Mr. Stankey say the types of speeds that AT&T is
    talking about delivering wirelessly.
        There is just more competition than Mr. Blum and Mr.
    Kimmelman are willing to acknowledge, number one. Number two, I
    do not agree that we have the incentive to block any lawful use
    of our broadband pipe. It is our most important business. If we
    start blocking or degrading content, even if it is content of
    competitors, then we are going to lose customers and we are
    going to stop the growth of that business.
        So, it is just not in our business interest to do so, but
    even if you do not accept that, I do not care what the open
    Internet rules are going to look like, whether it is the 2010
    rules or whether it is new rules under Section 706 and Title I,
    or whether it is Title II, which I do not agree with and I hope
    that is not where we end up, the one thing I am confident is
    going to be included in any rules that are put in place, and
    for which Comcast has no issue and no problem, is that we are
    not going to be able to block or degrade anyone's content on
    our network, whether it is competitive with us or not.
        Senator Markey. OK, well----
        Mr. Cohen. I think the law is going to protect DISH. One
    other thing that I want to say, which is Mr. Blum keeps talking
    about how this new DISH product is going to compete with
    Comcast. It is going to compete with DISH, too. It is competing
    with their traditional service as well.
        Senator Markey. OK. I understand. So, the whole history of
    this is the incumbents trying to block competitors from getting
    access to the same consumers and degrading the quality of the
    service that the competitor can provide to the very same
    consumer by default, meaning they will stick with the
    incumbent.
        So, that is the whole history of this, since the 38 years
    that I started on the Telecommunications Committee, and I just
    want to finish up with one quick question if I can, and that is
    on municipal broadband. That would be to you, Mr. Cohen, and
    you, Mr. Stankey.
        Do either of your companies oppose municipalities being
    able to deploy their broadband in their own municipality as a
    third wire? Do you oppose that corporately, Mr. Stankey, Mr.
    Cohen?
        Mr. Cohen. Do you want to go first, John? You want me to go
    first? So, generally speaking as a company, we have serious
    questions about whether municipalities should get into the
    broadband business. Speaking personally----
        Senator Markey. But do you oppose them getting in?
        Mr. Cohen. Let me--I was in city government for six and a
    half years. I know what city government can do. I think it is a
    mistake to do it, so we will advocate at the municipal
    government level that we think this is a mistake.
        We are not--the answer is we do not oppose it. We do not
    have the right to oppose it. We have the right to advocate
    against it.
        Senator Markey. I will just say this. More competition is
    the answer for all these problems, so that Mr. Blum or Mr. Ryan
    or anyone else has more roots into the home. If we are talking
    about two, we could talk about three, if municipalities
    deployed broadband--to not do that in my opinion kind of makes
    it harder for the government then not to get in and regulate in
    order to protect.
        See, my basic philosophy, just very simply, is that
    Darwinian eye watering bone chilling competition is the answer
    to all regulation. You do not need it, but the smaller the
    number of competitors is the more regulation you need.
        Mr. Cohen. All I am going to say is that taxpayer subsidy
    of poorly run and ultimately bankrupt municipal broadband
    networks do not benefit anyone.
        Senator Markey. But if a community wants to do it, should
    they be allowed to do it?
        Mr. Cohen. They should be allowed to do it.
        Senator Markey. And do you agree with that, Mr. Stankey? If
    a community wants to deploy their own broadband system, in
    competition with AT&T, in competition with Comcast, should they
    be allowed to do that?
        Mr. Stankey. If it is an underserved community where there
    has been no private solution----
        Senator Markey. No, no, no.
        Mr. Stankey. That is what I am saying.
        Senator Markey. A community that already has two
    companies----
        Mr. Stankey. We do not believe that private companies
    should actually compete against public subsidized taxpayer cost
    of capital in that market.
        Senator Markey. Well, then we would never have more than
    two, and again, that brings back the question of more
    regulation. See, that is the conundrum that you get into.
        Mr. Stankey. We are providing Internet services in Austin
    today where we are building--we are investing today to build
    gigabit networks, in which we compete against an incumbent
    cable company, Google, that is overbuilding at this point----
        Senator Markey. I appreciate----
        Mr. Stankey.--and a second overbuilder called ``Grande
    Communications,'' and there are four in that market. So, there
    are more than two that play in these markets.
        Senator Markey. Yes, and I just think it is an area of
    competition where if a local municipality is unhappy, they want
    to have their own broadband system to make prices go down, and
    prices go down dramatically, and all of a sudden, the two
    private sector incumbents find a way to lower prices, which is
    really what those people desperately want at home.
        Mr. Chairman, I thank you so much for your indulgence.
        The Chairman. Thank you, and indulgent, I was.
        [Laughter.]
        The Chairman. What I feel badly about is that Senator
    Heller, Senator Ayotte, Senator--anyway, Senator Heller, to be
    followed by Senator Ayotte.

                    STATEMENT OF HON. DEAN HELLER,
                        U.S. SENATOR FROM NEVADA

        Senator Heller. Mr. Chairman, thank you, and thank you to
    the Ranking Member for having this hearing today. You can tell
    by the witnesses here we are having a heck of a discussion, and
    there is no doubt by those that are in this room today that
    this video hearing is a wide ranging discussion.
        I would like to before I ask questions further add to this
    discussion or perhaps give my view of the world. I think it is
    no secret that the telecommunications laws currently in effect
    today do not line up with the marketplace.
        We have rules for voice and video that are provided for the
    consumer by copper wire and by multi-video programming
    distributors, but if the same voice and video services are
    distributed over broadband Internet, then no rules apply.
        Whether we look at this today or we look at this tomorrow,
    the facts are the same. It is unfair for voice and video
    providers who are regulated to compete against providers
    offering the same services over the Internet.
        I do not think we can afford to wait much longer. According
    to some estimates, global IP traffic will increase by almost
    three times from 2013 to 2018, and 84 percent of that traffic
    will be video. We will have to address this through a form of
    our telecommunications laws, and it should be led right here in
    this committee.
        I know some here in this room have called for regulating
    the Internet like a phone utility. Why would we ever consider
    treating the Internet, the most disruptive technology in our
    lifetime, as a public utility? To me, it makes no sense. Power
    and water utilities have not changed or innovated in decades.
    Why would we want the Internet to become stagnant instead of
    vibrant?
        These calls for regulation fail to recognize that the world
    has changed for the better, not because of regulation, but in
    spite of it.
        The video market is proof that less regulation and more
    choice offer the most benefit to consumers. It also moves us
    away from punishing some distributors of phone and video simply
    because they came about in a different era.
        In the meantime, the marketplace is still moving. AT&T and
    Comcast are examples of that movement. The growth of these
    companies is now about providing broadband and not about
    providing just wireless telephone or cable television. They are
    moving to provide the consumers what they want, voice and video
    over the Internet, and that is why, as I understand these
    mergers, I think, come with benefits.
        But we can do more here to help the consumers as well. We
    should focus efforts on understanding the marketplace, divided
    by urban, rural, residential and business sections, we can
    understand where competition is excelling and where it is not,
    and enact policies for growth where appropriate, and leave the
    marketplace alone where appropriate, based on actual market
    failures and not perceived ones.
        We should also focus on spectrum. We must bring as much
    spectrum to the marketplace as possible in a responsible
    manner. Bringing parity and service capabilities between
    wireline and wireless should be a goal, even if today that is a
    lofty goal.
        We should not let opportunities for reforming the video
    marketplace pass us by. For example, we will be looking at
    STELA. I would encourage all actors in this sphere to come
    forward with their proposals.
        If a consensus can be reached and any part of our video law
    can be reformed, we should try to do it. Our job as legislators
    is to reform laws that are outdated, and if we can, find some
    solutions. We should not kick this can down the road.
        So, Mr. Chairman, I just want to sum it up. Consumers in
    Nevada want more choices. We need to meet those expectations by
    working toward a new telecommunications bill that rewards
    innovation and drives more investments in content and
    infrastructure.
        And with that, I do have a couple of questions. Mr.
    Stankey, I would like to start with you. We heard about what
    you are doing for South Dakota. Would you please let us know,
    being accused, of course, of the merger being harmful to
    competition, what Nevada will benefit in this particular
    merger?
        Mr. Stankey. Sure. The number, if you are interested, is
    probably about 31,000 additional homes in Nevada for rural
    broadband, if that is the question you are seeking.
        Senator Heller. It is. It is.
        Mr. Stankey. And I would also like to clarify, when Ranking
    Member Thune asked me about timing and I indicated two years, a
    vast majority of that will get done during that first 2 year
    period of time. There are some locations that will take up to 4
    years to fully get to as we refine the implementation plan.
        Senator Heller. Mr. Cohen, do you anticipate other mergers
    occurring in this current marketplace?
        Mr. Cohen. So, if you had asked me that question two days
    ago, I would have said none that I can think of, and then I
    woke up this morning like everyone else to hear about 21st
    Century Fox and Time Warner.
        It is a very, very dynamic marketplace. Again, I think Mr.
    Kimmelman and I agree that out of this dynamism and disruption,
    it does create the need for additional conversations about how
    content and distribution companies can continue to have the
    scale to be able to invest and to be able to innovate, to be
    able to provide the best experience possible to customers.
        So, I think it is impossible for me to say that I would
    rule out any additional merger or acquisition activity within
    the overall media, entertainment, and distribution space, but I
    do think each transaction needs to be viewed on its own
    individual merits, and I am very comfortable, notwithstanding
    what transactions may follow, about the compelling consumer
    advantages that arise from our particular transaction.
        Senator Heller. Thank you. Mr. Chairman, thank you.
        The Chairman. Thank you, Senator Heller. Senator Ayotte?

                    STATEMENT OF HON. KELLY AYOTTE,
                    U.S. SENATOR FROM NEW HAMPSHIRE

        Senator Ayotte. Thank you, Mr. Chairman. I agree with the
    comments of my colleague, Senator Heller, and also appreciated
    what former FCC Commissioner Robert McDowell wrote yesterday in
    the Washington Post, where he referred to the Internet as ``The
    greatest deregulatory success story of all time.''
        I agree with that assessment, and that is why I do not want
    to treat the Internet like a public utility either.
        Can you help me, Mr. Stankey or Mr. Cohen? What would
    happen if we reclassify the Internet as a common carrier? How
    would that affect what you do and how would that affect
    consumers?
        Mr. Stankey. Well, you are taking something that is not
    broken and applying new rules to it. It creates unknown
    problems and one of those problems is that heavy regulation
    that goes with Title II would clearly slow down innovation and
    investment.
        You would begin to subject the Internet to a lot of
    different regulatory constructs that will be procedural in
    nature, and as a result of that uncertainty, investment tends
    to dry up.
        I think that is the greatest risk that we have, and when
    you see record broadband investment going on in the United
    States today, when you see companies build additional
    broadband, when you have examples like what I cited with
    municipalities that now have three and four competitors coming
    in, I am not sure what it is exactly we are going to try to fix
    with that.
        And so, our view is let's keep a light touch. Let's make
    sure that we have the typical constructs we have in the United
    States to ensure that anticompetitive and antitrust behavior
    are enforced, and there are folks that violate the principles
    that many of us agreed to in this room, for example, what has
    been outlined in the Net Neutrality rules from 2010, then let's
    find those exceptions and deal with them.
        Our view is it is not that we disagree that it should be
    open and free and the Internet should work, it is just how we
    go about administering it, and that is what we think we risk in
    putting Title II into place.
        Mr. Cohen. Senator, it is rare that in a single question--
    it is rare that you can come up with a question that a single
    answer can potentially slightly irritate every member of the
    panel, which is what this question does.
        So, I really think Mr. Stankey said it right. I am going to
    crystallize it a little bit more, at least from my perspective,
    which is I actually think there is pretty wide agreement among
    everyone at this table and probably among everyone on the panel
    that we are all for a free and open Internet. No one wants to
    have any restrictions in the Internet at all.
        When you talk about the Comcast position, which I think is
    the AT&T position also, but I will allow myself to be
    corrected, you know, we have reached the conclusion that being
    for a free and open Internet on a voluntary basis is just not
    enough in America today.
        So, we are also for--``we'' Comcast--are also for legally
    enforceable FCC rules that provide basic consumer protection
    for a free and open Internet, and what I mean by that is
    transparency, no blocking rules, non-discrimination rules,
    essentially what the 2010 Open Internet Order was able to do.
        In terms of paid prioritization and so-called ``fast
    lanes'' and ``slow lanes,'' Comcast's position is we are not
    even sure we know what they are. We do not have any. We have no
    plans to develop any.
        So, we are not defending in any way the right of Comcast or
    anyone else to have a fast lane, and I think the one area of
    disagreement or the major area of disagreement is what is the
    authority that the FCC has to put in place those rules, do you
    have to reclassify broadband under Title II as a telecom
    service to do that.
        We think the answer to that is no, and we think the risks
    are as Mr. Stankey outlined, which is removing incentives to
    invest, creating a disincentive to invest.
        Under the 1996 Act as applied by bipartisan FCCs over the
    last almost 20 years, this industry has invested $1.2 trillion
    in building out the Internet, and we think it is a huge risk to
    create the uncertainty that would be created from a
    reclassification under Title II, which does not take away in
    any way whatsoever our commitment to everything else that is
    being talked about in the open Internet space.
        Senator Ayotte. Thank you. Mr. Stankey, I would like also
    to have the question answered that you have been asked by
    Senator Heller and Senator Thune about the impact of the merger
    on New Hampshire.
        As you know, AT&T does not offer its U-verse video service
    in New Hampshire, but DIRECTV has a footprint in our state. So,
    will your merger with DIRECTV result in extending broadband
    coverage to unserved areas and underserved areas in New
    Hampshire?
        Also, I have been a strong advocate for USF reform, and I
    think that is something we need to do if we really want to get
    more access for people in rural areas, especially in states
    like mine.
        My time is coming up but I would like to know what the
    impact would be on New Hampshire if this merger is approved.
        Mr. Stankey. Yes, Senator. There is a positive impact on
    New Hampshire as well, about 166,000 additional rural customers
    will be served by a broadband solution.
        Senator Ayotte. Thank you.
        The Chairman. Thank you, Senator. Senator Blumenthal was
    here, went out and came back, so the order will be Senator
    Blunt, Senator Blumenthal, and Senator Klobuchar.

                     STATEMENT OF HON. ROY BLUNT,
                       U.S. SENATOR FROM MISSOURI

        Senator Blunt. Well, thank you. It sounds like the rules
    maybe worked for me here, so whatever the rules are, I am
    pleased to benefit from them.
        [Laughter.]
        Senator Blunt. Thank you all for being here. Mr. Kimmelman,
    I am going to see Senator Danforth this weekend, and I will
    tell him you mentioned him and also mentioned that he worked
    hard to try to find the balance between good business practices
    and good regulatory practices, and I think that is what we all
    want to do and are trying to do here.
        We have seen this industry change so dynamically and so
    rapidly that it is hard to estimate any answers to speculative
    questions, about speculating what will happen in the next 5
    years. I am almost sure we will all find we are wrong, because
    so much has happened and so much has happened so quickly.
        Mr. Stankey, recently Google made a major investment in
    Kansas City. I had a chance with Mayor James to go through that
    not too long ago, talk about what they were doing, some of the
    impact it was having.
        From your point of view, has their entry provided
    competition that is an alternative to U-verse, to cable, to
    satellite?
        Mr. Stankey. It has provided significant competition. They
    have been very successful in Kansas City. You probably had an
    opportunity to hear from them what their market share success
    has been there. So, they are a meaningful competitor when they
    enter into a market.
        Senator Blunt. Are they entering into other markets?
        Mr. Stankey. To my knowledge, they are working to take over
    a failed municipal broadband project in Provo, Utah and begin
    to offer services over it, and they are now building and
    constructing services in Austin, Texas, and then they have made
    an announcement to negotiate with about 30 other municipal
    markets. It is uncertain at this point how many of those 30
    they intend to enter into and what timeframe. That is my
    understanding of their plans.
        Senator Blunt. Thinking about your potential merger with
    DIRECTV, is there anywhere where you and DIRECTV both offer
    services now that do not also have a cable competitor, to your
    knowledge?
        Mr. Stankey. No.
        Senator Blunt. So, anywhere you are and DIRECTV is, there
    is also another alternative right now, a cable competitor?
        Mr. Stankey. There are locations where DIRECTV will offer
    service in rural areas where there may not be a competitor, a
    cable competitor. There will be another satellite competitor in
    those instances, and of course, after the transaction, both of
    us will remain selling services in those areas.
        Senator Blunt. Mr. Cohen, you mentioned there were any
    number of content delivery networks and interconnections. Is
    there anything else we should know about that which has not
    been covered yet at this hearing?
        Mr. Cohen. So, I think there is plenty that we could know.
    We could spend a whole hearing on peering and interconnection.
    I think the only other point I would add is that--it may be
    more responsive to Senator Booker's original question--peering
    and interconnection is really not net neutrality.
        I think Chairman Wheeler sort of nailed that right when he
    just explicitly said ``Peering and interconnection is not net
    neutrality, it might be a cousin or a sibling, but it is not
    net neutrality.''
        We applaud the FCC's opening of an inquiry--it is not a
    rulemaking or an investigation--into peering and
    interconnection, because I think it is very misunderstood, and
    I think having the FCC take a look at practices in that market
    and draw some conclusions would be very, very helpful to the
    overall understanding of what is going on in the peering and
    interconnection market, and whether it is a choke point,
    whether there is a need for FCC action or other action.
        We are very confident that the answer to that question will
    be no, but we are also very comfortable with the FCC looking
    into it and gathering the data and drawing an expert
    conclusion.
        Senator Blunt. Well, I think that would be something we
    would be interested in and benefit from.
        Mr. Hurwitz, thinking about--you know, Netflix has come up
    a couple of times here, and I think I was a Netflix subscriber
    early on. Their early delivery system was DVDs through the
    Postal Service, and then when Internet speed developed,
    clearly, that is a totally different product than it was just a
    handful of years ago.
        My question to you is what would you think the impact would
    be of Title II regulation as it relates to things like the kind
    of content Netflix provides and the cable companies currently
    provide?
        Mr. Hurwitz. The impact of Title II regulation on Netflix
    largely is not about the technology. The open Internet rules,
    to the extent the FCC has authority to enact them, could be
    enacted under Section 706 of Title II, largely with the same
    result.
        The greatest concern, returning to Chairman Rockefeller's
    initial focus on the consumer, is if the FCC does take a Title
    II approach, it creates a great deal of uncertainty about what
    rules will apply. It is going to lead to unquestionably years,
    at least months, possibly years of discussion within the FCC,
    possibly followed by litigation over what the rules should be.
        Senator Blunt. My final question would be, since you are
    there, all that time spent in litigation and trying to define
    what this really means, what impact do you think that has on
    the continued development of this communications system that
    has grown so rapidly?
        Mr. Hurwitz. Most importantly, it harms consumers. It will
    slow down the development of new technologies. It will slow
    down the deployment of existing technologies.
        Senator Blunt. Thank you, Mr. Chairman.
        The Chairman. Thank you, Senator Blunt. Senator Blumenthal?

                 STATEMENT OF HON. RICHARD BLUMENTHAL,
                     U.S. SENATOR FROM CONNECTICUT

        Senator Blumenthal. Thank you, Mr. Chairman. Thank you all
    for being here today on this very important hearing, and thanks
    to the Chairman for having this hearing to discuss really the
    future of video, and in many ways, it is a bright future with
    Amazon and Netflix beginning to deliver on much needed
    competition in this marketplace, and finally threatening to
    provide some of the competitive discipline that we need.
        But online video is still a very young service and still
    very vulnerable to threats from large entrenched companies, as
    they use mergers and market power to thwart competition.
        When consumers look at the market today, and like my
    colleagues, I talk to a lot of consumers, what they see is more
    mergers, more consolidations, less choice. They also see the
    only competition right now is the race to increase prices.
        That is the way they see it, and fueling this fire are
    larger and larger bundles of channels that consumers have to
    purchase in order to get service, and the increasing cost of
    programming.
        We have talked about these issues before in this very room.
    That phenomenon especially affects sports programming, and that
    is why I have joined with Senator McCain in championing the
    Television Consumer Freedom Act, often referred to as the
    ``Cable A La Carte Act,'' as well as the ``Fans Act,'' which
    would end blackouts of the sports programming consumers pay so
    much to receive. Both of our bills essentially give consumers a
    choice.
        To continue taking advantage of Federal policies that
    protect their business models, companies have to provide
    consumers with more choices and make programming more
    available.
        Our legislation would give consumers more choice, on the
    theory--it sounds like a novel theory, I know, in this day and
    age--when consumers have more power and when there is true
    competition, they actually affect market outcomes.
        Mr. Cohen, when we were last in this room not long ago, we
    spoke a little bit about the regional sports network. I want to
    follow up and pursue that line of questioning.
        Comcast's proposed merger would unite Comcast's 11 RSNs in
    the country's largest media markets and Time Warner Cable's
    five RSNs, and those RSNs along with another 16 local sports
    channels would belong to one company that would have
    significant nationwide market power.
        That power would affect sports programming, I think we can
    all agree. Combined, the merged entity would own the rights to
    a formidable amount of local sports programming in the largest
    media markets in the country.
        You said at that hearing, and I am quoting, ``There is
    nothing in this transaction that changes the competitive
    dynamic in any market in the country,'' with regard to regional
    sports networks.
        We have now one of your competitors here, Mr. Blum, and I
    want to give him an opportunity to address that statement, and
    ask you specifically, Mr. Blum, if the merger is approved,
    would Comcast have additional market power to withhold or
    overcharge DISH for access to local sports programming in the
    markets now controlled by Time Warner, for example, and should
    consumers bear the additional cost of those licensing fees?
        Mr. Blum. Unquestionably, yes. The ownership of these RSNs
    by a cable provider poses competitive harms, it is not like an
    owner of RSN that wants to get distribution.
        Comcast combining with Time Warner owning all these RSNs
    could use those RSNs for anticompetitive purposes, by
    withholding the ability for us to offer that product to our
    customers, which unfortunately Comcast did to DISH and DIRECTV
    for over a decade, and it was only when the merger with NBC
    went through that we were finally afforded the right.
        Unfortunately, they engaged in not disclosure activity but
    pricing it so astronomically that we could not pass on that
    cost to our customers, because one of the things that you
    recognize and that your bill attempts to address in terms of a
    la carte is these RSNs, they are not a la carte. We have to
    pass these costs on to our customers, even if they are not
    watching sports programming.
        So, we believe that there will be less competition in the
    RSN market because Comcast will take Time Warner's RSNs, and
    there is the potential to foreclose access to that content or
    to act in an anticompetitive way that ends up hurting consumers
    and raising prices for them, Senator.
        Senator Blumenthal. Thank you. Unfortunately, my time has
    expired, but I think the question then is for Mr. Cohen, and he
    may wish to address it at another time later in the hearing. I
    hope that he will, if not here, then perhaps in writing.
        Why not commit to offering all of your RSN programming on
    an a la carte basis, give consumers a choice, and let
    competitive market discipline determine the price of sports
    content?
        Mr. Chairman, I recognize my time has expired and others
    have waited a long time, but perhaps I can ask Mr. Cohen to
    answer that question for the record or now, whichever you would
    prefer.
        The Chairman. Why do you not try now?
        Mr. Cohen. I will do it short now and I will do it in
    writing later as well.
        So, first of all, I think it is important to listen to Mr.
    Blum's answer to your question because I think it shows just
    how non-transaction specific the issue is.
        The underlying analysis that led to the answer that I gave
    you is that regional sports net programming is by definition
    local and negotiated market by market. So, whatever the
    problems are, and there may be problems, they exist regardless
    of whether you own one regional sports net or 30 regional
    sports nets.
        So, the issues with the pricing of a regional sports net,
    let's just take Time Warner Cable's pricing of the L.A.
    Dodgers' sports net in Los Angeles, which right now, no other
    multi-channel video distributor is carrying, is created by the
    result--theoretically could be created by the result of Time
    Warner Cable as the video operator controlling that regional
    sports net.
        When the transaction goes through, we will control that
    regional sports net. We are not going to have any more power
    than Time Warner Cable does to be able to extract a deal in Los
    Angeles by virtue of the fact that we own other regional sports
    nets, which are simply not a part of that negotiation.
        I will also note that at least in the short run, there will
    be an advantage for the consumer and for the dishes, because
    our ownership of regional sports net will put that under the
    arbitration provisions of the FCC Order in the NBC/Universal
    transaction, and if DISH or anyone else thinks that the price
    being offered for that regional sports net is not fair, they
    can take it to arbitration.
        By the way, DISH has done that to us once before. They do
    not talk about it because they lost the arbitration. The
    arbitrator found that the price that we were seeking for the
    regional sports net represented market value and was the right
    price.
        DISH responded, by the way, citing they were not going to
    bother with the arbitrator's decision, and they dropped the
    regional sports net. They picked it up again. We negotiated a
    deal, and they are carrying it.
        So, a la carte is a more complicated question. I briefly
    responded to you in the last hearing as well. I will give you
    the headline, which is that we believe that a mandatory a la
    carte regime will result in less choice, and Senator Booker
    asked me earlier about independent programming and diversity of
    choice, if you are for less choice, less diverse programming,
    you are for a la carte, because you will have fewer choices and
    it will be more expensive for the consumer.
        There is independent study after independent study that has
    reached that conclusion, and we understand the frustration that
    consumers have and that you and Senator McCain have, and a la
    carte just is not the solution to the frustration. I am not
    sure I know what the solution is, but I do know that a la carte
    will not work to be able to accomplish the objectives that you
    have.
        Senator Blumenthal. Well, just two points, if that is not
    the solution, I would like to know what is. Number two, your
    response to my question, I think, depends on the assumption
    that your market power is virtually not increased in any way by
    the number of RSNs you own.
        Mr. Cohen. I think that is basically right, and I would
    note, by the way----
        Senator Blumenhal. Very short.
        Mr. Cohen. I would note that DIRECTV--I am sorry, that Fox
    still will own twice as many regional sports nets as we will
    after this transaction.
        Senator Blumenthal. Mr. Chairman, I hope I have not
    exhausted your patience.
        The Chairman. You came close.
        [Laughter.]
        Senator Blumenthal. Thank you very much.
        The Chairman. Senator Klobuchar?

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

        Senator Klobuchar. Well, thank you very much, Mr. Chairman.
    As many of our witnesses know, I chair the Antitrust
    Subcommittee of Judiciary, so we have held hearings for both
    the--lengthy hearings--Comcast/Time Warner's merger as well as
    the AT&T/DIRECTV merger. I feel like I am a bit in a
    ``Groundhog Day'' movie, a movie I do like and I hope will
    continue to play on your stations and channels, no matter what
    happens here.
        [Laughter.]
        Senator Klobuchar. Senator Lee and I sent a letter sharing
    our concerns together on the Comcast/Time Warner deal, and are
    working on the AT&T/DIRECTV, so I am not going to go over the
    many questions that we asked at those hearings.
        I did have one new question that came up, Mr. Cohen, since
    that hearing. I understand that Comcast would be divesting its
    Minnesota customers as a result of the deal, mainly in the Twin
    Cities' area and Mankato. This would mean that my service as
    well as my in-laws', which is more significant in Mankato,
    would be rolled into the new company called ``SpinCo.''
        What will this mean for Minnesota customers and how would
    you mitigate any harm that the potential transaction would have
    on their service? Where would their bills come from? Who will
    they call for customer service?
        My in-laws took a while getting used to the cell phone, so
    I am concerned about the effect this is going to have if this
    deal goes through. So, can you answer those questions? Thank
    you.
        Mr. Cohen. Yes, Senator. So, at the time of your hearing,
    we did make the representation that we were prepared to divest
    about three million of our customers in order to bring us under
    the 30 percent ownership of MVPD households.
        We ended up entering into an arrangement with Charter that
    would actually result in a divestiture of 3.9 million
    customers, and unfortunately, because Minnesota is actually a
    very strong and good market for us, our Minnesota subscribers
    are included in that divestiture plan.
        Of the 3.9 million customers that we are divesting, 2.5
    million will be spun off to a new independent publicly traded
    cable company, which has the legal name ``SpinCo.'' I will
    represent to you and I will absolutely promise you that no one
    will ever get a bill with a label that says ``SpinCo'' on the
    top of it. It will have a real name by the time we launch the
    service.
        The way this will happen is after the transaction closes,
    we will purchase all the Time Warner Cable subscribers, and
    then we will spin off 2.5 million of those subscribers to this
    new company. It probably will take two or 3 weeks after the
    close of the transaction to be able to do that.
        They will then be owned by this company. The CEO of the
    company, by the way, is Michael Willner, who I am sure many of
    you know. He was the former CEO of Insight Communications, one
    of the most respected cable operators and cable CEOs in the
    business.
        There will be two sets of important agreements. There will
    be a transition services agreement with Comcast, so we are not
    just going to spin the customers off and say goodbye and
    Michael, they are all yours, you are a brand new company, pick
    them up.
        There will be some transitional period of time where those
    customers will be operating on the Comcast plan, with Comcast
    engineering and Comcast technology, Comcast customer service,
    billing, et cetera, while we transition to the new company.
        There will also be a services agreement between Charter
    Communications and SpinCo, because SpinCo will be one-third
    owned by Charter.
        So, when we are ready, and I do not know yet exactly how
    long that will take, but it will be months, not days or weeks--
    when we are ready to cut over from the Comcast system basically
    to a Charter supported technology and engineering
    infrastructure for SpinCo, there will be a cut over to the new
    system.
        Comcast has vast experience in transactions--AT&T
    broadband, Adelphia, multiple smaller transactions. We are very
    good at ensuring that the transitions are seamless and customer
    friendly, and that customers know who they are supposed to
    call, know what is happening, and that ultimately the cut over
    is opaque to the customer.
        That is the customer does not realize it has happened. They
    will simply have the new service on the new Charter, basically
    we assume Charter supplied engineering and technology platform.
        Senator Klobuchar. All right. Thank you. Appreciate that.
    Mr. Blum, you were not at our last hearing.
        Mr. Blum. I was there in the audience.
        Senator Klobuchar. You were there but not with your new
    position. In your testimony, you mentioned that Comcast had
    several choke points over its broadband pipe that Comcast or
    other ISPs could use to harm competitors' online video
    offerings.
        Can you explain that in more detail?
        Mr. Blum. Sure. So, there are at least three choke points,
    and Mr. Cohen is absolutely right. The net neutrality rules
    that they are agreeing to commit to have nothing to do with
    interconnection, but it so happens interconnection is one of
    the choke points.
        So, the example I gave is a highway. Interconnection is the
    entry ramp on to that highway, and all these content delivery
    networks are bringing all the content to that choke point, to
    that entryway. Comcast controls what gets in and what gets in
    slowly by opening and closing the ports.
        That is a very significant way for them to engage in
    anticompetitive conduct that net neutrality rules and Comcast
    commitment do not address at all. So, that is one choke point.
        Then there is the open Internet choke point. The fact that
    you had Netflix at the last hearing and there was a lot of
    discussion, you asked questions about this, the fact that there
    is a dispute where Netflix is claiming Comcast misused the
    ports and closed the ports and intentionally slowed down the
    content, and Comcast is saying no, no, it was Netflix's fault,
    the fact that there is a dispute, imagine if this merger goes
    through and DISH's content is suddenly slowed, and we believe
    it is Comcast, and Comcast says no, no, it is not us.
        We have to bring a complaint before the FCC that takes two
    years to resolve. Meanwhile, our content is slowed down and we
    are being hurt, and customers are leaving us to go to Comcast.
    So, that is another choke point that we are concerned about.
        The third choke point is managed services, these super fast
    lanes. There is no doubt that Comcast can create fast lanes on
    its broadband pipe. Those fast lanes can squeeze the open
    Internet portion of the pipe. So, even if Comcast is not
    blocking, not discriminating on that right lane, that right
    lane is unpalatable to consumers because it is so slow and
    jittery, meanwhile, Comcast content is fast and wonderful, and
    that is not good for consumers. That is not good for
    competition.
        Senator Klobuchar. OK. Thanks. I just have one last
    question of you, Mr. Kimmelman. You look kind of lonely down
    there.
        You know, consolidation does not necessarily mean that it
    is bad, but I think a lot of the concern is what is the tipping
    point and at what point do all these consolidations spell
    trouble for consumers.
        Regardless of how these mergers look for the shareholders
    or the companies themselves, our job is to look at them in
    terms of consumers.
        Could you just briefly, briefly talk about what kind of
    terms you think the Department of Justice should look at, why
    it is important for the purposes of these mergers and the
    larger future of competition in video, in terms of policies and
    trends, what do you think they should be looking at when they
    look at these mergers?
        Mr. Kimmelman. Certainly, Senator Klobuchar. I think it is
    important to look at what the Department of Justice already
    does, and whether you agree with my numbers about broadband
    concentration or even Mr. Cohen's numbers, the Department of
    Justice has already found the market to be highly concentrated
    for the MVPD services and the broadband services.
        I am going to suggest it is very likely they are going to
    find this for the consumer interface, whether it is a set-top
    box or another device, but they have already found it for those
    other services.
        They have already found that Comcast in its past
    transaction had the opportunity and the incentive to
    discriminate against other programmers, online video
    distribution, and in transmission.
        And therefore, Comcast made a number of concessions, to the
    great credit of Mr. Cohen and his company, which the Department
    of Justice found to be adequate at that point in time to remedy
    the concerns they had, enough to not proceed to challenge the
    transaction.
        I think the question now would be with the addition of ten
    plus million new subscribers through Time Warner, are those
    remedies adequate? Have they worked?
        I would hope the Department and the FCC would look back and
    see if they have worked, and also look at whether the
    additional size, the additional scope, adds concern. It is not
    just about foreclosure of competition, as Mr. Cohen has
    identified, but it is also a question of raising rivals' costs,
    a critical antitrust concern.
        So, whether Comcast's regional sports channels are in Los
    Angeles or in New York, if Comcast's competitor is nationwide
    and Comcast is driving up the cost to his competitor, Comcast
    is causing a potential competitive harm to the broader
    marketplace.
        So, these are the kinds of issues that I certainly hope the
    enforcement agencies will look at and see whether in addition
    to what they have experienced under the existing transaction,
    the new transaction adds additional problems.
        Senator Klobuchar. Thank you very much.
        The Chairman. Thank you, Senator Klobuchar. I think there
    are a couple of people that want to ask several questions, so I
    think we should have a second round, and I apologize to
    everybody on their schedules. I have kept my sister's best
    friend waiting 50 minutes, but life is such.
        Let me just start by this. Let me ask both Mr. Cohen and
    Mr. Stankey, does your company, AT&T and Comcast, enter into
    any anticompetitive contracts to prevent content companies from
    selling their TV shows and movies to online video competitors?
    Do they or will they?
        Mr. Stankey. No.
        Mr. Cohen. I will go with a no also, and I may get myself
    in trouble, but remember our company is a little more
    complicated, I think for good reasons, even though Mr.
    Kimmelman may disagree.
        We have not just the cable side, but we have the content
    side, which is actually selling content to online video
    distributors, and in the last 3 years since we have owned that
    company, we have made literally dozens of deals selling vast
    amounts of highly popular content to online video distributors
    like Netflix, Amazon and VUDU, Apple, a whole host of----
        The Chairman. Mr. Cohen, the question I asked was for the
    record, and you gave me your answer.
        Mr. Stankey. Senator, to be clear, we do not own content,
    so we are basically licensing----
        The Chairman. Understood; understood. Second and lastly, an
    observation from my point of view, an observation, that this
    subject like others--E-Rate is one that comes to mind, where
    the FCC--it does not get legislated. The President does not
    sign anything. He does not do an Executive Order.
        It just comes into being by virtue of the silent process,
    which brings up one of the reasons why this is so complicated
    and misunderstood, and therefore, subject to a lot of suspicion
    in the process, because it is not by definition open.
        Our oversight function on the Commerce Committee helps, but
    let me just give you one example. You have caps and price caps,
    and price caps sounds very good, but price caps can also be
    manipulated so that there is enough bandwidth given so that a
    particular company can provide two-thirds of a movie, but if
    you want to provide the last third, the price goes up.
        Now, who in the world knows that? Nobody knows that, but it
    is a fact of the business that we are in here and what we are
    talking about. I think it talks to the necessity of oversight
    and the importance of oversight and the importance of
    transparency.
        The other thing I want to say is I feel extremely badly and
    personally responsible for the fact that Mr. Ryan has not
    gotten any questions. I cannot help that because nobody asked
    you questions. I need to have you say whatever you want to say
    at this point.
        [Laughter.]
        Mr. Ryan. Well, thank you for that. It is interesting, this
    conversation. You know, somebody said at the beginning of this
    that content is king, and as someone who is sitting here
    representing those people who create the content, it is
    interesting that so much of this conversation has happened
    without me.
        I would reiterate so much of what my two colleagues right
    here have said about things. You know, Comcast and Time Warner
    in various studies are very low in customer satisfaction. I
    think in a recent study they finished worse and second to
    worse.
        So, one thing I would say is that if this merger were to go
    through, the only thing we know for sure is it would open up a
    new spot at number two for who might be the worse in customer
    satisfaction.
        So, I would just counsel the reason why that exists is
    because customers feel that certain promises they think they
    have gotten from them have not been lived up to.
        So, I would just counsel you to take their promises with a
    grain of salt, and if you determine that this is going to go
    through, hold their feet to the fire on this, and then I would
    counsel to not let it go through because I think there is just
    too much to worry about.
        We do not need a new toll booth on the information super
    highway, and that is what I think this sets up. I am surprised
    by Mr. Cohen's uncertainty about what a fast lane would look
    like at his company. I think all you have to do is go look at a
    graph that was made public recently during their negotiations
    with Netflix.
        The speed at which Netflix was running through their pipes
    was very slow while they were in negotiations, and the moment
    that Netflix agreed to pay them some money, all of a sudden,
    miraculously, the speed went up.
        In the screenwriting business, that would be the equivalent
    of saying yes, that is some awfully nice Internet we are
    providing you, it would be a shame if something happened to it.
        That is a situation that we do not want to get in with
    these companies, where they get to decide you get the fast
    treatment and you get the slow treatment. It does not just
    apply to businesses. It could apply to political organizations.
    It could put a cap on the kinds of material that we are able to
    write and consumers are able to see.
        So, I would just say be very careful about what they are
    promising and whether they can and will live up to it.
        The Chairman. I promise you I will be, because as I have
    said this in a number of hearings--Senator Thune, please do not
    hit me over the head with whatever this is.
        [Laughter.]
        The Chairman. When we passed E-Rate in 1996, I wrote, Mr.
    Ryan, every single telecommunications company a letter, in
    which I asked them to write me back saying they would not
    litigate the E-Rate decision. Every company wrote me back
    promising they would not do so, and every company litigated the
    E-Rate decision, and they all lost. So, I think your counsel is
    wise.
        Senator Thune?
        Senator Thune. Thank you, Mr. Chairman. I have a couple of
    quick questions here. I wanted to follow up with Mr. Stankey.
    Most wireless broadband services have data usage caps that are
    much, much lower than you are going to find on a fixed wireline
    broadband service, and my understanding is your wireline U-
    verse product is capped at 250 gigabytes per month whereas a
    comparably priced mobile data plan is more like two gigabytes.
        So, the question has to do with, and we talked about
    earlier, this expansion and making this more available. What
    kind of data cap can we expect these new fixed wireless
    customers to see?
        Mr. Stankey. As I indicated earlier, we are intending to
    engineer this product like a wire line fixed broadband product,
    not a mobile broadband product. We have not put the exact caps
    in place. We have done engineering studies to understand what
    we think is reasonable.
        I cannot promise you they will be the identical number that
    is on the U-verse construct that you just put forward, but we
    do know for a fact that their input will be very de minimis.
    They will hit the very top 2 percent kind of thing, and it will
    be designed to find that abuse that is going on, not
    necessarily to prevent customers from doing the things they
    need to do in their homes to use a broadband service, and it
    will be substantially different than what you see in a mobile
    broadband service.
        Senator Thune. OK. Professor Hurwitz, back to you for a
    minute here. We have had some discussion today about the impact
    of these mergers and what they are going to do both to
    consumers and creators alike.
        As a professor of law and economics, my question is do you
    agree with the views that have been articulated by Mr. Ryan
    regarding the economic literature on communications and media
    mergers?
        Mr. Hurwitz. The economics literature sides more along the
    analysis that Mr. Cohen gave in terms of unbundling. Generally,
    what we find is when we have large bundles of content, when we
    have large vertically integrated firms who are able to take
    greater risk, they are able to invest more in questionable and
    uncertain projects, and that is very frequently where the
    really great projects come from.
        Senator Thune. OK. Mr. Kimmelman, as large as some of these
    MVPDs have become, they all apparently feel competitive
    pressure to acquire and deliver the so-called ``must have
    programming.''
        So, the question is no matter how many competitive
    distributors there are, do we not essentially have an auction
    where all the bidders win but only after paying the highest
    price to content providers, and why would prices decrease when
    all distributors need to have essentially the same programming?
        Mr. Kimmelman. That is a very good question, Senator Thune.
    I think it is a problem. I think that is why we are in a bit of
    an arms' race here, and I think it is worth looking at this as
    a broader policy issue. Some of the traditional superficial
    analysis of what another competitor would offer may not be
    helpful from the consumer vantage point.
        However, I think what is changing is that on the broadband
    service distribution level, the ongoing culture has been much
    more of an unbundled, pick what you want. My kids do not even
    know what a channel is. They know a show. They know a video
    clip. They know something is video streamed.
        I think the next generation is really moving toward a
    different experience and different expectation for what they
    want from video, so while some of the traditional marquee
    programming in this high price range will continue, I think
    there will be new product, especially if Mr. Ryan and some of
    the people like him can produce for online distribution and
    challenge some of those traditional companies, and then I think
    you will see the market shake up a bit.
        I think it is the business model of bundling that is really
    part of the problem here, and the ability to connect that then
    with a transmission system that is dominant.
        We probably from what we know economically are never going
    to get ten, we maybe never are going to get to five, we may not
    get to two in many places. I think what AT&T is trying to do is
    an interesting experiment using fixed wireless, but it has not
    been great in rural America for the whole bundled service.
        So, we have a huge problem here of a highly concentrated
    market in transmission, and then these very popular sets of
    programming. I think we need to have more choices so that those
    who are creating have more new ways to present it to the
    public, and we are seeing a new generation that wants it
    presented in a different way.
        I think it is great if Comcast does that as well and AT&T.
    I think we need to make sure that there are some new players
    who have a chance to break up that traditional high price
    structure.
        Mr. Hurwitz. Mr. Thune, if I may add on to that, and I
    would like to agree with Mr. Kimmelman and also Mr. Ryan in
    some respects.
        It is in many ways a real shame that we do not have any
    programmers here today because the programmers are a very
    important part of this discussion, and their voice is
    absolutely lacking on the current panel.
        The advent of the new forms of Internet-based technology
    really is an aspect of the tipping point that we have not
    spoken about. When you look at the demographics, people under
    25 today are consuming most of their video content online. The
    most recent numbers I have seen, under 25, it is about twice as
    much online video content as cable content, about twice as much
    cable content as traditional broadcast content.
        If you go into older demographics, it is still almost
    entirely traditional broadcast and MVPD content. So, for the
    younger generations in many ways, the tipping point has already
    occurred.
        On the question of wireless, this is a final point, we have
    spoken about wireless in several manners here, there is a lot
    of technology that we do not understand, a lot of really,
    really great cutting edge stuff that is on the verge of
    becoming mainstream, on the verge perhaps of 3 to 5 years,
    perhaps 5 to 10 years, particularly on the wireless front, on
    the network neutrality front.
        The FCC struggles with the level of technical
    sophistication needed to really address and understand these
    issues.
        I do not hold it against anyone in this room. We are not
    engineers. We are not trained Ph.D. engineers focusing on these
    issues. It is really difficult to have an informed discussion
    about the future of competition, the future of network
    neutrality, without understanding complex issues like
    statistical multiplexing, how routers actually work, how
    prioritization would be implemented.
        So, it is really hard for us to have a discussion about
    that. In terms of wireless, I would like to just make one
    really amazing point. I am following a lot of the technical
    literature about developments in the so-called ``millimeter
    wave bands.''
        What could be possible using MIMO and millimeter wave
    technology for mid to short haul fixed line wireless in the
    next 3 to 10 years is incredible. I would say cable should be
    scared to death of what fixed line wireless can do, because it
    has the potential to have ten times the capacity that coaxial
    cable running to your house has, and that will revolutionize
    telecommunications.
        Senator Thune. OK. Mr. Chairman, thank you, and thank you,
    panel.
        The Chairman. Thank you, Senator Thune. Senator Booker, if
    you do not have a question, I am going to be shocked.
        Senator Booker. So, I want to save you that kind of shock,
    although it would be exciting to see what would happen if----
        The Chairman. I like your questions.
        Senator Booker. I appreciate that. I will just add a last
    point. When I sat with a lot of the heads of a lot of tech
    companies, they said the same thing about the technology
    changing so rapidly.
        But my concern is about the here and now, really focused on
    one clarification and one question about municipal broadband,
    which is something I care a lot about, having served as a
    mayor.
        Before I ask that question, I just want to give a lot of
    talk now between sort of whether we should use Title II or not,
    and I heard very strong comments about why Title II is not the
    way to go. I would love to give Mr. Kimmelman and Mr. Ryan a
    chance to quickly, very quickly, respond to some of the ideas
    about whether we should be using Title II or not.
        Mr. Kimmelman. Thank you, Senator Booker. We favor Title II
    because it is not some traditional way only of looking at
    utilities, it is a fundamental non-discrimination principle
    that enables a rule to be developed that prohibits undue
    discrimination, unfair discrimination.
        Section 706 is a new approach that is being put forward. It
    involves filing complaints after the fact when you think there
    has been some discrimination, with some limitation of how far
    the FCC can go based on the court decision. We will see how the
    FCC can interpret that to create something that would be
    meaningful.
        From what we know right now, the most fail/safe mechanism
    is an old traditional non-discrimination rule. It does not mean
    you need to do 15 other things that one could conceivably think
    of under Title II that have not been done in 15 or 20 years. I
    know there is a desire to scare people about what could be
    hidden in that.
        It is a tried and true non-discrimination tool that has
    been used very effectively. It is what enabled all the
    innovation Senator Heller was referring to on the Internet that
    he does not want to regulate to blossom, to grow. It was either
    the exact Title II regulations or it was the fear that someone
    might impose them and you need to be careful that has allowed
    all this innovation to grow.
        I am reminded that AT&T under its old rules was a great
    transmission company, as a telephone company. They had the fax
    machine before the turn of the century. I do not mean this
    century, the 20th century, but could not figure out what to do
    with it, could not figure out what to do with a whole lot of
    things in wireless until we opened up the market to more
    players.
        It is not because they are a bad company. They are a great
    company. They did wonderful things. They were never the
    innovators. They were not the Bill McGowan/MCI innovators that
    brought long distance competition and brought us new interfaces
    and equipment, and similarly on cable, they did not invent the
    over-the-top product. It was others who challenged them.
        So, good transmission companies can do a lot of wonderful
    things, but they are not necessarily or often have not been the
    innovators. It is those edge company investors who can get
    capital in the market because they know when they succeed,
    someone cannot discriminate against them, and they get the
    fruits of their innovation. That is what Title II has offered
    us.
        Senator Booker. Mr. Ryan, very quickly, because I do have a
    question.
        Mr. Ryan. Yes. I am a writer and a content provider, not a
    lobbyist, so it is hard for me to go into the detail that they
    do, but I will say that the Writers Guild of America, West,
    believes that the FCC should reclassify Internet access as a
    telecommunications service under Title II. This gives the
    Commission the clearest path to enacting strong and open
    Internet rules.
        Senator Booker. OK. Let me just jump into municipal
    broadband, and I say this with some trepidation, and I want to
    say for the record, David and I have been friends for a long
    time.
        I have known him since he was a municipal official. I say
    this for the record, that he was truly one of the greatest
    municipal officials I ever encountered in our country, and I
    made it a purpose to study good cities and the way they were
    managed, and he was most certainly one of the best.
        Mr. Stankey and Mr. Cohen, I do worry about what is
    happening, and especially my concern is I am in a state that
    has a lot of urban municipalities, a lot of very poor people,
    and their access to broadband.
        So, this push back, and literally from what I can see,
    people going in and trying to pass laws against municipal
    broadband, I worry about that. Mr. Markey and I were talking
    over here about when municipalities do go in and do these
    broadbands, it actually lowers the price for consumers about 20
    percent because big companies come in and then lower their
    prices as well.
        Mr. Cohen rightfully said something. He and I both dealt
    with cities. Cities do not run things really all that well,
    even if they have some of the best master minds like you and
    Governor Rendell, who I think were sort of Batman and Robin--
    maybe Starsky and Hutch--not Lenny and Squiggy, I promise you.
        [Laughter.]
        Senator Booker. Two of the best municipal--my philosophy is
    that if the private world can do something better, cheaper,
    better for taxpayers, it is something we should consider.
        That said, the reality is that broadband is not just
    sitting back watching cable any more. It is not just I want to
    get my Jersey Shore, which is something, Mr. Chairman, you
    probably watch.
        [Laughter.]
        Senator Booker. It is about having access to information,
    having access to innovation, having access to markets. It has
    become an essential part of life.
        So, for me, when I see communities in very poor census
    tracts in urban areas having very high costs, relatively high
    costs, for families of what their access is, it is very
    worrisome to me.
        So, a lot of the conversations in this hearing about costs
    are really important. When I see a municipality that is
    desperate to try to do right by poor people want to do this, it
    is kind of almost offensive to me that local lobbyists are
    going in and trying to pass laws that ban people from doing
    things that those local actors believe will lower costs for the
    poor people in that community.
        So, I would love to hear from Mr. Stankey first. I have
    great access. I have Mr. Cohen's cell phone number. Let's call
    him second just in case the Chairman does cut me off.
        Mr. Stankey. First of all, as I stressed, if it is an
    underserved area, there probably is a role for subsidy. If it
    is an area that is served competitively, I would suggest first
    of all you have to look at life cycle costs.
        Unfortunately, a long history of municipalities that start
    these projects and ultimately are not successful in completing
    them over the long haul, and then taxpayers are on the hook to
    bail them out, or similar to what you are seeing in Provo----
        Senator Booker. That is them going bad, but them going
    right, sir, and correct me if I am wrong, is the revenue they
    receive, it is not actually a taxpayer subsidy if they are done
    right, the revenue that they receive at the lower cost covers
    the cost of the efforts. It may not be as good as what you all
    provide, but it provides a low cost option, if it is done
    right.
        Mr. Stankey. So, if you were subsidizing something with
    public capital that does not have a rate in the market, then
    over time, it will chase away the private investment and you
    will be left with nothing but an urban or municipal supported
    broadband infrastructure.
        If you want to trust that is the right investment cycle
    over time----
        Senator Booker. So, you are telling me that the--let me
    hear you correctly, the municipally run system will chase away
    the big companies. They will say oh, we are leaving this
    municipality. You will not go in there and compete. You will
    compete with Comcast but you will not compete with a
    municipally run----
        Mr. Stankey. Whoever the other providers are in that market
    have to make a return on their invested capital. If they are
    competing against an entity that does not require a return and
    wants to run a break even, they will always be in a situation
    where they could potentially charge a price that is less, and
    then ultimately, you are in a situation where that has to be a
    sustaining equation.
        Senator Booker. Is there anywhere in the United States of
    America where there is a municipal one where that theory is
    seen being played out?
        Mr. Stankey. We are very early in the innings on it right
    now. These are investments that are long lived investments that
    take time. We invest in equipment cycles that last for 10
    years.
        So, you have to go through these cycles, and that is
    typically when you see these projects get in trouble, when they
    get to that seven/eight year point and they have to start the
    new reinvestment cycle, and all of a sudden, somebody did not
    care for in the budget the fact that they have to go and invest
    another $800 per home to serve with the latest technology to
    get it to the next speeds, and the equation starts to fall
    apart.
        Senator Booker. Of all the places I thought you would take
    that argument, that is not where I thought you would take it.
    As Mr. Kimmelman seems to be laughing at the same thing, I
    cannot imagine in a city as diverse as Chicago, where you have
    poor neighborhoods, that the more middle class or wealthy
    people would not choose the far better option that you are
    providing, that offers that kind of return on investment.
        Mr. Cohen?
        Mr. Cohen. Senator, what I would think would be the right
    way and what we are seeing in models starting to emerge around
    the country is when municipalities work cooperatively with
    providers to lower the barriers and construction costs and
    permitting to be able to get infrastructure investment at a
    lower cost and faster speed.
        That is one of the best incentives to get the right kind of
    service done.
        Senator Booker. Right, and what I will tell you right now
    is that what is happening right now is inadequate for poor
    families in this country. The system as it stands right now is
    inadequate to provide open equal access for Americans who are
    struggling to make it.
        Cable bills, broadband access, in America right now, is too
    expensive. It is shutting out poor people from what is becoming
    now essential for getting access to everything from education
    to job opportunities.
        David, I know you have a better answer.
        Mr. Cohen. We fully agree with that, sir, and that is why
    our sponsorship of $100 million back to ConnectED, what we have
    done through Aspire, those are all additional ways to try to
    help.
        Senator Booker. Sir, I respect it but what I am saying is
    your efforts, as noble as they are, right now, are inadequate
    because--I know you know this. There are families right now
    that are making tough decisions by cutting their cords because
    they are having difficulty choosing to make rent and to buy for
    essentials.
        I know it might be difficult for you to understand, but I
    know you can take a leap of empathy to see how difficult it is
    for many families in America to afford broadband access as it
    stands right now.
        Mr. Cohen?
        Mr. Cohen. So, I am going to just spend a tiny time on the
    process. We basically agree with AT&T on the bottom line. We do
    have a difference between the two companies on the way in which
    we pursue this.
        Our style, and it is my style, so I will take
    responsibility for it, and it does come from the prism of my
    life, like most of us do, is to go and talk to local
    governments and say are you sure this is a good idea.
        Look at Provo, Utah, which spent this money, and for the
    next 20 years, the taxpayers in Provo are going to be paying
    off the cost of this broadband network that they built and
    never got launched and then sold to Google for a dollar.
        So, Google bought it for a dollar and the taxpayers of
    Provo are going to be paying it off for the next 20 years.
        As a matter of style, I hated it when the state would
    attempt to preempt anything that Philadelphia wanted to do,
    whether it was gun control or voter registration laws, I do not
    believe in state preemption of municipal prerogatives.
        So, it is not part of our style to get state legislatures
    to pass laws prohibiting municipalities from doing municipal
    overbuilds, but consistent with that, I am also not for the
    Federal Government preempting states and what they might want
    to do.
        So, I think I have a pretty consistent position across the
    line there. The most important thing I want to say is I think
    the most important point you make, and it is a personal passion
    of mine, and you know you have heard me talk about it before,
    is if there is a single focus, Mr. Chairman, in your remaining
    time as the Chair of this committee, it is to shine a spotlight
    on the issue of accessibility of low income Americans to
    broadband, and I have said it is one of the cruelest ironies in
    America, that in the Internet, we have the most transformative
    and disruptive technology that I believe we have ever developed
    as a country.
        It is a technology that has the capacity to level the
    playing field in terms of access to education, to health care,
    to vocational opportunity, to news, to information, and
    entertainment, and instead of leveling the playing field, we
    are exacerbating difference as the have's, people who have
    broadband adoption rates of 85, 90, and 95 percent, primarily
    in high income communities, are accelerating and have greater
    access--let's just talk about education, the innovations in
    education, then people in low income communities, primarily
    people in poor urban communities, primarily people of color,
    who have broadband adoption rates of 15, 20 and 25 percent.
        That is the digital divide and it is creating one of the
    great civil rights' disparities that this country has ever
    seen.
        So, Senator, you know how passionately I agree with that
    point. I do not believe that municipal broadband is the
    cleanest path to that. I continue to believe, and you know the
    work that we have done in this space, that the number one
    barrier to broadband adoption in low income communities is not
    the cost of the service, it is digital literacy and a whole
    bucket of digital literacy and relevance buckets that too many
    people in these communities do not understand the value of the
    Internet, the relevance of the Internet. They are scared of the
    Internet. They do not know what it means for them and their
    lives.
        Breaking that cycle of digital illiteracy is the most
    important step to breaking down the digital divide, and we are
    enormously proud of our Internet Essentials program, and I
    noticed you used the word ``essentials'' three times in talking
    about this issue, it is where the name of the program came
    from, which is the Nation's largest and most comprehensive
    broadband adoption program for low income Americans.
        In two and a half years, we will have some new numbers at
    the end of this month, but in two and a half years, we have
    been able to sign up over 300,000 families, 1.2 million low
    income Americans to the Internet, most of them for the first
    time in their lives.
        By the way, 50 percent of those--80 percent of those who
    have signed up are people of color, which is typical of the
    demographic you are referring to as being left behind.
        Senator Booker. So, first of all, again, you and I have had
    this conversation in private. I really appreciate the fact that
    you eloquently put the truth of the matter is in our country,
    in a lot of our communities, the broadband penetration is
    abhorrent, at a time when one of the most important
    democratizing forces, both in the United States and globally,
    is broadband access.
        I mean we are intermediating banks with platforms like
    Kiva, we are intermediating universities, as we see books and
    other things being put on line.
        As you said, in the medical profession, it is such a
    powerful force.
        The only thing I would say--the only point I would take
    issue with you on is that some of it is, as you called it,
    illiteracy around these issues, but just the mere fact that you
    have so many poor minorities grasping for the programs that you
    are offering shows, and I can take you to any community in
    Philly or Newark, Trenton, Camden, Passaic, and there is a
    hunger out there for low cost options.
        So, when you provide it, people come. To me, and I am sure
    this has happened before I came to the United States Senate,
    but we are not doing enough to bridge this divide.
        We, as a country, will pay the price for it because when
    people do get that access, their economic productivity
    flourish. Their children's access to--our ability to access
    their children's genus flourishing.
        That is just my concern in this. Maybe I am wrong on
    municipal broadband. I am willing to have this dialogue back
    and forth. My goal is to figure out a way to make sure every
    American has a free, robust, net neutral Internet as well as a
    broadband access that is affordable because it is becoming as
    essential as heat and water, when it comes to the success of an
    individual.
        Mr. Cohen. I totally agree. All I want to add is that we--
    when I say that Internet----
        The Chairman. Mr. Cohen.
        Mr. Cohen. Sorry.
        The Chairman. I chair this committee, and I am going to
    exercise----
        [Laughter.]
        The Chairman.--a necessary right. Let me say two things.
    One is that in response to any question about my commitment, I
    went to West Virginia in 1964 as a VISTA volunteer. Virtually
    everything I ever did as Governor, virtually everything I have
    ever fought for in 30 years in the Senate, has been for working
    class people, for poor people, and I have never deviated from
    that, and it all flowed very easily simply because of the moral
    compass that was working within me after I had finished my 2
    years with VISTA.
        It was just like drinking a glass of water. It was easy for
    me, where my priorities should lie, and I followed that.
        The second and final thing I want to say is that this has
    been a very long hearing but I think an extraordinarily
    interesting one, because the questions did not all fit exactly,
    you know, they were not a perfect puzzle, but we covered a lot
    of ground on what has to be one of the most important subjects
    that is available, and you have made that point several times,
    Mr. Kimmelman, as have you, Mr. Cohen, as have you, Senator
    Booker, that this is important beyond belief.
        Where Americans get their information, if they can get
    their information, how do they absorb it, how do they use it,
    if they cannot get their information, what do we do to correct
    that.
        As the providers of the potential of getting that
    information from whatever point of view they come, we have
    serious responsibilities because the divide in our country is
    bad and it is getting worse. It is not a good time.
        I thank you and I treasure each and every one of you at the
    witness table for staying, all of you in the audience for
    staying for this long hearing, because I think it was worth it.
    It was a good hearing, and each of you made a major
    contribution.
        Mr. Ryan, your star just shot up as soon as I said nobody
    had asked you a question, you know. It was terrific.
        [Laughter.]
        The Chairman. The hearing is adjourned. Thank you.
        [Whereupon, at 5:20 p.m., the hearing was adjourned.]
                                A P P E N D I X

    Response to Written Questions Submitted by Hon. John D. Rockefeller IV
                               to David L. Cohen
        Question 1. Mr. Cohen, online video platforms are exploring a mix
    of revenue models to support their development, many of which include
    digital advertising. Questions have been raised, though, about whether
    Comcast, through the pending merger with Time Warner Cable and its
    purchase of FreeWheel, could have significant control over the
    burgeoning digital advertising market and the more traditional cable ad
    sales market.
        With respect to digital advertising, your company has indicated
    that it will operate FreeWheel as an independent entity, safeguard data
    collected by the company regarding other media companies' digital
    operations, and not give preferential treatment to its own content.
    Will you reaffirm those commitments to the Committee?
        Answer. As background, Comcast's acquisition of FreeWheel received
    antitrust approval in March 2014. This result was not surprising, since
    the transaction did not reduce competition in any way. Prior to the
    transaction, Comcast did not have a digital advertising platform
    competitive with FreeWheel. The transaction is procompetitive because
    it will provide FreeWheel with the resources and scale required to
    continue to develop into a robust competitor in the digital advertising
    space.
        Comcast and FreeWheel management are committed to safeguarding the
    data of FreeWheel's clients. This is essential to continued growth and
    success of FreeWheel. As explained by Rob Holmes, Vice President of
    Advanced Advertising at Comcast, ``our goal is to maximize the value of
    FreeWheel to the overall ecosystem, and not respecting our clients'
    data in some way would run counter to those purposes.''

        Question 1a. With respect to the traditional advertising market,
    how do you respond to claims from some groups that the merger will give
    Comcast excessive control over the local ad time sold by cable systems
    around the country and would have significant influence in the
    cooperative interconnects that facilitate cable ad sales on a local and
    regional basis?
        Answer. The proposed Comcast-Time Warner Cable (``TWC'')
    transaction presents no plausible competitive concerns regarding local
    advertising for a number of independently sufficient reasons.
        It is important to emphasize that cable companies like Comcast and
    TWC control a very small percentage of television advertising. As a
    general matter, national cable network and local broadcast stations
    sell the vast majority of national and local television advertising.
    Cable companies like Comcast and TWC are generally allotted only two
    minutes per hour of advertising on national cable networks and no time
    at all on local broadcast networks. Such cable spot advertising
    accounts for only about seven percent of all spending on local
    advertising and only approximately eight to 11 percent of saleable
    impressions in local markets--far less than broadcast television,
    radio, Internet, or newspapers.
        Furthermore, Comcast and TWC generally operate in different local
    geographic markets. There should be no competitive concern due to the
    same company selling locally targeted advertisements in different
    geographic markets, as local advertisers do not view such products as
    competitive with each other. Consider an example: If an advertiser
    (such as a local car dealership) wants to purchase advertising time in
    Washington, D.C., to reach potential consumers in Washington, D.C.,
    this advertiser would not view advertising in Los Angeles as a
    competitive substitute. Thus, combining advertising inventory in
    Washington, D.C. and Los Angeles (through a merger or otherwise) can
    have no competitive effect on the D.C. car dealership, because that car
    dealership never was interested in purchasing advertising in Los
    Angeles in the first place.
        For this same reason, the transaction changes nothing at the local
    level with respect to local interconnects. Interconnects are formed
    when different MVPDs situated within the same television market (also
    known as ``designated market areas'' or DMAs) contract together to pool
    their advertising inventory to cover a broader geographic area. This
    permits MVPDs to compete more effectively with other outlets for local
    advertising, like broadcast television, which sell advertising
    inventory on a DMA-level with far greater coverage than any individual
    MVPD can generally achieve. This structure benefits advertisers, who
    can go to one outlet (the interconnect) to purchase DMA-level
    advertising if they choose without having to go MVPD-by-MVPD to cobble
    together a purchase of similar scope. As an established practice, the
    largest participating MVPD in a given area typically manages the local
    interconnect, which means overseeing negotiations with advertisers that
    want access to the pooled inventory of available advertising time on
    the participating MVPDs' systems, along with technically managing the
    insertion of advertisements. These roles require substantial investment
    in time, employees, and technology.
        As a result of the transaction, in areas where TWC currently
    manages an interconnect, Comcast will merely step into its shoes and
    manage that interconnect. As these local interconnects pursue local
    advertising in different markets, Comcast's managing of additional
    interconnects will not alter the local advertising market dynamic
    within any locality.
        The lack of impact on the local advertising market is not altered
    by the fact that Comcast owns NBC broadcast stations in four markets
    (New York, Los Angeles, Dallas, and San Diego) where TWC operates cable
    systems. The FCC and the DOJ have each concluded that locally-zoned
    cable spot advertising, which is targeted at a sub-DMA level, is not
    generally a close substitute for local broadcast advertising, which is
    targeted at the DMA level. In addition to NBC broadcast stations and
    the cable interconnects in these markets, advertisers who wish to
    advertise at the DMA level have a broad array of options, including
    other broadcast television networks, Internet, radio, newspaper,
    billboards, and direct mail. Due to this variety of available options,
    local broadcast and local cable advertising combined account for a
    minority of local advertising spending in these markets, according to
    BIA/Kelsey data. Even if one were to view local cable and local
    broadcast advertising as being close substitutes, and exclude all non-
    television local advertising options, NBC and the combined Comcast/TWC
    local cable advertising share is still a minority of such a
    hypothetical market.
        In sum, due to their small share of local advertising and the
    distinct geographical markets in which they operate, the Comcast-TWC
    merger would not have an appreciable impact on local advertising.
                                     ______

       Response to Written Questions Submitted by Hon. Barbara Boxer to
                                 David L. Cohen
        Question 1. According to the California Emerging Technology Fund,
    Comcast's Internet Essentials program has signed up 11 percent of the
    eligible households in California.
        Answer. Comcast is fully committed to helping close the ``digital
    divide,'' and we believe the record will show that we have done more to
    encourage broadband adoption by low-income families than any other
    entity in the nation, private or governmental. Our Internet Essentials
    program was designed to meet the needs of a specific population--low-
    income families with school-age children who are not currently
    connected to broadband Internet at home. This is the population with
    the greatest need for Internet connectivity for educational purposes.
        At the hearing, I reported that, since launching Internet
    Essentials during the 2011 back-to-school season, Comcast had signed up
    more than 300,000 households to receive the Internet at home, serving
    over 1.2 million Americans. We also had provided more than 30,000 low-
    cost, subsidized computers to program families.\1\
    ---------------------------------------------------------------------------
        \1\ See Draft Hearing Tr. At 125:12-125:16 (July 16, 2014); Press
    Release, Comcast Corp., Comcast Offers Up to Six Months of
    Complimentary Internet Service and an Amnesty Program for Low-Income
    Families (Aug. 4, 2014), http://coporate.com/news-information/news-
    feed/comcast-offers-up-to-six-months-of-complimentary-internet-service-
    and-an-amnesty-program-for-low-income-families.
    ---------------------------------------------------------------------------
        As promised, I am pleased to provide updated numbers for
    participation in Internet Essentials, which now show that over 350,000
    families representing over 1.4 million Americans have been connected to
    the power of the Internet--an increase of over 50,000 families and
    200,000 Americans. Moreover, as of June 21, 2014, the number of
    California participants had surpassed 46,000 families--or almost 15
    percent of the eligible population.
        Experts agree that the success of Internet Essentials has exceeded
    all reasonable expectations.\2\ The unconnected population is difficult
    to reach, and because issues of igital literacy (lack of understanding
    of the value or relevance of the Internet, fear of the Internet, lack
    of knowledge as to how to use computers, etc.) are the primary barriers
    to adoption, research confirms that closing the digital divide will be
    a very long-term project.
    ---------------------------------------------------------------------------
        \2\ See, e.g., Marguerite Reardon, Comcast Extends `Internet
    Essentials' Program Indefinitely, CNET, Mar. 4, 2014, http://
    www.cnet.com/news/comcast-extends-internet-essentials-program-
    indefinitely/ (``Comcast is not the only company that is working toward
    more Internet adoption. . . . But so far, Comcast's program is the
    largest such effort. According to new research, it's also been among
    the most successful.''), citing Dr. John B. Horrigan, The Essentials of
    Connectivity (Mar. 2014), available at http://corporate.comcast.com/
    images/Final_IE_Re
    search_Full_Paper.pdf
    ---------------------------------------------------------------------------
        Even so, when you consider that after nearly two decades of
    aggressive marketing--spending hundreds of millions of dollars--Comcast
    has connected to the Internet less than 40 percent of all the
    households we pass, the fact that we have connected almost 15 percent
    of the eligible low-income families in California to the Internet in
    less than three years is a remarkable accomplishment.\3\
    ---------------------------------------------------------------------------
        \3\ In March 2014, Comcast received the T. Howard Foundation's
    Innovative Program Award honoring the success of Internet Essentials in
    helping close the digital divide for low-income families with children.
    ---------------------------------------------------------------------------
        When this transaction is approved, Internet Essentials will become
    available in all the communities in the retained TWC markets--including
    major new metropolitan areas such as Los Angeles, New York, and Dallas/
    Fort Worth. This will significantly extend the program's reach to
    millions of additional low-income children and families.\4\
    ---------------------------------------------------------------------------
        \4\ Because Comcast will not control the cable systems in the
    markets being divested, we will no longer be able to support Internet
    Essentials in those communities, although SpinCo could choose to
    continue an equivalent program.

        Question 1a and 1b. How can Internet Essentials do better? What
    specific changes or modifications to the program could Comcast make to
    improve sign-up rates?
        Answer. Although Internet Essentials is unquestionably the most
    successful broadband adoption program in the county, it remains an
    evolutionary one that Comcast continuously enhances and supplements to
    help improve participation rates by low-income families.
        As we recently reported to the FCC,\5\ program enhancement to date
    include:
    ---------------------------------------------------------------------------
        \5\ See Third Annual Compliance Report on Internet Essentials, The
    Comcast Broadband Opportunity Report, MB Docket No. 10-56, at 22-23
    (July 31, 2014).

       Extending the program indefinitely--beyond Comcast's initial
    ---------------------------------------------------------------------------
            three-year commitment.

       Expanding the eligibility requirement for Internet
            Essentials twice, first by extending eligibility to families
            with children eligible to receive reduced-price school lunches,
            and then by including parochial, private, cyberschool, and
            homeschooled students.

       Increasing the broadband speeds for Internet Essentials
            customers twice in less than two years; Internet Essentials now
            offers up to 5 Mbps downstream, which is triple the speed
            offered at the beginning of the program, and faster than
            Comcast's entry-level service (3 Mbps) in most of its markets.

       Expanding an instant approval process for families whose
            students attend schools with 70 percent or more NSLP
            participation (previously, the threshold was 75 percent), which
            enhanced participation rates.
       Creating an online application tool on the Internet
            Essentials website to make it easier and faster for a family to
            apply for Internet Essentials. The online application form is
            now available in English and Spanish, and is optimized for use
            on mobile devices.

       Enabling Comcast's community partners to help connect low-
            income families to the Internet by purchasing Opportunity Cards
            that can be used toward the cost of paying for Internet
            Essentials service.

       Launching an enhanced version of its online Learning Center
            to provide families with enhanced and dynamic content,
            including interactive content in Spanish.

       Creating the Gold Medal Recognition Program to award grants
            to communities that have done the most to help close the
            digital divide and create Internet Essentials Learning Zones.
            As part of this program, Comcast recently made grants totaling
            more than $1 million to 15 communities, including in Elk Grove
            and Fresno, California.\6\
    ---------------------------------------------------------------------------
        \6\ The additional Gold Medal-recognized communities include Adams
    County, Aurora, and Denver, Colorado; Atlanta, Georgia; Chicago and
    Cicero-Berwyn, Illinois; Collier, Miami, and Palm Beach, Florida;
    Pasadena, Texas; Seattle and Tacoma, Washington; and St. Paul,
    Minnesota.

        Comcast is extremely proud of the success of Internet Essentials.
    Going forward, we remain committed to making the program and our other
    community service efforts even more effective, including in the
    ---------------------------------------------------------------------------
    communities with TWC systems that we will acquire in this transaction.

        Question 1c. Does Comcast support continuing the Internet
    Essentials program until California and the Nation achieve an 80
    percent home broadband adoption rate?
        Answer. Comcast announced in March 2014 that it has extended
    Internet Essentials indefinitely.\7\ However, the suggestion that any
    one company could accomplish an 80 percent broadband adoption rate in
    the low-income population is unrealistic. As noted above, after two
    decades of intense marketing, Comcast has yet to achieve an overall 40
    percent adoption rate across all of the homes we currently pass.
    ---------------------------------------------------------------------------
        \7\ See Press Release, Comcast Corp., Comcast Extends National
    Broadband Adoption Program for Low-Income Families (Mar. 4, 2014),
    http://corporate.comcast.com/news-information/news-feed/internet-
    essentials-2014.

        Question 2. I represent California, which is home to the creative
    and content community. My concern with the Comcast-Time Warner merger
    is that because Comcast now controls cable systems in Los Angeles and
    New York, it has the ability to decide which content, which cable
    channels, will succeed and which will be crippled.
        My constituents from the content community tell me that they cannot
    get the support of advertisers and investors to launch a new channel
    without exposure in Los Angeles, New York, Chicago or Philadelphia.
        Answer. Today, the MVPD marketplace is fiercely competitive and
    provides programmers with more outlets than ever before for their
    content. Nothing about this transaction will harm programmers.
        Comcast, like other MVPDs, has--and will continue to have--every
    business incentive to carry programming that its customers value and
    demand. As others have said, ``Content is king.'' Comcast faces intense
    competition for customers in these markets from the two DBS providers,
    telcos, cable over-builders, and, increasingly, OVDs--including
    Netflix, Amazon, Hulu, and others that are producing their own content
    and curating other programming. In fact, Netflix alone has more
    customers than the combined company will have and provides broader
    exposure than any MVPD, giving content providers a whole new platform
    to establish themselves and advertisers a new way to reach millions of
    viewers. As a result, Comcast would quickly lose subscribers to other
    MVPDs if it failed to carry channels its customers want to watch, or
    failed to offer attractive packages of desired programming to
    consumers.
        The D.C. Circuit concluded more than a decade ago that the evidence
    before the FCC and the court could not have justified a horizontal
    ownership limit lower than 60 percent on the basis of buyer power
    concerns.\8\ And in 2009, the same court concluded that ``[i]n light of
    the changed marketplace, the Government's justification for the 30
    percent cap is even weaker now than in 2001. . . .'' \9\ As the court
    explained:
    ---------------------------------------------------------------------------
        \8\ See Time Warner Entm't Co., L.P. v. FCC, 240 F.3d 1126, 1136
    (D.C. Cir. 2001).
        \9\ Comcast Corp. v. FCC, 579 F.3d 1, 9 (D.C. Cir. 2009) (emphasis
    added).

            [T]he record is replete with evidence of ever increasing
            competition among video providers: Satellite and fiber optic
            video providers have entered the market and grown in market
            share since the Congress passed the 1992 Act, and particularly
            in recent years. Cable operators, therefore, no longer have the
            bottleneck power over programming that concerned the Congress
            in 1992.\10\
    ---------------------------------------------------------------------------
        \10\ Id. at 8.

        Today's MVPD marketplace is even more competitive than it was in
    2009--let alone in 2001--with cable providers' share of U.S. MVPD
    subscribers having declined significantly in recent years in light of
    robust competition from DBS and telco providers and online video
    distributors. Given these clear judicial precedents and the enhanced
    competition that has developed in the video marketplace since the
    decisions were issued, there is no credible basis for concluding that a
    cable operator serving less than 30 percent of all MVPD subscribers
    could be a bottleneck or raise competitive issues.\11\ A 70 percent
    ``open playing field'' is more than sufficient to allow new cable
    channels to be launched.
    ---------------------------------------------------------------------------
        \11\ See Applications of Comcast Corp. and Time Warner Cable Inc.
    for Consent to Transfer Control of Licenses and Authorizations, MB
    Docket No. 14-57, Applications and Public Interest Statement, at 143-51
    (filed Apr. 8, 2014); Rosston-Topper Declaration  185-188.
    ---------------------------------------------------------------------------
        Indeed, looking solely at carriage by MVPDs, Epix, Longhorn
    Network, NFL Sunday Ticket, Fusion, Fox Soccer Plus, Universal Sports,
    and MTV U are among many networks that are (or were originally) carried
    by other MVPDs besides Comcast. Similarly, the Big 10 Network, ESPNU,
    Smithsonian Channel, Fox Movie Channel, MASN, CBS Sports Net, and
    several other networks were launched by other MVPDs before Comcast
    started carrying them.
        Conversely, carriage by Comcast does not guarantee a network's
    success. AZN, Bridges Network, ESPN3D, and Mountain West Conference
    Channel are among various networks that Comcast carried that were
    ultimately not successful. As these facts further demonstrate,
    therefore, carriage by Comcast is not essential to the ability of an
    independent network to launch or to succeed.
        In short, previous concerns about video competition are truly
    antiquated in light of today's marketplace realities. This is
    particularly so where, as here, Comcast and TWC do not compete for
    customers in any market and there will be no reduction in consumer
    choice among competing MVPDs. Comcast will continue to face the same
    competitive pressures post-transaction as it does today.

        Question 2a. How will the merger with Time Warner impact diversity
    of content for Comcast customers?
        Answer. Comcast serves the diverse needs and interests of our
    customers by offering a wide variety of compelling content, regardless
    of any affiliation with Comcast. We currently carry over 160
    independent networks, including many small, diverse, and international
    ones.\12\ Moreover, Comcast does not have an ownership interest in the
    overwhelming majority of content that it distributes. In fact, six of
    every seven networks carried by Comcast are unaffiliated with the
    company.
    ---------------------------------------------------------------------------
        \12\ Comcast is using the FCC's definition of ``independent
    networks'' in the NBCUniversal Order, which includes networks that are
    not owned by Comcast and not affiliated with either Comcast or a top 15
    programming network owner, as measured by annual revenues.
    ---------------------------------------------------------------------------
        We carry--and will continue to carry--the programming that our
    subscribers want and value. And our proven commitment to a wide
    diversity of content will enhance consumer access to diverse
    programming after the TWC transaction is completed.
        More specifically, Comcast is proud of the amount of diverse
    programming we make available to our customers. All of our cable
    systems are now digital and we carry scores of diverse networks on our
    Digital Basic tiers at affordable prices. In total, Comcast currently
    carries more than 100 cable networks geared toward African American,
    Hispanic/Latino, and Asian American audiences. These include:

       11 cable networks geared toward the African American
            community.

       Dozens of cable networks geared toward the Hispanic/Latino
            community. Comcast fulfilled its commitment to launch a package
            of 40 to 60 Spanish-language channels in all major Latino
            markets, including South Florida. The XFINITY TV Latino
            packages now include approximately 60 Latino networks in
            English and Spanish, depending on a customer's region,
            including 50+ independent channels in our Spanish-only ``H''
            tier. Comcast also launched the Xfinity Latino website
            (Xfinity.com/Latino), which features almost 9,000 choices and
            2,500 hours of movies and shows online free to XFINITY Latino
            customers.

       25 cable networks geared toward the Asian community.
            Highlights include Mnet, the only 24/7 English-language
            nationwide television network in the U.S. targeting Asian
            Americans, and MYX TV, a channel carried in Seattle and western
            Washington State made for and by Asian Americans.

        Since 2011, and as part of our commitments in the NBCUniversal
    Order, Comcast has also launched five independent networks, four of
    which have Hispanic American or African American ownership or
    management. These include BabyFirst Americas, El Rey, ASPiRE, and
    REVOLT. All of these networks are carried on our Digital Basic tier.
    The launch of these networks has created even more outlets and
    opportunities for content creators serving the interests and needs of
    diverse audiences.\13\
    ---------------------------------------------------------------------------
        \13\ Comcast has committed to launch four additional minority-owned
    networks and one additional independent network in the next few years.
    ---------------------------------------------------------------------------
        In addition, since 2011, Comcast has expanded its distribution of
    over 120 independent networks, including expanded distribution of a
    host of minority channels to tens of millions of additional customers.
    This increased distribution is consistent with commitments that Comcast
    made as part of memoranda of understanding (``MOU'') with various
    diverse organizations, in conjunction with the NBCUniversal
    transaction.
        For example, consistent with the MOU, Comcast has made the Africa
    Channel available to over two million additional customers, and TV One
    available to over 600,000 additional customers. Comcast likewise
    extended distribution of seven Hispanic programming services--Azteca
    America, Galavision, HITN, LATV, nuvoTV (f/k/a SiTV), UniMas (f/k/a
    Telefutura), and Univision--by more than 14 million subscribers.\14\
    Mnet, a leading Asian American entertainment network, was also expanded
    to millions of additional subscribers in major DMAs. And we have
    increased the number of video-on-demand (``VOD'') hours for diverse
    programming by more than 270 percent, while increasing the number of
    online hours for diverse programming (via Xfinity.com) by nearly 170
    percent.
    ---------------------------------------------------------------------------
        \14\ This exceeded, by more than 40 percent, Comcast's commitment
    in the NBCUniversal transaction to expand carriage of three Hispanic
    networks by 10 million subscribers.
    ---------------------------------------------------------------------------
        Besides expanding distribution of these channels and other diverse
    content, Comcast also has also helped promote and drive viewer interest
    in its diverse programming in innovative ways that many smaller
    networks could not do on their own. Specifically, between 2011 and
    2013, we created Xfinity ``microsites'' tailored for African American,
    Asian-Pacific, Hispanic, and LGBT audiences.\15\ Each microsite brings
    together culturally relevant entertainment from a variety of sources in
    a central, easy-to-navigate location. As an example, xfinity.com/
    CelebrateBlackTV featured special programming celebrating Black History
    Month. And to commemorate the 50th anniversary of the March on
    Washington, Comcast launched HisDreamOurStories.com, an award-winning
    website dedicated to the legacy of Dr. Martin Luther King, Jr. For
    these and other efforts, Comcast/NBCUniversal was recently honored with
    the 2014 Multicultural TV Front Runner Award, which recognizes the
    company's commitment and leadership in supporting multicultural
    communities.
    ---------------------------------------------------------------------------
        \15\ See http://xfinity.com/celebrateblacktv; http://xfinity.com/
    asia; http://xfinity.com/latino; http://xfinity.com/lgbt.
    ---------------------------------------------------------------------------
        Comcast has also invested heavily to develop and deploy the first-
    of-its-kind Xfinity Latino Entertainment Channel, a linear, interactive
    ``barker'' channel available to over 20 million subscribers that
    promotes curated, Latino-relevant content. During June 2014, this
    channel was transformed into a one-stop shop for all things World Cup,
    including direct links to Xfinity On Demand for immediate VOD
    availability of every World Cup match, the latest news, scores and
    standings, content recaps, and information on upcoming matches.\16\
    ---------------------------------------------------------------------------
        \16\ See Press Release, Comcast Corp., Every Moment, Every Match On
    Demand, Instantly (June 11, 2014), http://corporate.comcast.com/news-
    information/news-feed/comcast-delivers-the-world-cup-on-demand-
    instantly.
    ---------------------------------------------------------------------------
        These are only a few of the additional ways that Comcast is
    providing and supporting diverse programming. Nothing about the
    transaction will change our commitment to offering and promoting
    programming, regardless of source, that appeals to a broad range of
    consumers; instead, we will bring this same approach to a larger
    universe of customers.

        Question 2b. What does Comcast plan to do to ensure that consumers
    are not harmed by Comcast having too much control over content?
        Answer. The transaction will not give Comcast the incentive or
    ability to restrict competing content providers from distributing their
    content to consumers, or to withhold NBCUniversal programming from
    competing TV and Internet providers.
        The combined company will account for less than 30 million managed
    MVPD subscribers, or less than 30 percent of MVPD subscribers
    nationally. This will not adversely affect the ability of content
    providers to distribute their content broadly to a national audience,
    whether or not they enter into an agreement with our company, for the
    same reasons I previously explained.
        Indeed, today, most consumers can choose among at least three
    facilities-based MVPD providers; many can choose among four or more.
    And this does not even account for the increasing number of online
    video distributors offering content to consumers. According to SNL
    Kagan, 53.9 million U.S. households subscribed to online video services
    at the end of 2013, nearly triple the 18.2 million that did so in 2010.
    If Comcast refuses to carry the content that consumers want, they can
    and will switch to our competitors, and their numbers are growing
    everyday.
        The transaction will not affect NBCUniversal's licensing of content
    to MVPDs, either.\17\ Comcast is acquiring minimal new programming
    interests from TWC: one major league professional sports English
    language RSN, some local sports and news channels, and interests in two
    national cable networks in which Comcast already has a partial
    ownership interest (MLB Network and iN Demand). As a result, there will
    only be a de minimis change in the new company's programming assets.
    NBCUniversal will not have the power or incentive to withhold its
    programming from MVPDs in any markets. And, in all events, these
    relatively modest new holdings will be subject to safeguards such as
    the FCC's program access rules.
    ---------------------------------------------------------------------------
        \17\ Since the Comcast-NBCUniversal transaction, there have been no
    disputes with any MVPDs over licensing of NBCUniversal programming on
    fair and reasonable terms--and none in which the parties have resorted
    to arbitration. NBCUniversal has successfully reached affiliation
    agreements covering the full suite of NBCUniversal programming with,
    among others, Verizon, Cablevision, Charter, Dish Network, Suddenlink,
    Mediacom, and NCTC without resort to the arbitration remedies in the
    NBCUniversal Order.
    ---------------------------------------------------------------------------
        For the same reasons, the transaction will not affect
    NBCUniversal's licensing of content to OVDs. Since the NBCUniversal
    transaction was approved, NBCUniversal has licensed or renewed
    programming content to numerous OVDs, including Apple, Amazon, Netflix,
    and YouTube. The NBCUniversal Order's licensing and arbitration rights
    for OVDs will also continue to apply after this transaction as a
    backstop.
                                     ______

         Response to Written Questions Submitted by Hon. Mark Pryor to
                                 David L. Cohen
        Question 1. I have long been concerned about ``orphan counties''
    and the ability of consumers living in those areas to have access to
    home state broadcast TV programming. I would expect that as online
    video choices continue to grow consumers in these counties would have
    more access to programming that is specific to their state. Could you
    please state your thoughts on how increased online video competition
    could help address the orphan county issue?
        Answer. Comcast recognizes the frustration that results from
    consumers' lack of access to in-state broadcast signals and
    programming, which arises from Nielsen's construct of DMAs. We agree
    that the explosive growth of online video has the potential to fill
    some of those gaps for consumers seeking local content such as news,
    weather, and sports.
        In a number of circumstances, Comcast carries additional broadcast
    stations in order to provide in-state coverage to our customers. For
    example, our cable systems in West Memphis currently include locally-
    based stations broadcasting out of Memphis, Little Rock, and Jonesboro.
        In addition, the increasing competition to provide online video
    will help provide greater access to local programming for consumers
    living in an orphan county in at least two ways. First, this increased
    competition will continue to drive Internet Service Providers to invest
    in infrastructure that gives more consumers access to online sites and
    platforms, extending the availability of broadband services into rural
    areas that typically comprise orphan counties. And second, in response
    to this increased competition, broadcast stations and other
    programmers, as well MVPDs and OVDs, will continue to invest in
    providing online content that appeals to consumer interests, including
    local news, weather, and sports programming.
        Broadcasters, in particular, are offering websites where local
    information can be accessed freely by any consumer. For instance, among
    other websites, an Arkansan living in the Memphis DMA can find in-state
    news, sports, and weather (including watches and warnings) originating
    from Jonesboro at www.kait8.com; or from Little Rock at
    www.arkansasmatters.com or www.Fox16.com. These kind of online
    offerings of local content will continue to expand as programmers and
    distributors compete for viewer attention and loyalty in this
    increasingly dynamic video marketplace.\1\
    ---------------------------------------------------------------------------
        \1\ Indeed, the website of WATN, Memphis (ABC), covered almost 60
    stories about Arkansas in the last month. See http://
    www.localmemphis.com/sitesearch?q=arkansas&mod=m. The website of WHBQ,
    Memphis (Fox), covered close to 50 stories about Arkansas in the last
    three weeks or so. See http://www.myfoxmemphis.com/
    search?RecordNum=1&vendor=ez&qu=
    arkansas. The website of WMC-TV, Memphis (NBC), covered about 100 news
    stories in the last 30 days that mentioned Arkansas. See http://
    search.wmctv.com/default.aspx?ct=r&q=arkansas
    &type=20198,155010154&r.STRDAT=8%2f03%2f2014%2c.

        Question 2. As we look to the future of video, no Americans should
    be left behind. I authored the Twenty-First Century Communications and
    Video Accessibility Act in 2010 as a way to make sure communications
    and video services remain available to all consumers. In addition to
    the FCC's laudable recent actions to expand its closed captioning rules
    to Internet video clips, are there additional steps that Congress or
    the FCC need to take to make sure all video services are accessible to
    everyone?
        Answer. Comcast shares Senator Pryor's commitment to improving the
    accessibility of video services. We supported the Twenty-First Century
    Communications and Video Accessibility Act of 2010 (the ``CVAA''). We
    have also participated in a constructive and collaborative way in many
    CVAA rulemaking proceedings at the FCC; and we are now working
    diligently to implement the law's requirements, including those
    relating to Internet video clips. Comcast believes the goals of the
    CVAA are being achieved, but also recognizes that there is always more
    to do in this area. We look forward to working together with the FCC
    and other stakeholders on these and other accessibility issues.
        Comcast appreciates that both Congress in drafting the CVAA, and
    the FCC in implementing its related rules, have given industry
    flexibility to build next-generation accessibility solutions by not
    limiting technology choices. This policy has enabled Comcast to develop
    innovative solutions for viewers with disabilities. We have made
    accessibility an integral part of our service and product planning,
    design, and implementation. We work closely with individuals with
    disabilities and advocacy groups to drive a customer-informed
    accessibility strategy, and have hosted numerous roundtables with
    interested parties to identify ways to make our services and products
    more accessible.
        These collaborative efforts have led to a range of innovative,
    industry-leading solutions, including:

       A first-of-its-kind ``talking guide'' solution for our
            acclaimed X1 platform, which assists blind and visually-
            impaired customers in navigating the X1 TV user interface and
            selecting particular services for use.

       Simplified processes for activating accessibility features,
            such as programmable ``soft keys'' on the remote control for
            the X1 platform that can be configured for one-touch activation
            of closed captioning or video description.

       Screen-reader technology on the Xfinity Connect Mobile App,
            so blind and low-vision users can access e-mail, text, and
            other online services on tablets and smartphones.

       A new automated monitoring tool, which enables Comcast to
            detect closed captioning problems and quickly investigate and
            troubleshoot captioning issues.

       A Comcast Accessibility Center of Excellence focused on
            providing specialized customer care for persons with
            disabilities.

        We also recognize the importance of making a wider range of content
    accessible to viewers with disabilities. In fact, NBCUniversal began
    captioning online video well before the FCC required it, including, for
    example, news clips on the NBC News and Today Show websites.
    NBCUniversal has also captioned content that is not subject to the
    FCC's rules, such as Internet-only video feeds for the 2014 Sochi
    Olympics. And we played a leading role in the development of industry
    best practices (later codified in the FCC's rules) to improve the
    quality of closed captions.
        Comcast appreciates Senator Pryor's leadership on accessibility
    issues, and is strongly committed to continuing to work with him and
    other stakeholders to make further improvements in this area.
                                     ______

         Response to Written Questions Submitted by Hon. Mark Pryor to
                              Justin (Gus) Hurwitz
        Question 1. As we look to the future of video, no Americans should
    be left behind. I authored the Twenty-First Century Communications and
    Video Accessibility Act in 2010 as a way to make sure communications
    and video services remain available to all consumers. In addition to
    the FCC's laudable recent actions to expand its closed captioning rules
    to Internet video clips, are there additional steps that Congress or
    the FCC need to take to make sure all video services are accessible to
    everyone?
        Answer. The direction of the video market is largely being driven
    by competition for high-value consumers that are interested in, or that
    the market believes are interested in, high-definition, Internet-
    delivered, general interest entertainment programming. I worry that
    this competition will tend to leave three groups behind: local
    programmers (including news, information, and local entertainment),
    consumers without access to the highest-speed Internet services, and
    traditional MVPD (cable and satellite services). Each of these are
    problematic in their own right, and also raise concerns that the
    evolving media marketplace is ``evolving'' in part by leaving consumers
    that are not of ``high-value'' to the market behind. Whether, or what,
    can be done in response to these concerns is a difficult question, but
    I offer some preliminary thoughts below.
        First, local programming--which is often more important to and
    representative of those with accessibility needs--is largely
    unavailable online. Some broadcasters may stream their content on their
    own--but it is not part of the typical online video ecosystem. Other
    local broadcasters do not make their video content available online--in
    any format, let alone real-time streaming of broadcaster-originated
    content. As consumers continue to migrate to online video sources, they
    also move away from these local programming sources. This is
    exacerbated by typical consumer demand, which is driven by consumption
    of non-local programming (and primarily entertainment programming).
    This loss of local content is potentially devastating to participatory
    government in a modern liberal democracy. While there are no clear
    answers to address this concern today, Congress and the FCC should be
    actively investigating the role of local programming in the media
    (especially video, and online video) marketplace, and considering
    approaches to bringing local content to online video platforms in a
    meaningful way, and the role of local media in the lives of the
    disabled.
        Second, the online video marketplace is driven by a hydraulic
    pressure to cater to the demands of the highest value consumers--those
    who typically make the greatest investments in video consumption,
    including by having high-quality video systems (e.g., HD TVs) and high-
    speed Internet. It is an unfortunate truth that consumers with
    disabilities are often not represented among these ``high-value''
    consumers--ongoing technological development often does not cater to
    them, and, indeed, often leaves them behind. This is particularly,
    troubling where earlier iterations of a given technology may be more
    accommodating (or more readily accommodated) to their needs.
        The technological state of the art will always be beyond what the
    median consumer demands, and entirely out of reach of many consumers.
    Undoubtedly this pressure to develop new and better technologies yields
    immeasurable benefits (viz., the new technologies that result). But if
    we define what ``the typical'' or ``every'' consumer should have access
    to as what is necessary to make use of what the market is offering, we
    will be in a perpetual state of ``falling behind''--and to the extent
    that we do catch up, it will often be by expending substantial
    resources to provide consumers with resources they do not necessarily
    want or need. The Universal Service program is one mechanism that helps
    reduce this concern, by ensuring that consumers have access to high-
    speed Internet--but it does nothing to address the hydraulic pressure
    that will ensure many consumers do not have access to much video
    content, and in fact may exacerbate that pressure. Rather, Congress and
    the FCC, at least to the same extent they are pushing for the most
    advanced technologies to be widely available to consumers, should also
    be working to ensure that consumers have access to less technologically
    demanding equivalents of video (and other online service) offerings.
    Thanks to technological advances, typical quality video offerings from
    3-4 years ago can today be accommodated by Internet connections
    commonly available 5-8 years ago. But the market is focused on
    developing video offerings that require consumers to have substantial
    multiples of resources beyond that (e.g., HD-quality video requires 3-6
    times the bandwidth of DVD quality video; 4K-quality video requires 25
    times the bandwidth)--and that do nothing to improve the accessibility
    of this content. These higher-quality video offerings offer little
    necessary benefit to many forms of programming--especial for the most
    vital programming, such as local news and information--yet there is
    little focus on preserving access to non-HD quality content for
    consumers who may not have or want access to HD-quality content.
        Similar concerns can be expressed about online accessibility
    outside of the video marketplace context. The Internet is increasingly
    a rich multimedia environment, the evolution of which has been driven
    by low-cost access to high-speed broadband service. But this audio-and
    video-rich environment frequently leaves disabled persons behind.
        Third, traditional MVPD platforms are subject to myriad regulations
    to which emerging video marketplace participants are not. These
    restrictions regulate, for instance, how much and what types of certain
    content these firms can (or must) carry, as well as how, when, or even
    whether these firms can negotiate over the price or terms for carrying
    that content. The subject many of these firms to local or other
    licensing regulations, and impose other limits on how they develop and
    operate their infrastructures. And increasingly it is unclear whether
    these regulations do or should apply to non-traditional entrants into
    the video marketplace.
        The existing regulatory framework therefore presents two types of
    problem relevant to accessibility concerns. First, it ossifies
    traditional MVPDs, limiting their ability to provide access to or
    compete with other providers in the emerging video marketplace. This is
    particularly problematic because many with accessibility concerns may
    be averse to experimenting with new technology platforms, preferring
    instead to stick with a known platform that offers at least minimal
    accessibility support. Moreover, allowing traditional MVPDs to evolve
    their own technological and business models to look more like the
    evolving online video marketplace may in many cases require those MVPDs
    to expand their accessibility features to cover new content forms and
    sources. And second, related to this point, many firms in the evolving
    marketplace--those that are not (or may not be) subject to existing
    regulations--operate without any concern for or awareness of
    accessibility issues. This furthers the tendency of the market to speed
    ahead, catering to ``high-value'' consumers while leaving those with
    other needs or demands behind. This is particularly tragic because many
    of the firms developing these new technologies have incredible
    innovative capabilities that could likely yield substantial benefits to
    those who need more accessible content--were these firms brought under
    the umbrella of responsibility for ensuring the accessibility of their
    wares, the dividends could be substantial.
                                     ______

         Response to Written Questions Submitted by Hon. Mark Pryor to
                                John T. Stankey
        Question 1. As we look to the future of video, no Americans should
    be left behind. I authored the Twenty-First Century Communications and
    Video Accessibility Act in 2010 as a way to make sure communications
    and video services remain available to all consumers. In addition to
    the FCC's laudable recent actions to expand its closed captioning rules
    to Internet video clips, are there additional steps that Congress or
    the FCC need to take to make sure all video services are accessible to
    everyone?
        Answer. The passage of the Twenty-First Century Communications and
    Video Accessibility Act (``CVAA'') represented a landmark event for
    persons with disabilities, significantly increasing access to modern
    communications and video products and services. For its part, the
    Federal Communications Commission (``FCC'') has worked diligently to
    adopt rules under the CVAA that can be implemented by the
    communications and video industries. The CVAA and implementing FCC
    regulations not only mandate more accessible and usable video products
    and services, but inspire manufacturers, service providers, and video
    providers to rethink how they make communications and video products
    and services available to the public. Yet, the CVAA wisely avoids
    prescriptive regulations that would be all too quickly out of date and
    potentially limit innovation and the benefits to persons with
    disabilities. The communications and video industries have used the
    impetus of the CVAA and the existing momentum from advancements in
    technology to significantly increase access to video for persons with
    disabilities, such as the development of increasingly accessible mobile
    operating systems and mobile applications. Today, persons who are blind
    can use camera and video applications to communicate, identify colors,
    have video clips described, and travel in unfamiliar areas
    independently, and persons with speech disabilities can use
    applications to augment their speech. This cycle of innovation will
    continue without additional Congressional or FCC action, resulting in a
    greater number of options for persons with disabilities to access and
    enjoy video communications.
        Given that the CVAA is still in its relatively early stages of
    implementation, companies like AT&T are primarily focused on finalizing
    implementation and ensuring compliance. For example, AT&T has created
    the Corporate Accessibility Technology Office, which has evaluated over
    17,000 products and services for accessibility. We also have invested
    in improving access to U-verse video programming for persons with
    disabilities. U-verse customers who are deaf or have hearing loss rely
    on closed captioning to experience video programming and customers who
    are blind or have low vision rely on video description to access video
    programming. Currently, video description is required for 50 hours of
    programming per calendar quarter for nine channels--the four television
    broadcast networks in the largest 25 markets and the top five non-
    broadcast networks.
        Congress has provided the FCC with authority under the CVAA to
    examine whether and when it is appropriate to increase the number of
    hours of described programming and to expand the market areas where
    such programming must be provided. In addition, Congress could examine
    the costs versus benefits of opening more markets to described
    programming on less than the ten year timeline it provided in the CVAA
    and to encourage and recognize voluntary efforts by content developers,
    researchers and organizations of persons with disabilities that result
    in an increase in the amount of described programming.
        The FCC can also enhance access to video services by increasing the
    number of persons with disabilities who are eligible for assistance
    under the National Deaf-Blind Equipment Distribution Program
    (``NDBEDP''). For persons who are both deaf and blind, the potential
    for full inclusion is often blocked by the significant cost of
    specialized equipment and related activities, which will likely remain
    high due to specialization and limited market size. To help this
    community acquire assistive equipment, the FCC adopted rules under
    Section 105 of the CVAA to establish a trial of the NDBEDP, setting an
    income eligibility threshold to participate in the trial at 400 percent
    of the Federal Poverty Guidelines ($43,320 based on 2010 poverty
    levels). According to the National Coalition of Deafblindness, this
    eligibility threshold will exclude some persons who are deaf-blind
    because of their family situation and the high costs of their
    transportation, medical, home support and other needs, even before
    considering the costs of assistive technology.\1\ Those persons would
    also have fewer employment options, as some small businesses may be
    unable to bear the cost of assistive technologies. In light of these
    issues, the final FCC NDBEDP rules should significantly lower the
    income eligibility threshold and Congress should evaluate the costs and
    benefits of continuing to restrict participation in the NDBEDP to low
    income individuals.
    ---------------------------------------------------------------------------
        \1\ Comments of National Coalition on Deafblindness, Implementation
    of the Twenty-First Century Communications and Video Accessibility Act
    of 2010, Section 105, Relay Services for Deaf-Blind Individuals, CG
    Docket No. 10-210, at 5 (filed Feb. 4, 2011).
    ---------------------------------------------------------------------------
        Congress could also increase access to video communications by
    promoting continued research and technological advancement. While
    device manufacturers and video distributors work actively with
    disability organizations, such as the National Association of the Deaf,
    the American Foundation for the Blind, and Telecommunications for the
    Deaf and Hard of Hearing, Inc., to understand the needs of persons with
    disabilities, research is ultimately conducted by accessibility
    experts. The Rehabilitation Engineering Research Centers (e.g., the
    Telecommunications Access Program at Gallaudet University), with
    industry support and participation, offer a good model for technology
    transfer in the accessibility and usability of communications and
    video. It is critical that these research efforts continue and increase
    in scope, to not only provide access to advanced communications and
    video, but also to foster advancements in the areas of education,
    employment and civic participation for persons with disabilities
    through these technologies. Efforts to increase access to video
    programming tend to focus on persons with hearing and vision
    disabilities (i.e., Sections 204 and 205 of the CVAA). With additional
    funding, these Research Centers (and similar organizations) could
    expand their focus on improving the video experience for persons with
    cognitive and physical disabilities. The results of this research could
    form the basis for manufacturers and video providers to develop more
    universally accessible remote controls, interfaces, and other assistive
    technology. Given the prevalence of physical and cognitive
    disabilities, the increasing interactivity of video, and the wider use
    of video programming in the workplace, education settings, social
    networks, and elsewhere, Congress should also direct Federal agencies
    to fund user research intended to identify accessibility barriers to
    video programming for people with physical and cognitive disabilities
    and potential solutions to circumvent those barriers, and to work with
    industry on the transfer of technology to develop those solutions.
        Lastly, without research and training at the university level, it
    will be difficult for companies to find the experts necessary to
    harness the potential of advanced communications and video programming
    for persons with disabilities. The International Association of
    Accessibility Professionals (``IAAP'') encourages programs that
    increase the number of professionals with expertise in accessibility in
    engineering, human factors, and computer science. Congress can promote
    the continued development of the field by recognizing the efforts of
    organizations like the IAAP and encouraging funding to university and
    professional development programs with the goal to develop
    accessibility expertise.
                                     ______

         Response to Written Questions Submitted by Hon. Mark Pryor to
                                Jeffrey H. Blum
        Question 1. I have long been concerned about ``orphan counties''
    and the ability of consumers living in those areas to have access to
    home state broadcast TV programming. I would expect that as online
    video choices continue to grow consumers in these counties would have
    more access to programming that is specific to their state. Could you
    please state your thoughts on how increased online video competition
    could help address the orphan county issue?
        Answer. DISH shares your concern regarding the inability of orphan
    county residents to access in-state broadcasts. While the Internet has
    generally provided more video options, it is not guaranteed that all
    orphan county residents are connected to the Internet or have the high-
    speed, high-capacity connections that online video is increasingly
    dependent upon. Rather than hoping that all orphan county residents
    have sufficient broadband connections in order to seek out alternative
    Internet sources of in-state news and weather, Congress should consider
    the statutory changes that would be necessary for consumers to receive
    in-state local broadcast stations from the pay-TV provider of their
    choice.

        Question 2. As we look to the future of video, no Americans should
    be left behind. I authored the Twenty-First Century Communications and
    Video Accessibility Act in 2010 as a way to make sure communications
    and video services remain available to all consumers. In addition to
    the FCC's laudable recent actions to expand its closed captioning rules
    to Internet video clips, are there additional steps that Congress or
    the FCC need to take to make sure all video services are accessible to
    everyone?
        Answer. DISH shares the goal of making video services more
    accessible to all consumers. We look forward to continuing to work with
    Congress and the FCC to ensure Americans have access to video
    technologies while preserving flexibility for the industry to continue
    innovating in this rapidly evolving space.
                                     ______

         Response to Written Questions Submitted by Hon. Mark Pryor to
                                 Gene Kimmelman
        Question 1. I have long been concerned about ``orphan counties''
    and the ability of consumers living in those areas to have access to
    home state broadcast TV programming. I would expect that as online
    video choices continue to grow consumers in these counties would have
    more access to programming that is specific to their state. Could you
    please state your thoughts on how increased online video competition
    could help address the orphan county issue?
        Answer. The orphan county issue highlights one of the problems with
    today's video marketplace. It is an artifact of rules that say that
    viewers can only access programming from ``their'' DMAs. But DMAs are
    drawn to suit advertisers' needs, not viewers' needs. Orphan counties
    are only the clearest example--but why is it difficult for any viewer
    who so chooses to access ``out of market'' programming?
        Increased competition from online sources could help alleviate some
    of the problems caused by the DMA system, by giving viewers new ways to
    access programming that is not available over the air or through an
    MVPD. But territorial exclusivity can still affect what programming
    viewers can access online, and the existing structures of the video
    marketplace can keep programming from being distributed online
    altogether.
        At the very least, FCC rules should not reinforce a system that
    works against viewer choice. As with the sports blackout issue, private
    parties should not be able to use government regulations as an excuse
    to limit what people can see. They might still be able to use private
    contracts to restrict viewer access to programming, but it should be
    clear that these restrictions are driven by business considerations and
    not public policy.

        Question 2. As we look to the future of video, no Americans should
    be left behind. I authored the Twenty-First Century Communications and
    Video Accessibility Act in 2010 as a way to make sure communications
    and video services remain available to all consumers. In addition to
    the FCC's laudable recent actions to expand its closed captioning rules
    to Internet video clips, are there additional steps that Congress or
    the FCC need to take to make sure all video services are accessible to
    everyone?
        Answer. In general, accessibility rules should not hinge on whether
    online programming was once aired on broadcast or cable. Regulatory
    silos are not appropriate when it comes to ensuring that technology and
    media are accessible to all. Policymakers should ensure that content,
    devices, and services are all accessible to Americans with
    disabilities, in a way that is not unduly burdensome to small creators.
        Additionally, as more video goes online, access to video
    increasingly requires access to broadband. Universal service for
    broadband is thus necessary to ensure that Americans in every part of
    the country, and at every income level, can access and participate in
    culture.

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