[Senate Hearing 113-710]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-710

   EXAMINING THE COMCAST-TIME WARNER CABLE MERGER AND THE IMPACT ON 
                               CONSUMERS

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

                                HEARING

                               BEFORE THE

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 9, 2014

                               __________

                          Serial No. J-113-56

                               __________

         Printed for the use of the Committee on the Judiciary
         
         
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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
DIANNE FEINSTEIN, California         CHUCK GRASSLEY, Iowa, Ranking 
CHUCK SCHUMER, New York                  Member
DICK DURBIN, Illinois                ORRIN G. HATCH, Utah
SHELDON WHITEHOUSE, Rhode Island     JEFF SESSIONS, Alabama
AMY KLOBUCHAR, Minnesota             LINDSEY GRAHAM, South Carolina
AL FRANKEN, Minnesota                JOHN CORNYN, Texas
CHRISTOPHER A. COONS, Delaware       MICHAEL S. LEE, Utah
RICHARD BLUMENTHAL, Connecticut      TED CRUZ, Texas
MAZIE HIRONO, Hawaii                 JEFF FLAKE, Arizona
           Kristine Lucius, Chief Counsel and Staff Director
        Kolan Davis, Republican Chief Counsel and Staff Director
                            
                            C O N T E N T S

                              ----------                              

                       APRIL 9, 2014, 10:06 A.M.

                    
                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Grassley, Hon. Chuck, a U.S. Senator from the State of Iowa......     3
    prepared statement...........................................    60
Klobuchar, Hon. Amy, a U.S. Senator from the State of Minnesota..     4
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     1
    prepared statement...........................................    58
Lee, Hon. Michael S., a U.S. Senator from the State of Utah......     5

                               WITNESSES

Witness List.....................................................    57
Bosworth, Jr., James L., Chairman and Chief Executive Officer, 
  Back9Network Inc., Hartford, Connecticut.......................    11
    prepared statement...........................................   123
Cohen, David L., Executive Vice President, Comcast Corporation, 
  Philadelphia, Pennsylvania.....................................     7
    prepared statement...........................................    62
Kimmelman, Gene, President and Chief Executive Officer, Public 
  Knowledge, Washington, DC......................................    10
    prepared statement...........................................   114
Minson, Jr., Arthur T., Executive Vice President and Chief 
  Financial Officer, Time Warner Cable Inc., New York, New York..     9
    prepared statement...........................................    62
Sherwin, Richard J., Chief Executive Officer, Spot On Networks, 
  LLC, New Haven, Connecticut....................................    13
    prepared statement...........................................   137
Yoo, Christopher S., John H. Chestnut Professor of Law, 
  Communication, and Computer & Information Science, University 
  of Pennsylvania Law School, Philadelphia, Pennsylvania.........    14
    prepared statement...........................................   140

                               QUESTIONS

Questions submitted to James L. Bosworth, Jr., by Senator 
  Grassley.......................................................   162
Questions submitted to James L. Bosworth, Jr., by Senator Hatch..   172
Questions submitted to James L. Bosworth, Jr., by Senator 
  Klobuchar......................................................   147
Questions submitted to James L. Bosworth, Jr., by Senator Lee....   177
Questions submitted to David L. Cohen by Senator Franken.........   152
Questions submitted to David L. Cohen and Arthur T. Minson, Jr., 
  by Senator Graham..............................................   176
Questions submitted to David L. Cohen by Senator Grassley........   163
Questions submitted to David L. Cohen by Senator Hatch...........   173
Questions submitted to David L. Cohen by Senator Klobuchar.......   148
Questions submitted to David L. Cohen by Senator Lee.............   178
Questions submitted to Gene Kimmelman by Senator Grassley........   165
Questions submitted to Gene Kimmelman by Senator Klobuchar.......   149
Questions submitted to Gene Kimmelman by Senator Lee.............   179
Questions submitted to Arthur T. Minson, Jr., by Senator Franken.   159
Questions submitted to Arthur T. Minson, Jr., by Senator Grassley   167
Questions submitted to Arthur T. Minson, Jr., by Senator 
  Klobuchar......................................................   150
Questions submitted to Arthur T. Minson, Jr., by Senator Lee.....   180
Questions submitted to Richard J. Sherwin by Senator Grassley....   169
Questions submitted to Christopher S. Yoo by Senator Grassley....   170
Questions submitted to Christopher S. Yoo by Senator Hatch.......   175
Questions submitted to Christopher S. Yoo by Senator Klobuchar...   151

                                ANSWERS

Responses of James L. Bosworth, Jr., to questions submitted by 
  Senators Hatch, Klobuchar, Grassley, and Lee...................   181
Responses of David L. Cohen to questions submitted by Senators 
  Klobuchar, Franken, Grassley, Hatch, Graham, and Lee...........   186
Responses of Gene Kimmelman to questions submitted by Senators 
  Klobuchar, Grassley, and Lee...................................   285
Responses of Arthur T. Minson, Jr., to questions submitted by 
  Senators Klobuchar, Franken, Grassley, Graham, and Lee.........   292
Responses of Richard J. Sherwin to questions submitted by Senator 
  Grassley.......................................................   318
Responses of Christopher S. Yoo to questions submitted by 
  Senators Klobuchar, Grassley, and Hatch........................   320

                MISCELLANEOUS SUBMISSIONS FOR THE RECORD

American Antitrust Institute, Albert A. Foer, President, and 
  Diana L. Moss, Vice President, April 4, 2014, letter...........   333
American Cable Association and NTCA--The Rural Broadband 
  Association, Matthew M. Polka, President and Chief Executive 
  Officer, ACA, and Shirley Bloomfield, Chief Executive Officer, 
  NTCA--The Rural Broadband Association, April 9, 2014, joint 
  letter.........................................................   330
Consumers Union, Delara Derakhshani, Telecommunications Policy 
  Counsel, and George P. Slover, Senior Policy Counsel, April 8, 
  2014, letter...................................................   337
NAACP and NABOB, Hilary O. Shelton, Director, NAACP Washington, 
  and Senior Vice President for Policy and Advocacy, and Jim 
  Winston, NABOB Executive Director and General Counsel, April 7, 
  2014, joint letter.............................................   359
National FFA Center, W. Dwight Armstrong, Chief Executive 
  Officer, Indianapolis, Indiana, April 7, 2014, letter..........   356
RFD-TV, Rural Media Group, fact sheet............................   361
United States Hispanic Chamber of Commerce, Marc Rodriguez, 
  Chairman of the Board, and Javier Palomarez, President and CEO, 
  April 9, 2014, letter..........................................   328
Veria Living, Eric Sherman, Chief Executive Officer, New York, 
  New York, April 9, 2014, testimony.............................   353

 
    EXAMINING THE COMCAST-TIME WARNER CABLE MERGER AND THE IMPACT ON
                               CONSUMERS

                              ----------                              


                        WEDNESDAY, APRIL 9, 2014

                              United States Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:06 a.m., in 
Room SH-216, Hart Senate Office Building, Hon. Patrick J. 
Leahy, Chairman of the Committee, presiding.
    Present: Senators Leahy, Klobuchar, Franken, Coons, 
Blumenthal, Hirono, Grassley, Hatch, Graham, and Lee.

          OPENING STATEMENT OF HON. PATRICK J. LEAHY,
            A U.S. SENATOR FROM THE STATE OF VERMONT

    Chairman Leahy. I would like to welcome everybody here. The 
Chair and Ranking Member of the Subcommittee with jurisdiction, 
Senator Klobuchar and Senator Lee, will be taking over the 
hearing at some point during the morning, and I appreciate the 
work both of them have done in getting us here.
    The original business of the cable industry--delivering 
television programming--is, as we all know, migrating to the 
Internet, and the industry has been changing in response. 
Consumers can now watch what they want and when they want. And 
if any of us have any question about it, ask our children or 
our grandchildren, and they will explain it to us.
    But when companies like Comcast and Time Warner Cable were 
founded, the term ``binge watching'' was unheard of; now it 
describes how many Americans watch their favorite shows. Cable 
companies have moved beyond delivering television, adapting 
their networks to provide broadband. They are now the sole 
source of this service for millions of Americans. As a result, 
they play a dominant role in how many people in the country get 
their information. Consumers deserve to know how the 
combination of the two largest companies in the industry will 
impact them. Every Senator has heard from their constituents 
saying, ``What is this going to do to me?''
    So we are going to cover the current state of the video and 
broadband markets. We will hear discussion of vertical 
integration, relevant markets, and public interest standards. 
These are important issues to consider when analyzing the 
merger. Consumers, though, do not want to hear complex legal 
jargon or obscure regulatory terms. They just want to know why 
their cable bills keep going up. They want to know why they do 
not have more choice of providers. And consumers want to know 
is this merger good for them or not. Frankly, every one of us 
wants to find out the same things.
    In 1996, I voted against the Telecommunications Act in part 
because of concerns I had about the lack of competition in the 
cable TV market. And I am still concerned. Similar questions 
are now being raised about the broadband industry, where 
consumers feel like they get large bills and inadequate 
choices.
    In Vermont, we are deeply concerned about net neutrality, 
but we do not simply want lip service. We want meaningful rules 
of the road to protect an open Internet so that anyone with an 
idea can have a chance to succeed in the online marketplace. 
And Vermonters are not alone in this. Thousands of Americans 
have flooded the FCC in recent weeks with comments supporting 
the restoration of open Internet rules, and their voices have 
to be heard.
    I appreciate that Comcast agreed to be bound by the FCC's 
Open Internet rules as part of the NBCUniversal transaction. 
This was an important commitment, especially now that core 
elements of the Open Internet Order have been struck down. The 
conditions that currently apply to Comcast should not be seen 
as the end point but, rather, the minimum level of protection 
that should apply to promote competition online. And regardless 
of the outcome of this latest merger, I hope that Comcast will 
accept an extension of these rules beyond 2018. Better still, I 
urge them to support stronger rules that protect consumers and 
drive innovation.
    The recent interconnection deal between Comcast and Netflix 
also raises important questions for advocates of net 
neutrality. When ISPs can charge tolls or block access to their 
networks, net neutrality policies alone may no longer be enough 
to protect consumers or promote an open Internet. If companies 
have to enter special agreements to ensure adequate quality for 
their streaming video service, I worry about the potential 
impact on other bandwidth-intensive services. One that I think 
of that I worked on for years is telemedicine, especially tying 
together medical centers in rural areas. It is an annoyance for 
consumers when they cannot stream the most recent season of 
``House of Cards'' due to an interconnection dispute. But it is 
really serious if it becomes a matter of life or death for 
patients who cannot reach health care for the same reason.
    So the proposed transaction touches on a range of critical 
policy issues going beyond just the broadband space. There are 
important questions about diverse and independent video 
programming and a vibrant marketplace for online video. So we 
have to ask how this is going to impact consumers, and I urge 
the FCC and Justice Department to consider this just as 
carefully.
    So I thank everybody for being here. I am going to yield to 
Senator Grassley. Then I understand Senator Klobuchar and 
Senator Lee have brief statements.
    [The prepared statement of Senator Leahy appears as a 
submission for the record.]

           OPENING STATEMENT OF HON. CHUCK GRASSLEY,
             A U.S. SENATOR FROM THE STATE OF IOWA

    Senator Grassley. Well, good morning. Thanks for the 
witnesses being here.
    Our Judiciary Committee's role is not to decide whether or 
on what conditions Comcast and Time Warner will be permitted to 
merge. The Federal Communications Commission and the Justice 
Department are responsible for determining whether there are 
any issues with this transaction. But no doubt a hearing like 
this, as we have had in this Committee on other mergers, is a 
very important part of the process, because it does give the 
Committee an opportunity to hear and to conduct proper 
oversight not only of this specific merger but also to make 
sure that we understand the issues and that the Federal 
Communications Commission and the Justice Department are 
carrying out the law.
    Every year we are seeing new and exciting innovations in 
technology and communications. When I first came to Congress, I 
did not carry a phone around in my pocket like we do now. I 
never knew that one day there would even be such a thing as 
Twitter and that I would have 75,000 followers. Innovations 
like these have radically changed how we communicate and how we 
interact with each other, how we learn, how we get news, how we 
conduct business, and access entertainment.
    Access to the Internet is quickly becoming an absolute 
necessity. Americans need it to compete in this fast-paced and, 
more importantly, the globalized economy that has developed 
over the last 50 years and is going to be more important in the 
future. They need the Internet to stay in touch not only with 
family and friends but probably very much a part of their 
economic lifeline, and particularly when they have access to 
their choice, and what a wide range of choice now.
    Right now we are experiencing a bit of a revolution in 
Internet technology. Just some examples: Products like Verizon 
FiOS and Google Fiber are changing the Internet's 
infrastructure by delivering faster access through fiber optic 
cables. And on the content side, companies like Netflix and 
Hulu are allowing people to ``cut the cord'' and access their 
media through the Internet and their handheld devices.
    Comcast and Time Warner control a significant amount of the 
cable infrastructure that Americans use to access high-speed 
Internet. They control the cable lines that go directly into 
people's homes. So there is a lot of interest in what will 
happen if the two companies merge and, quite frankly, probably 
just stated a little bit differently, but I have the same 
interest that Chairman Leahy has expressed. Consumers want to 
know whether a combined Comcast-Time Warner will be in a better 
position to expand high-speed Internet access. Will consumers 
have higher cable bills? Will they have more or less content 
choices? Will the merger inhibit growth and deployment of 
broadband services? Will it enhance competition with other 
companies? And what are the downstream effects of the merger?
    Another question is whether or not a combined Comcast-Time 
Warner will impact television or Internet content in a 
detrimental way. Will the company be able to block consumers' 
access to content? Or will the merger allow the company to 
negotiate for better licensing arrangements from popular 
broadcasters like ESPN and Disney? Because Comcast creates some 
of its own programming, some have suggested that this will put 
independent programmers at a disadvantage. Well, all of those 
things are what this hearing is all about.
    Today we have an opportunity to learn how these markets 
actually work and what a Comcast-Time Warner merger could mean 
to competition and consumers. There is no doubt that a combined 
Comcast-Time Warner could significantly affect the markets for 
television programming, high-speed Internet access, and program 
access, and there has been no shortage of opinions expressed in 
the media since the companies announced the planned merger.
    So I look forward to a very important hearing and also 
following up with how DOJ and FCC are going to respond.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Grassley appears as a 
submission for the record.]
    Chairman Leahy. Thank you.
    Senator Klobuchar.

            OPENING STATEMENT OF HON. AMY KLOBUCHAR,
           A U.S. SENATOR FROM THE STATE OF MINNESOTA

    Senator Klobuchar. Thank you very much, Mr. Chairman. Thank 
you to you and Senator Grassley for holding this very important 
hearing.
    Competition in the cable industry is one of the most 
critical issues that this Committee faces for a very simple 
reason: Cable is the primary way Americans get pay TV and 
broadband Internet access. This issue literally touches 
people's lives every day, and it touches their wallets every 
month.
    As Senator Lee, the Ranking Member of our Subcommittee, and 
I have said from the day the merger was announced, the proposed 
merger between Comcast and Time Warner Cable, the two largest 
cable companies in the country, presents unique issues.
    From my perspective, while the companies' service areas do 
not overlap, this cannot be our only focus of our discussion 
today. The combined company would control about 30 percent of 
the pay television market and 40 percent of the wireline 
broadband market, with some estimates putting it at 50 percent.
    Its size and scope would give it the power to affect 
prices, service, and content offerings throughout the industry 
and the future of online video competition.
    There are a number of critical questions that we need to 
ask.
    First, what is in this merger for consumers? Comcast has 
already said they are not promising that their consumers will 
pay less or that their bills will increase less quickly. What 
benefits do consumers stand to gain that they would not have 
gained without the merger? And do they outweigh the potential 
harms that could result if the merger is approved?
    This merger is also relevant for consumers who are outside 
of Comcast's and Time Warner Cable's footprint. Competitive 
video providers to Time Warner Cable will now have to buy must-
have NBC programming, including regional sports networks, from 
their competitor. There are concerns that the merged company's 
larger presence throughout the country, especially in major 
markets like New York and L.A., will give it even more leverage 
to charge competitors more for its programming--a cost that 
could be passed on to consumers.
    By combining its vertical integration of content ownership 
with an expanded share of the cable market, Comcast would also 
have greater negotiating leverage with independent programmers. 
We hear regularly from these companies, many of whom are 
reluctant to go public because of how it might affect their 
negotiating positions.
    They say it is increasingly hard to negotiate carriage 
agreements in a market where content providers and distributors 
are consolidating. A post-merger Comcast would sit on both 
sides of the fence. It would be the gatekeeper to a third of 
the cable market and stand as one of the largest content 
providers. Consumers should know whether this merger enhances 
or limits the diversity of programming.
    Finally, as has been noted, we need to pay special 
attention to the impact this merger will have on the Internet 
and online video distributors like Netflix, YouTube, and Hulu. 
During the Comcast-NBC merger, the FCC highlighted that Comcast 
has ``the incentive and ability to hinder the development of 
rival online video offerings.'' Concerns have been raised that 
the merged entity would now have even greater ability to limit 
competition through data caps, discrimination against non-
affiliated content, and charging content providers for access 
to that last mile of network.
    What will happen to the next Netflix that today is still 
just a dream in a garage? We want to make sure that the next 
new and competitive online service will be able to get their 
content to the merged company's growing consumer base. With 
control of nearly 40 percent of the national broadband market, 
Comcast could potentially exert undue terms, conditions, and 
prices on online providers that are trying to serve their 
customers.
    The lines between cable and Internet are rapidly blurring, 
and 10 years from now, Americans will be consuming media in new 
and innovative ways. The question is: Who is going to be 
delivering that content? Will that content be coming from 
Comcast or be coming from an independent online distributor or 
some combination? Will it be channeled through a cable box or 
routed through the Internet?
    The merger has implications for how much these services 
will cost and what variety of programs and applications can be 
delivered into our homes. Technology and market innovation 
should result in Americans receiving better services and more 
value, not less service and less value.
    I look very forward to hearing from our witnesses today.
    Chairman Leahy. Thank you very much.
    Senator Lee.

           OPENING STATEMENT OF HON. MICHAEL S. LEE,
             A U.S. SENATOR FROM THE STATE OF UTAH

    Senator Lee. Thank you, Mr. Chairman. Today's hearing has 
received significant attention throughout the country, and with 
some good reason. The proposed merger between Comcast and Time 
Warner has implications for two markets that affect the 
everyday lives of most Americans, certainly a majority of the 
people in my State and in the country as a whole.
    Most Americans pay a monthly bill for both video and 
broadband Internet. In fact, as recently as 2012, 90 percent of 
U.S. households with a television paid for a television 
subscription. And a recent study concluded that approximately 
70 percent of U.S. adults over the age of 18 have broadband 
access within their home.
    The parties to this proposed merger have carefully 
structured their transaction in an apparent effort to maximize 
their chances of gaining the necessary regulatory approval. The 
two companies assure us that they do not currently compete in 
each other's footprint, and the combined company would have 
less than 30 percent of the video market, a number that some 
have suggested as a figure within a sort of safe harbor for 
concentration within the relevant market.
    Comcast has vertically integrated with NBCUniversal. This 
is a complicating factor for a larger distributor of video 
content and broadband Internet that is seeking to become 
larger. But as the company points out, it remains subject to 
conditions stemming from regulatory approval of that previous 
transaction.
    The proposed merger has, nonetheless, raised some 
potentially very serious concerns. This transaction takes place 
against the backdrop of significant pre-existing concerns with 
respect to the competitive state of the market for video and 
for broadband Internet.
    I have heard concerns for some time that the effects of 
robust competition, whether experienced in terms of pricing or 
quality of service, are not currently enjoyed in these markets. 
It is important that this Committee take into account the state 
of competition in the markets for video and Internet as pre-
existing issues may make it more likely for a large transaction 
to pose some kind of a competitive threat.
    At the same time, if concerns related to this transaction 
result only from issues affecting those industries as a whole, 
it may, arguably, be unfair to the merging parties to impose 
only on them conditions designed to ameliorate competition. 
Regardless of the outcome of the agency's review of this 
transaction, I think it is important for Congress to continue 
to monitor the competitive state within these markets 
throughout the country.
    Concerns with this transaction also arise from the nature 
of the services at issue. Internet in particular is of obvious 
importance to American families and to businesses, and it is of 
special importance to an increasing degree. The combined 
company will potentially control greater than 50 percent of 
high-speed Internet access across the country. Markets do, of 
course, change quickly and government must be careful not to 
step in where economic forces will better direct and better 
incentivize future investment and development of new products. 
But where the stakes are high--and surely they are high with 
respect to Americans' access to the Internet--any potential for 
anticompetitive effects or for undue control of that market 
must be scrutinized very carefully.
    It is also important to note here that this is an extremely 
large transaction affecting both the video market and the 
Internet market. A complicating factor arises given that 
Comcast owns NBCUniversal. Considering the significant share of 
the video and Internet market that the new Comcast would have 
and considering the well-known political leanings of NBC, I 
have heard concerns that Comcast might have the incentive and 
the ability to discriminate against certain political content, 
including, for example, conservative political content, and 
that that capacity could be significantly enhanced as a result 
of this transaction.
    Now, as with any matter before this Committee or the 
relevant enforcement agencies, it is essential that we apply 
proper economic analysis and ground our conclusions in the 
evidence before us by ensuring that we protect competition 
rather than trying to protect any individual company or 
competitor from competition. We can help create market 
conditions that benefit consumers and promote economic growth 
throughout the country.
    Thank you, Mr. Chairman.
    Chairman Leahy. Thank you very much, and I thank you and 
Senator Klobuchar for your work on this.
    The first witness is David Cohen, executive vice president, 
Comcast Corporation. His work covers a broad range of 
activities, including corporate communications, government and 
regulatory affairs, public affairs, legal affairs, corporate 
administration, community investment. No stranger to Capitol 
Hill, Mr. Cohen, please go ahead.

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

    Mr. Cohen. Thank you, Mr. Chairman and Members of the 
Committee. I appreciate the opportunity to testify and explain 
the substantial benefits to consumers of the transaction 
between Comcast and Time Warner Cable.
    Traditional boundaries between media, communications, and 
technology companies are becoming obsolete. While this 
transaction will make us bigger, that is a good thing, not a 
problem. Most of our real competitors are national and global 
and larger than us, like the Bells, satellite companies, Apple, 
Google, Sony, and Netflix. In fact, the business reason for 
this transaction is to create the scale that will enable 
Comcast to invest more in innovation and infrastructure and 
enhance our ability to compete more effectively. And when we 
invest, our competitors invest, too. AT&T has already said that 
our transaction, and I quote here, ``puts a heightened sense of 
urgency'' on other companies to invest more in their networks 
and improve service, and consumers will benefit from this 
competitive investment cycle.
    Our investment will bring Time Warner Cable residential 
customers faster Internet speeds, more programming choices, our 
next-generation X1 entertainment operating system, and more 
robust WiFi. Business customers will benefit from a stronger 
new entrant offering more choice and better prices.
    Comcast has a record of investing in new technologies and 
networks. Two announcements we are making today underscore that 
commitment.
    First, our XFINITY WiFi network achieved another milestone 
with the deployment of more than one million hot spots.
    And, second, we have just increased Internet speeds again. 
Our 50-meg service in the Northeast will increase to 105 meg, 
and our 105-meg service will increase to 150 meg at no 
additional charge to consumers. This is the 13th time we have 
increased Internet speeds in 12 years.
    This transaction will generate other substantial public 
interest benefits as well. Just two examples:
    First, we have committed to extend to the entire Time 
Warner Cable footprint our industry-leading Internet Essentials 
program that has already connected 1.2 million low-income 
Americans to the Internet. And our commitment to abide by the 
judicially vacated Open Internet rules will also extend to Time 
Warner Cable customers.
    More investment, faster speeds, better technology, more 
Americans connected--even with these compelling benefits, we 
understand the questions that arise any time two big companies 
combine. But, objectively, this is not a challenging 
transaction from an antitrust perspective. Our companies serve 
separate and distinct geographic areas. We do not compete for 
customers anywhere. So the transaction will not lead to any 
reduction in competition or consumer choice in any market.
    We also will not gain undue power over programmers. After 
divestitures, the combined company will manage subscribers 
representing less than 30 percent of the market. The FCC twice 
adopted a rule setting a 30-percent ownership cap to prevent a 
single cable operator from wielding bottleneck control over 
programmers, and the Federal courts twice rejected it, finding 
that no cable operator could exercise market power at 30 
percent or even higher market shares.
    Last, American consumers will enjoy the same choice among 
broadband providers before and after this transaction. There 
are no competition issues in that market either.
    Mr. Chairman, Comcast represents the American dream. We 
were founded 50 years ago with 1,200 customers in Tupelo, 
Mississippi. We have always strived to invest, innovate, and 
lead our industry with a focus on the consumer. If this 
contract is approved, it will give us the scale and reach to 
innovate and compete against our national and global 
competitors.
    Thank you for the opportunity to testify.
    [The prepared statement of Mr. Cohen appears as a 
submission for the record.]
    Chairman Leahy. Thank you very much.
    And as per our normal procedure, the full statements--of 
course, you have a longer statement--will be made part of the 
record of each of the witnesses.
    The next witness is Arthur Minson, executive vice president 
and chief financial officer of Time Warner Cable. He oversees 
all of Time Warner Cable's financial functions, including its 
financial operations, financial planning and analysis, 
treasury, accounting, tax, mergers and acquisitions, internal 
audit, and investor relations.
    Please go ahead, Mr. Minson.

 STATEMENT OF ARTHUR T. MINSON, JR., EXECUTIVE VICE PRESIDENT 
AND CHIEF FINANCIAL OFFICER, TIME WARNER CABLE INC., NEW YORK, 
                            NEW YORK

    Mr. Minson. Mr. Chairman and Members of the Committee, 
thank you for the opportunity to speak with you today. I am 
pleased to be here to discuss the proposed transaction between 
Comcast and Time Warner Cable.
    Let me start by saying that I share David's view that the 
combination of our two companies will bring substantial 
benefits to our customers, our employees, and the local 
communities we serve.
    Cable companies operate in an incredibly dynamic 
marketplace, and we face robust competition from a wide range 
of sophisticated national and global powerhouses. We compete to 
develop the most innovative products and services, to attract 
and retain both customers and employees, and to access funding 
for our ongoing operating and capital investments. As a result, 
we must adapt in order to succeed.
    As chief financial officer, one of my responsibilities is 
overseeing our allocation of capital, both human capital as 
well as investments in our products, services, and physical 
infrastructure. We have invested billions in capital 
expenditures and made significant strides in developing and 
offering innovative new products and services for our 
customers.
    But when the opportunity to combine with Comcast arose, we 
knew it would be a game changer. By joining our complementary 
technological strengths and creating greater scale, the 
transaction will allow the combined company to bring next-
generation video, broadband, and voice services to customers 
faster than either company could do on its own.
    Let me provide some examples of the benefits our customers 
will see as a result of this transaction.
    Time Warner Cable recently announced plans to invest 
billions of dollars over the next three years to upgrade our 
network. Comcast has already completed similar upgrades to its 
network. As a combined company, our subscribers will capitalize 
on Comcast's experience to accelerate the rollout of these 
consumer benefits across the entire Time Warner Cable 
footprint.
    The transaction will also benefit the business market. 
Greater scale will enable the combined company to offer more 
advanced services to our existing small and medium-sized 
business customers and also offer a competitive alternative to 
larger businesses in the regional and national marketplace.
    Given our limited geographic footprint, we have been 
hindered in our ability to compete with national telecom 
providers in serving multiregional and national enterprise 
customers. After the transaction, the greater coverage of the 
combined company will encompass significantly more 
multiregional business locations, allowing us to compete more 
aggressively and provide better alternatives for businesses 
than either Time Warner Cable or Comcast could accomplish 
alone.
    Let me conclude by saying that we believe this transaction 
will create a world-class provider of video, broadband, and 
voice products and services, resulting in greater competition 
and consumer choices in this already robust marketplace.
    Thank you for the opportunity to appear before you today. I 
look forward to answering your questions.
    [The prepared statement of Mr. Minson appears as a 
submission for the record.]
    Chairman Leahy. Thank you very much, Mr. Minson.
    Our next witness is Gene Kimmelman. He is the president and 
CEO of the Washington, DC-based Public Knowledge. He previously 
served as director of the Internet Freedom and Human Rights 
Project at the New America Foundation. He was Chief Counsel at 
the U.S. Department of Justice's Antitrust Division and is also 
well known to this Committee.
    Please go ahead, Mr. Kimmelman.

  STATEMENT OF GENE KIMMELMAN, PRESIDENT AND CHIEF EXECUTIVE 
           OFFICER, PUBLIC KNOWLEDGE, WASHINGTON, DC

    Mr. Kimmelman. Thank you, Mr. Chairman and Members of the 
Committee. I am here to represent the Internet users and the TV 
consumers on behalf of Public Knowledge, which is a nonprofit 
dedicated to an open Internet, open access to lawful content, 
and innovative technologies.
    I want to note that I worked at the Department of Justice 
during a previous Comcast transaction, so I contacted DOJ 
ethics officials who provided guidance on what kinds of 
information cannot in any way, shape, or form be used. And 
because I am confident that I can abide by those limitations, I 
am very comfortable being here this morning testifying.
    Now, after years of constant, substantial cable rate 
increases and poor service, things are finally starting to 
change--very slowly, a little bit--with new online video 
streaming services, new mobile devices, tablets, alternative 
set-top boxes. These are all beginning to deliver consumers 
innovative new services, more video choices at lower prices, 
and some new first-run programming.
    This has some cable companies starting to think about 
offering a la carte individual channels, some cable companies 
talking about going all broadband with their services, some of 
the top network programmers beginning to think about selling 
first-run content directly online.
    Now, as good as this sounds for consumers, these low-cost 
choices are anathema to Comcast, which maximizes revenue by 
keeping consumers in a high-priced, monthly cable bundled 
XFINITY service package and by charging top dollar for NBCU 
networks, sports, and cable programming, driving up traditional 
cable bundle prices for all distributors nationwide. So the 
transaction could fundamentally undermine these new, wonderful, 
innovative options consumers are seeing.
    Comcast, with its control of video and high-speed 
broadband, adding Time Warner's systems, could lock in 
increased high prices for NBCU programming and sports and 
regional sports and cable programming; expand Comcast's ability 
to press down prices for other quality programming below market 
rates, harming quality in the marketplace; increase Comcast's 
ability to dissuade other programmers from distributing high-
quality programs directly online; undermine innovation by 
controlling equipment and standards and apps, and many consumer 
interfaces that block other business models in this 
marketplace; and, finally, could provide favorable 
interconnection speeds, quality, pricing for XFINITY services 
compared to all competitors.
    These forms of leverage would come from the combined power 
of what looks almost like a nationwide octopus with tentacles 
reflecting each of these leverage points, massive tentacles, 
each individually capable of squeezing innovation in sectors 
all throughout the distribution chain, and each tentacle able 
to fill in when the other one is removed. In other words, this 
proposed transaction consolidates too much power in the 
combined video and high-speed Internet market, giving Comcast a 
virtual gatekeeper role for fast Internet-delivered video and 
innovative new services.
    Mr. Chairman, Members of the Committee, the issue before 
antitrust officials and communications regulators is really 
very, very simple. If we want more innovative, low-priced, 
Internet-delivered services, this merger must be rejected.
    Thank you.
    [The prepared statement of Mr. Kimmelman appears as a 
submission for the record.]
    Chairman Leahy. Thank you, Mr. Kimmelman.
    Our next witness is James Bosworth. He is the chief 
executive officer of Back9Network, a network focused on the 
golf lifestyle. Mr. Bosworth previously held high-level sales 
and marketing positions at a number of leading golf equipment 
companies, and I would note that in college he led the Seton 
Hall Pirates to a Big East golf championship.
    That might have been a few years ago, but we wanted to 
remind everybody of that, Mr. Bosworth. Please go ahead.

    STATEMENT OF JAMES L. BOSWORTH, JR., CHAIRMAN AND CHIEF 
  EXECUTIVE OFFICER, BACK9NETWORK INC., HARTFORD, CONNECTICUT

    Mr. Bosworth. Thank you, Chairman. Good morning, Chairman 
Leahy, Ranking Member Grassley, and Members of the Committee. 
My name is Jamie Bosworth, and I am the chairman and CEO of the 
Back9Network, an independent and aspiring 24/7 cable network. I 
very much appreciate the opportunity to testify before you 
today.
    Based in Hartford, Connecticut, Back9Network is an 
independent network focused on providing golf lifestyle 
programming that attracts a larger, more diverse audience to 
the game.
    Americans spend $177 billion on golf lifestyle each year, 
and our programming centers on this market. We are tremendously 
proud of what we have accomplished over the past two years: 
state-of-the-art production facilities, job creation, and the 
fastest-growing online audience in golf.
    But when it comes to getting on the air, our story is very 
similar to that of other truly independent networks. We are up 
against a distribution system that stifles innovation and 
consumer choice. It is dominated by a few large players.
    We are concerned that this merger may make a bad situation 
even worse. True independent networks like ours, with zero 
affiliation with any other channels or distributors, rely 
solely on advertising revenue in the early years. Therefore, 
there are only two requirements for a successful cable launch: 
One, the ability to produce or require quality programming; 
and, two, initial carriage on one of the four largest video 
distributors: Comcast, DIRECTV, DISH Network, or Time Warner 
Cable. They are the only distributors that have the ability to 
reach the viewers in the top markets that the advertisers want 
and demand.
    But it is not that simple. Satellite providers have severe 
bandwidth limitations and are hesitant to launch new channels. 
So today new channels need permission to compete from one of 
the two cable providers--Comcast or Time Warner Cable. And 
because of the Comcast-NBCUniversal merger, Comcast vertical 
integration makes it one of the largest content providers as 
well.
    Now, if you marry that vertical integration with 
distribution in 10 of the top 10 markets, 23 of the top 25 
markets, and 37 of the top 40 markets, then suddenly Comcast 
alone has tremendous power to decide what gets on the air. Let 
me share with you what that means for our channel and for other 
aspiring independent networks. It does not matter that our 
programming has been praised by cable executives. It does not 
matter that we are offering an attractive value proposition. We 
are competing directly with a Comcast-owned network, the Golf 
Channel, and that gives Comcast every incentive to keep us off 
the air.
    More tellingly, productive conversations that we had with 
Time Warner Cable stalled as the merger was announced. We would 
not worry about Comcast's vertical integration if there were 
effective competition in the distribution marketplace. We would 
put our programming up against the Golf Channel and let the 
audience decide what is compelling. But in the real world, new, 
independent networks need to be in the top 10 markets, and that 
means you need to be in Comcast and Time Warner Cable.
    In conclusion, the choice to testify today was very 
difficult because we want nothing more than to be in business 
with Mr. Cohen and Mr. Minson. But it is important that we be 
here. We are fighting for the right to exist--for our 
investors, for our employees, and, most importantly, for the 
consumer. If this merger goes through without effective, 
enforceable conditions that force Comcast to treat new channels 
fairly, we are concerned for both channel innovation and 
consumer choice in the future. But we remain cautiously 
optimistic. We hope Comcast will be true to its legal 
obligation and not discriminate based upon its ownership of the 
Golf Channel. And we hope that Comcast will judge us on the 
merits of our content and on our carriage proposal. However, 
right now they are both judge and jury.
    Thank you again for the opportunity to testify. I look 
forward to your questions.
    [The prepared statement of Mr. Bosworth appears as a 
submission for the record.]
    Chairman Leahy. Thank you very much, Mr. Bosworth.
    Our next witness, Richard Sherwin, is founder and CEO of 
Spot On Networks, LLC. That is a provider wireless 
telecommunication for the multifamily market. He has, as I 
understand, 30 years of experience in wireless communications, 
radio frequency transmissions, including significant experience 
with wireless and wired telecommunication ventures in Europe.
    Mr. Sherwin, thank you for coming, and please go ahead.

        STATEMENT OF RICHARD J. SHERWIN, CHIEF EXECUTIVE
     OFFICER, SPOT ON NETWORKS, LLC, NEW HAVEN, CONNECTICUT

    Mr. Sherwin. Thank you, Mr. Chairman, thank you, Senators, 
for the opportunity to present our experiences with both 
Comcast and Time Warner.
    Spot On has been serving the multifamily residential 
community for a decade, as you mentioned. We provide high-
quality, high-speed WiFi services to buildings which otherwise 
would have only limited and more expensive choices for high-
speed broadband. We believe in doing well by doing good.
    The multifamily residential community currently represents 
nearly 35 percent of the United States population. This segment 
includes a large percentage of affordable housing. The 
population residing in these communities uses wireless 
communications almost exclusively for all their communication 
needs. This is a big change because of the demographic in the 
multifamily community.
    Spot On has been in the forefront of innovative design 
approaches, new technologies, and more efficient ways to serve 
these multifamily communities. And although we have spent 
millions of dollars and a decade of hard work building these 
businesses, we are still a David to the Goliaths of the cable 
companies with whom we often compete.
    I am proud to say that Spot On's services and those of our 
WiFi competitors, our brethren, are generally 30 percent less 
costly than services provided by the dominant cable providers, 
and Spot On provides unique features not otherwise found in 
other wired or wireless access technologies or provided in off-
the-shelf or cable company-supplied wireless routers that 
merely redistribute a signal.
    The problem of serving multifamily communities is further 
exacerbated by green initiatives, energy conservation in 
buildings which dictate the choice of building materials. These 
materials prevent cellular signals from penetrating inside 
these buildings and decrease the effectiveness of wireless to 
reach this segment of the population. These problems even 
present public safety concerns because not only are normal 
voice calls deterred and data access limited, but 911 calls 
are, at best, sketchy.
    Communitywide managed WiFi service can not only resolve 
these service issues but also deliver significantly larger 
capacity to residents inside these buildings. We bring high-
speed broadband to a building, relying on a big broadband 
supplier, often a cable operator like Comcast, sometimes a 
fiber operator, as the source of the backhaul broadband.
    It is important to understand how important our service and 
the service offered by similar companies to ours is to 
competition. Usually the cable company that supplies us also 
provides retail cable services and content in that particular 
area. Frequently, the cable company is the only retail supplier 
to that area. Once we secure a broadband backhaul, we build our 
own facilities-based network inside the building, making use of 
the FCC-allocated WiFi spectrum and offer service to users. 
These users use our distributed wireless network to do all 
sorts of things from social networking, video streaming, smart 
building applications, email, et cetera, and now even for voice 
calls.
    We need bandwidth to the buildings that come from companies 
like Time Warner, Verizon FiOS, Comcast Business, and Charter. 
If we could not acquire that broadband from a large broadband 
provider, for whatever the reason, we would be basically out of 
business. Competition would be squelched. There would be no 
innovation.
    Comcast has refused to sell us broadband in many areas of 
the country over the last 12 months, although prior to that 
they had continued to do so. So we think conditions need to be 
placed on this kind of a merger in which wholesale broadband is 
available to providers such as us. And we also believe that in 
certain markets, because Comcast will be the only provider of 
high-speed broadband service in the market, that they should be 
prohibited from using their financial power to exclude 
alternate high-speed Internet providers from offering 
competitive high-speed wireless Internet access in multifamily 
residential communities.
    Thank you very much for your time.
    [The prepared statement of Mr. Sherwin appears as a 
submission for the record.]
    Chairman Leahy. Thank you very much, Mr. Sherwin.
    Christopher Yoo is the John H. Chestnut Professor of Law, 
Communication, and Computer & Information Science at the 
University of Pennsylvania. He is also the founding director of 
UPenn's Center for Technology, Innovation and Competition. 
Professor Yoo's research, I am told, focuses on law and 
technology, particularly the regulation of electronic 
communications.
    We thank you for taking the time to be here, Professor.
    Please go ahead.

STATEMENT OF CHRISTOPHER S. YOO, JOHN H. CHESTNUT PROFESSOR OF 
    LAW, COMMUNICATION, AND COMPUTER & INFORMATION SCIENCE, 
     UNIVERSITY OF PENNSYLVANIA LAW SCHOOL, PHILADELPHIA, 
                          PENNSYLVANIA

    Mr. Yoo. Thank you to you, Mr. Chairman, Ranking Member 
Grassley, and the Committee for inviting me. I am happy to have 
the opportunity to offer my views on the impact the proposed 
merger between Comcast and Time Warner Cable would have on 
consumers. My written submission contains my complete 
testimony. I would like to focus on the two issues the 
Committee has identified: the impact of the merger on the 
market for traditional cable channels, such as ESPN, the Disney 
Channel, and the like; and the impact on the market for 
broadband Internet access.
    First, with respect to the distribution of traditional 
television networks, established principles of antitrust and 
communications law indicate that the merger is unlikely to harm 
consumers. The lack of any overlap in the areas served by 
Comcast and Time Warner Cable means that the merger should not 
affect the prices that subscribers pay for cable television 
subscriptions. In short, consumers would have the same number 
of choices of multichannel video providers the day after the 
merger as they did the day before.
    Two major court decisions in 2001 and 2009 also rejected 
arguments that companies that controlled only 30 percent of 
nationwide cable subscribers could inflict anticompetitive harm 
on cable networks. In light of the merging parties' commitment 
to reduce their holdings so that they control no more than 30 
percent of the national market, these court decisions represent 
a potentially insuperable obstacle to claims that allowing the 
transaction to proceed would adversely affect this market.
    Moreover, those court decisions were issued in a different 
era when the multichannel video market was much less 
competitive. Since 2009, the costs of program acquisition have 
risen substantially faster than cable rates as program 
providers have driven increasingly tough bargains. At the same 
time, the number of options for video distribution has 
continued to increase as Verizon's FiOS and AT&T's U-verse 
networks have expanded their customer bases and Internet-based 
systems such as Netflix, Amazon, Hulu, Google, Roku, and Apple 
have emerged as important video platforms.
    This industry is just not structured in a way that would 
make anticompetitive harm in the market for video programming 
likely, and the residual concerns may be addressed by the 
extensive program carriage and access rules that the FCC has 
developed to ensure that the entire industry has sufficient 
access to video content and distribution. The regulatory 
agencies have repeatedly recognized that such problems are 
better handled through general rules applicable to all industry 
players than through one-off conditions that bind only merging 
parties.
    Turning to the market for broadband Internet access, the 
lack of any overlap in the areas served by Comcast and Time 
Warner Cable again makes it unlikely that the merger would 
affect the prices that subscribers pay. In addition, the 
structure of the market for broadband Internet access makes 
competitive harms less likely than in the market for cable 
television. By my count, the merged company will control 32 
percent of the nationwide broadband subscribers, but more 
importantly, the market for broadband Internet access is really 
undergoing dynamic change. AT&T's Project VIP is expanding the 
reach of its DSL network and increasing download speeds to 45 
megabits per second, and even to 75 and 100 megabits per second 
in substantial areas of its footprint. Google is extending its 
fiber initiative beyond Kansas City, Provo, and Austin to 34 
additional cities. At the same time, wireless broadband 
providers are racing to build out LTE, which typically delivers 
an average of 12 megabits per second in a world where viewers 
only need eight megabits per second to view high-definition 
television. LTE Advanced promises to deliver speeds of 150 to 
300 megabits per second.
    In addition, interconnection in the Internet space is 
fundamentally different from interconnection in the cable 
television system. In cable television, the failure to come to 
an agreement means subscribers cannot receive content. With 
respect to the Internet, multiple ways to reach consumers 
always exist. In fact, Comcast maintains 40 settlement-free 
peering relationships and 8,000 transit relationships, which 
ensures that disagreements over price do not prevent anyone 
from reaching access to content. And in any event, Comcast will 
remain bound by the open Internet Order via its prior 
commitments, and that commitment would be extended to Time 
Warner Cable.
    In closing, it bears keeping in mind how dynamic and 
unpredictable this sector has been. Consider February 29, 2000, 
when Time Warner was before this Committee to discuss its 
merger with America Online. What many predicted would be the 
end of history ended up being the end of $200 billion of Time 
Warner shareholder value. In addition, a few short years ago, 
many argued fiber-to-the-home would soon consign cable to the 
dustbin of history. These episodes underscore how easy it is to 
hypothesize problems that never materialize and how easy it is 
to overlook how innovation and willingness to undertake 
commercial risk can create greater consumer benefits than 
anyone could have anticipated.
    [The prepared statement of Mr. Yoo appears as a submission 
for the record.]
    Chairman Leahy. Thank you very much, and your full 
statement will be part of the record.
    Mr. Cohen, obviously you have heard this, that cable and 
broadband customers, many are concerned about how the merger 
will affect what they are going to pay. That is as much as any 
issue we are hearing on the Hill.
    You said that you would be able to compete more effectively 
as a result of increased scale. You also said, ``We are 
certainly not promising that customer bills are going to go 
down or even increase less rapidly.'' So if they are not going 
to go down, they could increase, the merger will reduce the 
number of competing companies in both cable TV and broadband 
Internet, how specifically does it help the consumer?
    Mr. Cohen. Mr. Chairman, let me briefly address both halves 
of that question. I am very careful about what I commit to and 
what I promise. I can make you and the Members of this 
Committee one absolute commitment, which is that there is 
nothing in this transaction that will cause anyone's cable 
bills to go up. I have a nasty little habit of telling the 
truth, and when I was asked, ``Are people's cable bills going 
to go down?'' I said, ``I cannot make that commitment.'' But 
between the synergies in this deal and whatever marginal 
additional leverage we might have in programming and equipment 
supply purchasing, whatever economic benefits are generate will 
ultimately inure to the benefit of consumers.
    And let us face it. Consumers today are in the driver's 
seat. Both for broadband and, in particular, for video, there 
are a vast number of competitive choices. And that is why the 
scale that we are trying to get here to stimulate investment to 
provide a better experience for consumers is so important to us 
and to the American consumer.
    So I am just going to tick off the litany of what consumers 
will get as a result of this transaction: faster broadband; 
greater network reliability and security; better in-home WiFi; 
access to a more ubiquitous national WiFi network; access to 
Comcast's revolutionary new X1 video viewing experience; access 
to greater on-demand choices, 50,000 on-demand choices; access 
to Comcast's industry-leading TV Everywhere experience where 
people can view video live and on-demand on portable devices 
inside the home and outside the home; the protections of the 
no-blocking and non-discrimination provisions of the open 
Internet order; and more generic public interest benefits like 
extension of the Internet essential program to low-income 
customers of Time Warner Cable; extension of our diversity and 
community investment commitments across the Time Warner Cable 
footprint. So I think consumers are the big winners in this 
transaction.
    Chairman Leahy. You have also said that you will apply the 
FCC's open Internet rules to Time Warner Cable until 2018. Will 
you do it beyond 2018?
    Mr. Cohen. I think the answer to that is that we will be 
doing it beyond 2018 because Chairman Wheeler and the FCC have 
already started a proceeding to put in place industrywide open 
Internet protections. And I cannot imagine that the Commission 
is not going to have those rules in place well before 2018.
    Chairman Leahy. Now, Mr. Minson, you must be expecting this 
question, but your CEO will get $80 million for his two months 
of work as CEO before he agreed to sell the company. You will 
get $27 million if the merger is approved for less than a year 
in your position.
    Now, do these golden parachutes help your shareholders?
    Mr. Minson. Let me, Mr. Chairman, give you----
    Chairman Leahy. And you knew you would be asked that 
question, so go ahead.
    Mr. Minson. Let me give you our perspective on how we make 
operating and strategic decisions at the company. For us, the 
North Star for us is what is best for the consumer, and we 
concluded that this deal is far and away the best outcome for 
our consumers.
    The reason for that is--in our marketplace a few things 
really matter. Products matter, innovation matters, and speed 
matters. And I think as a result of this deal, you will have 
positive outcomes in all three areas.
    Chairman Leahy. And the golden parachutes? Not wanting to 
interrupt by going back to my question.
    Mr. Minson. As it relates to the overall compensation 
packages, I would say for transactions of this size and for 
transactions this complex, I think you will find that they are 
in line.
    Chairman Leahy. You may find that not all consumers agree, 
but it is what it is.
    Mr. Bosworth--if I might just take a moment for one more 
question.
    Senator Grassley. You take as long as you want. You are 
Chairman.
    Chairman Leahy. No, no. I want to give everybody else a 
chance. But----
    Senator Grassley. You are fair.
    Chairman Leahy. Thank you. Mr. Bosworth, I am intrigued by 
what you discussed about your network. I am not a golfer, but 
the fact that you could have a 24-hour network and people want 
it, that is pretty amazing. You have worked very hard doing 
that. I understand your frustration that you cannot get carried 
on cable or satellite.
    Why is it critical for you to be carried by Comcast? Could 
you simply operate as an online video service?
    Mr. Bosworth. Thank you, Senator. That is actually a great 
question, and while online content and over-the-top content is 
increasing, the average American still watches 20 times more 
video content via television, and the advertising rates mirror 
that as well.
    Chairman Leahy. Thank you very much. I will have other 
questions for the record. I am going to be leaving soon, but I 
will come back, and Senator Klobuchar will be chairing. We will 
keep this record open until the end of the week for others who 
have questions or statements.
    [The questions of Chairman Leahy appear as submissions for 
the record.]
    Chairman Leahy. Senator Grassley.
    Senator Grassley. And also after I ask my questions, 
Senator Lee is going to take over as Ranking Member of the 
Subcommittee.
    First of all, I thank all of you for coming here. I am 
going to ask two questions first of Mr. Cohen, but I want you 
others to listen because at the end of my questions, I will 
give you an opportunity to respond or add to, if you want to, 
but I am not going to call on you. But that is part of my 
program.
    Mr. Cohen, if the merger is approved, Comcast-Time Warner 
Cable would become the largest cable television and IT service 
provider in our country. Its size would give the company 
increased ability to demand more favorable terms and rates from 
content providers and equipment manufacturers. What effect will 
this--it is really three parts, so listen to all three parts. 
What effect will this have on smaller TV and Internet 
providers? If content providers are forced to charge Comcast-
Time Warner significantly less, will they end up charging 
smaller providers more? And will consumers in places like my 
State of Iowa, which is not served by Comcast, pay higher TV 
and Internet prices because of the merger?
    Mr. Cohen. Okay. I think I only got two parts, but I think 
I can cover that.
    Senator Grassley. Okay.
    Mr. Cohen. So let me do two parts to the answer, and I 
think I can merge them all together, which is--we currently 
have 22 million customers, Comcast does, and we are the largest 
cable company at 22 million customers. And I wish I could 
represent to you that I thought by moving to 30 million 
customers we would generate all this wonderful leverage and be 
able to really negotiate harsh programming deals, bring down 
the costs of programming, bring down the cost of equipment. But 
I do not think that is the reality. Programmers have inordinate 
market power and attractiveness of their content. I will just 
give you one statistic that I think drives this home. So this 
is for Comcast, the largest cable company in the country.
    Over the last decade, our programming costs have gone up 98 
percent, while our cable rates over that period of time have 
gone up basically at half that rate. So it shows you the 
balance of power in the market where programmers have so much 
more power at the negotiating table. So I do not think you are 
going to see dramatic shifts in programming costs or in 
equipment costs as a result of this transaction. And, by the 
way, that is one of the reasons why I say I just cannot 
guarantee that I think cable prices are going to go down as a 
result of this transaction because programming costs are our 
number one cost input in our business model.
    But for whatever we are able to move the needle even 
marginally in terms of negotiating better programming rates for 
our company, better equipment costs for our company, which will 
inure to the benefit of our customers, I think any sound 
economic theory and any economist will tell you that that does 
not have an impact on what other cable companies are paying for 
their program or equipment. And the easiest way for me to 
explain this, since I am not an economist, but as it has been 
explained to me, is that if you posit that that is the case, 
that is, if we get a programmer to drop their costs to us by 
$100, that they will go out and try and collect that $100 from 
another cable provider, that means that they have left $100 on 
the table with that other cable provider; that is, they 
negotiated the deal and they said, ``We do not need that last 
$100 because we are getting it from Comcast.'' And as soon as 
they do not get it from Comcast, they have to go back and say, 
``Oops, we need another $100.''
    In fact, programmers and equipment manufacturers will 
negotiate to get the last dollar that they can from everyone 
who they are negotiating against, and this is a form of what I 
believe is called ``adjacent market economic theory,'' that 
there is no impact on what a programmer or an equipment 
manufacturer would charge to another multichannel video 
provider based upon the negotiations that are taking place with 
Comcast.
    Senator Grassley. Mr. Kimmelman, I see you want to respond.
    Mr. Kimmelman. If I may, Senator. That is a nice economic 
theory. I am sure programmers charge as much as they can now, 
but with an additional eight million subscribers or 10 million 
subscribers from Time Warner, Comcast will be in the driver's 
seat. You are either on their system serving more than 30 
million customers, or you are not. Will that impact the price? 
You have got to believe it will. If that price goes down for 
other programmers, they could reduce the quality or they could 
try to pass it along to other vendors.
    And even if Mr. Yoo has some interesting statistics about 
other players in the market, this is a highly concentrated 
transmission market. There are very few players in any 
community who can offer Internet or a big package of video 
programming.
    So the squeeze will come from Comcast. It is logical. They 
will want to save money. I commend them for trying to do that. 
The ramifications will cascade through the economy and could 
lead to significant price increases for others.
    Senator Grassley. Professor Yoo.
    Mr. Yoo. We are at a seminal moment in the history of the 
television industry. Looking at traditional video in some ways 
masks the fact that it is losing subscribers, and what we are 
seeing is a transformation to online video systems that is 
changing the economics, changing who the market leaders are, 
and changing what the future outcomes are likely to be.
    We are also fortunate to live in a world where 98 percent 
of American households have three choices in providers, which 
is the best in the world. I think we are at a moment where 
things are going to change whether the companies like it or 
not, and we need to allow them to respond to those changes in 
the environment.
    Senator Grassley. Okay. Mr. Sherwin.
    Mr. Sherwin. Senator, you raised the issue a little while 
ago, the impact on Internet service providers, and I would like 
to address that for the moment. I mentioned to you in my 
opening that Comcast has refused to sell to us for the last 
year. When they are the only provider of high-speed broadband 
in a specific area, a geographic area, it makes it very 
difficult for us to provide services. In effect, then what 
happens is the competition is limited.
    My suggestion to you would be that we find some compromise 
position in which a condition is imposed where wholesale 
broadband is available to Internet service providers, which 
would address the issue you raised on the Internet service 
provision.
    Senator Grassley. I think you go ahead, Mr. Cohen, and then 
I am not going to take time of the Committee with a second 
question. I will submit it for answer in writing.
    Go ahead.
    Mr. Cohen. Just a brief response to Mr. Sherwin. I actually 
think Mr. Sherwin's testimony sets forth in a pretty compelling 
fashion why there is no need for such a condition in this 
transaction. He points out that he has Internet interconnection 
agreements with a wide variety of companies--Comcast, Time 
Warner Cable, Verizon, AT&T, Level 3, and a number of other 
companies. I know that today--and I am just not aware of any 
refusal on the part of Comcast to do business with Mr. Sherwin. 
I know that today we have about a hundred commercial agreements 
with Mr. Sherwin in a hundred different buildings in America, 
and that in all of those cases there is at least one other 
option that Mr. Sherwin has to obtain services. And in some of 
those buildings, there may be three or four other options for 
him to be able to pursue.
    So the issue of wholesale unbundling of our network is an 
issue that was vigorously raised in the NBCUniversal 
transaction, one which we vigorously fought in that 
transaction, and one in which the Department of Justice and the 
FCC concluded that the market was sufficiently dynamic and 
competitive that it was not going to compel wholesale 
unbundling of our Internet service.
    [The questions of Senator Grassley appear as submissions 
for the record.]
    Senator Grassley. Thank you.
    Senator Klobuchar [presiding]. Thank you very much.
    I know Senator Grassley is going to go and vote, and if you 
noticed that there are not many people left here, it is because 
people are coming in and voting. It is not like they have left 
for the day.
    I want to start with you, Mr. Cohen. You talked about some 
of the benefits you foresee coming from this merger. Would 
those things not happen if there was not a merger?
    Mr. Cohen. So I think the answer, Senator, is that those 
things are going to happen faster and with more certainty than 
they would occur in the event there was not a merger. And I was 
really talking about the immediate consumer benefits. The 
reason those benefits have not occurred in the Time Warner 
Cable footprint is because of the difference of scale between 
Comcast and Time Warner Cable, and it is the scale that leads 
to the investment that leads to the rapid deployment of those 
benefits.
    And when we move beyond the immediate, and when we look at 
our competitors and what they are investing and innovation that 
they are rolling out, we believe going forward in the future 
that in the absence of comparable scale to the national and 
global competitors that are our real competitors in this 
market, our customers will fall behind. We will not have the 
choice, the innovation, and the technology to be able to offer 
them in the future.
    Senator Klobuchar. Mr. Bosworth, I know the environment for 
independent programmers is not that easy right now. I have 
heard from many of them. So what is it about this merger that 
you think will make it harder for independents? And why can't 
you simply go to other cable providers and satellite providers 
to get carriage from them? Why would you need Comcast or Time 
Warner? I think I know the answer.
    Mr. Bosworth. Thank you, Senator. Like we said, the 
combined merger would put them in 27 of the top 30 markets, and 
young networks need to generate their revenue through 
advertisers, and the advertisers demand that we be in those 
large markets.
    Senator Klobuchar. Well, Comcast brings up Apple and Amazon 
and Netflix as competitors and other outlets programmers can go 
to. Are these viable options for Back9Network?
    Mr. Bosworth. It is increasing but yet still the average 
American watches 20 times more video via television than they 
do online.
    Senator Klobuchar. Mr. Cohen, what competitive pressures 
are there to keep Comcast from dictating terms and creating 
high hurdles for programming like Mr. Bosworth's?
    Mr. Cohen. Okay. So three answers, if I can.
    First of all, Comcast is probably the most independent 
programmer-friendly multichannel video distributor in the 
marketplace. We carry 160 independent programmers. Six out of 
every channels that we carry are independent programmers. In 
the last three years alone, we have provided expanded carriage 
to 120 independent programmers, and we have launched five new, 
independent programming networks, including four that are 
minority owned and minority controlled. And there have been 
numerous independent networks that have publicly expressed the 
views that I am expressing here today about our independent 
programmer friendliness.
    Number two, the primary legal protection for an independent 
programmer who wants to be carried or the program carriage 
rules that the FCC has, those rules prohibit us from 
discriminating against a provider who wants carriage on our 
systems. So there is----
    Senator Klobuchar. But there have been some challenges, 
right, with----
    Mr. Cohen. Well, there have been a handful of challenges 
that we have tended to prevail on because there is an 
attitude--or there is--look, I do not begrudge--I do not 
begrudge independent programmers' efforts to get carriages. You 
said in your question it is tough to get carriage for any new 
networks today. By the way, Comcast--talk about our vertical 
integration--we have dropped a network in the last three years 
because we had trouble getting carriage elsewhere for that 
network.
    So it is tough to get carriage deals, period. The space is 
very populated, and it is very difficult to be able to do that.
    But we are--we try as hard as we can to have reasonable and 
rational discussions with independent programmers. And by the 
way, I would include the Back9Network in that category of 
networks that we are talking to and that we are trying to reach 
arrangements with. There was a meeting just this week between 
our program affiliation group and the Back9Network, which was 
scheduled well before we knew that Back9Network was going to be 
a witness at this hearing.
    Senator Klobuchar. Do you want to get to the third reason?
    Mr. Cohen. Right. And the third reason is that we carry 
these networks because we are always focused on the consumer. 
So if you have compelling content and you can make the case 
that our consumers want to watch this content, we will carry 
it.
    Senator Klobuchar. Okay. Thank you very much.
    Mr. Cohen. Sorry.
    Senator Klobuchar. I do not want to miss the paycheck 
fairness vote.
    Mr. Kimmelman, do you want to respond to that? And then I 
will be turning it over to Mr. Franken or Mr. Lee.
    Mr. Kimmelman. I will just say very quickly this is the 
real scale question, as the scale issue raised before about 
acquiring Time Warner. One could say with $45 billion you could 
do a lot of those other things without having to buy up the 
second largest company in the market.
    But here on the scale side you cannot launch, you cannot 
get out there, as Mr. Bosworth said, unless you have 
advertisers willing to support you. They will only support you 
if you have enough distribution. So it is a no-win game, and 
the problem particularly, having been involved in crafting 
those original provisions more than 20 years ago, I throw up my 
hands, because when you are vertically integrated and you have 
a golf channel, and someone else comes along, how do you judge 
whether it is a fair way of putting someone on or not, 
whether--we know they have a self-interest in their own 
channel. This becomes almost an impossible task. It has been 
extremely difficult for the FCC. And so I question whether 
those rules can really do the job.
    Senator Klobuchar. Thank you. Do you think those rules then 
should be changed? Or do you think as the Justice Department 
considers this merger that that should be part of the 
consideration, in addition?
    Mr. Kimmelman. Senator Klobuchar, I think it is appropriate 
for both reviewing agencies to consider all of its existing 
safeguards as they take on a new transaction to determine 
whether the old ones work, because to just reapply them without 
understanding whether they work would make no sense whatsoever.
    Senator Klobuchar. Okay. Very good. I am going to turn this 
over to Senator Lee, and then Senator Franken will be next. 
Thank you very much.
    Senator Lee [presiding]. Thank you, Madam Chair, and thanks 
to all of you for being here today.
    Mr. Cohen, why don't I start with you? As I referenced 
briefly in my opening statement, I have heard some concerns 
related to content, related to the idea of one company 
controlling a significant share of both Internet and video 
distribution. So, you know, whether with respect to politically 
affiliated networks or content or otherwise, I have heard some 
concerns expressed that the emerging Comcast, the post-merger 
Comcast, might have the incentive or even the predilection but 
certainly an enhanced capacity, due to its larger size, to 
discriminate against certain types of content, including 
political content.
    How would you respond to those concerns?
    Mr. Cohen. So we started talking about this just now, and I 
think the easiest way to directly respond to that question is 
to say that it is an important question, but it is a question 
that is probably the most litigated question in the telecom 
space in the past 15 or 20 years, and I say that because the 
FCC went through two lengthy proceedings in the late 1990s and 
the first decade of the 21st century to determine what level of 
cable ownership, horizontal ownership, would raise a concern 
that either the cable company could exercise monopsony power--
that is, extract unfair pricing from a programmer--or could 
serve as a bottleneck to prevent a programmer from reaching the 
American consumer. And in both cases, the Commission 
established a 30-percent horizontal ownership cap saying that 
if you are over 30 percent, those risks were present; but if 
you were not over 30 percent, those risks were significantly 
mitigated.
    In both cases, the Federal courts overturned the horizontal 
ownership cap, concluding that the FCC record was arbitrary and 
capricious, that the facts did not support a 30-percent cap, 
and that, therefore, the law did not support it either; and 
that, in fact, the portion that the cable company with 30 
percent does not control is known as the ``open field''; that 
is, it is known as ``the rest of the public'' that you can get 
to. And what the Federal court said was that a 70-percent open 
field was considerably larger, considerably greater than what a 
new programmer would need to be able to be launched and to be 
able to be viable.
    So in this transaction, we announced on day one that we 
were prepared to divest about three million customers to bring 
us underneath 30 percent of the total MVPD market. And that is 
even though by law there is no 30-percent cap, but that 30-
percent number is a bit of a hot-button issue for those who 
watch this space. And by being under 30 percent, we believe 
that we have a compelling argument that the concerns that you 
are addressing in your question would not be significant 
concerns in this transaction.
    Senator Lee. Mr. Kimmelman, how do you respond to that?
    Mr. Kimmelman. Well, as Professor Yoo said, things have 
changed since those rulings, and those were about generic 
rules. Here we have a specific transaction with specific 
ownership, and very importantly, a company with substantial 
vertical integration in programming, with NBC network, NBC 
cable programming, sports, regional sports. So they have a 
variety of different forms of leverage here that are not simply 
addressed by this simple horizontal issue. And I would say that 
the thing that has changed the most since those rulings, too, 
is the Internet, is the growth of high-speed Internet delivery. 
As we have seen in most places, we do not get much head-to-head 
competition with two, three, five cable operators or multiple 
phone companies coming in. It just has not happened. So the 
Internet has become the vehicle for this new potential form of 
competition, and with that, they have as many as 50 percent of 
the really high-speed customers in the country. That could be a 
chokehold that should be looked at.
    Senator Lee. So if I understand you correctly, you are 
saying that Mr. Cohen's response does not adequately take those 
two factors into account: number one, the effect of the changes 
in the Internet market; and, number two, the relationship 
between Comcast and NBC. Is that--am I----
    Mr. Kimmelman. That is correct. Yes, Senator.
    Senator Lee. Okay. Professor Yoo, would you care to chime 
in on that, especially since your name was invoked there?
    Mr. Yoo. Of course. Thank you. To take a historical 
perspective, people are very concerned about vertical 
integration. If you look at the facts, vertical integration has 
been dropping like a stone for 25 years in the traditional 
cable industry. The industry has below 10 percent vertical 
integration, and it continues to decrease. And the concerns 
that this is a growing problem just are not borne out by the 
facts.
    Unlike Mr. Kimmelman, I would say that the Internet cuts 
the other way. It makes it less likely that people have trouble 
getting their message out. One of the great benefits of the 
Internet is people who want to speak can speak, and the 
transformation that is happening on the Internet, on video, is 
that it is becoming a video-on-demand world, where people 
request content. Instead of getting what someone else thinks 
they should see, people decide for themselves, and actually 
that has been enriching the environment in ways that are 
transformative. If you want to see, look at our kids and see 
how they are doing it. It is just a completely different world.
    Senator Lee. Okay. I am sure I am going to have more 
questions later and will want to follow up on this, but my time 
has expired. We will turn the time over to Senator Franken.
    Senator Franken. Thank you, Mr. Chairman. I want to thank 
Chairman Leahy for holding this hearing.
    What we are talking about today is a $45 billion deal that 
would combine the Nation's biggest and the Nation's second 
biggest cable companies and the Nation's biggest and the 
Nation's third biggest Internet service providers.
    There is no doubt that Comcast is a huge influential 
corporation. I understand there are over a hundred lobbyists 
making the case for this deal to Members of Congress and our 
staffs. But I have also heard from over 100,000 consumers who 
oppose this deal, and I think their voices need to be heard, 
too.
    As members of the Senate Judiciary Committee, we are here 
to question whether this deal is good for competition and 
whether it is in the public interest. I am against this deal 
because I believe it does not meet either test. I believe this 
deal with result in fewer choices, higher prices, and even 
worse service for my constituents.
    Comcast has argued that there is nothing to worry about 
here because it does not compete with Time Warner Cable in any 
zip code. Mr. Cohen has told reporters, ``There is absolutely 
no competitive overlap between the two companies--none.'' What 
he is really saying is that these two companies, each of which 
controls many of its own local markets, want to become one 
larger company that controls the national market. The new 
Comcast would operate in 19 of the Nation's 20 biggest markets, 
27 of the top 30, as Mr. Bosworth said.
    That kind of expansion has a serious impact on competition. 
For example, when Comcast wanted to acquire NBCUniversal, 
Comcast's CEO told this Committee not to worry about it because 
there were still other ``robust distributors''--and he 
specifically named Time Warner Cable--which would prevent 
Comcast from setting anticompetitive prices for NBC content.
    The point was that Comcast could not get away with that 
sort of behavior because the distributors, including Time 
Warner Cable, could not stand for it, and they could go to the 
FCC to complain about it, too.
    Later in the hearing, Comcast's CEO also assured us, ``We 
are not getting any larger in cable distribution here.''
    Well, if this deal goes through, Comcast will become larger 
in cable distribution, and if this deal goes through, Comcast 
never again will have to negotiate with Time Warner Cable when 
it comes to setting prices for NBC content. And NBC content, 
everyone should remember, is 20-some networks.
    Comcast cannot have it both ways. It cannot say that the 
existence of competition among distributors, including Time 
Warner Cable, was a reason to approve the NBC deal in 2010 and 
then turn around a few years later and say that the absence of 
competition with Time Warner Cable is a reason to approve this 
deal.
    Mr. Kimmelman, what do you make of Comcast's argument that 
they do not compete against each other at all? Doesn't that 
really underestimate the anticompetitive implications of this 
deal?
    Mr. Kimmelman. Absolutely, Senator Franken. It is true they 
do not overlap geographically, but that is not the entire 
competitive analysis either for the Department of Justice or 
for the Federal Communications Commission. The question here 
is: Are there ways in which they can leverage unfairly? Do they 
have excess market power? Can they drive up prices? Can they 
harm quality and innovation? And there are numerous ways in 
which they can do that?
    If Time Warner can no longer discipline their pricing for 
NBC programming, prices will go up there. They probably will go 
up across the entire distribution chain, harming consumers 
everywhere.
    Having the additional leverage of Time Warner as part of 
the Comcast family gives them enormous power over how the 
Internet develops the ability to offer new, innovative 
services. What devices, what consumer interfaces work? If they 
have almost half of the customers in the country, that is what 
manufacturers will make: products for that half, meet their 
specifications. If they continue to want that to be through a 
bundled, high-priced set of services, I am sure it will be.
    These are all enormous dangers that have significant 
competitive impacts and tremendous harm for consumers.
    Senator Franken. Well, speaking of bundled services, we 
will get to that later. I am out of time.
    Mr. Chairman, I very much hope we will go to a second 
round.
    Senator Lee. I am confident we will.
    Senator Franken. Great. Thank you.
    Senator Lee. Thank you, Senator Franken.
    Senator Hatch.
    Senator Hatch. Well, thank you, Mr. Chairman.
    Robert Bork taught us that the overriding objective of 
antitrust law is to promote consumer welfare. Antitrust 
enforcement may seek to safeguard robust competition, but it 
must not become a tool to advantage or disadvantage particular 
competitors.
    I know that some of my friends here today have never met a 
merger that they liked. But too often government intervention 
in such matters risks harming consumer welfare and innovation 
by protecting insufficient competitors from market forces.
    Absent clear evidence of market failure, consumers benefit 
when the government allows free markets to allocate resources 
in the most efficient manner possible. The markets for both 
video services and broadband Internet are dynamic and 
innovative, with new entrants and evolving technologies. 
Government regulators must be especially careful not to 
intervene unwisely in such technologically dynamic markets.
    Still, the scope of the proposed merger between Comcast and 
Time Warner raises issues that deserve attention, and I thank 
all the witnesses for being here today to discuss this matter.
    Let me ask you this, Professor Yoo. I would like your view 
of transaction from the supervision of antitrust law. After 
all, although the FCC has a broader mandate to examine whether 
the merger serves the public interest, the Justice Department 
must look, in my opinion, solely at whether the transaction is 
consistent with antitrust law. According to your legal 
analysis, would this merger create for either video or 
broadband an industry structure resulting in anticompetitive 
harms under established antitrust or communications law? And, 
in particular, can you speak to the relevant markets at issue 
in that analysis?
    Some critics stress that the combined company would control 
50 percent of high-speed Internet access, a majority of cable 
subscribers, and 30 percent of--no, MVPD customers. But are 
those the markets relevant to antitrust analysis in a video 
space that includes satellite providers and Internet video 
platforms, or in a rapidly evolving broadband space that 
includes enhanced DSL fiber, DSL fiber and advanced LTE 
services?
    Now, that is a lot of questions for you, but I just thought 
I would ask them anyway.
    Mr. Yoo. Well, they are insightful questions, so I thank 
you for them.
    The people who have cited a number of close to 50 percent 
market share for the merged entity have not taken into account 
the latest technological advances that are going on right now. 
DSL is rapidly improving and deploying a vast array of new 
technologies, including IP DSLAMS and vectoring and a bunch of 
technical jargon which I will not bother the Committee with. 
But what is happening is AT&T is rolling out a new 45-meg 
service across 80 percent of its footprint and enhanced to 10-
meg in some areas, and we are not the only country. The U.K., 
Germany, a lot of different countries are on this strategy.
    And when you start to see that, you see that DSL is 
actually coming back from the dead, and the facts say that 
where DSL has not enhanced itself, yes, it is losing market 
share to cable. But in the areas where AT&T has upgraded its 
network, it is actually taking subscribers from cable.
    And so we see a market where the only way you can get the 
50 percent number is if you pretend that DSL is not a 
competitor. The cable companies who are losing customers to DSL 
right now would beg to differ because the fact for them is they 
are competing. This is the exact kind of dynamic competition 
which we want, which is cable got better, but even as of today, 
the markets are not structured in a way that any 
anticompetitive effects are likely under conventional antitrust 
analysis. But what antitrust law will also tell you is what 
matters is not what is happening today, but it is what is going 
to happen in the future that really should drive the analysis, 
and that world is going to become even more competitive than 
the facts today would lead you to believe.
    Senator Hatch. Well, thank you.
    Now, Mr. Cohen or Mr. Minson, whoever wants to answer it, 
we all know the broadband marketplace is dynamic. Five years 
ago, many believed that no one could compete effectively 
against the Bells. Today some suggest that no one will be able 
to compete effectively against cable in providing broadband.
    What are the competitive conditions you now face? And how 
do you see the broadband marketplace evolving in the near 
future? Either or both.
    Mr. Cohen. I will go first, Artie.
    So thank you, Senator, and I think we see a fiercely 
competitive broadband marketplace across our entire footprint. 
In each of the top MSAs in the country, there are double-digit 
broadband competitors in that space, and I will give you--just 
to look at the combined footprint of Comcast and Time Warner 
Cable, in 98.4 percent of that footprint, the consumers have a 
choice between Comcast, Time Warner--Comcast or Time Warner 
Cable and at least one top-10 ILEC. So that is in 98.4 percent 
of our combined footprint.
    As Professor Yoo just pointed out, there is a virtuous 
investment cycle that is occurring here. We started--we 
launched, the cable industry launched cable model service. That 
stimulated the Bells to take DSL off the shelves. It existed 
for more--they invested in it and launched that product. We 
invested more in cable modem service and made cable speeds much 
faster. That led the Bells ultimately to move to fiber-based, 
fiber to the home, fiber to the neighborhood, FiOS or U-Verse 
or other Bell products that are like U-Verse.
    That led us to invest more and increase speeds. Those new 
speed announcements that I announced today, 13 speed increases 
in 12 years, are competitive responses to the Bells offering 
faster and faster Internet service.
    As Professor Yoo pointed out, that led the Bells to put to 
the side old DSL and invest in modern DSL technology to have 
more speeds. We announced this transaction, and the CEO of AT&T 
immediately said that this is going to create a heightened 
sense of urgency for us to invest even more in being able to 
respond to this particular transaction.
    So in the end, consumers are the big winners. In the 
broadband space or in the video space, it is really good to be 
a consumer today because of this investment cycle.
    Senator Hatch. Well, thank you.
    Mr. Minson. What I would add is that in my opening remarks 
I noted that we have spent billions of dollars over the last 
several years in capital expenditures, and a very high 
percentage of that goes to increasing capacity in our broadband 
plant. We have increased speeds from 3 Mbps to 100 Mbps across 
our footprint, and we have pockets of our footprint we offer a 
300 Mbps service. So obviously on a price-per-meg basis, we 
offer much more value to consumers today than we did 10 years 
ago.
    In addition, that investment has allowed us to offer 
different tiers of service. We offer over six different tiers 
of service. For example, earlier this year, we offered an 
everyday low price offer of $14.95 so that customers, for that 
part of the population, was priced very effectively. All in 
response to a very competitive marketplace.
    Senator Hatch. Thanks, Mr. Chairman. Thank you. Thank you 
for your testimony.
    Senator Klobuchar [presiding]. Senator Hirono.
    Senator Hirono. Thank you, Madam Chair.
    Thank you for all of your testimony. I realize that 
following some of the line of questioning of my colleagues, I 
think it is difficult to apply traditional antitrust analysis 
to a market where so much is changing so fast. And, Professor 
Yoo, you said that what the antitrust law should look to is 
what happens not today but in the future, which brings me to 
Mr. Kimmelman's suggestion, I think it was--no, Mr. Bosworth's 
suggestion that perhaps what should be happening is that the 
DOJ and the FCC should engage in basically continuing oversight 
to make sure that new, independent networks, others who want to 
come into the marketplace to provide choices for consumers will 
have a fair opportunity to compete.
    Would you agree that that would be something to consider in 
this market that is changing so rapidly?
    Mr. Yoo. I would agree entirely. The FCC should engage in 
ongoing oversight, and, in fact, it does. There is a very well-
developed set of program access rules and carriage access rules 
to make sure that independent programmers have the ability to 
be carried and to make sure that people who have content must 
share it with other cable operators and other satellite 
operators.
    There are some complaints. As always, there are people who 
do not get what they want out of the process, and the FCC has 
consistently said the correct solution is to fix that process 
so it is available for everyone, instead of using a merger to 
do a company-specific solution that will only affect the 
merging party.
    Senator Hirono. For Mr. Cohen, your basic cable package is 
about $75 a month. Is that about right?
    Mr. Cohen. Senator, we actually have many basic cable 
packages, so we would start with a lifeline-type service, which 
would be, you know, broadcast channels and a few other channels 
that more typically would be around $20 a month. We have a 
digital economy package which----
    Senator Hirono. What is kind of your median amount that 
your subscribers pay for your services?
    Mr. Cohen. So median, I am not sure I know that. I can 
provide that to the Committee. And, remember, it is hard 
because we have--half of our customers are in bundles and are 
getting a bundle of services for $99 a month or $129 a month, 
and that includes video, high-speed data, and telephone.
    Senator Hirono. It is that group that I want to address, 
the people who have the bundled package.
    Mr. Cohen. Okay.
    Senator Hirono. And there are consumers who might want to 
have more of a say in what kind of programming they want to pay 
for. So do you have any--in the group that gets the bundled 
product, do you have any initiatives in mind that would create 
more of a choice, provide more of a choice for consumers to get 
the kind of programming they actually want and not have to pay 
for--in my case, for example, it would be, no offense, some 
sports programming.
    Mr. Cohen. Right. So the answer is we do offer a variety of 
video bundles, all of which or most of which are available in 
bundles with high-speed data and with telephone service. The 
whole issue of so-called a la carte programs where people can 
assemble their own packages is a very complicated question, and 
I would note that in every independent study that has ever been 
done of a la carte programming, the study has concluded that 
the result of an a la carte regime would be less choice for 
consumers and higher costs. And the reason for that is that the 
economics of cable programming involves both advertising and 
affiliation fees.
    Senator Hirono. I think, Mr. Cohen--I hate to interrupt 
you. My time is running out. I think it just illustrates how 
dynamic this marketplace is and----
    Mr. Cohen. I would agree with that.
    Senator Hirono [continuing]. How many different offerings 
and why perhaps the DOJ and FCC should continue to monitor to 
make sure that competition is actually occurring.
    I have a question about Hawaii. Now, Hawaii is not served 
by Comcast at all, and Oceanic has about 90 percent of all the 
cable subscribers, and they have Internet service where they 
have a particular Internet address. Should this merger occur, 
my specific question: Would they be able to continue to use 
their same Internet address? Or do they have to completely 
change what is happening with them?
    Mr. Cohen. So we have not gotten to that level of detail on 
transition planning. When we have done other transitions 
relating to other transactions, we have tended to have a long 
phase-in period for changes of Internet addresses. And I think 
some people are still using their AT&T Internet addresses which 
was a transaction that was done in 2001. But we really have not 
gotten to that level of transition planning yet.
    Senator Hirono. So I take it the idea would be to be as 
accommodating to your customers all across the country.
    Mr. Cohen. We are totally focused on the customer 
experience and have a lot of experience in doing these types of 
transitions, and that is exactly what the concern is and what 
the planning process would be.
    Senator Hirono. Thank you. I have run out of time.
    Thank you, Madam Chair.
    Senator Klobuchar. Thank you very much.
    Senator Graham.
    Senator Graham. Thank you, Madam Chairman.
    Mr. Cohen, how would this potential merger affect the South 
Carolina market?
    Mr. Cohen. So, Senator, good morning. South Carolina is one 
of the States actually where Comcast and Time Warner Cable both 
have a presence. It is a State that actually demonstrates the 
lack of competitive overlap between the two. Although we are 
both in the State, we are in different parts of the State. So I 
think that South Carolinians would gain the benefits of the 
transaction that I had a chance to run through before: more 
investment, faster Internet, better video experience, roll out 
of the X1 platform, better TV Everywhere experience. And I 
think South Carolina is a State where bringing the two cable 
operators together will provide a more unified experience in 
the State, although we will continue to compete--and you know 
the State well. We will continue to compete with DIRECTV, DISH, 
and AT&T as major wireline providers in the State of South 
Carolina.
    Senator Graham. Mr. Minson, you do not compete with Comcast 
in South Carolina. Is that correct?
    Mr. Minson. That is correct.
    Senator Graham. Do you agree with what he just said about 
the potential merger affecting South Carolina?
    Mr. Minson. I do.
    Senator Graham. Okay. Now, I am a DIRECTV subscriber, so--I 
had problems with cable.
    [Laughter.]
    Mr. Cohen. If I can say, you are proof of the point that I 
am making.
    Senator Graham. And I have got problems with DIRECTV when 
the weather is bad, so I am trying to revisit this. I really 
am. I do not know what to do. I am trying to figure out what is 
the best--I think most consumers want as much as they can get 
as cheap as they can get it, right? At least I do. And the 
details kind of cloud us over.
    So the bottom line is this merger, you are not taking two 
people who compete in the same marketplace. Am I right about 
that?
    Mr. Cohen. That is correct.
    Senator Graham. So my choices would be, if the merger comes 
about, to stay with DIRECTV, go with DISH, go with you all. Who 
else could I choose from?
    Mr. Cohen. You could go with AT&T as a wireline competitor.
    Senator Graham. So I have got four choices?
    Mr. Cohen. You have got four choices, and, again, depending 
on where you live, other wireline competitors in broadband and 
cable are Charter, Cogeco Cable, Home Telecom, and WOW in 
various places in South Carolina.
    Senator Graham. So it could be up to seven or eight to ten 
choices, depending on where you live.
    Mr. Cohen. Right, on a statewide basis. But to be fair, so 
Mr. Kimmelman does not jump in and correct me, just like we do 
not compete with Time Warner Cable, we do not compete with 
Charter either. So it really depends where you live as to 
whether one of those cable competitors----
    Senator Graham. So basically cable companies do not compete 
with each other, generally speaking? Is that what we are 
saying?
    Mr. Cohen. Right, that is a result--that is correct, and it 
is really because of the way in which cable grew up as a matter 
of local franchising, that local franchises were granted--
originally when Congress authorized them, they actually were 
exclusive. Ultimately Congress got rid of exclusive franchises, 
but the cable business grew up community by community by 
community.
    Senator Graham. So in my case, I would not be losing a 
choice. The theory would be I could have a new choice with more 
services through the merger. Is that correct?
    Mr. Cohen. I should let you take the witness seat. That is 
exactly what I have been trying to say.
    Senator Graham. Okay. So somebody can sell me a product at 
this hearing, because I am really--does anybody represent 
DIRECTV?
    [Laughter.]
    Senator Graham. Because I really do not know--you know, I 
am thinking about changing because I have had the satellite 
signal knocked out twice. I have had to move the satellite 
twice. But before that, the cable went out right in the fourth 
quarter of a ball game.
    [Laughter.]
    Senator Graham. So from a content provider's point of view, 
if I am a content provider, am I at a disadvantage from this 
merger, in your view?
    Mr. Cohen. So I believe that you are not. As a combined 
company, we would have under 30 percent of the market. And I do 
not think that that is a sufficient share of the market to 
create problems for programmers. And maybe more importantly 
than my opinion, the Federal courts and the DC Circuit have 
ruled on two occasions that having under 30 percent of the 
market does not create an undue risk of monopsony power or 
bottleneck authority. And I will agree with something Mr. 
Kimmelman said beforehand. That was a different time when the 
court made those rulings, but the way in which I think it is 
different is that the multichannel video marketplace today is 
even more competitive than it was in 2001 and 2009 when the DC 
Circuit made those decisions.
    Senator Graham. In 20 seconds, tell me why I should switch 
back to cable.
    Mr. Cohen. So I am going to give you the Comcast pitch, 
even though we are not there yet. I think Comcast provides the 
best-in-class video viewing experience in the country. Our X1 
operating system changes the way people watch TV--better 
search, voice control, disabilities access, and our TV 
Everywhere experience; 50,000 choices on demand, which nobody 
comes close to; and TV Everywhere gives you the ability to 
watch 50 live channels anywhere, inside or outside the home 
now, and tens of thousands of video choices on demand.
    Senator Klobuchar. Thank you very much.
    Senator Blumenthal.
    Senator Blumenthal. Thanks, Madam Chairwoman, and thank you 
for your leadership in the antitrust area and for participating 
and leading on this hearing.
    First, let me say how delighted I am to see two Connecticut 
residents here, the morning after another great triumph by our 
team. And if you are around long enough, you will see me 
present to Senator Rand Paul my Huskies tie because he is 
obligated to wear it as part of the bet we made. So that may be 
the best entertainment of the whole day in Washington, DC--not 
to take away anything from this panel.
    And let me just say how much respect I have for Mr. Cohen 
and Mr. Minson--thank you for being here--and for your 
companies, who do so much to enrich and enliven our lives. And 
to all of our witnesses, thank you on this very, very 
consequential, even historic issue that is before us.
    And let me just say that I think what we have heard among 
some of our colleagues is a general sense of skepticism, which 
is reflected in the general public about how this deal will 
really help consumers. Prices will not go down. We have already 
heard that from the proponents. So where is the beef? Where is 
the ``there'' there for consumers? And apart from the fairly 
vague potential promises of good things happening, I think the 
case has yet to be made that consumers will really benefit in a 
tangible, real, substantial way.
    In my experience as Attorney General and here in 
Washington, I have witnessed how excessive consolidation in any 
market can sharply increase prices and reduce consumer choices 
in the markets for broadband and pay-TV services. I am 
especially concerned that the bulwarks of a competitive 
marketplace--choice and aggressive rivalry, not just 
competition but aggressive head-to-head rivalry--have been 
diminished over the years, and these markets are plagued with 
anticompetitive conduct, industry agreements to limit consumer 
choice, and skyrocketing monthly bills at triple the rate of 
inflation. That is the reason why I think you are hearing a 
high degree of skepticism here.
    So I think the Department of Justice has to conduct a very 
comprehensive and thorough review of this merger, paying 
careful attention to the potential abuse of power. And since I 
opened about sports, let me focus for the moment on regional 
sports networks, also known as RSNs.
    The most recent information I have details Comcast owning 
11 RSNs in the country's largest markets and Time Warner Cable 
owning five RSNs, along with 16 local sports channels. 
Combined, the merged entity would own the rights to a very 
formidable amount of local sports programming in the largest 
media markets in the country. These are unique products of 
tremendous value. Access to them is crucial to a pay-TV 
provider's ability to remain competitive. And the cost of 
sports programming continues to rise with no end in sight. The 
L.A. Times reported last week that cable bills are expected to 
rise to $125 a month from $90 a month in the next few years, 
almost entirely due to sports programming.
    Any competitors that will not pay your increased costs for 
sports programming get denied access. And that has led to some 
serious, high-profile disputes, as you well know, between 
Comcast, Time Warner, and your satellite and telco companies. 
In fact, I think there are still several outstanding disputes 
right now where regional sports programs continues to be 
withheld from competitors by both Comcast- and Time Warner-
owned RSNs.
    So I am really concerned that the increased ownership of 
high-value programming like regional sports networks will give 
your companies, soon to be one company, both the means and 
incentive to overcharge your rivals. I think that is a 
practical, hard fact of life--means and incentive to overcharge 
for an economically crucial element of programming involving 
sports.
    So, Mr. Cohen and Mr. Minson, I wonder if you would address 
these concerns.
    Mr. Minson. Do you want to go first and I will go second?
    Mr. Cohen. I will go first. Good morning, Senator. I was 
wondering, when you did not come in here, if you were still 
celebrating from last night. Actually, I will say I think 
everyone in the country shares your joy, and particularly if I 
can say there is something unique about women's basketball, and 
the sheer joy of the end of the game was last night something I 
think everyone in America can get a lot of pleasure out of.
    I will point out, by the way, that in the diversity of 
programming and the way in which we are bringing this, that, of 
course, the men's championship was on CBS or broadcast network, 
and the women's was on ESPN, a cable network, and that is part 
of what cable has been able to enable in America to be able to 
have these diversity of outlets to show really exciting and 
incredible content like that.
    So in the RSN world, my numbers are a little different than 
yours, but I think the point is essentially well taken. I had 
said earlier that one of the reasons why I could not make a 
commitment that cable pricing was going to go down as a result 
of this transaction was because the number one driver of our 
cost structure is programming costs, and the biggest factor in 
programming costs is sports programming. So we are in total 
agreement on that.
    In the RSN context, though, RSNs are not national networks. 
And as you point out, they are regional; they are offered in a 
particular market. And so there is really nothing in this 
transaction that changes the competitive dynamic in any market 
in the country.
    So we already own, as you said, a bunch of regional sports 
networks. Time Warner Cable has a few. But let us take the L.A. 
Lakers regional sports network in Los Angeles. Comcast is not 
in Los Angeles. Time Warner Cable is. Whatever the competitive 
dynamic is today, for Time Warner Cable negotiating regional 
sports network deals for multichannel video distributors in the 
L.A. market for the Lakers regional sports net will be exactly 
the same. We are not going to have any more power in the L.A. 
market to negotiate different deals because we also own 
regional sports nets in Chicago and Philadelphia and the 
Washington area.
    So those markets, the impact of regional sports net 
bargaining power is tied to the structure of the local markets 
where the regional sports nets are offered, and there is 
nothing in this transaction that changes the competitive 
balance or competitive equilibrium in those particular markets.
    Senator Blumenthal. There may be nothing in this deal that 
changes the configuration locally, but it increases the 
bargaining power on one side.
    Mr. Cohen. The bargaining power for who? I mean, I am 
trying to figure out----
    Senator Blumenthal. The bargaining power for the entity 
that controls the programming. It is a bigger entity with more 
economic power and potentially more power over other 
programming in other markets and increases its strength, its 
ability to withstand potential hostile negotiations. I think 
that----
    Mr. Cohen. So it is the collection----
    Senator Blumenthal [continuing]. You are right if you view 
it only through the prism of the local configuration. But even 
there it may have an impact.
    Mr. Cohen. So I will just end with really short--and I 
apologize--to say that in the Comcast case, of course, under 
the NBCUniversal conditions, multichannel video distributors 
actually have the right to demand arbitration for regional 
sports nets on a stand-alone basis, along with no other 
channels, just the sports net. Now, no one has done that. No 
one has availed themselves of the arbitration rights because we 
have been able to reach deals with people without the need for 
arbitration. But there is that extra protection that is present 
in the NBCUniversal order.
    Senator Blumenthal. Why not----
    Senator Klobuchar. Senator Blumenthal, do you want to go on 
a second round? Because----
    Senator Blumenthal. Okay. I apologize, Madam Chair.
    Senator Klobuchar. Senator Coons. Thank you.
    Senator Coons. Thank you, Senator Klobuchar. Thank you to 
our entire panel and to the Members of the Committee who have 
dedicated significant time today to reviewing this substantial 
transaction.
    Mr. Cohen, if I might, I would just like to start with a 
few questions about service, employment, and diversity. First, 
the main concerns I have heard from my constituents in Delaware 
have to do with customer service, future price and employment. 
Comcast is a major employer in the Philadelphia region, and 
there are some real concerns among my constituents that this 
merger, if it goes forward, will not achieve significant 
improvement in customer service levels, may lead to increase in 
price, and may lead to a loss of jobs. Are there any assurances 
that you could give us today about how the significant benefits 
that you have described, both in writing and in testimony, to 
this merger will inure in some ways not just to shareholders 
but also to customers who, frankly, more than not have 
contacted me with concerns about price and customer service?
    Mr. Cohen. So let me do--service, price, and jobs. Let me 
do price first because I have already addressed that. I am not 
sure you were here. I will make--again, you know how careful I 
am. I will make my one firm commitment that there is absolutely 
nothing in this transaction that will result in an increase in 
prices for Comcast customers. Nothing. Whatever economic 
benefits we can derive, whether it is through synergies or 
whatever marginal additional leverage we might receive for 
programming negotiations and equipment negotiations, ultimately 
those inure to the benefit of consumers. So that is my response 
on price.
    On service, so service, I am glad you raised the question. 
Senator Franken has talked about this, and, you know, Senator 
Franken, I actually appreciate what you have said about 
service, because I want to tell you, at our company this is--we 
have an incredible focus on this, and it bothers us that we 
have so much trouble delivering a really high-quality service 
level to our customers on a consistent basis. It is not 
something we are ignoring. It is not something that we are not 
serious about.
    We have spent billions of dollars over the past five years 
improving our networks to try and make them more reliable, on 
additional training for technicians and for our call center 
employees. We have created new call center Centers of 
Excellence, one of which is in Delaware, where we have 
specially trained call center representatives, with a design of 
trying to enhance the level of customer service.
    We have focused on a whole host of customer service 
improvements, including creating one- and two-hour appointment 
windows across most of our footprint, which we actually meet 
now 97 percent of the time statistically. And we are not happy 
that we do not meet it three percent of the time.
    So this is a place where we are having issues, and we are--
I can just tell you that as a company we are laser focused on 
trying to improve the customer experience and do the very best 
we can to be the best--to offer the best customer service and 
best customer experience in the country, internally and 
externally. And there are a lot of surveys around, and some of 
them are very difficult for us to read. But I will tell you 
that over the last three years in J.D. Power and Associates, 
which I think is viewed as the Cadillac survey of customer 
attitudes and customer value, Comcast's service, Comcast's 
score in J.D. Power has gone up about 100 points in video and 
about 80 points in broadband, and those are the largest 
increases for anyone in our industry. So the investments that 
we are making and the commitment that we have internally to 
improving the customer experience are beginning to bear fruits. 
But we are deeply disappointed as to where we are, and all I 
can tell you is that the scores that we receive, the comments 
that people like Senator Franken have made, the conversations 
that I have had with you, they just spur us to do even better 
and to really try and enhance the customer experience.
    In terms of jobs----
    Senator Franken. You are welcome.
    Mr. Cohen. I really mean that. It is a good way to focus 
us, and we are totally open to the fact that sometimes we need 
a kick in the butt to focus us on things that are important, 
and this is a place where external voices have absolutely had 
that impact. And we think in the end we are going to be a 
better company as a result of it. So thank you.
    In terms of jobs, obviously unlike the NBCUniversal 
transaction, where we could stand up and say this is a vertical 
transaction and there is not any overlap in jobs and we are not 
going to be laying people off, in fact, we expect to grow jobs, 
this is a transaction where there is some overlap of jobs, but 
it is headquarters and shared services jobs. It is not the 
basic operations of the cable system. And so, you know, the 
State of Delaware, we do not have headquarters or shared 
services jobs in the State of Delaware. We do not have them in 
the State of Connecticut. We do not have them in the State of 
Minnesota. And we do not have them in the State of Utah. So for 
the Members of the Committee who are here now, I can comment on 
that. We have not gotten deeply enough into looking at where 
the potential overlap is for me to be more specific than that. 
But cable, because cable is such a local business, most of our 
jobs are the customer-facing jobs of technicians and call 
centers and local management of our systems, and we do not 
anticipate any reductions in those jobs.
    Senator Coons. Thank you. I see I am about to run out of 
time. Let me ask one more question, if I might, about sort of 
terms and conditions as you have referenced in the previous 
merger with NBCUniversal.
    Some commitments were made, and there has been a 
significant rollout of the Internet Essentials program, which 
is a very promising program to provide low-cost, high-speed 
Internet access for low-income households to help address the 
achievement gap, to help improve access and deal with the 
digital divide. There were also commitments made about 
diversity of programming, and I am interested in both diversity 
in the work force and diversity in programming and the 
accessibility of your service platform to a wide variety of 
content providers.
    Let me focus you as an example on TV One, an African 
American-focused channel, if you would speak briefly in closing 
to both of those. And then, Mr. Kimmelman, if you might on 
whether terms and conditions really are the appropriate way to 
address concerns that some might have about this merger.
    So, Mr. Cohen, if you would, on your progress toward 
delivery of Internet Essentials, your progress toward meeting 
commitments made about diversity and programming, and then Mr. 
Kimmelman.
    Mr. Cohen. So Internet Essentials, at the time we proposed 
it in 2010, was an experiment. We had no idea if it would work. 
We had a concept for a program based on research, and as we 
have rolled it out, it is now the most important community 
investment initiative of Comcast Corporation, and it is a 
program that I think not only the executives in the company but 
rank-and-file employees have an enormous amount of pride in. In 
30 months, we have successfully connected about 300,000 
families, 1.2 million low-income Americans to the Internet, 
most of them for the first time in their lives. Eighty percent 
of those families are minority, and when we survey those 
customers and say, ``What do you do with the Internet?'' the 
number one answer is, ``Our kids do homework on it.'' Ninety-
four percent of the families say that their kids do homework on 
it, and of those 94 percent of the families, 90 percent of them 
say they think their kids are doing better in school as a 
result of having the Internet at home.
    So it is a program that is an amazing success. We, together 
with thousands of community partners--it is not just us--are 
really making a difference in closing the digital divide, and 
we are incredibly proud and enthusiastic of being able to 
extend that program throughout the Time Warner Cable footprint.
    So there have been multiple references to the size of this 
company being in 19 of the 20 largest cities in America and 37 
of 40 and whatever all the numbers are. I look at those 
numbers, and when I think about Internet Essentials, I am 
excited, because we are bringing the Nation's largest and most 
comprehensive broadband adoption program for low-income 
Americans to 19 of the 20 largest cities in America, 37 of the 
40 largest cities, and I really think we are going to make a 
difference in moving the needle.
    In terms of diversity of programming, we are very proud of 
our record there, too. We agreed to launch 10 new, independent 
networks, at least eight of which would be minority owned and 
controlled, on a schedule. Consistent with that schedule, we 
have launched five, including four networks that are minority 
owned and controlled. TV One, by the way, which we referenced, 
was a network that we originally helped to launch after the TV 
One transaction, being an investor, and giving it its first 
carriage deal. And so we are enormously proud of our record for 
enhancing minority-owned and minority-focused networks, both in 
terms of creating wealth creation opportunities for minority 
entrepreneurs and in terms of making sure that we have 
programming that is being designed by and run by diverse 
ownership and management teams to be able to provide that type 
of programming to the particular ethnic communities and diverse 
communities that are represented.
    Senator Coons. Thank you, Mr. Cohen.
    Could Mr. Kimmelman comment as well.
    Mr. Kimmelman. Thank you, Senator Klobuchar. I will try to 
be very brief, Senator Coons. I will only address the 
competitive kinds of conditions that I think are important here 
to customers, users, consumers.
    In the kinds of regulations that have been cited in this 
hearing and the kinds of benchmarks that have been there and 
used in the past that some are trying to rely on, the 
difficulty here is none of them are absolute. None of them are 
``you may absolutely do X and you may absolutely not do Y.'' 
They all have to rely upon reasonable business practices, 
common practices of the lead companies in the industry. And the 
difficulty here is with the size of Comcast combined with Time 
Warner. They could drive what those practices are. And it 
becomes a bit of a circular reasoning of what is reasonable is 
what they do, what is acceptable in the industry is what they 
decide. The standards are determined by them. So that is the 
concern.
    My suggestion, Senator, would be that for all conditions in 
a transaction like this, the oversight agency should go back 
and review whether they work and have worked in the past and 
whether they can work given the factors involved in the 
transaction.
    Senator Coons. Thank you. Thank you for your testimony.
    Thank you, Madam Chair.
    Senator Klobuchar. Thank you.
    Senator Lee.
    Senator Lee. Thank you, Madam Chair.
    Professor Yoo, I would like to get back to you to follow up 
on a question that Senator Blumenthal asked earlier about 
regional sports networks. How do you respond to this question, 
this concern that has been expressed about the RSNs that the 
merged entity may own and the potential for this ownership to 
be used in an anticompetitive manner? Do you see a risk of 
this?
    Mr. Yoo. I do not, for the most part. For example, to use 
the L.A. Lakers, right now the fact that previously Time Warner 
had owned the L.A. original sports network and they are 
bargaining with other L.A.-oriented video providers, and that 
company is now co-owned by Comcast, it does not really change 
the bargaining leverage of the L.A. Lakers network against any 
of those other L.A.-based video distributors.
    And so this is, again, because L.A. programming is only 
primarily of interest to people in L.A., the fact that it is 
now co-owned by a person who also owns a regional sports 
network in Philadelphia does not really change their bargaining 
power in the L.A. market.
    On a broader scale----
    Senator Lee. I suppose you are presupposing that most or 
all RSNs would have a regional fan base----
    Mr. Yoo. That is correct, because----
    Senator Lee [continuing]. And that will not always be the 
case.
    Mr. Yoo. For the most part it is, because if they do not, 
the programming tends to migrate to the national sports 
networks as opposed to the regionals, and that, in fact, 
companies have a choice about where they are going to place 
that programming.
    Senator Lee. Okay.
    Mr. Yoo. On a much broader level, we have been fighting 
about RSNs before this transaction. We are going to be fighting 
about it after this transaction. And this is a classic example 
of a problem that I believe is not merger specific, which is 
why we are working on a dispute resolution mechanism as part of 
the program access provisions that is overseen by the FCC and 
has been around for a very long time, and that, in fact, is 
believed to be a reasonably effective means for resolving 
disputes that have been very high profile. And if there is a 
problem, the real solution lies in fixing that process, because 
then all programmers, regardless of whether they are operating 
in areas currently served by Time Warner Cable or Comcast will 
gain the benefit of it, because this is a bigger problem that 
precedes and goes beyond what the merger requires.
    Senator Lee. Okay. Thank you.
    Mr. Kimmelman, shifting gears, I want to talk for a minute 
about the advertising spot market. I understand that Comcast 
has been saying that its acquisition will provide something of 
a one-stop shop for cable advertising. Do you have any concerns 
with regard to the market for cable advertising and how the 
merger might impact that market?
    Mr. Kimmelman. Yes, Senator Lee. I think it is a very 
important area to look at because this, after all, is all about 
eyeballs and all about viewership. And I think it ought to be 
looked at very carefully through antitrust review as to whether 
this consolidates. One-stop shopping is great on one level. On 
the other level, if it leads to market power and the ability to 
dominate in the market, it may strip off advertising 
opportunities for potential competitors to Comcast, 
particularly on the programming side.
    Senator Lee. Okay. And is this concern higher with regard 
to local advertising? Is that the concern?
    Mr. Kimmelman. I think a lot of the local advertising is 
very, very important. I would have to think more about how much 
national--I mean, the importance here is that for every one 
of--whether it is regional sports or you are talking local 
advertising and local cable systems, keep in mind that the kind 
of competitors we are talking about on some level are satellite 
companies that are nationwide competitors. Or if we are talking 
about Internet-provided services, those may also be 
increasingly marketed nationwide. And so there are some 
national implications here, but it would all be driven by the 
levels of concentration and looking at those specific markets.
    Senator Lee. Levels of concentration which could lead some 
to have fewer options for local advertising----
    Mr. Kimmelman. Correct, Senator, yes.
    Senator Lee. Professor Yoo, let us get back to you on a 
different issue. As you note in your testimony, markets related 
to cable and the Internet have tended to change rapidly, 
particularly in recent years, as a result of changes in 
technology. And at the same time, I think history has shown 
that large incumbents will at times take actions that are 
designed to protect their incumbency and sometimes when they do 
that, that tends to prevent or slow rapid changes in technology 
that might otherwise bring about a more robust competitive 
environment.
    There are those who have expressed concerns that this 
merger might have that effect, and some of those who make this 
point will point to relatively new offerings such as Netflix, 
Roku, Amazon Fire TV. These are products that compete, 
arguably, with Comcast's cable video offering. And those who 
have expressed this concern have been concerned that perhaps, 
you know, because some of these services that I just mentioned 
can be accessed only through high-speed Internet, they are 
worried about the fact that that market, the market for high-
speed Internet, is a market in which the merged company would 
have a very significant share. So does that cause you any 
concern?
    Mr. Yoo. It does not, for reasons I will explain. I did 
want to make one comment about local advertising. Cable 
represents seven percent of the local advertising market. It is 
a relatively small part, and the level of concentration there 
really is not a material impact.
    In response to your specific question----
    Senator Lee. Seven percent of the local----
    Mr. Yoo. Advertising revenue is on cable. If you are a 
local advertiser, 93 percent of your money is going elsewhere, 
and a seven percent concentration level under any antitrust 
standard is irrelevant.
    Senator Lee. Okay. Got you.
    Mr. Yoo. There is a tendency to think about the Internet-
based video distribution world as just an extension of the 
cable world and that we take the intuitions and the knowledge 
we have from cable and just move them over. It is just not 
true.
    In the cable world, the kinds of carriage agreements that 
the independent cable networks are trying to cut, well, if they 
cannot come to an agreement with a cable provider, that is it; 
they do not get carriage.
    That is just not the case with the Internet. One of the 
realities is every Internet provider maintains thousands of 
connections. There are thousands of ways in. Comcast itself has 
40 settlement-free and 8,000 transit arrangements, and if one 
of those connections does not negotiate well on terms, there is 
actually a multitude of options elsewhere, and the leverage is 
not yes or no. The leverage is the difference of the price I 
get through this connection versus my next best connection. And 
when you start to look at it that way, the amount of leverage 
that they have over individual providers becomes very, very 
narrow.
    The only way they could stop that is by monitoring all 
8,000 of their connections and with thousands of different 
kinds of streams, and I am going to pick out this content 
provider's stream out of that stream, and discriminate against 
that.
    Senator Lee. You are saying that would not make sense as a 
business proposition and would be technologically difficult----
    Mr. Yoo. And barred by law under Comcast agreement under 
the NBC----
    Senator Lee. Yes, there is that.
    Mr. Yoo [continuing]. NBC merger. But, yes, absolutely. 
Technically very hard to do, really bad idea from the business 
sense, and, in fact, Cablevision said publicly in the Wall 
Street Journal they may get out of the programming business and 
just carry over-the-top players because the program costs are 
so high, why should they be squeezed in the middle? Why not 
allow over-the-top providers to negotiate on a much broader 
basis? That is part of the dynamic changing world we are living 
in.
    Senator Lee. Okay. Thank you. My time has expired.
    Thank you, Madam Chair.
    Senator Klobuchar. Thank you.
    Senator Blumenthal had one follow-up question, and then 
Senator Franken, and I will leave my questions to the end. 
Senator Blumenthal.
    Senator Blumenthal. I very much appreciate that, Madam 
Chairman, and thanks also to Senator Franken.
    Just a quick question for Mr. Kimmelman. As you heard, Mr. 
Cohen and I agree that the costs of sports programming are 
rising. In fact, they are rising astronomically and should 
better reflect consumer demand. So my question to you is: 
Really aren't consumers the best judge of what a fair price for 
programming should be? And wouldn't prices come down if they 
had more choice? Specifically the way to break this cycle of 
ever increasing costs for sports programming is to give 
consumers some more choice through a la carte programming. And 
I wonder if you could comment on the potential effects of 
disciplining the market and bringing down the costs of cable as 
a result of a la carte?
    Mr. Kimmelman. Senator Blumenthal, thank you. I truly 
believe you are correct. I think one of the concerns that was 
not addressed earlier was that we have numerous studies that 
show with vertical integration we end up with higher prices on 
the regional sports channels that are integrated than on the 
ones that are independent. And one of the related concerns 
there is that competitors who want sports programming in that 
market have had a very difficult time negotiating a reasonable 
price for that, even if the price is higher than it should be.
    So it seems to me one of the things to look at, as you have 
recommended legislatively, more broadly is to offer channels a 
la carte, offer more programs a la carte, give consumers the 
choice as to whether they really want to pay the price that is 
being passed through.
    Senator Blumenthal. Thank you, Madam Chairman.
    Senator Klobuchar. Thank you very much.
    Senator Franken.
    Senator Franken. Thank you, Madam Chair, and I have three 
questions to get through, and I know you are chairing. I have 
been in that position, and is it okay if I go over a little 
bit? Okay.
    Senator Klobuchar. You would not be alone.
    Senator Franken. Mr. Cohen, I am worried that this deal 
simply continues a trend of media consolidation, a trend that 
has led to increasing prices for consumers who have seen their 
bills go up at more than twice the rate of inflation since the 
mid-1990s. Earlier this week, news broke out about a JPMorgan 
report in which Wall Street analysts apparently recommended 
that cable companies continue to raise prices on consumers. And 
as you have admitted, prices might go up even faster, and we 
have talked about your comment.
    Mr. Cohen, don't your investors, people who invest in 
Comcast, expect Comcast to leverage its market share by getting 
as much money as it can out of consumers?
    Mr. Cohen. I think our investors want us to have the best 
multichannel video and broadband business in the country, and I 
think that includes getting whatever prices the market will 
bear, but it also includes providing an extraordinarily high-
quality video and broadband experience. And I think we have 
made--and you can look at our analyst calls. We have made it a 
point of significant discussion not only for us but for the 
entire cable industry about our need to continue to invest to 
be able to compete better against national and global 
competitors who are increasingly coming into this space.
    So yes to your question, but I think also to be fair, yes 
to the business reasoning underlying this transaction, which is 
to provide us with the opportunity to create a better 
experience for consumers.
    Senator Franken. Well, my concern is that as Comcast 
continues to get bigger, it will have even more power to 
exercise that leverage, to squeeze consumers. And part of the 
reason I am concerned about this is because Comcast's own CFO 
has pretty much told Wall Street that that is what Comcast 
does.
    During a fall 2012 conference call, an analyst from Goldman 
Sachs noted that cable had a big share of the broadband market 
and asked Comcast CFO, ``Is there a way to exercise pricing 
leverage to a greater extent?'' And Comcast's CFO said, ``I 
think that we have actually exercised some pricing leverage. We 
have increased the cost of the service by roughly $4 to $5 per 
customer per month over the last few years.''
    It is understandable that Comcast has a responsibility to 
look out for its investors. But I am concerned that the bigger 
and more dominant the company becomes, the less incentive they 
have to look out for consumers, and the more power they have to 
squeeze them.
    Mr. Kimmelman--and I think this goes to bundling, too, 
because I know that in some of those talks, right after the 
talk of this acquisition, there were pledges to push bundling, 
to upsell your product.
    Mr. Kimmelman, won't this give Comcast more leverage?
    Mr. Kimmelman. Absolutely, Senator Franken. Even though who 
are arguing about these other competitors, mostly they are 
giving us examples of things either that just show the market 
is highly concentrated but not monopolistic, or they are quite 
futuristic and we did use the Huberis numbers, Professor Yoo, 
in our analysis. There is enormous market power here that could 
be leveraged, and on top of that, there is the very popular 
NBCU programming that could be leveraged. And that 
understandably maximizes profits for Comcast to keep it in a 
big bundle, to charge as much as possible, and the increasing 
trend for consumers is to buy at least two services, broadband 
and video, if not three. And so they know that they can drive 
up prices to competitors and benefit from raising their rivals' 
costs, and if some people want to drop those rival services, it 
is most likely going to be business going to them. That is 
where their financial incentive lies, and then we would expect 
them to follow through on that. Those are the kinds of concerns 
that on the public record were in the FCC ruling on NBCU and 
Comcast and in the DOJ, and I imagine they will be relevant 
here as well.
    Mr. Bosworth. Senator Franken, could I jump in on that?
    Senator Franken. Sure.
    Mr. Bosworth. Thank you. Understandably, this is a really 
complicated matter, but I think if we boil it down, the folks 
at home that bills keep going up are expecting more, and they 
are not getting more channels, and they are not getting more 
choice. And so, you know, Mr. Cohen pointed out that, you know, 
content costs are up 98 percent while the subscription fees are 
only up 50. Well, that is an extreme pressure on their gross 
margins, and any business owner would know that why would--what 
is the incentive to add more product when it is your highest 
gross margin product and it is your number one cost?
    So I think there have to be effective ways to encourage new 
competition in the marketplace. I mean, the marketplace that we 
are going into is a $170 billion marketplace. It is larger than 
all four major sports combined. There are 60 networks that are 
fighting over that space in the sports area. Your lifestyle, 
golf lifestyle market has won, and the only channel is that of 
Golf Channel, which is owned by Mr. Cohen.
    Now, a good real-world example that I think everybody ought 
to know how hard it is for original programmers is that we 
understood that Golf Channel was owned by Comcast, so we did 
not start there. You know, they did not have a huge incentive 
to launch us. But what we did is we started with Time Warner 
Cable and some other folks, and Time Warner Cable from the CEO 
to the programming people could not have been more constructive 
in their help to help us get our programming on the air.
    As soon as this merger was announced, that definitely 
softened quite a bit, and, you know, I am here to say that 
there are--Time Warner Cable did a wonderful job trying to get 
more product to the consumer, and since that time, when this 
was announced, it has become a lot more difficult for us. And 
the only thing I can think about is because they own the only 
competitor in the space.
    Senator Franken. And thank you for your indulgence, Madam 
Chair.
    You looked surprised, Mr. Cohen, when I talked about 
upselling and bundling. Neil Smit, an executive at Comcast who 
went on the phone call with Wall Street analysts, said this: 
``As I said, I think the revenue synergies are greater than the 
cost synergies. On the revenue synergy side, the first would be 
in the residential area where we would seek to bundle more, and 
that is call center training. That is teaching people to sell 
another RTU on a call, on a service call, fix the billing 
problem, upsell a third product.''
    So just bundling better. That is what I was talking about. 
You looked kind of puzzled when I brought it up.
    Mr. Cohen. I am sorry. I was not sure what you were 
referring to. But I think that obviously for us and for others 
in the cable industry, it has been a very effective strategy 
and one that consumers like, to purchase multiple products from 
a single provider, getting a single bill.
    Senator Franken. You were told by the FCC to actually stop 
that and to stop pushing bundles. But I have got other 
questions.
    Mr. Cohen. Okay. Well, I want to be very short, and I know 
sometimes I am too long. But all I will say is the FCC did not 
tell us to stop bundling and pushing bundles. They simply asked 
us to have a stand-alone broadband offering, which we did have 
and which we continue to have.
    Senator Franken. The FCC sent you a letter saying that, ``A 
consent decree imposes a detailed compliance plan requiring 
Comcast to undertake numerous activities, training its customer 
service representatives and retail sales personnel to reinforce 
their awareness and familiarity with the performance starter 
service.''
    Mr. Cohen. That is the single--the deal was that we would 
create a new broadband service which was a stand-alone service, 
6 meg down, for $49.95 a month. And we did create that tier, 
and the Commission raised concerns about how we were marketing 
the tier, whether our call center employees knew about it. We 
quickly resolved the matter. We may have had a difference of 
opinion. We quickly resolved the matter----
    Senator Franken. You paid a fine.
    Mr. Cohen [continuing]. Extended the commitment for another 
year, so----
    Senator Franken. You paid a fine.
    Mr. Cohen. We did. We did make--we did pay a fine. But all 
I am saying is there was no prohibition----
    Senator Franken. And then you were told----
    Mr. Cohen. No prohibition against----
    Senator Franken [continuing]. To tell your----
    Mr. Cohen [continuing]. Bundling.
    Senator Franken [continuing]. Tell your call center people 
to emphasize these stand-alone, not to upsell.
    Mr. Cohen. Not to emphasize it----
    Senator Franken. Not to push upselling, which is very 
different----
    Mr. Cohen [continuing]. To offer it.
    Senator Franken [continuing]. Than the condition----
    Mr. Cohen. To offer it. We were not--there is nothing in 
the FCC order to prevent us from bundling. I just want to say 
that. We agreed in addition to our bundling strategy for 
somebody who called and said, ``I only want to buy broadband,'' 
to have an option, a stand-alone broadband option.
    Senator Franken. When you train people to upsell, you are 
not training them to make people want to go for the stand-alone 
broadband, something that you were fined for not doing.
    Mr. Cohen. We are allowed to train people to upsell. All we 
have to do is when somebody says, ``I want to buy broadband 
alone,'' that our call center employees have to be aware of the 
stand-alone product and sell it to people.
    Senator Franken. Okay. You seem like a pretty good 
salesman. I know how people in call centers can emphasize 
certain things over others. And I think that is my fear here.
    I want to talk about two other things. I am so sorry, Madam 
Chair, but, Mr. Kimmelman, Comcast has argued that this deal 
will not jeopardize the open nature of the Internet. In the 
public interest statement that it filed with the FCC yesterday, 
Comcast promised regulators that it has no incentive to 
interfere with Internet traffic. I am not convinced. If this 
deal goes through, Comcast will control about 40 percent or 
more of the broadband market. And it will not just own all 
those pipes. It will also own a bunch of content, because it 
bought NBCUniversal a few years ago and the 20 or so cable 
networks that came with it.
    Mr. Kimmelman, doesn't that give Comcast both the power and 
the incentive to manipulate Internet traffic in its favor? And 
didn't we see a preview of that with the recent deal Comcast 
struck with Netflix?
    Mr. Kimmelman. Senator Franken, if you go back to all the 
big numbers Mr. Cohen had and Professor Yoo had about the many 
myriad interconnections of the Internet all around, all 
accurate in that space. But when you get close to the home, to 
the customer, the last mile, the ports that have to bring in 
the video traffic, one player, two players; sometimes more, 
hardly ever; and one of them is Comcast combining with Time 
Warner. So that part of the market is quite concentrated.
    There are, as Professor Yoo says, a lot of changes going on 
in the Internet. There are a lot of different kind of 
interconnection relationships. What we also see is a lot more 
proposals for usage-based pricing that was not there before, 
data caps.
    Senator Franken. Can you explain what those are?
    Mr. Kimmelman. Just that instead of getting a flat fee for 
eat as much as you want for your Internet usage, that above a 
certain level your prices go up, or that you pay per certain 
amount of usage, and there is no flat----
    Senator Franken. Unless it is a Comcast product, like 
XFINITY.
    Mr. Kimmelman. So there are some products that are dealt 
differently with by cable companies, and under a different set 
of standards and, arguably, preferential to what a competitor 
has. So there are dangers when the market is concentrated at 
that point of interconnection of ways to manipulate. And this 
is where I go back to my analogy of an octopus that has all 
these tentacles out there. There is net neutrality. There is 
the last-mile connection. But then there are the different 
pricing schemes, and then there are the different 
interconnection and peering arrangements. There are many ways 
in which a number of tentacles could be used to favor one 
product over another if it is financially advantageous to that 
broadband provider with market power, which would be Comcast-
Time Warner.
    Senator Franken. Thank you. I have one last question, and 
it is going to be short, I think.
    Mr. Cohen, on page 34 of your testimony, you have a section 
called ``Promises Made and Promises Kept--Our Record.'' And you 
say, ``When Comcast makes promises, it keeps them.'' Then you 
talk about the conditions that the FCC imposed on Comcast when 
it acquired NBCUniversal, and here is what I found puzzling. 
You say, ``Out of these conditions, the FCC has only found it 
necessary to look at one issue,'' and that was the issue we 
just talked about, on stand-alone broadband. But isn't it true 
that the FCC had to look at the neighborhooding condition? That 
is the condition that prohibited you from favoring NBC content. 
CNBC is neighborhooded. You were neighborhooding it with all 
the other 24-hour cable news channels with CNBC--or CNBC with 
MSNBC, with Fox, with CNN, but you put Bloomberg way out in the 
nosebleed seats so people could not find Bloomberg. And because 
they could not find Bloomberg, they would not go to Bloomberg, 
and Bloomberg could charge less for its advertising. And NBC 
would get more eyeballs for people who were interested in 24-
hour business news, and you could charge more. Isn't that 
another condition that they looked at?
    Mr. Cohen. So, generally speaking, that characterization is 
just not accurate. What we had in the Bloomberg neighborhooding 
area were interpretive differences between Bloomberg and 
Comcast as to what the condition met. And I do not--I can go 
through as much detail as you want, but----
    Senator Franken. The FCC certainly looked at it, didn't it?
    Mr. Cohen. Ultimately there was a complaint filed, and when 
we lost the complaint at the FCC, we have resolved the matter 
with Bloomberg. We are in compliance with that condition.
    Senator Franken. Okay. But let me ask you: Is this true, 
then, that out of these conditions, the FCC has only found it 
necessary to look at one issue? Is that still true?
    Mr. Cohen. It is. What is true is that we were--we only had 
a compliance issue with one condition. That Bloomberg issue was 
not a compliance issue. It was an interpretive issue. And when 
the interpretation was resolved, we were able to resolve our 
differences and our partnership with Bloomberg. We remain 
Bloomberg's largest distributor, and we have an excellent 
relationship----
    Senator Franken. Here is the FCC's order: ``In this 
Memorandum Opinion and Order, we affirm Media Bureau orders 
that direct Comcast to place Bloomberg Television in news 
neighborhoods, consistent with a condition of the Comcast-
NBCUniversal order.'' That is looking at that, and you right 
here in your testimony, and you are sworn under oath here, you 
say, ``Out of these''--and then brackets ``conditions''--that 
is what we are referring to--``the FCC has only found it 
necessary to look at one issue.'' And you are saying they did 
not look at this issue?
    Mr. Cohen. What I am saying is it was not a compliance 
issue. It was in interpretation issue.
    Senator Franken. Okay. Well, I----
    Mr. Cohen. You have to go back to the Media Bureau order 
because--let me just--I will give you an example, because the 
ultimate order of the Media Bureau was that we had to 
neighborhood Bloomberg where, I believe, it was five or--either 
four or more or five or more other news channels. The FCC order 
did not have that definitional issue. We did not know what a 
news neighborhood was. And we tend not to neighborhood our news 
channels the way you described in your question where all the 
news channels are together.
    So one of the interpretive issues that we needed to have 
resolved was what was a news neighborhood, and that is what the 
dispute in front of the Commission was.
    Senator Franken. I think--and, Madam Chair, this is the 
end, my friend.
    Senator Klobuchar. And, by the way, if any of the witnesses 
have to use the restroom, you really can come back, and we will 
take you back. I know it has been going on a couple hours.
    Senator Franken. You really undercut my big conclusion.
    [Laughter.]
    Senator Franken. I was going to----
    Senator Klobuchar. Senator Franken, please continue. I 
really meant that. I was just going to let them know.
    Senator Franken. I was going to say that I think the 
interpretation here is on what the word ``look'' means. And I 
think everyone knows what the word ``look'' means.
    Thank you.
    Mr. Cohen. And, Madam Chair, if I can, I will acknowledge 
that the word ``look'' may not have been the best-chosen word. 
But the point I was trying to get at was whether there were 
compliance issues. And I do not think that was a compliance 
issue. So I will acknowledge that we should have had a better 
use of words in the written testimony, and I apologize for 
that.
    Senator Franken. Accepted.
    Mr. Cohen. Thank you.
    Senator Klobuchar. Okay. Well, I have a few more questions. 
I wanted to follow up on what some of the other Senators have 
asked about, and the first thing was about what Senator Graham 
was asking about, about the wireless competition. And I guess I 
will start with you on this, Mr. Kimmelman.
    You know, in the Antitrust Subcommittee hearing that 
Senator Lee and I recently had on wireless competition, 
witnesses agreed that wireless is out there, but it is not yet 
a substitute for wireline. So when there was discussion about, 
well, you can have these alternatives with wireless, do you 
think that is really true in a big way?
    Mr. Kimmelman. I would like that to be the case, Senator 
Klobuchar. I do not see it now. Professor Yoo has indicated 
that the speeds are increasing, the service is better. The 
technology is better, but when you look at the price for the 
major wireless providers with their data cap for wireless 
compared to a Comcast price, for example, the price for the 
same amount is about 10 times higher. That is not what I would 
usually think of as a good consumer----
    Senator Klobuchar. You mean to get that kind of high speed 
with that kind of data?
    Mr. Kimmelman. Yes, to get that--yes, exactly. So we are 
hopeful, and maybe that will be the future. But, again, as 
Professor Yoo has admonished us to be more careful about what 
conditions we put in transactions with predictions of the 
future, I will just say that we have to also be careful about 
Pollyannaish predictions about levels of competition. Fifteen 
years ago, we all thought there would be video over energy 
company wires, and we have a few of them--there is RCN out 
there--but not very much.
    So some of the predictions can be wrong going the other way 
as well, and maybe this is the kind of thing where, for 
wireless to be a real competitor, we ought to wait a few years 
and see if it really develops that way.
    Senator Klobuchar. Mr. Sherwin, you have not been able to 
talk very much here. You look like you want to say something.
    Mr. Sherwin. I do. First of all, most of the discussion has 
been about programming, and that is out of my bailiwick. But 
when it comes to wireless, that is in my bailiwick. And the 
technology is such today that if fiber--if any kind of fiber or 
some kind of backhaul is brought to a building, especially a 
multifamily building, then the resident can have speeds of in 
excess of 100 megabits per second wirelessly. And I think that 
is a very important point, because what that says is that the 
technology has caught up. It is not the cellular wireless as 
you know it, and that I think is what Professor Yoo was 
referring to. It is WiFi wireless, and that is a big 
difference. And----
    Senator Klobuchar. So it would not be capable of carrying 
the--or it would cost more? I am trying to figure out--I 
understand the difference between WiFi and cellular, but are 
you saying that it would not have the same capabilities as the 
cable?
    Mr. Sherwin. I am sorry.
    Senator Klobuchar. I am asking, are you saying one of the 
points that Mr. Kimmelman made was that it is a lot more 
expensive if you are going to get that kind of data coverage 
and you----
    Mr. Sherwin. That is actually not the case. In most cases, 
wireless is 30 percent less than wired. In most cases. If the 
backhaul is reasonably priced to the building in a multifamily 
residential situation, wireless is 30 percent less expensive 
than wired. That is number one.
    Number two, it offers much more capability, much more 
functionality. So not only is it less expensive, it has greater 
functionality, and there is no need for cap if the backhaul is 
done correctly.
    Senator Klobuchar. Mr. Kimmelman, do you want to respond.
    Mr. Kimmelman. I cannot disagree with Mr. Sherwin for a 
specific set of circumstances he is describing. And he is also 
describing circumstances where he faces a bottleneck of being 
able to get the wholesale product so that he can deliver that 
service at a lower cost. Also a lot----
    Mr. Sherwin. Only in Comcast areas.
    Mr. Kimmelman. The other interesting issue, if you go down 
this path, with all the increased need for WiFi downloading 
because of limits of spectrum, all the wireless carriers also 
ultimately very much need a wired service to connect themselves 
to get closer to the customer. Many of those are owned by 
Comcast and Time Warner or by some of the phone companies. And 
so there are other choke points here that need to be looked at 
in terms of cost.
    Mr. Sherwin. I agree with that.
    Senator Klobuchar. All right. One follow-up on the 
advertising questions that were asked, because I know that 
Professor Yoo talked about, what, you said eight percent?
    Mr. Yoo. Seven percent.
    Senator Klobuchar. Seven percent of the market was cable. 
And so there was a Wall Street Journal article, I am quoting, 
on SNL Kagan Comcast--SNL Kagan, and they said that small local 
advertisers are worried about facing higher prices because they 
would have roughly--Comcast would have roughly half of the 
local ad sales market. So what is this about, half compared to 
eight percent? Is it just a different market you are looking 
at? Are you including everything?
    Mr. Yoo. I am looking at the FCC's video competition report 
where they do an assessment of the different sectors, both on a 
national level and a local level. And they have nationwide 
numbers. What they are looking at is that the total local 
advertising budget for cable is seven percent.
    Now, I do not know where this SNL Kagan number comes from, 
and as you know, with advertising, different advertisers want 
different segments because they want different characteristics, 
and there are possibilities of submarkets where they do not 
have as much choice.
    Senator Klobuchar. Okay.
    Mr. Yoo. If I can add one fact----
    Senator Klobuchar. Did everyone agree with that? I will get 
back to you.
    Mr. Minson. All I would add is that the revenue breakdown 
in our ad sales business tends to be about a third local, a 
third regional, and a third national in terms of how we sell. 
And clearly on the national front there are a number of 
competitors, and on the local and regional front, we have 
actually been the competitors who have gone in and competed 
against broadcast stations, et cetera. There are also 
additional competitors online given the online companies' 
ability to target. So, to be clear, there are lots of different 
avenues to reach customers from an advertising perspective.
    Senator Klobuchar. Okay. Mr. Kimmelman?
    Mr. Bosworth. It makes--I am sorry.
    Senator Klobuchar. Yes.
    Mr. Bosworth. It makes it difficult when the quasi-public 
utility also has 50 percent of the ad market space and also 
controls the content.
    Senator Klobuchar. So that will make for higher prices 
and----
    Mr. Bosworth. Higher prices, less competition, less choice.
    Senator Klobuchar. Okay. One thing that is a little off on 
this, Professor Yoo, a different topic, but in your testimony 
you talk about how the merger does not pose competitive 
concerns because there is no geographic overlap--there has been 
a lot of discussion about this--between the two cable systems. 
Under this theory, would consolidating all--all-nonoverlapping 
cable systems into only one or two companies be of concern to 
you if that happened in the country?
    Mr. Yoo. To be specific in the testimony, cable operators 
basically serve three purposes: They sign up subscribers and 
deliver programs to individual households; they contract with 
cable networks; and they sell advertising. The point about the 
lack of overlap refers to the transactions between cable 
companies and users, and in that sense, mergers in different 
areas do not have an impact.
    You do have to do the separate analysis of the markets in 
which you do local advertising, which is the same, from these 
with respect to programming. If you did merge to monopoly, you 
would see an adverse competitive impact in that market, there 
is no question. Then you have to do the antitrust analysis to 
look at the various concentration levels.
    To pick up the conversation before, one of the interesting 
questions is: What is a real competitor to cable broadband? And 
we have heard this defined different ways. One of the 
interesting things is Mr. Kimmelman says we should not 
speculate too much about the future, let us think about facts. 
One of the interesting facts is 10 percent of American citizens 
now rely entirely on their wireless connection for broadband. 
What you are seeing is, in fact, in other countries they now 
regard wireless and fixed line as the same market for antitrust 
purposes, because there is so much substitution. And if you 
look at the direction where all these are going and the bets 
that companies and countries are making, it is quite likely 
that wireless is, for an increasing number of Americans every 
year, a real substitute for fixed-line broadband.
    Senator Klobuchar. Okay. Now I have a few specific 
questions here. Comcast has experimented with data caps and 
usage-based pricing for its broadband service and is reportedly 
testing new usage-based pricing in a few markets. And this is 
for you, Mr. Minson. Time Warner Cable tried using similar caps 
but quickly abandoned them. Why?
    Mr. Minson. The approach we have taken as it relates to 
usage-based pricing actually gives people the ability to reduce 
their bill if they will agree to a cap. So we actually took the 
approach that it is an unlimited service unless you would like 
to reduce your bill by $5 a month if you agree to a cap.
    I think what is--and I will let Mr. Cohen jump in, but I 
think, you know, the market is very much a test-and-learn 
mentality right now. We have had our usage-based caps out there 
for a while. We have seen some uptake in them, but where we 
have landed is the unlimited tier, giving people the ability to 
have an unlimited tier, with a right to reduce the bill if they 
agree to a cap.
    Senator Klobuchar. Okay. Prior to the merger, Time Warner 
Cable also spoke positively about giving its consumers complete 
access to their channel line-up without requiring a set-top box 
rental. Consumers would then have their choice to watch all the 
channels using either Apple TV, Xbox, or any of the other 
Internet-connected devices, and it would create a far more 
competitive system.
    In contrast, Comcast's new Internet-connected X1 set-top 
box seems to create a more closed ecosystem where only Comcast-
approved apps and content are allowed in.
    I thought it was interesting that you guys were willing to 
give up that cable box, and what motivated it? How does the 
decision benefit consumers, and what is going to happen if the 
merger is approved?
    Mr. Minson. Sure. I think what you are seeing in the 
marketplace are lots of different approaches to delivering the 
video experience in the home. I think you will always have the 
set-top box experience for that portion of the population who 
likes to have the two-way interactivity of the set-top box, and 
there are certain features, like the next generation guides, et 
cetera, that work best or only work, in some instances, on the 
new set-top box.
    That being said, we do recognize as you get----
    Senator Klobuchar. But you did not require--you announced 
you were not going to require it.
    Mr. Minson. Well, as the home evolves and there are often 
multiple TV rooms in a home, what we have been comfortable with 
is allowing our customers to bring their own device, whether it 
be, to your point, a Roku or a similar device, and let them 
consume their content on that device. What we have found is 
often what you have is one room in the house has a set-top box, 
two-way interactivity, and then you may have another room where 
people are running the video experience, for example, off a 
Roku. Again, this is a portion of the market that continues to 
evolve with really new devices coming out, it feels, almost 
monthly at this point.
    Mr. Cohen. Senator, if I could say two sentences, just to 
be clear, Comcast is offering the same experience, maybe on 
different devices. So part of the excellent platform is the 
ability to watch in the home the content that is available--the 
content that is available, all the live channels, anywhere in 
the home, on an iPad----
    Senator Klobuchar. Is it more of a closed system with just 
the common----
    Mr. Cohen. I think it is the same system, and a lot of this 
is programming rights issues.
    Senator Klobuchar. Okay. Well, we will do some follow-up 
questions on it.
    Mr. Cohen. So I think we are actually doing the same thing, 
just on different devices.
    Senator Klobuchar. We are going to have some follow-up 
questions on it on the record later on.
    Comcast and Netflix, Mr. Cohen, reportedly announced a paid 
peering agreement earlier this year where, for the first time, 
Netflix will pay for a direct connection to Comcast's network 
that provides more reliable delivery of Netflix content to 
Comcast subscribers. I know Netflix's CEO called this an 
``arbitrary toll'' that his company was forced to pay. Comcast 
called it a 11commercially necessary agreement.'' Why charge 
both Netflix and your consumers for this service? And then I 
want to ask Mr. Kimmelman about this paid peering.
    Mr. Cohen. Okay. So your statement is 100 percent correct. 
For the first time, Netflix is paying for connection to our 
Internet backbone directly to us. But Netflix has always paid 
for connection to our Internet backbone. All edge providers pay 
for connection to the backbone. This is not net neutrality. It 
does not deal with the part of our service that goes to the 
last mile. This is how Internet edge providers connect to the 
Internet backbones of ISPs. And since the Internet was born, 
those are paid transit relationships. And as Professor Yoo 
said, in the Comcast case, Comcast has 40--has agreements with 
40 companies for settlement-free peering. They, by the way, go 
out and sell access to their networks to connect to the 
Internet. So even though they are not paying us anything, they 
are charging Internet edge providers to be able to connect to 
our ISP as well as everyone else's.
    We have over 8,000 free peering and paid arrangements, and 
that market is intensely, intensely competitive. In the Netflix 
case, this was--I hate to say this. This was Netflix's idea. 
Netflix is responsible for 32 percent of the traffic on the 
Internet, and they woke up one day and they said, ``Wait a 
minute. We have 32 percent of the traffic on the Internet. Why 
do we have to pay a middleman to get access to Comcast, Time 
Warner Cable, AT&T, Verizon? Why don't we cut out the 
middleman, have a direct relationship, and potentially save 
ourselves some money?''
    That is where that agreement came from: That is, the 
Netflix desire to pay us directly and cut out a middle man.
    Now, as it turns out, that was a smart thing, I think, for 
Netflix to do and for us, because having the direct 
relationship gives us a better ability to work together to 
manage the traffic and make sure that Netflix customers who are 
our customers are getting an optimal viewing experience.
    So once again, the customers are the winners here, because 
you have got this intensely competitive backbone market. We 
talked about price a lot. Pricing in that market, which, again, 
has existed since the birth of the Internet, pricing has 
dropped 99 percent in the last 15 years.
    So this is a market that is working. It is not a market 
that is dysfunctional. It is not a market that is impacted by 
this transaction. And I think consumers end up being the big 
winners when we let markets like this function the way they 
were intended to do.
    Senator Klobuchar. Well, whoever's idea it was, Mr. 
Kimmelman, does this kind of paid peering exist in other parts 
of the world? And how do you think it could impact innovation?
    Mr. Kimmelman. Well, it certainly has--peering is a form of 
interconnection, and it is a barter exchange. So these are 
forms of interconnection, and it is absolutely right, some have 
been paid, some have been just a barter because of traffic 
arrangements. And the world is changing as more video streaming 
is occurring. What happened with Netflix was an enormous 
success for them. As they went to original programming, it 
became increasingly popular.
    But without getting into--they do not seem to be too happy 
in the way Mr. Cohen is, but leaving aside the companies, here 
is the point that I think is important related to the 
transaction and for the Committee to consider longer term. As 
you have vertically integrated companies that have their own 
programming and have their own desire to bundle the channels 
and charge as much as possible, as others come in with 
Internet-delivered programming that could compete, what are the 
ways in which they might want to advantage their own versus 
their competitors, drive up their competitors' costs, make it 
more complicated and reduce quality for their competitors?
    I am not saying any one arrangement necessarily does it, 
but these are the kinds of competitive concerns we think 
oversight officials should look at.
    Senator Klobuchar. You are talking about what I referred to 
earlier as the next Netflix, which is still a dream in a 
garage, and just that we have a structure that works to promote 
this kind of innovation.
    Mr. Kimmelman. Exactly, Senator.
    Senator Klobuchar. One last thing. Mr. Minson, I understand 
that Time Warner Cable has a business service called 
``Ethernet''--is that right?--for which it offers wholesale 
access to its competitors. Competition like this is critical. I 
know we have said this many times up here just because we 
believe it creates a market that provides best prices and best 
services. High-quality and competitive Internet services are 
especially important for small businesses in our economy. Can 
you explain why offering wholesale access is good for Time 
Warner and good for consumers? And I guess I would ask you if 
Comcast has a similar offering, and would the combined company 
continue to offer this?
    Mr. Minson. Our Ethernet service is part of our overall 
business services offering. To date, our business services get 
the vast majority of its revenue from small businesses with 
less than 25 employees. As we have expanded in the marketplace, 
we have entered the mid-market and enterprise market where you 
will see these wholesale arrangements happening more. Our entry 
allows competitors and peers to come into the marketplace. And 
it is certainly something that we find provides a return for 
our investors and something we continue to plan on doing.
    Senator Klobuchar. Thank you.
    Mr. Cohen. So, Senator, we--actually, if I can, a few 
sentences just to say it is the first time small and medium-
sized businesses have come up in this hearing, and when you 
talk about the benefits of competition--or the benefits of this 
transaction, the scale and the investment, as Mr. Minson said 
in his opening statement, the impact on the market for small 
and medium-sized businesses to get telephone and high-speed 
data services will be substantial as a result of this 
transaction. It is one of the big procompetitive benefits that 
I just want to underline and put a yellow highlighting through.
    In terms of Ethernet, we have a product we call ``Metro 
Ethernet,'' which we have also started to roll out. Again, it 
is a product we market to larger, medium-sized businesses. We 
also have within that product a managed service which does 
permit wholesaling of that service, and we have got a few dozen 
customers in that space. Frankly, it is a service that we 
talked to Spot On about about a year ago and never reached an 
agreement with them to be able to offer that service. So it is 
a market that we are just beginning to be in. I do not know 
that we have as fully developed an opinion as Time Warner Cable 
might have about that. And this is not something we discuss 
during the pendency of the transaction, so I think my answer to 
your question is that we do not have an answer yet about how 
extensive we think a managed--what we would call a managed 
service under our Metro Ethernet service would be something 
that we would make available on the market.
    Senator Klobuchar. Okay. Mr. Sherwin.
    Mr. Sherwin. We are a customer of Time Warner's Metro 
Ethernet service as well as their cable service. We buy a lot 
of services from Time Warner Telecom. We buy it wholesale, and 
we buy almost all of our services from Time Warner wholesale. I 
think that may be largely due to the conditions that were 
placed on the AOL-Time Warner merger by the Federal Trade 
Commission and the Federal Communications Commission back when 
that occurred.
    Our big concern is that that has been very advantageous for 
us, and we think it has been advantageous for Time Warner. We 
are hopeful that when this merger occurs that there is a 
condition placed that the conditions will continue to be 
enforced and monitored because it is helpful for us to provide 
a competitive service in buildings where the bigger providers 
are.
    Senator Klobuchar. Thank you. I was thinking, when Mr. 
Cohen was referring to small businesses, you probably consider 
yourself not a huge business there, Mr. Bosworth.
    Mr. Bosworth. No, we are not.
    Senator Klobuchar. There are a lot of independent 
programmers that are a focus of this hearing as well. Do you 
want to respond?
    Mr. Bosworth. Yes, thank you. We have raised $30 million 
from individuals, a little bit over that, and one of our only 
remedies right now is to go out and try to raise another $30 
million to litigate. And that just should not be the avenue in 
order to provide consumers with a choice. And I have heard 
litigation mentioned a bunch, and I have heard a lot of--and I 
am not an attorney, but that does not seem like a fair and 
competitive marketplace.
    Another thing I wanted to address is in the NBCUniversal 
merger, none of the independent networks that were launched--
and we applaud the diversity angle. Back9 is bringing many more 
people into the game, people that have been excluded in the 
past. So we want to bring them into the game. So we applaud 
that. However, none of the channels, independent channels that 
were launched were in direct competition with any of the 
channels that they own.
    The last point I wanted to make is that the 160 independent 
networks that they referenced, if you strip away all the 
different networks that either have affiliations with 
distributors, channels, indoor media conglomerates, it is less 
than 20. So truly----
    Mr. Cohen. That is simply untrue, Senator.
    Senator Klobuchar. Okay. Let us--Mr. Cohen and Mr. Minson, 
if you could have a chance to respond when you are done.
    Mr. Bosworth. Thank you.
    Senator Klobuchar. Okay. And then we are going to turn over 
to Senator Lee for some closing----
    Mr. Bosworth. Thank you. In the productive meeting that Mr. 
Cohen referenced that we had two days ago, we were given 
nothing, with zero promises, and the only thing that went on 
was they said, ``We would like to keep an eye on you for the 
next 24 months.''
    Now, potentially that may be our fault. Maybe we did not do 
a good job. But the constructive conversations that we have had 
with other distributors that give you specific feedback, when 
you are market maker and you own the toll, you give zero 
feedback as to how to be successful, and then you say, ``Let us 
keep an eye on you.''
    When you know for a fact there is what was called, I guess, 
in the last hearing a ``ripple effect,'' they are essentially 
market makers. So people look at you to see where the market 
leader goes. And so when you are given zero feedback and 
perhaps, you know, ``Let us just keep an eye on you,'' for a 
small business that has raised independent dollars, it puts you 
in a very tough spot.
    Senator Klobuchar. Okay. Mr. Cohen.
    Mr. Cohen. I think, look, all I would say is the statistic 
of 160 independent networks is 160 channels that are 
unaffiliated with any of the broadcasters, major media 
companies, et cetera. And, again, I am going to stand by our 
record of support of independent programmers because I do not 
think there is a company--I do not think there is a distributor 
in the industry that has done more to support the launch and 
ultimate growth of independent programmers than Comcast has. As 
I mentioned, we have increased distribution for 120 independent 
programmers in the last three years alone.
    And, by the way, I am very proud of our networks, and I 
have a lot of respect for Mr. Bosworth. And, frankly, my--I do 
not participate in program affiliation negotiations, you will 
all be pleased to hear. But my folks are telling me these are 
productive discussions. This is a network we might end up 
wanting to launch and might want to be part of our system. 
They, however, are not in competition with the Golf Channel.
    Senator Klobuchar. Okay. I am going to let you guys 
negotiate after the hearing.
    Mr. Bosworth. Can I just mention one important thing?
    Senator Klobuchar. I am going to just finish up here with 
Mr. Minson, and I really appreciate your testimony, and I think 
that if, in fact, the negotiations are productive or not, we 
will see if we can get the channel. Right, Mr. Lee? And I think 
you two should talk about it later.
    Mr. Minson.
    Mr. Minson. Thank you. I just wanted to respond to a couple 
of comments made by Mr. Sherwin and Mr. Bosworth. In terms of 
us providing services to Mr. Sherwin's company, that does not 
have to do with any terms and conditions from the AOL-Time 
Warner merger. If it makes business sense for us to do it, we 
have done it, provided they are in compliance with our overall 
terms and conditions as a reseller.
    One point I just wanted to address as well is Mr. Sherwin's 
reference to buying services from Time Warner Telecom. Not to 
overly complicate things, but Time Warner Telecom is actually a 
separate publicly traded company headquartered in Denver.
    As it relates to the Back9Network, a couple things I just 
want to address. Previously Mr. Bosworth had indicated that 
conversations with us stalled--with ``us'' being Time Warner 
Cable--as a result of the Comcast transaction, and I can tell 
you that could not be further from the truth. Between signing 
and ultimate closing of the transaction, we are obviously 
acting on our own to make all of those such decisions. It would 
be inappropriate for us to be consulting at all with Comcast. 
So any decisions we make, we will make on our own, and it will 
be made on a price/value relationship for our customers, taking 
into consideration things like overall programming costs and 
bandwidth constraints that we have.
    Senator Klobuchar. All right. I am going to let Senator--I 
am sure we are going to have more questions here for the 
record, but I am going to let Senator Lee say some closing 
comments.
    Senator Lee. I have got about 30 or 40 questions that I 
would like to ask.
    [Laughter.]
    Senator Lee. But given that the Eighth Amendment does have 
some application here----
    [Laughter.]
    Senator Lee [continuing]. I am going to forgo those.
    I want to thank our witnesses for coming today. Neither 
Chairwoman Klobuchar nor I had any expectation that by the end 
of this hearing we would have everyone singing on the same 
page, and so that part is not surprising. But your testimony 
has been helpful, and I appreciate your willingness to be here 
and to endure our questions.
    Thank you very much, and thank you, Madam Chair.
    Senator Klobuchar. Well, thank you. And I think as all of 
the questions and the testimony has shown us, there are a lot 
of very important issues here: the issue of consumers and how 
they will be protected going forward. We have the issue clearly 
of independent programmers, and as the merger is considered and 
if it is considered for approval, what kind of conditions would 
be placed on that? And I think while this is one specific 
example, I think both Senator Lee and I are aware of other 
examples of people that would not go public but are concerned 
about that. And it is not just about the independent 
programmers. It is about what the price then is and what that 
does to the market, whether we are talking about that, whether 
we are talking about advertising, whether we are talking about 
the wholesale pricing that Mr. Sherwin has mentioned. And then, 
finally, of course, the issue of the Internet and making sure 
that that is done in a fair way so it is available to everyone.
    We are looking forward to getting more information. I know 
that, Mr. Cohen and Mr. Minson, your companies filed their--was 
it 180 pages?--report yesterday so we will be reviewing that. 
And I just want to thank the witnesses.
    The Committee has received a number of letters from parties 
raising concerns about the merger, including Consumers Union, 
the American Antitrust Institute, and others, which I will be 
placing in the record.
    [The information referred to appears as a submission for 
the record.]
    Senator Klobuchar. The hearing record will remain open for 
one week for any additional submissions and questions from 
Senators.
    Thank you. You can go get some lunch. The hearing is 
adjourned.
    [Whereupon, at 1:08 p.m., the Committee was adjourned.]

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