[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


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                    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.
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    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).
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    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-.
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    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.
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    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.
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    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.
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    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.
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    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\
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    \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).
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    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.
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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\
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    \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.
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    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\
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    \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.
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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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