[Federal Register Volume 76, Number 20 (Monday, January 31, 2011)]
[Notices]
[Pages 5440-5466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-1821]



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Vol. 76

Monday,

No. 20

January 31, 2011

Part III





Department of Justice





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Antitrust Division



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United States, et al. v. Comcast Corp., et al.; Proposed Final Judgment 
and Competitive Impact Statement; Notice

  Federal Register / Vol. 76 , No. 20 / Monday, January 31, 2011 / 
Notices  

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DEPARTMENT OF JUSTICE

Antitrust Division


United States, et al. v. Comcast Corp., et al.; Proposed Final 
Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec.  16(b)-(h), that a proposed Final 
Judgment, Stipulation and Order, and Competitive Impact Statement have 
been filed with the United States District Court for the District of 
Columbia in United States of America, et al. v. Comcast Corp., et al., 
Civil Action No. 1:11-cv-00106. On January 18, 2011, the United States 
filed a Complaint alleging that the proposed joint venture between 
Comcast Corp. and General Electric Co., which would give Comcast 
control over NBC Universal, Inc., would violate Section 7 of the 
Clayton Act, 15 U.S.C. 18. The proposed Final Judgment, filed 
simultaneously with the Complaint, requires the defendants to license 
the joint venture's content to online video programming distributors 
under certain conditions, relinquish its management rights in Hulu, 
LLC, and subject itself to Open Internet and anti-retaliation 
provisions, along with other requirements.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection at the Department of 
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth 
Street, NW., Suite 1010, Washington, DC 20530 (telephone: 202-514-
2481); on the Department of Justice's Web site at http://www.usdoj.gov/atr; and at the Office of the Clerk of the United States District Court 
for the District of Columbia. Copies of these materials may be obtained 
from the Antitrust Division upon request and payment of the copying fee 
set by Department of Justice regulations.
    Public comment is invited within sixty (60) days of the date of 
this notice. Such comments, and responses thereto, will be published in 
the Federal Register and filed with the Court. Comments should be 
directed to Nancy Goodman, Chief, Telecommunications & Media 
Enforcement Section, Antitrust Division, Department of Justice, 450 
Fifth Street, NW., Suite 7000, Washington, DC 20530 (telephone: 202-
514-5621).

Patricia A. Brink,
Director of Civil Enforcement.

United States District Court for the District of Columbia

    United States of America, United States Department of Justice, 
Antitrust Division, 450 Fifth Street, NW., Suite 7000, Washington, 
DC 20530; State of California, Office of the Attorney General, CSB 
No. 184162, 300 South Spring Street, Suite 1702, Los Angeles, CA 
90013; State of Florida, Antitrust Division, PL-01, The Capitol, 
Tallahassee, FL 32399-1050; State of Missouri, Missouri Attorney 
General's Office, P.O. Box 899, Jefferson City, MO 65109; State of 
Texas, Office of the Attorney General, 300 W. 15th Street, 7th 
Floor, Austin, TX 78701; and State of Washington, Office of the 
Attorney General of Washington, 800 Fifth Avenue, Suite 2000, 
Seattle, WA 98104-3188, Plaintiffs, v. Comcast Corp., 1 Comcast 
Center, Philadelphia, PA 19103; General Electric Co., 3135 Easton 
Turnpike, Fairfield, CT 06828; and NBC Universal, Inc., 30 
Rockefeller Plaza, New York, NY 10112, Defendants.

Case: 1:11-cv-00106.
Assigned to: Leon, Richard J.
Assign. Date: 1/18/2011.
Description: Antitrust.

Complaint

    The United States of America, acting under the direction of the 
Attorney General of the United States, and the States of California, 
Florida, Missouri, Texas, and Washington, acting under the direction of 
their respective Attorneys General or other authorized officials 
(``Plaintiff States'') (collectively, ``Plaintiffs''), bring this civil 
action pursuant to the antitrust laws of the United States to 
permanently enjoin a proposed joint venture (``JV'') and related 
transactions between Comcast Corporation (``Comcast'') and General 
Electric Company (``GE'') that would allow Comcast, the largest cable 
company in the United States, to control some of the most popular video 
programming among consumers, including the NBC Television Network 
(``NBC broadcast network'') and the cable networks of NBC Universal, 
Inc. (``NBCU''). If the JV proceeds, tens of millions of U.S. consumers 
will pay higher prices for video programming distribution services, 
receive lower-quality services, and enjoy fewer benefits from 
innovation. To prevent this harm, the United States and the Plaintiff 
States allege as follows:

I. Introduction and Background

    1. This case is about how, when, from whom, and at what price the 
vast majority of American consumers will receive and view television 
and movie content. Increasingly, consumers are demanding new ways of 
viewing their favorite television shows and movies at times convenient 
to them and on devices of their own choosing. Consumers also are 
demanding alternatives to high monthly prices charged by cable 
providers, such as Comcast, for hundreds of channels of programming 
that many of them neither desire nor watch.
    2. Today, consumers buy video programming services only from the 
distributors serving their local areas. Incumbent cable companies 
continue to serve a majority of customers, offering services consisting 
of multiple channels of linear or scheduled programming. Beginning in 
the mid-1990s, cable companies first faced competition from the direct 
broadcast satellite (``DBS'') providers. More recently, firms that 
traditionally offered only voice telephony services--the telephone 
companies or ``telcos,'' such as AT&T and Verizon--have emerged as 
competitors. The video programming offerings of these competitors are 
similar to the cable incumbents' programming packages, and their 
increased competition has pushed cable companies to offer new features, 
including additional channels, digital transmission, video-on-demand 
(``VOD'') offerings, and high-definition (``HD'') picture quality.
    3. Most recently, online video programming distributors (``OVDs'') 
have begun to provide professional video programming to consumers over 
the Internet. This programming can be viewed at any time, on a variety 
of devices, wherever the consumer has high-speed access to the 
Internet. Cable companies, DBS providers, and telcos have responded to 
this entry with further innovation, including expanding their VOD 
offerings and allowing their subscribers to view programming over the 
Internet under certain conditions.
    4. Through the JV, Comcast seeks to gain control of NBCU's 
programming, a potent tool that would allow it to disadvantage its 
traditional video programming distribution competitors, such as cable, 
DBS, and the telcos, and curb nascent OVD competition by denying access 
to, or raising the cost of, this important content. If Comcast is 
allowed to exercise control over this vital programming, innovation in 
the market for video programming distribution will be diminished, and 
consumers will pay higher prices for programming and face fewer 
choices.
    5. Attractive content is vital to video programming distribution. 
Today, consumers subscribe to traditional video programming 
distributors in order to view their favorite programs (scheduled

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or on demand), discover new shows and networks, view live sports and 
news, and watch old and newly available movies. Distributors compete 
for viewers by marketing the rich array of programming and other 
features available on their services. This marketing often promotes 
programming that is exclusive to the distributor or highlights the 
distributor's rivals' lack of specific programming or features.
    6. NBCU content, especially the NBC broadcast network, is important 
to consumers and video programming distributors' ability to attract and 
retain customers. Programming is often at the center of disputes 
between subscription video programming distributors and broadcast and 
cable network owners. The public outcry when certain programming is 
unavailable, even temporarily, underscores the damage that can occur 
when a video distributor loses access to valuable programming. The JV 
will give Comcast control over access to valuable content, and the 
terms on which its rivals can purchase it, including the possibility of 
denying them the programming entirely.
    7. NBCU content is especially important to OVDs. NBCU has been an 
industry leader in making its content available over the Internet. If 
OVDs cannot gain access to NBCU content, their ability to develop into 
stronger video programming distribution competitors will be impeded.
    8. Comcast itself recognizes the importance of the NBC broadcast 
network, which it describes as an ``American icon.'' NBC broadcasts 
such highly rated programming as the Olympics, Sunday Night Football, 
NBC Nightly News, The Office, 30 Rock, and The Today Show. NBCU also 
owns other important programming, including the USA Network, the 
number-one-rated cable channel; CNBC, the leading cable financial news 
network; other top-rated cable networks, such as Bravo and SyFy; and 
The Weather Channel, in which it holds a significant stake and has 
management rights.
    9. Comcast faces little video programming distribution competition 
in many of the areas it serves. Entry into traditional video 
programming distribution is expensive, and new entry is unlikely in 
most areas. OVDs' Internet-based offerings are likely the best hope for 
additional video programming distribution competition in Comcast's 
cable franchise areas.
    10. Thus, the United States and the Plaintiff States ask this Court 
to enjoin the proposed JV permanently.

II. Jurisdiction and Venue

    11. The United States brings this action under Section 15 of the 
Clayton Act, as amended, 15 U.S.C. 25, to prevent and restrain Comcast, 
GE, and NBCU from violating Section 7 of the Clayton Act, 15 U.S.C. 18.
    12. The Plaintiff States, by and through their respective Attorneys 
General and other authorized officials, bring this action under Section 
16 of the Clayton Act, 15 U.S.C. 26, to prevent and restrain Comcast, 
GE, and NBCU from violating Section 7 of the Clayton Act, 15 U.S.C. 18. 
The Plaintiff States bring this action in their sovereign capacities 
and as parens patriae on behalf of the citizens, general welfare, and 
economy of each of the Plaintiff States.
    13. In addition to distributing video programming, Comcast owns 
programming. Comcast and NBCU sell programming to distributors in the 
flow of interstate commerce. Comcast's and NBCU's activities in selling 
programming to distributors, as well as Comcast's activities in 
distributing video programming to consumers, substantially affect 
interstate commerce and commerce in each of the Plaintiff States. The 
Court has subject-matter jurisdiction over this action and these 
defendants pursuant to Section 15 of the Clayton Act, as amended, 15 
U.S.C. 25, and 28 U.S.C. 1331, 1337(a), and 1345.
    14. Venue is proper in this District under Section 12 of the 
Clayton Act, 15 U.S.C. 22, and 28 U.S.C. 1391(b)(1) and (c). Defendants 
Comcast, GE, and NBCU transact business and are found within the 
District of Columbia. Comcast, GE, and NBCU have submitted to personal 
jurisdiction in this District.

III. Defendants and the Proposed Joint Venture

    15. Comcast is a Pennsylvania corporation headquartered in 
Philadelphia, Pennsylvania. It is the largest video programming 
distributor in the nation, with approximately 23 million video 
subscribers. Comcast is also the largest high-speed Internet provider, 
with over 16 million subscribers for this service. Comcast wholly owns 
national cable programming networks, including E! Entertainment, G4, 
Golf, Style, and Versus, and has partial interests in Current Media, 
MLB Network, NHL Network, PBS KIDS Sprout, Retirement Living 
Television, and TV One. In addition, Comcast has controlling interests 
in the following regional sports networks (``RSNs''): Comcast SportsNet 
(``CSN'') Bay Area, CSN California, CSN Mid-Atlantic, CSN New England, 
CSN Northwest, CSN Philadelphia, CSN Southeast, and CSN Southwest; and 
partial interests in three other RSNs: CSN Chicago, SportsNet New York, 
and The Mtn. Comcast also owns digital properties such as 
DailyCandy.com, Fandango.com, and Fancast, its online video Web site. 
In 2009, Comcast reported total revenues of $36 billion. Over 94 
percent of Comcast's revenues, or $34 billion, were derived from its 
cable business, including $19 billion from video services, $8 billion 
from high-speed Internet services, and $1.4 billion from local 
advertising on Comcast's cable systems. In contrast, Comcast's cable 
programming networks earned only about $1.5 billion in revenues from 
advertising and fees collected from video programming distributors.
    16. GE is a New York corporation with its principal place of 
business in Fairfield, Connecticut. GE is a global infrastructure, 
finance, and media company. GE owns 88 percent of NBCU, a Delaware 
corporation, with its headquarters in New York, New York. NBCU is 
principally involved in the production, packaging, and marketing of 
news, sports, and entertainment programming. NBCU wholly owns the NBC 
and Telemundo broadcast networks, as well as ten local NBC owned and 
operated television stations (``O&Os''), 16 Telemundo O&Os, and one 
independent Spanish-language television station. Seven of the NBC O&Os 
are located in areas in which Comcast has incumbent cable systems--
Chicago, Hartford/New Haven, Miami, New York, Philadelphia, San 
Francisco, and Washington, DC. In addition, NBCU wholly owns national 
cable programming networks--Bravo, Chiller, CNBC, CNBC World, MSNBC, 
mun2, Oxygen, Sleuth, SyFy, and the USA Network--and partially owns A&E 
Television Networks (including the Biography, History, and Lifetime 
cable networks), The Weather Channel, and ShopNBC.
    17. NBCU also owns Universal Pictures, Focus Films, and Universal 
Studios, which produce films for theatrical and digital video disk 
(``DVD'') release, as well as content for NBCU's and other companies' 
broadcast and cable programming networks. NBCU produces approximately 
three-quarters of the original, primetime programming shown on the NBC 
broadcast network and the USA cable network--NBCU's two highest-rated 
networks. In addition to its programming-related assets, NBCU owns 
several theme parks and digital properties, such as iVillage.com. 
Finally, NBCU is a founding partner and

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32 percent owner of Hulu, LLC, an OVD. In 2009, NBCU had total revenues 
of $15.4 billion.
    18. On December 3, 2009, Comcast, GE, NBCU, and Navy, LLC 
(``Newco''), a Delaware corporation, entered into a Master Agreement, 
whereby Comcast agreed to pay $6.5 billion in cash to GE, and Comcast 
and GE each agreed to contribute certain assets to the JV to be called 
Newco. Specifically, GE agreed to contribute all of the assets of NBCU, 
including its interest in Hulu and the 12 percent interest in NBCU it 
does not currently own but has agreed to purchase from Vivendi SA. 
Comcast agreed to contribute all its cable programming assets, 
including its national networks as well as its RSNs, and some digital 
properties, but not its cable systems or its online video Web site, 
Fancast. As a result of the content contributions and cash payment by 
Comcast, Comcast will own 51 percent of the JV, and GE will retain a 49 
percent interest. The JV will be managed by a separate board of 
directors initially consisting of three Comcast-designated directors 
and two GE-designated directors. Board decisions will be made by 
majority vote.
    19. Comcast is precluded from transferring its interest in the JV 
for a four-year period, and GE is prohibited from transferring its 
interest for three and one-half years. Thereafter, either party may 
sell its respective interest in the JV, subject to Comcast's right to 
purchase at fair market value any interest that GE proposes to sell. 
Additionally, three and one-half years after closing, GE will have the 
right to require the JV to redeem 50 percent of GE's interest; after 
seven years, GE will have the right to require the JV to redeem all of 
its remaining interest. If GE elects to exercise its first right of 
redemption, Comcast will have the contemporaneous right to purchase the 
remainder of GE's ownership interest once a purchase price is 
determined. If GE does not exercise its first redemption right, Comcast 
will have the right to buy 50 percent of GE's initial ownership 
interest five years after closing and all of GE's remaining ownership 
interest eight years after closing. It is expected that Comcast 
ultimately will own 100 percent of the JV.

IV. The Professional Video Programming Industry

    20. The professional video programming industry has had three 
different levels: Content production, content aggregation or networks, 
and distribution.

A. Content Production

    21. Television production studios produce television shows and 
license that content to broadcast and cable networks. Content producers 
typically retain the rights to license their content for syndication 
(e.g., licensing of series to networks or television stations after the 
initial run of the programming) as well as for DVD distribution and VOD 
or pay-per-view (``PPV'') services. In addition to first-run rights 
(i.e., the rights to premiere the content), content producers such as 
NBCU also license the syndication rights to their own programming to 
broadcast and cable networks. For example, House is produced by NBCU, 
licensed for its first run on the FOX broadcast network, and then rerun 
on the USA Network, a cable network owned by NBCU. These content 
licenses often include ancillary rights to related content (e.g., short 
segments of programming or clips, extras such as cast interviews, 
camera angles, and alternative feeds), as well as the right to offer 
some programming on demand (both online and through traditional cable, 
satellite, and telco distribution methods).
    22. A content owner controls which entity receives its programming 
and when, through a process known as ``windowing.'' Historically, the 
first television release window was reserved for broadcast on one of 
the four major broadcast networks (ABC, CBS, NBC, and FOX), followed by 
broadcast syndication, and, ultimately, cable syndication. Over the 
past couple of years, however, content owners have created new windows 
and begun to allow their content to be distributed over the Internet on 
either a catch-up (e.g., next day) or syndicated (e.g., next season) 
basis.
    23. In addition to producing content for television and cable 
networks, NBCU produces and distributes first-run movies through 
Universal Pictures, Universal Studios, and Focus Films. Typically, 
these movies are distributed to theaters before being released on DVD, 
then licensed to VOD/PPV providers, then to premium cable channels 
(e.g., Home Box Office (``HBO'')), then to regular cable channels, and 
finally to broadcast networks. As they have with television 
distribution, over the past several years content owners have 
experimented with different windows for distributing films over the 
Internet.

B. Programming Networks

    24. Networks aggregate content to provide a 24-hour-per-day service 
that is attractive to consumers. The most popular networks, by far, are 
the four broadcast networks. The first cable network was HBO, which 
launched in the early 1970s. Since then, cable networks have grown in 
popularity and number. As of the end of 2009, there were an estimated 
600 national, plus another 100 regional, cable programming networks. 
More than 100 of these networks were also available in HD.
1. Broadcast Networks
    25. Owners of broadcast network programming or broadcasters (e.g., 
NBCU) license their broadcast networks (e.g., NBC, Telemundo) either to 
third-party television stations affiliated with that network (``network 
affiliates''), or to their owned and operated television stations or 
O&Os. The network affiliates and O&Os distribute the broadcast network 
feeds over the air to the public and, importantly, retransmit them to 
professional video programming distributors such as cable companies and 
DBS providers, which in turn distribute the feeds to their subscribers.
    26. The Cable Television Consumer Protection and Competition Act of 
1992 (``1992 Cable Act''), Public Law 102-385, 106 Stat. 1460 (1992), 
gave broadcast television stations, whether network affiliates or O&Os, 
the option to demand ``retransmission consent,'' a process through 
which a distributor negotiates with the station for the right to carry 
the station's programming for agreed-upon terms. Alternatively, 
stations can elect ``must carry'' status, which involves a process 
through which the station can demand to be carried without 
compensation. Stations affiliated with the four major broadcast 
networks, including the O&Os, all have elected retransmission consent. 
Historically, these stations negotiated for non-monetary reimbursement 
(e.g., carriage of new cable channels) in exchange for retransmission 
consent. Today, most broadcast stations seek fees based on the number 
of subscribers to the cable, DBS, or telco service distributing their 
content. Less popular broadcast networks generally have elected must 
carry status, although recently they also have begun to negotiate 
retransmission payments.
    27. In the past, NBCU has negotiated the retransmission rights only 
for its O&Os, but it has expressed interest in and made efforts to 
obtain the rights from its NBC broadcast network affiliates to 
negotiate retransmission consent agreements on their behalf. NBCU could 
also seek to renegotiate its agreements with its affiliates to obtain a 
share of any retransmission consent fees the affiliates are able to 
command.

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2. Cable Networks
    28. In addition to the broadcast networks, programmers produce 
cable networks and sell them to video programming distributors. Most 
cable networks are based on a dual revenue-stream business model. They 
derive roughly half their revenues from licensing fees paid by 
distributors and the other half from advertising fees. The revenue 
split varies depending on several factors, including the type of 
programming (e.g., financial news or general entertainment) and whether 
the program is established or newly launched.
    29. Generally, an owner of a cable network receives a monthly per-
subscriber fee that may vary based upon the popularity or ratings of a 
network's programming, the volume of subscribers served by the 
distributor, the packages in which the programming is included, the 
percentage of the distributor's subscribers receiving the programming, 
and other factors. In addition to the right to carry the network, a 
distributor of the cable network often receives two to three minutes of 
advertising time per hour on the network that it can sell to local 
businesses (e.g., car dealers). A distributor may also receive 
marketing payments or discounts to encourage greater penetration of its 
potential consumers. In the case of a completely new cable network, a 
programmer may pay a distributor to carry the network or offer other 
discounts.
    30. Over time, some video programming distributors, such as Comcast 
and Cablevision Corp., have purchased or launched their own cable 
networks. Vertical integration between content and distribution was a 
reason for the passage of Section 19 of the 1992 Cable Act, 47 U.S.C. 
548. Pursuant to the Act, Congress directed the Federal Communications 
Commission (``FCC'') to promulgate rules that place restrictions on how 
cable programmers affiliated with a cable company can deal with 
unaffiliated distributors. These ``program access rules'' apply to a 
cable company that owns a cable network, and prohibit both the cable 
company and the network from engaging in unfair acts or practices, 
including (1) Entering into exclusive agreements for the cable network; 
(2) selling the cable network to the cable company's competitors on 
discriminatory terms and conditions; and (3) unduly influencing the 
cable network in deciding whom, and on what terms and conditions, to 
sell its programming. 47 CFR 76.1001-76.1002. The prohibition on 
exclusivity sunsets in October 2012, unless extended by the FCC after a 
rulemaking proceeding. The program access rules do not apply to online 
distribution or to retransmission of broadcast station content.

C. Professional Video Programming Distribution

    31. Video programming distributors acquire the rights to transmit 
professional, full-length broadcast and cable programming networks or 
individual programs or movies, aggregate the content, and distribute it 
to their subscribers or users.
1. Multichannel Video Programming Distributors (``MVPDs'')
    32. Traditional video programming distributors offer hundreds of 
channels of professional video programming to residential customers for 
a fee. They include incumbent cable companies, DBS providers, cable 
overbuilders, also known as broadband service providers or ``BSPs'' 
(e.g., RCN), and telcos. These distributors are often collectively 
referred to as MVPDs (``multichannel video programming distributors''). 
In response to increasing consumer demand to record and view video 
content at different times, many MVPDs offer services such as digital 
video recorders (``DVRs'') that allow consumers to record programming 
and view it later, and VOD services that allow viewers to view 
broadcast or cable network programming or movies on demand at times of 
their choosing.
2. Online Video Programming Distributors (``OVDs'')
    33. OVDs offer numerous choices for on-demand professional (as 
opposed to user-generated, e.g., typical YouTube videos), full-length 
(as opposed to clips) video programming over the Internet, whether 
streamed to Internet-connected televisions or other devices, or 
downloaded for later viewing. Currently, OVDs employ several business 
models, including free advertiser-supported streaming (e.g., Hulu), 
[aacute] la carte downloads or electronic sell-through (``EST'') (e.g., 
Apple iTunes, Amazon), subscription streaming models (e.g., Hulu Plus, 
Netflix), per-program rentals (e.g., Apple iTunes, Vudu), and hybrid 
hardware/subscription models (e.g., Tivo, Apple TV/iTunes).
    34. Consumer desire for on-demand viewing and increased broadband 
speeds that have greatly improved the quality of the viewing experience 
have led to distribution of more professional content by OVDs. Online 
video viewing has grown enormously in the last several years and is 
expected to increase. Today, some consumers regard OVDs as acceptable 
substitutes for at least a portion of their traditional video 
programming distribution services. These consumers buy smaller content 
packages from traditional distributors, decline to take certain premium 
channels, or purchase fewer VOD offerings, and instead watch that 
content online, a practice known as ``cord-shaving.'' A smaller but 
growing number of MVPD customers also are ``cutting the cable cord'' 
completely in favor of OVDs. These trends indicate the growing 
significance of competition between OVDs and MVPDs.
    35. OVD services, individually or collectively, are likely to 
continue to develop into better substitutes for MVPD video services. 
Evolving consumer demand, improving technology (e.g., higher Internet 
access speeds, better compression to improve picture quality, improved 
digital rights management to fight piracy), and advertisers' increasing 
willingness to place their ads on the Internet, likely will make OVDs 
stronger competitors to MVPDs for greater numbers of existing and new 
viewers.
    36. Comcast and other MVPDs recognize the impact of OVDs. Their 
documents consistently portray the emergence of OVDs as a significant 
competitive threat. MVPDs, including Comcast, have responded by 
improving existing services and developing new, innovative services for 
their customers. For example, MVPDs have improved user interfaces and 
video search functionality, offered more VOD programming, and begun to 
offer programming online.
    37. GE, through its ownership of NBCU, is a content producer and an 
owner of broadcast and cable channels. Comcast is primarily a 
distributor of video programming, although it owns some cable networks. 
Through the proposed JV, Comcast will control assets that produce and 
aggregate some of the most significant video content. Comcast also will 
continue to own the nation's largest distributor of video programming 
to residential customers.

V. Relevant Market

    38. The relevant product market affected by this transaction is the 
timely distribution of professional, full-length video programming to 
residential customers (``video programming distribution''). Both MVPDs 
and OVDs are participants in this market. Video programming 
distribution is characterized by the aggregation of professionally 
produced content, consisting of entire episodes of shows and movies, 
rather than short clips. This content includes live programming, 
sports, and general entertainment

[[Page 5444]]

programming from a mixture of broadcast and cable networks, as well as 
from movie studios. Video programming distributors typically offer 
various packages of content (e.g., basic, expanded basic, digital), 
quality levels (e.g., standard-definition, HD, 3D), and business models 
(e.g., free ad-supported, subscription). Video programming can be 
viewed immediately by consumers, whether on demand or as scheduled 
(i.e., in a cable network's linear stream).
    39. A variety of companies distribute video programming--cable, 
DBS, overbuilder, telco, and online. Cable has remained the dominant 
distributor even as other companies have entered video programming 
distribution. In the mid-1990s, DirecTV and DISH Network began offering 
hundreds of channels using small satellite dishes. Around the same 
time, firms known as ``overbuilders'' began building their own wireline 
networks, primarily in urban areas, to compete with the incumbent cable 
operator and offer video, high-speed Internet, and voice telephony 
services--the ``triple-play.'' More recently, Verizon and AT&T entered 
the market with their own networks and also offer the triple-play. 
Competition from these video programming distributors has provoked 
incumbent cable operators across the country to upgrade their systems 
and thereby offer substantially more video programming channels, as 
well as the triple-play. Now, OVDs are introducing new and innovative 
business models and services to inject even more competition into the 
video programming distribution market.
    40. Historically, over-the-air (``OTA'') distribution of broadcast 
network content has not served as a significant competitive constraint 
on MVPDs because of the limited number of channels offered. In 
addition, OTA distribution likely will not expand in the future, as no 
new broadcast networks are likely to be licensed for distribution. This 
diminishes the possibility that OTA could increase its content package 
substantially to compete with MVPDs. Thus, OTA is unlikely to become a 
significant video programming distributor. By contrast, OVDs, though 
they may offer more limited viewing options than MVPDs currently, are 
expanding rapidly and have the potential to provide increased and more 
innovative viewing options in the future.
    41. Consumers purchasing video programming distribution services 
select from among those distributors that can offer such services 
directly to their home. The DBS operators, DirecTV and DISH, can reach 
almost any customer in the continental United States who has an 
unobstructed line of sight to their satellites. OVDs are available to 
any consumer with a high-speed Internet service sufficient to receive 
video of an acceptable quality. However, wireline cable distributors 
such as Comcast and Verizon generally must obtain a franchise from 
local, municipal, or state authorities in order to construct and 
operate a wireline network in a specific area, and then build lines 
only to homes in that area. A consumer cannot purchase video 
programming distribution services from a wireline distributor operating 
outside its area because that firm does not have the facilities to 
reach the consumer's home. Thus, although the set of video programming 
distributors able to offer service to individual consumers' residences 
generally is the same within each local community, that set differs 
from one local community to another and can vary even within a local 
community.
    42. For ease of analysis, it is useful to aggregate consumers who 
face the same competitive choices in video programming distribution by, 
for example, aggregating customers in a county or other jurisdiction 
served by the same group of distributors. The United States thus 
comprises numerous local geographic markets for video programming 
distribution, each consisting of a community whose residents face the 
same competitive choices. In the vast majority of local markets, 
customers can choose from among the local cable incumbent and the two 
DBS operators. Approximately 38 percent of consumers can also buy video 
services from a telco, and a much smaller percentage live in areas 
where overbuilders provide service. OVDs are emerging as another viable 
option for consumers who have access to high-speed Internet services. 
OVDs rely on other companies' high-speed Internet services to deliver 
content to consumers.
    43. The geographic markets relevant to this transaction are the 
numerous local markets throughout the United States where Comcast is 
the incumbent cable operator, covering over 50 million U.S. television 
households (about 45 percent nationwide), and where Comcast will be 
able to withhold NBCU programming from, or raise the programming costs 
to, its rival distributors, both MVPDs and OVDs. Because these 
competitors serve areas outside Comcast's cable footprint, other local 
markets served by these rival distributors may be affected, with the 
competitive effects of the transaction potentially extending to all 
Americans.
    44. A hypothetical monopolist of video programming distribution in 
any of these geographic areas could profitably raise prices by a small 
but not insignificant, non-transitory amount. While consumers naturally 
look for other options in response to higher prices, the number of 
consumers that would likely find these other options to be adequate 
substitutes is insufficient to make the higher prices unprofitable for 
the hypothetical monopolist. Thus, video programming distribution in 
any of these geographic areas is a well-defined antitrust market and is 
susceptible to the exercise of market power.

VI. Market Concentration

    45. The incumbent cable companies often dominate any particular 
market with market shares within their franchise areas well above 50 
percent. For example, Comcast has the market shares of 64 percent in 
Philadelphia, 62 percent in Chicago, 60 percent in Miami, and 58 
percent in San Francisco (based on MVPD subscribers). Combined, the DBS 
providers account for approximately 31 percent of total video 
programming distribution subscribers nationwide, although their shares 
vary and may be lower in any particular local market. AT&T and Verizon 
have had great success and achieved penetration (i.e., the percentage 
of households to which a provider's service is available that actually 
buys its service) as high as 40 percent in the selected communities 
they have entered, although they currently have limited expansion 
plans. Overbuilders serve only about one percent of U.S. television 
households nationwide.
    46. Today, OVDs have a de minimis share of the video programming 
distribution market in any geographic area. OVD services are available 
to any consumer who purchases a broadband connection. However, 
established distributors, such as Comcast, view OVDs as a growing 
competitive threat and have taken steps to respond to that threat. 
OVDs' current market shares, therefore, greatly understate both their 
future and current competitive significance in terms of the influence 
they are having on traditional video programming distributors' 
investment decisions to expand offerings and embrace Internet 
distribution themselves.

VII. Anticompetitive Effects

    47. Today, Comcast competes with DBS, overbuilder, and telco 
competitors by upgrading its existing services (e.g., improving its 
network, expanding its

[[Page 5445]]

VOD and HD offerings), and through promotional and other forms of price 
discounts. In particular, Comcast strives to provide a service that it 
can promote as better than its rivals' services in terms of variety of 
programming choices, higher-quality services, and unique features 
(e.g., unique programming or ease of use). Consumers benefit from this 
competition by receiving better quality services and, in some cases, 
lower prices. This competition has also fostered innovation, including 
the development of digital transmission, HD and 3D programming, and the 
introduction of DVRs and VOD offerings.
    48. The proposed JV would allow Comcast to limit competition from 
MVPD competitors and from the growing threat of OVDs. The JV would give 
Comcast control over NBCU content that is important to its competitors. 
Comcast has long recognized that by withholding certain content from 
competitors, it can gain additional cable subscribers and limit the 
growth of emerging competition. Comcast has refused to license one of 
its RSNs, CSN Philadelphia, to DirecTV or DISH. As a result, DirecTV's 
and DISH's market shares in Philadelphia are much lower than in other 
areas where they have access to RSN programming.
    49. Control of NBCU programming will give Comcast an even greater 
ability to disadvantage its competitors. Carriage of NBCU programming, 
including the NBC broadcast network, is important for video programming 
distributors to compete effectively. Out of hundreds of networks, the 
NBC broadcast network consistently is ranked among the top four in 
consumer interest surveys. It receives high Nielsen ratings, which 
distributors and advertisers use as a proxy for a network's value. The 
importance of the NBC broadcast network to a distributor is underscored 
by the fact that NBCU has recently negotiated significant 
retransmission fees with certain distributors that when combined with 
its advertising revenues, rival the most valuable cable network 
programming. Economic studies show that distributors that lose 
important broadcast content for any significant period of time suffer 
substantial customer losses to their competitors.
    50. NBCU's cable networks also are important to consumers and 
therefore to video programming distributors. USA Network has been the 
highest-rated cable network the past four years. CNBC is by far the 
highest-rated financial news cable network, and Bravo and SyFy are top-
rated cable networks for their particular demographics. NBCU's cable 
networks are widely distributed and command high fees.
    51. As a result of the JV, Comcast will gain control over the NBC 
O&Os in local television markets where Comcast is the dominant video 
programming distributor. The JV will give Comcast the ability to raise 
the fees for retransmission consent for the NBC O&Os or effectively 
deny this programming entirely to certain video programming 
distribution competitors. In addition, Comcast may be able to gain the 
right to negotiate on behalf of its broadcast network affiliate 
stations or the ability to influence the affiliates' negotiations with 
its distribution competitors. In either case, these distributors would 
be less effective competitors to Comcast. Comcast also will control 
NBCU's cable networks and film content, increasing the ability of the 
JV to obtain higher fees for that programming. The JV will have less 
incentive to distribute NBCU programming to Comcast's video 
distribution rivals than a stand-alone NBCU. Faced with weakened 
competition, Comcast can charge consumers more and will have less 
incentive to innovate.
    52. The impact of the JV on emerging competition from the OVDs is 
extremely troubling given the nascent stage of OVDs' development and 
the potential of these distributors to significantly increase 
competition through the introduction of new and innovative features, 
packaging, pricing, and delivery methods. NBCU has been one of the 
content providers most willing to support OVDs and experiment with 
different methods of online distribution. It was a founding partner in 
Hulu, the largest OVD today, and prior to the announcement of the 
transaction entered into several contracts with OVDs, such as Apple 
iTunes, Amazon, and Netflix.
    53. Comcast and other MVPDs have significant concerns over emerging 
competition by OVDs. To the extent that consumers, now or in the 
future, view OVDs as substitutes for traditional video programming 
distributors, they will be able to challenge Comcast's dominant 
position as a video programming distributor. Comcast has taken several 
steps to keep its customers from cord-shaving or cord-cutting in favor 
of OVDs. These efforts include launching its own online video portal 
(Fancast), improving its VOD library and online interactive interface 
(in order to compete with, e.g., Netflix and Amazon), and deploying its 
``authenticated'' online, on-demand service. Consumers have benefited 
from Comcast's competitive responses and, absent the JV, would benefit 
from increased competition from OVDs.
    54. Comcast has an incentive to encumber, through its control of 
the JV, the development of nascent distribution technologies and the 
business models that underlie them by denying OVDs access to NBCU 
content or substantially increasing the cost of obtaining such content. 
As a result, Comcast will face less competitive pressure to innovate, 
and the future evolution of OVDs will likely be muted. Comcast's 
incentives and ability to raise the cost of or deny NBCU programming to 
its distribution rivals, especially OVDs, will lessen competition in 
video programming distribution.

VIII. Absence of Countervailing Factors

 A. Entry

    55. Entry or expansion of traditional video programming 
distributors on a widespread scale or entry of programming networks 
comparable to NBCU's will not be timely, likely, or sufficient to 
reverse the competitive harm that would likely result from the proposed 
JV. OVDs are less likely to develop into significant competitors if 
denied access to NBCU content.

B. Efficiencies

    56. The proposed JV will not generate verifiable, merger-specific 
efficiencies sufficient to reverse the competitive harm of the proposed 
JV.

IX. Violations Alleged

Violation of Section 7 of the Clayton Act by Each Defendant

    57. The United States and the Plaintiff States hereby incorporate 
paragraphs 1 through 56.
    58. Pursuant to a Master Agreement dated December 3, 2009, Comcast, 
GE, and NBCU intend to form a joint venture.
    59. The effect of the proposed JV and Comcast's acquisition of 51 
percent of it would be to lessen competition substantially in 
interstate trade and commerce in numerous geographic markets for video 
programming distribution, in violation of Section 7 of the Clayton Act, 
15 U.S.C. 18, and Sections 1 and 2 of the Sherman Act, 15 U.S.C. 1, 2.
    60. This proposed JV threatens loss or damage to the general 
welfare and economies of each of the Plaintiff States, and to the 
citizens of each of the Plaintiff States. The Plaintiff States and 
their citizens will be subject to a continuing and substantial threat 
of irreparable injury to the general welfare and economy, and to 
competition, in their respective jurisdictions unless the

[[Page 5446]]

Defendants are enjoined from carrying out this transaction, or from 
entering into or carrying out any agreement, understanding, or plan by 
which Comcast would acquire control over NBCU or any of its assets.
    61. The proposed JV will likely have the following effects, among 
others:
    a. Competition in the development, provision, and sale of video 
programming distribution services in each of the relevant geographic 
markets will likely be eliminated or substantially lessened;
    b. Prices for video programming distribution services will likely 
increase to levels above those that would prevail absent the JV; and
    c. Innovation and quality of video programming distribution 
services will likely decrease to levels below those that would prevail 
absent the JV.

X. Requested Relief

    62. The United States and the Plaintiff States request that:
    a. The proposed JV be adjudged to violate Section 7 of the Clayton 
Act, 15 U.S.C. 18;
    b. Comcast, GE, NBCU, and Newco be permanently enjoined from 
carrying out the proposed JV and related transactions; carrying out any 
other agreement, understanding, or plan by which Comcast would acquire 
control over NBCU or any of its assets; or merging;
    c. The United States and the Plaintiff States be awarded their 
costs of this action;
    d. The Plaintiff States be awarded their reasonable attorneys' 
fees; and
    e. The United States and the Plaintiff States receive such other 
and further relief as the case requires and the Court deems just and 
proper.

Dated: January 18, 2011

Respectfully submitted,

For Plaintiff United States:

/s/--------------------------------------------------------------------

Christine A. Varney (DC Bar 411654)
Assistant Attorney General for Antitrust

/s/--------------------------------------------------------------------

Molly S. Boast
Deputy Assistant Attorney General

/s/--------------------------------------------------------------------

Gene I. Kimmelman (DC Bar 358534)
Chief Counsel for Competition Policy and Intergovernmental Relations

/s/--------------------------------------------------------------------

Patricia A. Brink
Director of Civil Enforcement

/s/--------------------------------------------------------------------

Joseph J. Matelis (DC Bar 462199)
Counsel to the Assistant Attorney General

/s/--------------------------------------------------------------------

Nancy M. Goodman
Chief

Laury E. Bobbish
Assistant Chief, Telecommunications & Media Enforcement

/s/--------------------------------------------------------------------

John R. Read (DC Bar 419373)
Chief

David C. Kully (DC Bar 448763)
Assistant Chief, Litigation III

/s/--------------------------------------------------------------------
Yvette F. Tarlov* (DC Bar 442452)
Attorney, Telecommunications & Media Enforcement, Antitrust 
Division, U.S. Department of Justice, 450 Fifth Street, NW., Suite 
7000, Washington, DC 20530, Telephone: (202) 514-5621, Facsimile: 
(202) 514-6381, E-mail: [email protected]v

Matthew J. Bester (DC Bar 465374)
Shobitha Bhat
Hillary B. Burchuk (DC Bar 366755)
Luin P. Fitch
Paul T. Gallagher (DC Bar 439701)
Peter A. Gray
F. Patrick Hallagan
Michael K. Hammaker (DC Bar 233684)
Matthew C. Hammond
Joyce B. Hundley
Robert A. Lepore
Erica S. Mintzer (DC Bar 450997)
H. Joseph Pinto III
Warren A. Rosborough IV (DC Bar 495063)
Natalie Rosenfelt
Blake W. Rushforth
Anthony D. Scicchitano
Jennifer A. Wamsley (DC Bar 486540)
Frederick S. Young (DC Bar 421285)
Attorneys for the United States

* Attorney of Record

For Plaintiff State of California

Kamala D. Harris
Attorney General

/s/--------------------------------------------------------------------

Jonathan M. Eisenberg
Deputy Attorney General, California Department of Justice, Office of 
the Attorney General, CSB No. 184162, 300 South Spring Street, Suite 
1702, Los Angeles, California 90013, Phone: (213) 897-6505, 
Facsimile: (213) 620-6005, [email protected]

For Plaintiff State of Florida

Pamela Jo Bondi
Attorney General, State of Florida

/s/--------------------------------------------------------------------

Patricia A. Conners
Associate Deputy Attorney General

Eli A. Friedman
Assistant Attorney General

Lizabeth A. Brady
Chief, Multistate Antitrust Enforcement, Antitrust Division, PL-01, 
The Capitol, Tallahassee, FL 32399-1050, Tel: (850) 414-3300, Fax: 
(850)488-9134, E-mail: [email protected]

For Plaintiff State of Missouri

/s/--------------------------------------------------------------------

Chris Koster
Attorney General

Anne E. Schneider
Assistant Attorney General/Antitrust Counsel

Andrew M. Hartnett
Assistant Attorney General

P.O. Box 899 Jefferson City, MO 65109 573/751-7445, F: 573/751-2041, 
[email protected],

For Plaintiff State of Texas

Greg Abbott
Attorney General of Texas

Daniel T. Hodge
First Assistant Attorney General

Bill Cobb
Deputy Attorney General for Civil Litigation

/s/--------------------------------------------------------------------

John T. Prud'homme, Jr.
Chief, Antitrust Division, Office of the Attorney General, 300 W. 
15th St., 7th floor, Austin, Texas 78701, (512) 936-1697, (512) 320-
0975--facsimile

For Plaintiff State of Washington

/s/--------------------------------------------------------------------

David M. Kerwin
Assistant Attorney General, Antitrust Division, Office of the 
Attorney General of Washington, 800 Fifth Avenue, Suite 2000, 
Seattle, WA 98104-3188, 206/464-7030, [email protected]

United States District Court for the District of Columbia

United States of America, State of California, State of Florida, 
State of Missouri, State of Texas, and State of Washington, 
Plaintiffs, v. Comcast Corp., General Electric Co., and NBC 
Universal, Inc., Defendants.

Case: 1:11-cv-00106.
Assigned To: Leon, Richard J.
Assign. Date: 1/18/2011.
Description: Antitrust.

Competitive Impact Statement

    The United States of America (``United States''), acting under the 
direction of the Attorney General of the United States, pursuant to 
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or 
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact 
Statement relating to the proposed Final Judgment (attached hereto as 
Exhibit A) submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    On December 3, 2009, Comcast Corporation (``Comcast''), General 
Electric Company (``GE''), NBC Universal, Inc. (``NBCU''), and Navy, 
LLC (``Newco''), announced plans to form a new Joint Venture (``JV'') 
to which Comcast and GE will contribute broadcast and cable network 
assets. As a result of the transaction, Comcast--the nation's largest 
cable company--will have majority control of a JV holding highly valued 
video programming needed by Comcast's video distribution rivals to 
compete effectively.
    The United States filed a civil antitrust Complaint on January 18, 
2011, seeking to enjoin the proposed transaction because its likely 
effect

[[Page 5447]]

would be to lessen competition substantially in the market for timely 
distribution of professional, full-length video programming to 
residential customers (``video programming distribution'') in major 
portions of the United States in violation of Section 7 of the Clayton 
Act, 15 U.S.C. 18. The transaction would allow Comcast to disadvantage 
its traditional competitors (direct broadcast satellite (``DBS'') and 
telephone companies (``telcos'') that provide video services), as well 
as competing emerging online video distributors (``OVDs''). This loss 
of current and future competition likely would result in lower-quality 
services, fewer choices, and higher prices for consumers, as well as 
reduced investment and less innovation in this dynamic industry.
    On January 18, 2011, the Federal Communications Commission 
(``FCC'') adopted a Memorandum Opinion and Order relating to the 
foregoing transaction.\1\ The FCC's Order approved the transaction 
subject to certain conditions.
---------------------------------------------------------------------------

    \1\ Memorandum Opinion and Order, In re Applications of Comcast 
Corp., General Electric Co. and NBC Universal, Inc. for Consent to 
Assign Licenses and Transfer Control of Licensees, FCC MB Docket No. 
10-56 (adopted Jan. 18, 2011). Under the Communications Act, the FCC 
has jurisdiction to determine whether mergers involving the transfer 
of a telecommunications license are in the ``public interest, 
convenience, and necessity.'' 47 U.S.C. 310(d).
---------------------------------------------------------------------------

    Under the proposed Final Judgment filed by the United States 
Department of Justice simultaneously with this Competitive Impact 
Statement and explained more fully below, Defendants will be required, 
among other things, to license the JV's programming to Comcast's 
emerging OVD competitors in certain circumstances. When Defendants and 
OVDs cannot reach agreement on the terms and conditions of the license, 
the aggrieved OVD may apply to the Department for permission to submit 
its dispute to commercial arbitration under the proposed Final 
Judgment. The FCC Order contains a similar provision. For so long as 
commercial arbitration is available for the resolution of such disputes 
in a timely manner under the FCC's rules and orders, the Department 
will ordinarily defer to the FCC's commercial arbitration process to 
resolve such disputes. However, the Department reserves the right, in 
its sole discretion, to permit arbitration under the proposed Final 
Judgment to advance the Final Judgment's competitive objectives. In 
addition, the Department may seek relief from the Court to address 
violations of any provisions of the proposed Final Judgment. The 
proposed Final Judgment also contains provisions to prevent Defendants 
from interfering with an OVD's ability to obtain content or deliver its 
services over the Internet.
    The proposed Final Judgment will provide a prompt, certain, and 
effective remedy for consumers by diminishing Comcast's ability to use 
the JV's programming to harm competition. The United States and 
Defendants have stipulated that the proposed Final Judgment may be 
entered after compliance with the APPA. Entry of the proposed Final 
Judgment would terminate this action, except that the Court would 
retain jurisdiction to construe, modify, or enforce the provisions of 
the proposed Final Judgment, and to punish and remedy violations 
thereof.

II. Description of Events Giving Rise to the Alleged Violation

A. Defendants, the Proposed Transaction, and the Department's 
Investigation

1. Comcast
    Comcast is a Pennsylvania corporation headquartered in 
Philadelphia, Pennsylvania. It is the largest cable company in the 
nation, with approximately 23 million video subscribers. Comcast is 
also the largest Internet service provider (``ISP''), with over 16 
million subscribers. Comcast also wholly owns national cable 
programming networks, including E! Entertainment, G4, Golf, Style, and 
Versus, and has partial ownership interests in Current Media, MLB 
Network, NHL Network, PBS KIDS Sprout, Retirement Living Television, 
and TV One. In addition, Comcast has controlling and partial interests 
in regional sports networks (``RSNs'').\2\ Comcast also owns digital 
properties such as DailyCandy.com, Fandango.com, and Fancast, its 
online video Web site. In 2009, Comcast reported total revenues of $36 
billion. Over 94 percent of Comcast's revenues, or $34 billion, were 
derived from its cable business, including $19 billion from video 
services, $8 billion from high-speed Internet services, and $1.4 
billion from local advertising on Comcast's cable systems. In contrast, 
Comcast's cable programming networks earned only about $1.5 billion in 
revenues from advertising and fees collected from video programming 
distributors.
---------------------------------------------------------------------------

    \2\ Comcast owns Comcast SportsNet (``CSN'') Bay Area, CSN 
California, CSN Mid-Atlantic, CSN New England, CSN Northwest, CSN 
Philadelphia, CSN Southeast, and CSN Southwest, and holds partial 
ownership interests in CSN Chicago, SportsNet New York, and The Mtn.
---------------------------------------------------------------------------

2. GE and NBCU
    GE is a New York corporation with its principal place of business 
in Fairfield, Connecticut. GE is a global infrastructure, finance, and 
media company. GE owns 88 percent of NBCU, a Delaware corporation, 
headquartered in New York, New York. NBCU is principally involved in 
the production, packaging, and marketing of news, sports, and 
entertainment programming.
    NBCU wholly owns the NBC and Telemundo broadcast networks, as well 
as ten local NBC owned and operated television stations (``O&Os''), 16 
Telemundo O&Os, and one independent Spanish language television 
station. In addition, NBCU wholly owns national cable programming 
networks--Bravo, Chiller, CNBC, CNBC World, MSNBC, mun2, Oxygen, 
Sleuth, SyFy, and USA Network--and partially owns A&E Television 
Networks (including the Biography, History, and Lifetime cable 
networks), The Weather Channel, and ShopNBC.
    NBCU also owns Universal Pictures, Focus Films, and Universal 
Studios, which produce films for theatrical and digital video disk 
(``DVD'') release, as well as content for NBCU's and other companies' 
broadcast and cable programming networks. NBCU produces approximately 
three-quarters of the original primetime programming shown on the NBC 
broadcast network and the USA cable network, NBCU's two highest-rated 
networks. In addition to its programming assets, NBCU owns several 
theme parks and digital assets, such as iVillage.com. In 2009, NBCU had 
total revenues of $15.4 billion.
    NBCU also is a founding partner and 32 percent owner of Hulu, LLC, 
currently one of the most successful OVDs. Hulu is a joint venture 
between NBCU, News Corp., The Walt Disney Company, and a private equity 
investor. Each of the media partners has representation on the Hulu 
Board, possesses management rights, and licenses content for Hulu to 
deliver over the Internet.
3. The Proposed Transaction
    On December 3, 2009, Comcast, GE, NBCU, and Newco, entered into a 
Master Agreement (``Agreement''), whereby Comcast agreed to pay $6.5 
billion in cash to GE, and Comcast and GE each agreed to contribute 
certain assets to the JV. Specifically, GE agreed to contribute all of 
the assets of NBCU, including its interest in Hulu, and the 12 percent 
interest in NBCU that GE does not own but has agreed to purchase

[[Page 5448]]

from Vivendi SA. Comcast agreed to contribute all its cable programming 
assets, including its national programming networks, its RSNs, and some 
digital properties, but not its cable systems or its Internet video 
service, Fancast. As a result of the content contributions and cash 
payment by Comcast, Comcast will own 51 percent of the JV, and GE will 
retain a 49 percent interest. The JV will be managed by a separate 
Board of Directors consisting initially of three Comcast-designated 
directors and two GE-designated directors. Board decisions will be made 
by majority vote.
    The Agreement precludes Comcast from transferring its interest in 
the JV for a four-year period, and prohibits GE from transferring its 
interest for three and one-half years. Thereafter, either party may 
sell its respective interest in the JV, subject to Comcast's right to 
purchase at fair market value any interest that GE proposes to sell. 
Additionally, three and one-half years after closing, GE will have the 
right to require the JV to redeem 50 percent of GE's interest and, 
after seven years, GE will have the right to require the JV to redeem 
all of its remaining interest. If GE elects to exercise its first right 
of redemption, Comcast will have the contemporaneous right to purchase 
the remainder of GE's ownership interest once a purchase price is 
determined. If GE does not exercise its first redemption right, Comcast 
will have the right to buy 50 percent of GE's initial ownership 
interest five years after closing and all of GE's remaining ownership 
interest eight years after closing. It is expected that Comcast 
ultimately will own 100 percent of the JV.
4. The Department's Investigation
    The Department opened an investigation soon after the JV was 
announced and conducted a thorough and comprehensive review of the 
video programming distribution industry and the potential implications 
of the transaction. The Department interviewed more than 125 companies 
and individuals involved in the industry, obtained testimony from 
Defendants' officers, required Defendants to provide the Department 
with responses to numerous questions, reviewed over one million 
business documents from Defendants' officers and employees, obtained 
and reviewed tens of thousands of third-party documents, obtained and 
extensively analyzed large volumes of industry financial and economic 
data, consulted with industry and economic experts, organized product 
demonstrations, and conducted independent industry research. The 
Department also consulted extensively with the FCC to ensure that the 
agencies conducted their reviews in a coordinated and complementary 
fashion and created remedies that were both comprehensive and 
consistent.

B. The Video Programming Industry

    NBCU and Comcast are participants in the video programming 
industry, in which content is produced and distributed to viewers 
through their television sets or, increasingly, through Internet-
connected devices. Historically, the video programming industry has had 
three different levels: content production, content aggregation or 
networks, and distribution.
1. Content Production
    Television production studios produce television shows and 
coordinate how, when, and where their content is licensed in order to 
maximize revenues. They usually license to broadcast and cable networks 
the right to show a program first (i.e., the first-run rights). Content 
producers also license their content for subsequent ``windows'' such as 
syndication (e.g., licensing series to broadcast and cable networks 
after the first run of the programming), as well as for DVD 
distribution, video on demand (``VOD''), and pay per view (``PPV'') 
services. For example, the television show House is produced by NBCU, 
licensed for its first run on the FOX broadcast network and then rerun 
on the USA Network, a cable network owned by NBCU. These content 
licenses often include ancillary rights such as the right to offer some 
programming on demand.
    Historically, first-run licenses were reserved for one of the four 
major broadcast networks (ABC, CBS, NBC, and FOX), followed by 
broadcast syndication and, ultimately, cable syndication. Over the past 
several years, however, content owners have begun to license their 
content for first run on cable networks and distribution over the 
Internet on either a catch-up (e.g., next day) or syndicated (e.g., 
next season) basis.
    In addition to producing content for television and cable networks, 
NBCU produces and distributes first-run movies through Universal 
Pictures, Universal Studios, and Focus Films. Typically, producers 
distribute movies to theaters before releasing them on DVD, then 
license them to VOD/PPV providers, then to premium cable channels 
(e.g., Home Box Office (``HBO'')), then to regular cable channels, and 
finally to broadcast networks. As with television distribution, studios 
have experimented with different windows for film distribution over the 
past several years.
2. Programming Networks
    Networks aggregate content to provide a 24-hour service that is 
attractive to consumers. The most popular networks, by far, are the 
four broadcast networks.\3\ However, cable networks have grown in 
popularity and number, and at the end of 2009 there were an estimated 
600 national, plus another 100 regional, cable programming networks.
---------------------------------------------------------------------------

    \3\ The four largest broadcast networks attract 8 to 12 million 
viewers each, whereas the most popular cable networks typically 
attract approximately 2 million viewers each. SNL Kagan, Economics 
of Basic Cable Networks 43 (2009); The Nielsen Company, Snapshot of 
Television Use in the U.S. 2 (Sept. 2010), http://blog.nielsen.com/nielsenwire/wp-content/uploads/2010/09/Nielsen-State-of-TV-09232010.pdf.
---------------------------------------------------------------------------

a. Broadcast Networks
    Owners of broadcast network programming or broadcasters like NBCU 
license their broadcast networks either to third-party television 
stations affiliated with that network (``network affiliates''), or to 
their owned and operated television stations (``O&Os''). The network 
affiliates and O&Os distribute the broadcast network feeds over the air 
(``OTA'') to the public and also retransmit them to video programming 
distributors, such as cable companies and DBS providers, which in turn 
distribute the feeds to their subscribers.
    Under the Cable Television Consumer Protection and Competition Act 
of 1992 (``1992 Cable Act''), Public Law 102-385, 106 Stat. 1460 
(1992), broadcast television stations, whether network affiliates or 
O&Os, may elect to obtain ``retransmission consent'' from a programming 
distributor, in which case a distributor negotiates with a station for 
the right to carry the station's programming for agreed-upon terms. 
Alternatively, stations may elect ``must carry'' status and demand 
carriage but without compensation. Stations affiliated with the four 
major broadcast networks and the networks' O&Os have elected 
retransmission consent. Historically, these stations negotiated for 
non-monetary compensation (e.g., carriage of new cable channels owned 
by the broadcaster) in exchange for retransmission consent. Today, most 
broadcast stations seek retransmission consent fees based on the number 
of subscribers to the cable, DBS, or telco service distributing their 
content.\4\ Less

[[Page 5449]]

popular broadcast networks generally elect must carry status, although 
recently they also have begun to negotiate retransmission payments. 
Despite these retransmission payments, broadcast stations earn the 
majority of their revenues from local advertising sales. The broadcast 
networks earn most of their revenues from national advertising sales.
---------------------------------------------------------------------------

    \4\ In the past, NBCU negotiated the retransmission rights only 
for its O&Os, but recently it has made efforts to obtain the rights 
from its network affiliates to negotiate retransmission consent 
agreements on their behalf. NBCU also may seek to renegotiate its 
agreements with its affiliates to obtain a share of any 
retransmission consent fees the affiliates are able to command.
---------------------------------------------------------------------------

b. Cable Networks
    Popular cable networks include ESPN, USA, MTV, CNN, and Bravo. 
Cable networks typically derive roughly one half of their revenues from 
licensing fees paid by video programming distributors and the other 
half from advertising fees. Generally, a distributor pays an owner of 
cable networks a monthly per-subscriber fee that may vary based upon 
the number of subscribers served by the distributor, the programming 
packages in which the program is included, the percentage of the 
distributor's subscribers receiving the programming, and other factors. 
Typically, the popularity or ratings of a network's programming affects 
the ability of a content owner to negotiate higher license fees. In 
addition to the right to carry the network, a distributor of the cable 
network often receives two to three minutes of advertising time per 
hour on the network for sale to local businesses (e.g., car dealers). A 
distributor also may receive marketing payments or discounts to 
encourage wider distribution of the programming. In the case of a 
completely new cable network, a programmer may pay a distributor to 
carry the network or offer other discounts.
3. Video Programming Distribution
    Video programming distributors acquire the rights to transmit 
professional (as opposed to user-generated videos such as those 
typically seen on YouTube), full-length (as opposed to clips) broadcast 
and cable programming networks or individual programs or movies, 
aggregate the content, and distribute it to their subscribers or users. 
This content includes live programming, sports, and general 
entertainment programming from a variety of broadcast and cable 
networks and from movie studios, and can be viewed either on demand or 
as scheduled in a broadcast or cable network's linear stream. Video 
programming distributors offer various packages of content (e.g., 
basic, expanded basic, digital) with different quality levels (e.g., 
standard definition, HD, 3D), and employ different business models 
(e.g., ad-supported, subscription).
a. Multichannel Video Programming Distributors
    Traditional video programming distributors include incumbent cable 
companies, DBS providers, cable overbuilders, also known as broadband 
service providers (``BSPs,'' such as RCN), and telcos. These 
distributors are referred to as multichannel video programming 
distributors (``MVPDs''), and typically offer hundreds of channels of 
professional video programming to residential customers for a fee.
b. Online Video Programming Distributors
    OVDs are relatively recent entrants into the video programming 
distribution market. They deliver a variety of on-demand professional, 
full-length video programming over the Internet, whether streamed to 
Internet-connected televisions or other devices, or downloaded for 
later viewing. Hulu, Netflix, Amazon, and Apple are examples of OVDs, 
although the content delivered and business model used varies greatly 
among them.
    Unlike MVPDs, OVDs do not own distribution facilities and are 
dependent upon ISPs for the delivery of their content to viewers. 
Therefore, the future growth of OVDs depends, in part, on how quickly 
ISPs expand and upgrade their broadband facilities and the preservation 
of their incentives to innovate and invest.\5\ The higher the bandwidth 
available from the ISP, the greater the speed and the better the 
quality of the picture delivered to an OVD's users.
---------------------------------------------------------------------------

    \5\ See discussion infra Section II.C.2.b.
---------------------------------------------------------------------------

    ISPs' management and pricing of broadband services may also affect 
OVDs. In particular, OVDs would be harmed competitively if ISPs that 
are also MVPDs (e.g., cable companies, telcos) were to impair or delay 
the delivery of video because OVDs pose a threat to those MVPDs' 
traditional video programming distribution businesses. Because Comcast 
is the country's largest ISP, an inherent conflict exists between 
Comcast's provision of broadband services to its customers, who may use 
this service to view video programming provided by OVDs, and its desire 
to continue to sell them MVPD services.
    Growth of OVDs also will depend, in part, on their ability to 
acquire programming from content producers. Some cable companies, such 
as Comcast and Cablevision Corp., have purchased or launched their own 
cable networks. This vertical integration of content and distribution 
was one reason for the passage of Section 19 of the 1992 Cable Act, 47 
U.S.C. 548. Pursuant to the Act, Congress directed the FCC to 
promulgate rules that place restrictions on how cable programmers 
affiliated with a cable company deal with unaffiliated distributors. 
These ``program access rules'' were designed to prevent vertically 
integrated cable companies from refusing to provide popular programming 
to their competitors. The rules prohibit both the cable company and a 
cable network owned by it from engaging in unfair acts and practices, 
including: (1) Entering into exclusive agreements to distribute the 
cable network; (2) selling the cable network to the cable company's 
competitors on discriminatory terms and conditions; and (3) unduly 
influencing the cable network in deciding to whom, and on what terms 
and conditions, to sell its programming.\6\ The FCC program access 
rules do not apply to online distribution or to retransmission of 
broadcast station content.
---------------------------------------------------------------------------

    \6\ 47 CFR 76.1001-76.1002. The prohibition on exclusivity 
sunsets in October 2012, unless extended by the FCC pursuant to a 
rulemaking. Id. Sec.  76.1002(c)(6).
---------------------------------------------------------------------------

C. The Market for Video Programming Distribution in the United States

    The relevant product market affected by this transaction is the 
market for timely distribution of professional, full-length video 
programming to residential customers (``video programming 
distribution''). Professionally produced content is video programming 
that is created or produced by media and entertainment companies using 
professional equipment, talent, and production crews, and for which 
those companies hold or maintain distribution and syndication rights. 
Video programming distribution is characterized by the aggregation of 
professionally produced content consisting of entire episodes of shows 
and movies, rather than short clips. The market for video programming 
distribution includes both MVPDs and OVDs.
1. Traditional Video Programming Distribution
    Cable companies first began operating in the 1940s and initially 
were granted exclusive franchises to serve local communities. Although 
they now face competition, the incumbent cable companies continue to 
serve a dominant

[[Page 5450]]

share of subscribers in most areas. In the mid-1990s, DirecTV and DISH 
Network began to offer competing services using small satellite dishes 
installed on consumers' homes. Around the same time, cable overbuilders 
began building their own wireline networks in order to compete with the 
incumbent cable operator and offer video, high-speed Internet, and 
telephony services--the ``triple-play.'' More recently, Verizon and 
AT&T entered the market with their own video distribution services, 
also offering the triple-play. Competition from these video programming 
distributors encouraged incumbent cable operators across the country to 
upgrade their systems and offer many more video programming channels, 
as well as the triple-play. Further innovations have included digital 
video recorders (``DVRs'') that allow consumers to record programming 
and view it later, and VOD services that enable viewers to watch 
broadcast or cable network programming or movies on demand at the 
consumer's convenience for a limited time.
    A consumer purchasing video programming distribution services 
selects from those distributors offering such services directly to that 
consumer's home. The DBS operators--DirecTV and DISH--can reach almost 
any consumer who lives in the continental United States and has an 
unobstructed line of sight to the DBS operators' satellites. However, 
wireline cable distributors, such as Comcast and Verizon, generally 
must obtain a franchise from local or state authorities to construct 
and operate a wireline network in a specific area, and can build lines 
only to the homes in that area. A consumer cannot purchase video 
programming distribution services from a wireline distributor operating 
outside its area because that firm does not have the facilities to 
reach the consumer's home. Consequently, although the set of video 
programming distributors able to offer service to individual consumers' 
residences generally is the same within each local community, that set 
differs from one local community to another and can even vary within a 
local community. The markets for video programming distribution 
therefore are local.
    The geographic markets relevant to this transaction are the 
numerous local markets throughout the United States where Comcast is 
the incumbent cable operator and where Comcast through the JV will be 
able to withhold NBCU programming from, or raise programming costs to, 
Comcast's rival distributors. Comcast service areas cover 50 million 
U.S. television households or about 45 percent of households 
nationwide, with nearly half of those households (23 million) 
subscribing to at least one Comcast service. Competitive effects also 
may be felt in other areas because Comcast's competitors serve 
territories outside its cable footprint. If Comcast can disadvantage 
these rivals, for example by raising their costs, competition will be 
reduced everywhere these competitors provide service reflecting these 
higher costs. Thus, the potential anticompetitive effects of the 
transaction could extend to almost all Americans.
    The incumbent cable companies often dominate any particular market 
and typically hold well over 50 percent market shares within their 
franchise areas. For example, Comcast has market shares of 64 percent 
in Philadelphia, 62 percent in Chicago, 60 percent in Miami, and 58 
percent in San Francisco (based on MVPD subscribers). Combined, the DBS 
providers account for approximately 31 percent of video programming 
subscribers nationwide, although their shares vary and may be lower in 
any particular local market. Although AT&T and Verizon have had great 
success and achieved penetration (i.e., the percentage of households to 
which a provider's service is available that actually buys its service) 
as high as 40 percent in the selected communities they have entered, 
they currently have limited expansion plans. Overbuilders serve an even 
smaller portion of the United States.
2. Competition From OVDs
    OVDs are relatively recent entrants into the video programming 
distribution market. Their services are available to any consumer with 
high-speed Internet service sufficient to receive video of an 
acceptable quality. OVDs have increased substantially the amount of 
full-length professional content they distribute online. Viewership of 
video content distributed over the Internet has grown enormously and is 
expected to continue to grow. The number of adult Internet users who 
watch full-length television shows online is expected to increase from 
41.1 million in 2008 to 72.2 million in 2011.\7\ The total number of 
unique U.S. viewers of video who watch full-length television shows 
online grew 21 percent from 2008 to 2009.\8\ OVD revenues also have 
increased dramatically. Revenue associated with video content delivered 
over the Internet to televisions is expected to grow from $2 billion in 
2009 to over $17 billion in 2014.\9\
---------------------------------------------------------------------------

    \7\ Reaching Online Video Viewers with Long-Form Content, 
eMarketer.com (July 26, 2010), http://www3.emarketer.com/Article.aspx?R=1007830.
    \8\ Id.
    \9\ Robert Briel, Faster growth for web-to-TV video, Broadband 
TV News (Aug. 17, 2010), http://www.broadbandtvnews.com/2010/08/17/faster-growth-for-web-to-tv-video.
---------------------------------------------------------------------------

    One reason for the dramatic growth of online distribution is the 
increased consumer interest in on-demand viewing, especially among 
younger viewers who have grown up with the Internet, and are accustomed 
to viewing video at a time and on a device of their choosing.\10\ In 
response to competition by OVDs, MVPDs increasingly are offering more 
on-demand choices.
---------------------------------------------------------------------------

    \10\ See R. Thomas Umstead, Younger Viewers Watching More TV on 
the Web, Multichannel News (Apr. 12, 2010), http://www.multichannel.com/article/451376-Younger_Viewers_Watching_
More_Television_On_The_Web.php (survey of more than 1,000 people 
shows 23 percent under the age of 25 watch most of their television 
online).
---------------------------------------------------------------------------

a. OVD Business Models and Participants
    Recognizing the enormous potential of OVDs, dozens of companies are 
innovating and experimenting with products and services that either 
distribute online video programming or facilitate such distribution. 
New developments, products, and models are announced on almost a daily 
basis by companies seeking to satisfy consumer demand. A number of 
companies are committing significant resources to this industry.
    OVDs provide content using a variety of different business models. 
Some offer content on an ad-supported basis pursuant to which consumers 
pay nothing. One firm using this model is Hulu, which aggregates 
primarily current-season broadcast content from NBC, FOX, ABC, and 
others. Hulu has experienced substantial growth since its launch in 
2008, reaching 39 million unique viewers by February 2010.\11\
---------------------------------------------------------------------------

    \11\ Press Release, comScore Releases February 2010 U.S. Online 
Video Rankings, Hulu Viewer Engagement Up 120 percent vs. Year Ago 
to 2.4 Hours of Video per Viewer in February (Apr. 13, 2010), http://www.comscore.com/Press_Events/Press_Releases/2010/4/comScore_February_2010_U.S._Online_Video_Rankings.
---------------------------------------------------------------------------

    Netflix has pursued a different business model. It initially 
offered DVDs delivered by mail and then added unlimited streaming of a 
limited library of content over the Internet for a monthly subscription 
fee. Netflix has expanded its online library and introduced an 
Internet-only subscription service. Netflix content primarily consists 
of relatively recent movies, older movies, and past-season television 
shows. Netflix recently announced a deal with premium cable network 
EPIX for access to more movie

[[Page 5451]]

content that it will distribute over the Internet.\12\ Netflix also has 
grown substantially in the last several years, from 7.5 million 
subscribers at the end of 2007 to 16.9 million in the third quarter of 
2010.\13\
---------------------------------------------------------------------------

    \12\ Netflix, Inc., Q3 10 Management's commentary and financial 
highlights, at 2 (Oct. 20, 2010), available at http://files.shareholder.com/downloads/NFLX/1118542273x0x411049/157a4bc4-4cad-4d7b-9496-b59006d73344/Q310%20Management%27s%20commentary%20and%20%20highlights.pdf.
    \13\ Netflix, Inc., Form 10-K at 32 (Feb. 22, 2010); Press 
Release, Netflix, Inc. Netflix Announces Q3 2010 Financial Results, 
at 1 (Oct 20, 2010), available at http://files.shareholder.com/
downloads/NFLX/1118542273x0x411037/5a757dd5-b423-40d7-bb60-
3418356e582e/3Q10--Earnings--Release.pdf.
---------------------------------------------------------------------------

    Apple also is experimenting with different business models for 
video programming distribution. For several years it has offered 
content on an electronic sell-through (``EST'') basis through its Apple 
iTunes Store. Customers pay a per-transaction fee to buy television 
shows and movies and download them onto various electronic devices 
(e.g., iPod). Apple recently announced a service that allows consumers 
to rent television content on a per-transaction basis (e.g., $0.99 per 
show) and view it for a limited time. Other major companies are 
offering or planning to offer OVD services.\14\
---------------------------------------------------------------------------

    \14\ For example, Google recently launched GoogleTV, a device 
that enables viewers simultaneously to search the Internet and their 
MVPD service for content, and to switch back and forth on their 
televisions between content delivered over the Internet and content 
delivered by their MVPD. Press Release, Google, Industry Leaders 
Announce Open Platform to Bring Web to TV (May 20, 2010), http://www.google.com/intl/en/press/pressrel/20100520_googletv.html. 
Walmart recently acquired VUDU, an OVD service, and is making 
content available for EST and rental to VUDU-enabled devices. Press 
Release, Walmart Announces Acquisition of Digital Entertainment 
Provider, VUDU (Feb. 22, 2010), http://www.walmartstores.com/pressroom/news/9661.aspx. Amazon is reportedly developing an OVD 
service that allows Amazon service subscribers to stream television 
and movie content over the Internet. Nick Wingfield & Sam Schechner, 
No Longer Tiny, Netflix Gets Respect--and Creates Fear, Wall St. J. 
(Dec. 6, 2010), http://online.wsj.com/article/SB10001424052748704493004576001781352962132.html. Sears and Kmart 
recently announced the launch of an online video store, called 
Alphaline, which sells and rents movies and television shows. Paul 
Bond, Sears, Kmart launch Alphaline online video store,Reuters (Dec. 
30, 2010), http://www.reuters.com/article/idUSTRE6BT03C20101230.
---------------------------------------------------------------------------

    b. The Impact of OVDs
    Some of these OVD products and services undoubtedly will be viewed 
by consumers as closer substitutes for MVPD services than others. The 
extent to which an OVD service has the potential to become a better 
substitute for MVPD service will depend on a number of factors, such as 
the OVD's ability to obtain popular content, its ability to protect the 
licensed content from piracy, its financial strength, and its technical 
capabilities to deliver high-quality content. Moreover, as noted 
previously, OVDs' future competitive significance depends, in part, on 
robust broadband capacity. Accordingly, the competitive significance of 
OVDs is fostered by protecting broadband providers' economic incentives 
to upgrade and improve their broadband infrastructure, and obtain fair 
returns on that investment.
    Today, some consumers regard OVDs as acceptable substitutes for at 
least a portion of their traditional video programming distribution 
services. These consumers buy smaller content packages from traditional 
distributors, decline to take certain premium channels, or purchase 
fewer VOD offerings, and instead watch that content online, a practice 
known as ``cord-shaving.'' A small but growing number of MVPD customers 
are also ``cutting the cable cord'' completely in favor of OVDs. These 
customers may rely on an individual OVD or may view video content from 
a number of OVDs (e.g., Hulu ad-supported service, Netflix subscription 
service, Apple EST service) as a replacement for their MVPD service.
    When measured by the number of customers who are cord-shaving or 
cord-cutting, OVDs currently have a de minimis share of the video 
programming distribution market. Their current market share, however, 
greatly understates their potential competitive significance in this 
market. Whether viewers buy individual or a combination of OVD 
services, OVDs are likely to continue to develop into better 
substitutes for MVPD video services. Evolving consumer demand, 
improving technology (e.g., higher Internet access speeds, better 
compression technologies to improve picture quality, improved digital 
rights management to combat piracy), the increased choice of viewing 
devices, and advertisers' increasing willingness to place their ads on 
the Internet likely will make OVDs stronger competitors to MVPDs for an 
increasing number of viewers.\15\
---------------------------------------------------------------------------

    \15\ Historically, OTA distribution of broadcast network content 
has not served as a significant competitive constraint on MVPDs 
because of the limited number of channels offered. In addition, OTA 
distribution likely will not expand in the future because no new 
broadcast networks are likely to be licensed for distribution. Thus, 
OTA is unlikely to become a more significant video programming 
distributor. By contrast, OVDs are expanding rapidly and have the 
potential to provide increased and more innovative viewing options 
in the future.
---------------------------------------------------------------------------

    The development of the video programming distribution market--and 
in particular the success of OVDs--may influence any future analysis of 
consolidation in this market. Such analysis would follow standard 
merger evaluation principles and consider not only the role of OVDs, 
but also factors such as the extent to which the merging firms' 
offerings are close substitutes and compete directly. In this case, 
Defendants' own assessments--as reflected in numerous internal 
documents and their executives' testimony--of the importance of OVDs 
and their potential to alter dramatically the existing competitive 
landscape are particularly important to determining the relevant 
product market.
c. Comcast's and Other MVPDs' Reactions to the Growth of OVDs
    Comcast and other MVPDs recognize the threat posed to their video 
distribution business from the growth of OVDs. Many internal documents 
reflect Comcast's assessment that OVDs are growing quickly and pose a 
competitive threat to traditional forms of video programming 
distribution. In response to this threat, Comcast has taken significant 
steps to improve the quality of Fancast, its own Internet video 
service. Among other things, Comcast has attempted to obtain 
additional--and at times exclusive--content from programmers, and has 
made Fancast's user interface easier to navigate. Comcast also has 
increased the quality and quantity of the VOD content it offers as an 
adjunct to its traditional cable service.
    In addition, Comcast has created and implemented an 
``authentication'' system that enables its existing cable subscribers 
to view some video content over the Internet if the subscriber already 
pays for and receives the same content from Comcast through its 
traditional cable service. Internal documents expressly acknowledge 
that ``authentication'' is Comcast's and other MVPDs' attempt to 
counter the perceived threat posed by OVDs.
    Comcast's and other MVPDs' reactions to the emergence of OVDs 
demonstrate that they view OVDs as a future competitive threat and are 
adjusting their investment decisions today in response to that threat. 
Because OVDs today affect MVPDs' decisions, they are appropriately 
treated as participants in the market. Market definition considers 
future substitution patterns, and the investment decisions of MVPDs are 
strong evidence of market participants' view of the increased 
likelihood of consumer substitution

[[Page 5452]]

between MVPD and OVD services.\16\ This effect on investment is 
significant and could be diminished or even lost altogether if Comcast, 
through the JV, acquires the ability to delay or deter the development 
of OVDs.
---------------------------------------------------------------------------

    \16\ Cf. U.S. Dep't of Justice & Fed. Trade Comm'n, Horizontal 
Merger Guidelines Sec.  5.2 (Aug. 19, 2010), available at http://www.justice.gov/atr/public/guidelines/hmg-2010.html (``However, 
recent or ongoing changes in market conditions may indicate that the 
current market share of a particular firm either understates or 
overstates the firm's future competitive significance. The Agencies 
consider reasonably predictable effects or ongoing changes in market 
conditions when calculating and interpreting market share data.'').
---------------------------------------------------------------------------

D. The Anticompetitive Effects of the Proposed Transaction

    Antitrust law, including Section 7 of the Clayton Act, protects 
consumers from anticompetitive conduct, such as firms' acquisition of 
the ability to raise prices above levels that would prevail in a 
competitive market. It also ensures that firms do not acquire the 
ability to stifle innovation. Vertical mergers are those that occur 
between firms at different stages of the chain of production and 
distribution. Vertical mergers have the potential to harm competition 
by changing the merged firm's ability or incentives to deal with 
upstream or downstream rivals. For example, the merger may give the 
vertically integrated entity the ability to establish or protect market 
power in a downstream market by denying or raising the price of an 
input to downstream rivals that a stand-alone upstream firm otherwise 
would sell to those downstream firms. The merged firm may find it 
profitable to forego the benefits of dealing with its rivals in order 
to hobble them as competitors to its own downstream operations.
    A merged firm can more readily harm competition when its rivals 
offer new products or technologies whose competitive potential is 
evolving. Nascent competitors may be relatively easy to quash. For 
example, denying an important input, such as a popular television show, 
to a nascent competitor with a small customer base is much less costly 
in terms of foregone revenues than denying that same show to a more 
established rival with a larger customer base. Even if a vertical 
merger only delays nascent competition, an increase in the duration of 
a firm's market power can result in significant competitive harm. The 
application and enforcement of antitrust law is appropriate in such 
situations because promoting innovation is one of its important 
goals.\17\ The crucial role of innovation has led at least one noted 
commentator to argue that restraints on innovation ``very likely 
produce a far greater amount of economic harm than classical restraints 
on competition,'' and thus deserve special attention.\18\ By quashing 
or delaying the progress of rivals that attempt to introduce new 
products and technologies, the merged firm could slow the pace of 
innovation in the market and thus harm consumers.\19\
---------------------------------------------------------------------------

    \17\ U.S. Dep't of Justice & Fed. Trade Comm'n, Antitrust 
Guidelines for the Licensing of Intellectual Property Sec.  1 (Apr. 
1995), available at http://www.justice.gov/atr/atr/public/guidelines/0558.htm (``The antitrust laws promote innovation and 
consumer welfare by prohibiting certain actions that may harm 
competition with respect to either existing or new ways of serving 
consumers.''); see also 19A Phillip E. Areeda et al., Antitrust Law, 
] 1902a (2d ed. 2005) (``Our capitalist economic system places a 
very strong value on competition, not only to reduce costs but also 
to innovate new products and processes.'').
    \18\ Herbert Hovenkamp, Restraints on Innovation, 29 Cardozo L. 
Rev. 247, 253-54, 260 (2007) (``[N]o one doubts [the] basic 
conclusion that innovation and technological progress very likely 
contribute much more to economic growth than policy pressures that 
drive investment and output toward the competitive level.''); see 
also 4B Phillip E. Areeda et al., Antitrust Law, ] 407a (3d ed. 
2007); Willow A. Sheremata, Barriers to innovation: a monopoly, 
network externalities, and the speed of innovation, 42 Antitrust 
Bull. 937, 938 (1997) (```[I]n the long run it is dynamic 
performance that counts.' The speed of innovation is important to 
social welfare.'' (quoting F.M. Scherer & David Ross, Industrial 
Market Structure & Economic Performance 613 (3d ed. 1990))).
    \19\ See Sheremata, supra note 18, at 944 (``When owners of 
current technology raise artificial barriers to entry of new 
technology, opportunities for innovation decline to the detriment of 
consumers.'').
---------------------------------------------------------------------------

1. The Importance of Access to NBCU Content
    Generally, programmers want to distribute their content in multiple 
ways to maximize viewers' exposure to the content and the impact of any 
advertising revenues. Likewise, distributors must be able to license a 
sufficient quantity and quality of content to create a compelling video 
programming service. A distributor also must gain access to a 
sufficient variety of content from different sources. This 
``aggregation'' of a variety of content is important to a distributor's 
ability to succeed.
    NBCU content is extremely valuable to video programming 
distributors. NBC is one of the original three broadcast networks and 
has decades of history and brand name recognition. It carries general 
interest content that appeals to a wide variety of viewers. Surveys 
routinely rank the NBC network as one of the top four of all broadcast 
and cable networks. Similarly, NBCU's USA Network is highly valued and 
has been rated the top cable network for four of the past five years. 
Many of NBCU's other networks--Bravo, CNBC, MSNBC, SyFy--also are 
highly rated and valued by their audiences.
    The proposed transaction would give Comcast, through the JV, 
control of an important portfolio of current and library content. The 
ratings of each NBCU network are based on the popularity of the 
particular slate of shows currently on that network and can increase or 
decrease significantly from one television season to the next based on 
the gain or loss of hit shows. NBCU also has the ability to switch 
programming from one network to another, or otherwise make popular 
content from one network available to another. Through the JV, Comcast 
would gain the ability to impair emerging OVD competition by 
withholding or raising the prices of individual NBCU shows, or of 
linear feeds of one or more NBCU cable or broadcast networks. It is 
reasonable to examine the competitive impact of withholding NBCU 
content in the aggregate, rather than analyzing the value of any 
individual show or network to a competitor, because an aggregate 
withholding strategy would have the greatest impact on Comcast's 
downstream rivals.
2. The Proposed Transaction Increases the JV's Incentive and Ability To 
Harm Competitors
a. Ability and Incentive To Harm Rival MVPDs
    If the proposed transaction is approved, Comcast through the JV 
will gain control of NBCU's content, including a substantial amount of 
valuable broadcast and cable programming. Competing MVPDs will be 
forced to obtain licenses for NBCU content from their rival, Comcast. 
Unlike a stand-alone programmer, Comcast's pricing and distribution 
decisions will take into account the impact of those decisions on the 
competitiveness of rival MVPDs. As a result, Comcast will have a strong 
incentive to disadvantage its competitors by denying them access to 
valuable programming or raising their licensing fees above what a 
stand-alone NBCU would have found it profitable to charge.
    A stand-alone programmer typically attempts to maximize the 
combined license fee and advertising revenues from its programming by 
making its content available in multiple ways. The JV would continue to 
value widespread distribution of NBCU content, but it also would likely 
consider how access to that content makes Comcast's MVPD rivals better 
competitors. This could lead the JV to withhold content

[[Page 5453]]

altogether or, more likely, to insist on higher fees for the NBCU 
content from Comcast's MVPD competitors. Whether Comcast's rival MVPDs 
refuse to purchase the programming or agree to pay the higher fees, 
Comcast would benefit from weakening its MVPD rivals. Likewise, high 
licensing fees charged to other MVPDs and OVDs will also induce 
customers to switch to (or stay with) Comcast. These higher licensing 
fees will be reflected either in higher subscriber fees or, in the case 
of MVPDs building alternative cable distribution infrastructures, a 
smaller level of investment and, consequently, a smaller coverage area 
for the MVPD competing with Comcast. In either case, higher licensing 
fees will reduce pricing pressure on Comcast's MVPD business and 
increase its ability to raise prices to its subscribers.
    By disadvantaging competitors in this manner, Comcast through the 
JV will cause some of its rivals' customers to seek an alternative MVPD 
provider. Many of these dissatisfied customers likely will become 
Comcast subscribers, making it profitable for Comcast and the JV to 
increase licensing fees above the stand-alone NBCU levels. Those 
increased fees likely will lead to higher prices for subscribers of 
other MVPDs and perhaps further migration by those subscribers to 
Comcast.
    Licensing disputes in which a major broadcast network has pulled a 
network signal from an MVPD have resulted in the MVPD's loss of 
significant numbers of subscribers to its competitors. Through the 
formation of the JV, Comcast gains the rights to negotiate on behalf of 
the seven O&Os that operate in areas where it is the dominant cable 
company. It also becomes the owner of the NBC network, which may give 
it leverage to seek the rights to negotiate on behalf of NBCU's NBC 
network affiliate television stations, or at least the ability to 
influence affiliate negotiations, for retransmission consent rights in 
other areas of the United States. Comcast, through the JV, can withhold 
or raise the price of the NBC network to its rivals, thereby causing 
customers to shift away from the rival. Other NBCU programming also is 
important to consumers, and similar switching behavior could result if 
the JV were to withhold it from Comcast's rival MVPDs.
    Comcast has engaged in such strategies in the past. For example, 
Comcast has withheld its RSN in Philadelphia in order to discriminate 
against, and thereby disadvantage, DBS providers against which Comcast 
competes in that city. The DBS providers' market shares are lower and 
Comcast's subscription fees are higher in Philadelphia than in 
comparable markets. This appears to have been a profitable strategy for 
Comcast because the overall benefit to its cable business of retaining 
subscribers seems to have outweighed the substantial losses associated 
with failing to earn licensing fees for the withheld RSN from DBS 
companies.
    Post-transaction, Comcast's rival MVPDs would realize that, unlike 
the stand-alone NBCU, the JV will set higher licensing fees for NBCU 
that take into consideration Comcast's business profits. Some MVPDs 
might find it unprofitable to carry the programming at the prices the 
JV could command. Other MVPDs might agree to the JV's increased prices 
for the NBCU content given the likelihood that they would lose a large 
number of their subscribers if they did not carry the NBCU content.
    Lowering the profitability of Comcast's MVPD rivals also would 
weaken the incentives of some existing and future entrants to build out 
their systems, especially in areas Comcast currently serves, weakening 
the competitive constraints faced by Comcast. This weakened state of 
competition would allow Comcast, in turn, to decrease its investments 
and innovation to improve its own offerings. Higher subscription fees 
for Comcast services or decreased investment in improving their quality 
are less likely to induce customer switching to Comcast's MVPD rivals 
where those rivals are unable to match its programming or prices. As a 
result, Comcast could reinforce and even increase its dominant market 
share of video programming distribution in all areas of the country in 
which it operates.
b. Incentive and Ability To Harm OVDs
    Comcast, through the JV, also could discriminate against competing 
OVDs in similar ways, thereby diminishing the competitive threat posed 
by individual OVDs and impeding the development of OVDs, generally. The 
JV could charge OVDs higher content fees than the stand-alone NBCU 
would have charged, or impose different terms for NBCU content than 
Comcast negotiates for itself. The JV also could withhold NBCU content 
completely, thereby diminishing OVDs' ability to compete for video 
programming distribution customers, again to Comcast's benefit. Either 
situation could delay significantly the development of OVDs as a 
competitive alternative to traditional video programming distribution 
services.
    Over the last several years, NBCU has been one of the content 
providers most willing to experiment with different methods of online 
distribution. It was a driving force behind the creation and success of 
Hulu, and is now a partner in, and major content contributor to, the 
recently launched Hulu Plus, a subscription version of Hulu. Prior to 
the JV announcement, NBCU entered into several contracts with OVDs to 
distribute its content online through Apple iTunes and Amazon, and on a 
subscription basis through Netflix. Allowing the JV to proceed removes 
NBCU content from the control of a company that supported the 
development of OVDs and places it in the control of a company that 
views OVDs as a serious competitive threat.
    Finally, Comcast, through the JV, would gain control of NBCU's 
governance rights and 32 percent ownership interest in Hulu, a current 
and future competitor to Comcast's MVPD services. Hulu has achieved 
significant success since its launch in early 2008.
    Each of the media partners in Hulu, including NBCU, contributes 
content to Hulu and holds three seats on Hulu's Board of Directors. 
Significantly, any important or strategic decisions by Hulu require the 
unanimous approval of all members of the Board. Comcast's acquisition 
of NBCU's interest in Hulu would give it the ability to hamper Hulu's 
strategic and competitive development by refusing to agree to major 
actions by Hulu, or by blocking Hulu's access to NBCU content.
3. How the Formation of the JV Changes Comcast's Incentives and 
Abilities
    Post-transaction, the JV would gain increased bargaining leverage 
sufficient to negotiate higher prices or withhold NBCU content from 
Comcast's MVPD competitors. Comcast's rival distributors would have to 
pay the increased prices or not carry the programming. In either case, 
the MVPDs likely would be less effective competitors to Comcast, and 
Comcast would be able to delay or otherwise substantially impede the 
development of OVDs as alternatives to MVPDs.
    All of these activities could have a substantial anticompetitive 
effect on consumers and the market. Because Comcast would face less 
competition from other video programming distributors, it would be less 
constrained in its pricing decisions and have a reduced incentive to 
innovate. As a result, consumers likely would be forced to pay higher 
prices to obtain their video content or receive fewer benefits of 
innovation. They also would have fewer choices in the types of content 
and providers to which they

[[Page 5454]]

would have access, and there would be lower levels of investment, less 
experimentation with new models of delivering content, and less 
diversity in the types and range of product offerings.
4. Entry Is Unlikely To Reverse the Anticompetitive Effects of the JV
    Over the last decade, Comcast and other traditional video 
distributors benefited from an industry with limited competition and 
increasing prices,\20\ in part because successful entry into the 
traditional video programming distribution business is difficult and 
requires an enormous investment to create a distribution infrastructure 
such as building out wireline facilities or obtaining spectrum and 
launching satellites. Accordingly, additional entry into wireline or 
DBS distribution is not likely in the foreseeable future.\21\ Telcos 
have been willing to incur some of the enormous costs to modify their 
existing telephone infrastructure to distribute video, but only in 
certain areas, and they have recently indicated that further expansion 
will be limited for the foreseeable future.\22\
---------------------------------------------------------------------------

    \20\ See, e.g., Report on Cable Industry Prices, In re 
Implementation of Section 3 of the Cable Television Consumer 
Protection and Competition Act of 1992, 24 F.C.C.R. 259, ] 2 & chart 
1 (rel. Jan. 16, 2009), http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-09-53A1.pdf (data showing price of expanded basic 
service increased more than three times the consumer price index 
(CPI) between 1995 and 2008).
    \21\ Similarly, it is unlikely that an entrant would attempt to 
provide a traditional MVPD service with wireless technology, 
particularly given the difficulty in acquiring spectrum and the 
costs and risks of constructing such a system. See generally U.S. 
Dep't of Justice, Ex Parte Submission, In re Economic Issues in 
Broadband Competition, A National Broadband Plan for our Future, FCC 
GN Docket No. 09-51, at 8-11 (filed Jan. 4, 2010), available at 
http://www.justice.gov/atr/public/comments/_.htm.
    \22\ See, e.g., Transcript, Verizon at Credit Suisse Group 
Global Media and Communications Conference, at 11 (Mar. 8, 2010), 
available at http://investor.verizon.com/news/20100308/_;20100308--
transcript.pdf.
---------------------------------------------------------------------------

    OVDs, therefore, represent the most likely prospect for successful 
competitive entry into the existing video programming distribution 
market. However, they face the difficulty of obtaining access to a 
sufficient amount of content to become viable distribution businesses. 
In addition, OVDs rely upon the infrastructure of others, including 
Comcast, to deliver service to their customers. After the JV is formed, 
Comcast will control some of the most significant content needed by 
OVDs to successfully position themselves as a replacement for 
traditional video distribution providers.
5. Any Efficiencies Arising From the Deal Are Negligible or Not Merger-
Specific
    The Department considers expected efficiencies in determining 
whether to challenge a vertical merger. The potential anticompetitive 
harms from a proposed transaction are balanced against the asserted 
efficiencies of the transaction. The evidence does not show substantial 
efficiencies from the transaction.
    In particular, the JV is unlikely to achieve substantial savings 
from the elimination of double marginalization. Double marginalization 
occurs when two independent companies at different points in a 
product's supply chain each extract a profit margin above marginal 
cost. Because each firm in the supply chain treats the other firm's 
price (in lieu of its marginal cost) as a cost of producing the final 
good, each firm finds it profitable to produce a lower output than the 
firms would have produced had they accurately accounted for the social 
cost of producing the output. This ultimately results in a lower output 
(and a higher price to consumers) than would have occurred if the 
product had been produced by a combined firm. Despite a higher price, 
the lower output from double marginalization ultimately results in 
lower total profits for the entire supply chain.
    Vertical mergers often are procompetitive because they enable the 
merged firm to properly account for costs when determining output and 
setting a final product price. The combined firm no longer treats the 
profit of the other firm as part of the cost of production. Because the 
combined firm faces lower marginal costs, it may find it profitable to 
expand output and reduce the final product price. Lower marginal costs 
may result in better service, greater product quality or innovation, or 
other improvements.
    In certain industries, however, including the one at issue here, 
vertical mergers are far less likely to reduce or eliminate double 
marginalization. Documents, data, and testimony obtained from 
Defendants and third parties demonstrate that much, if not all, of any 
potential double marginalization is reduced, if not completely 
eliminated, through the course of contract negotiations between 
programmers and distributors over quantity and penetration discounts, 
tiering requirements, and other explicit and verifiable conditions.
    Other efficiencies claimed by Comcast are not specific to this 
transaction or not verifiable, or both. It is unlikely that the 
efficiencies associated with this transaction would be sufficient to 
undo the competitive harm that otherwise would result from the JV.

III. Explanation of the Proposed Final Judgment

    The proposed Final Judgment ensures that Comcast, through the JV, 
will not impede the development of emerging online video distribution 
competition by denying access to the JV's content to such competitors. 
The proposed Final Judgment also contains provisions that protect 
Comcast's traditional video distribution competitors. The proposed 
Final Judgment thereby protects consumers by eliminating the likely 
anticompetitive effects of the proposed transaction.

A. The Proposed Final Judgment Protects Emerging Online Video 
Competition

1. The Proposed Final Judgment Ensures That OVDs Have Access to the 
JV's Video Programming
    The proposed Final Judgment requires the JV to license its 
broadcast, cable, and film content to OVDs on terms comparable to those 
in similar licensing arrangements with MVPDs or OVDs. It provides two 
options through which an OVD will be able to obtain the JV's content.
    Under the first option, set forth in Section IV.A of the proposed 
Final Judgment, the JV must license linear feeds of video programming 
to any requesting OVD on terms that are economically equivalent to the 
terms on which the JV licenses that programming to MVPDs. Subject to 
some exceptions, the JV must make available to an OVD any channel or 
bundle of channels, and all quality levels and VOD rights, it provides 
to any MVPD with more than one million subscribers.
    The terms of the JV's license with the OVD need not match precisely 
any existing license between the JV and the MVPD, but it must 
reasonably approximate, in the aggregate, an existing licensing 
agreement. That approximation must account for factors, such as 
advertising revenues and any technical and economic limitations of the 
OVD seeking a license.
    The first option ensures that the JV will not be able to use its 
control of content to impede competitive pressure exerted on 
traditional forms of video programming distribution from OVDs that 
choose to offer linear channels and associated VOD content. The 
proposed Final Judgment uses Defendants' own contracts with MVPDs, 
including MVPDs that do not compete with

[[Page 5455]]

Comcast, as proxies for the content and terms the JV would be willing 
to provide to distributors if it did not have the incentive or ability 
to disadvantage them in order to maintain customers in or drive 
customers to Comcast's service.
    Under the second option, set forth in Section IV.B, the proposed 
Final Judgment requires the JV to license to an OVD, broadcast, cable, 
or film content comparable in scope and quality to the content the OVD 
receives from one of the JV's programming peers. For example, if an OVD 
receives each episode of five primetime television series from CBS for 
display in a subscription VOD service within 48 hours of the original 
airing, the JV must provide the OVD a comparable set of NBC broadcast 
television programs, as measured by volume and economic value, for 
display during the same subscription VOD window. The requirement 
applies to all JV content, even non-NBCU content, in order to ensure 
that the JV cannot undermine the purposes of the proposed Final 
Judgment by shifting content from one network to another.
    While the first option ensures that Comcast, through the JV, will 
not disadvantage OVD competitors in relation to MVPDs, the second 
option ensures that the programming licensed by the JV to OVDs will 
reflect the licensing trends of its peers as the industry evolves. 
Because the OVD industry is still developing, the contracts of the JV's 
peers also provide an appropriate benchmark for determining the terms 
and conditions under which content should be licensed to OVDs. The 
programming peers include the owners of the three major non-NBC 
broadcast networks (CBS, FOX, and ABC), the largest cable network 
groups (including News Corporation, Time Warner, Inc., Viacom, and The 
Walt Disney Company), and the six largest production studios (including 
News Corporation, Viacom, Sony Corporation of America, Time Warner 
Inc., and The Walt Disney Company).
    If an OVD and the JV are unable to reach an agreement for carriage 
of the JV's programming under either of these options, an OVD may apply 
to the Department for permission to submit its dispute to commercial 
arbitration in accordance with Section VII of the proposed Final 
Judgment. The FCC Order requires the JV to license content on 
reasonable terms to OVDs and includes an arbitration mechanism for 
resolution of disputes over access to programming. The FCC is the 
expert communications industry agency, and the Department worked very 
closely with the FCC in designing effective relief in this case. For so 
long as commercial arbitration is available for resolution of disputes 
in a timely manner under the FCC's rules and orders, the Department 
will ordinarily defer to the FCC's commercial arbitration process to 
resolve such disputes. OVDs are nascent competitors, however, and 
consistent with the Department's competition law enforcement mandate, 
the Department reserves the right, in its sole discretion, to permit 
arbitration pursuant to Section VII to advance the competitive 
objectives of the proposed Final Judgment. Although the Department may 
seek enforcement of the Final Judgment through traditional judicial 
process, the arbitration process will help ensure that OVDs can obtain 
content from the JV at a competitive price, without involving the 
Department or the Court in expensive and time-consuming litigation.\23\ 
To support the proposed Final Judgment's requirement that the JV 
license its programming to OVDs and assist the Department's oversight 
of this nascent competition, Comcast and NBCU are required, pursuant to 
Sections IV.M and IV.N, to maintain copies of agreements the JV has 
with any OVD as well as the identities of any OVD that has requested 
video programming from the JV.
---------------------------------------------------------------------------

    \23\ Under Section VI of the proposed Final Judgment, Defendants 
are required to license only video programming subject to their 
management or control or over which Defendants possess the power or 
authority to negotiate content licenses. NBCU has management rights 
in The Weather Channel, including the right to negotiate programming 
contracts on its behalf. NBCU currently is not exercising these 
rights. However, Section V.F provides that if the JV exercises them 
or otherwise influences The Weather Channel, this programming will 
be covered under the requirements of the proposed Final Judgment. 
Similarly, Section V.E exempts The Weather Channel, TV One, FearNet, 
the Pittsburgh Cable News Channel, and Hulu from the definitions of 
``Defendants'' and other related terms unless the Defendants gain 
control over those channels or the ability to negotiate or influence 
carriage contracts for those channels.
---------------------------------------------------------------------------

2. The Proposed Final Judgment Prevents Comcast, Through the JV, From 
Adversely Affecting Hulu
    Section IV.D of the proposed Final Judgment requires Defendants to 
relinquish their voting and other governance rights in Hulu, and 
Section IV.E prohibits them from receiving confidential or 
competitively sensitive information concerning Hulu. As noted above, 
Hulu is one of the most successful OVDs to date. Comcast has an 
incentive to prevent Hulu from becoming an even more attractive avenue 
for viewing video programming because Hulu would then exert increased 
competitive pressure on Comcast's cable business. If the proposed 
transaction were to be consummated without conditions, Defendants would 
hold seats on Hulu's Board of Directors and could exercise their voting 
and other governance rights to compromise strategic and competitive 
initiatives Hulu may wish to pursue. Requiring Defendants to relinquish 
their voting and governance rights in Hulu, and barring access to 
competitively sensitive information, will prevent Comcast, through the 
JV, from interfering with Hulu's competitive and strategic plans.
    At the same time, NBCU should not be permitted to abandon its 
commitments to provide Hulu video programming under agreements 
currently in place and deny Hulu customers the value of the JV's 
content. Therefore, Section IV.G of the proposed Final Judgment 
requires the JV to continue to supply Hulu with content commensurate 
with the supply of content provided to Hulu by its other media owners.
3. The Proposed Final Judgment Prohibits Defendants From Discriminating 
Against, Retaliating Against, or Punishing Video Programmers and OVDs
    The proposed Final Judgment protects the development of OVDs by 
prohibiting Defendants from engaging in certain conduct that would 
deter video programmers and OVDs from contracting with each other. 
Section V.A of the proposed Final Judgment prohibits Defendants from 
discriminating against, retaliating against, or punishing any content 
provider for providing programming to any OVD. Section V.A also 
prohibits Defendants from discriminating against, retaliating against, 
or punishing any OVD for obtaining video programming, for invoking any 
provisions of the proposed Final Judgment or any FCC rule or order, or 
for furnishing information to the Department concerning Defendants' 
compliance with the proposed Final Judgment.
4. The Proposed Final Judgment Prohibits Defendants From Limiting 
Distribution to OVDs Through Restrictive Licensing Practices
    The proposed Final Judgment further protects the development of 
OVDs by preventing Comcast from using its influence either as the 
nation's largest MVPD or as the licensor, through the JV, of important 
video programming to enter into agreements containing restrictive 
contracting terms. Video programming agreements often grant

[[Page 5456]]

licensees preferred or exclusive access to the programming content for 
a particular time period. Such exclusivity provisions can be 
competitively neutral, but also can have either pro- or anticompetitive 
purposes or effects. Sections V.B and V.C of the proposed Final 
Judgment set forth broad prohibitions on restrictive contracting 
practices, including exclusives, but then delineate a narrowly tailored 
set of exceptions to those bans. These provisions ensure that Comcast, 
through the JV, cannot use restrictive contract terms to harm the 
development of OVDs and, at the same time, preserve the JV's incentives 
to produce and exploit quality programming.
    The video programming distribution industry frequently uses 
exclusive contract terms that can be procompetitive. For instance, as 
discussed above, content producers often sequence the release of their 
content to various distribution platforms, a practice known as 
``windowing.'' These windows of exclusivity enable a content producer 
to maximize the revenues it earns on its content by separating 
customers based on their willingness to pay and effectively increasing 
the price charged to the customers that place a higher value on 
receiving content earlier. Exclusivity also encourages the various 
distributors, such as cable companies, to promote the content during a 
distribution window by assuring the distributor that the content will 
not be available through other distribution channels at a lower price. 
This ability to price discriminate across types of customers and 
increase promotion of the content increases the profitability of 
producing quality programming and encourages the production of more 
high-quality programming than otherwise would be the case. Exclusivity 
also may help a new competitor gain entry to a market by encouraging 
users to try a service they would not otherwise consider. For example, 
an OVD may desire a limited exclusivity window in order to market its 
exclusive access to certain programming provided by its service. This 
unique content makes the service more attractive to consumers and gives 
them a reason to replace their existing service or try something new.
    However, exclusivity restrictions also can serve anticompetitive 
ends. As a cable company, Comcast has the incentive to seek exclusivity 
provisions that would prevent content producers from licensing their 
content to alternative distributors, such as OVDs, for a longer period 
than the content producer ordinarily would find economically 
reasonable, in order to hinder OVD development. If Comcast could use 
exclusivity provisions to prevent the JV's peers from licensing content 
to OVDs that otherwise would obtain the rights to offer the 
programming, other provisions of the proposed Final Judgment designed 
to preserve and foster OVD competition could be effectively nullified.
    The proposed Final Judgment strikes a balance by allowing 
reasonable and customary exclusivity provisions that enhance 
competition while prohibiting those provisions that, without any 
offsetting procompetitive benefits, hinder the development of effective 
competition from OVDs. Section V.B of the proposed Final Judgment 
prohibits the JV from entering into any agreement containing terms that 
forbid, limit, or create economic incentives for the licensee to limit 
distribution of the JV's video programming through OVDs, unless such 
terms are common and reasonable in the industry. Evidence of what is 
common and reasonable industry practice includes, among other things, 
Defendants' contracting practices prior to the date that the JV was 
announced, as well as practices of the JV's video programming peers. 
This provision allows the JV to employ those pricing and contractual 
strategies used by its peers to maximize the value of the content it 
produces, while limiting Comcast's incentives, through the JV, to craft 
unusually restrictive contractual terms in the JV's contracts with 
third parties, the purpose of which is to limit the access of OVDs to 
content produced by the JV. Section V.C of the proposed Final Judgment 
prohibits Comcast from entering into or enforcing agreements for 
carriage of video programming on its cable systems that forbid, limit, 
or create incentives that limit the provision of video programming to 
OVDs. Section V.C establishes three narrow exceptions to this broad 
prohibition. First, Comcast may obtain a 30-day exclusive from free 
online display if Comcast pays for the video programming. Second, 
Comcast may enter into an agreement in which the programmer provides 
content exclusively to Comcast, and to no other MVPD or OVD, for 14 
days or less. Third, Comcast may condition carriage of programming on 
its cable system on terms which require it to be treated in material 
parity with other similarly situated MVPDs, except to the extent such 
terms would be inconsistent with the purpose of the proposed Final 
Judgment. These provisions are designed to ensure that Comcast, either 
alone or in conjunction with the JV, cannot use existing or new 
contracts to dictate the terms of the video programming agreements that 
the JV's peers are able to offer OVDs, thereby hindering the 
development of OVDs.
5. The Proposed Final Judgment Prohibits Unreasonable Discrimination in 
Internet Broadband Access
    Section V.G of the proposed Final Judgment requires Comcast to 
abide by certain restrictions on the operation and management of its 
Internet facilities. Without these restrictions Comcast would have the 
ability and the incentive to undermine the effectiveness of the 
proposed Final Judgment. Comcast is the dominant high-speed ISP in much 
of its footprint and therefore could disadvantage OVDs in ways that 
would prevent them from becoming better competitive alternatives to 
Comcast's video programming distribution services. OVDs are dependent 
upon ISPs' access networks to deliver video content to their 
subscribers. Without the protections secured in the proposed Final 
Judgment, Comcast would have the ability, for instance, to give 
priority to non-OVD traffic on its network, thus adversely affecting 
the quality of OVD services that compete with Comcast's own MVPD or OVD 
services. Comcast also would be able to favor its own services by not 
subjecting them to the network management practices imposed on other 
services.
    Section V.G.1 of the proposed Final Judgment prohibits Comcast from 
unreasonably discriminating in the transmission of lawful traffic over 
its Internet access service, with the proviso that reasonable network 
management practices do not constitute unreasonable discrimination. 
This provision requires Comcast to treat all Internet traffic the same 
and, in particular, to ensure that OVD traffic is treated no worse than 
any other traffic on Comcast's Internet access service, including 
traffic from Comcast and NBCU sites. Similarly, Section V.G.2 prohibits 
Comcast from excluding their own services from any caps, tiers, 
metering, or other usage-based billing plans, and requires them to 
ensure that OVD traffic is counted in the same way as Comcast's 
traffic, and that billing plans are not used to disadvantage an OVD in 
favor of Comcast. Many high-speed Internet providers are evaluating 
usage-based billing plans. These plans may more efficiently apportion 
infrastructure costs across users, offer lower-cost service to low-
volume subscribers, or divert high-volume usage to non-peak hours. 
However, these plans also have the potential to increase the cost of 
high-volume services, such as video distribution, that may compete with 
an MVPD's video services. Section V.G.2

[[Page 5457]]

addresses this concern by ensuring that under these plans Comcast must 
treat other OVD services just as it treats its own Internet-based video 
services.
    Specialized Services are offered to consumers over the same last-
mile facilities as Internet access services, but are separate from the 
public Internet. The potential benefits of Specialized Services include 
the facilitation of services that might not otherwise be technically or 
economically feasible on current networks and the development of new 
and innovative services, such as services that may compete directly 
with Comcast's own MVPD offerings. If Comcast were to offer online 
video services through Specialized Services, however, it could 
effectively avoid the prohibitions in Sections V.G.1 and V.G.2. 
Sections V.G.3 and V.G.4 recognize both the potential benefits and the 
risks of Specialized Services and strike a balance to protect the 
beneficial development of these services while preventing Comcast from 
using them anticompetitively to benefit its own content. Section V.G.3 
prohibits Comcast from offering Specialized Services that are comprised 
substantially or entirely of the JV's content. Section V.G.4 requires 
Comcast to allow any OVD access to a Specialized Service if other OVDs, 
including Comcast, are being offered access. Together, these two 
provisions ensure that OVDs will have access to any Specialized Service 
Comcast may offer that includes comparable services.
    Finally, Section V.G.5 ensures that Comcast will maintain its 
public Internet access service at a level that typically would allow 
any user on the network to download content from the public Internet at 
speeds of at least 12 megabits per second in markets where it has 
deployed DOCSIS 3.0. The requirement to maintain service at this speed 
may be adjusted by the Court upon a showing that other comparable high-
speed Internet access providers offer higher or lower speeds. These 
speeds are sufficient to ensure that Comcast's Internet access services 
can support the development of OVDs as well as other services that are 
potentially competitive with Comcast's own offerings.
    In interpreting Section V.G and the terms used therein, the 
Department will be informed by the FCC's Report and Order, In re 
Preserving the Open Internet Broadband Industry Practices, GN Docket 
No. 90-191 & WC Docket No. 07-52, adopted December 21, 2010.

B. The Proposed Final Judgment Preserves Traditional Video Competition

    A number of FCC orders issued in prior mergers established a 
commercial arbitration process for resolution of disputes over access 
to broadcast network programming and regional sports networks. The FCC 
Order approving this transaction requires the JV to license all of its 
programming to MVPDs, including its cable networks, and includes an 
arbitration mechanism that contains several enhancements to its 
existing commercial arbitration process when licensing disputes between 
Defendants and other MVPDs arise.\24\ The Department believes that 
these enhancements, combined with the FCC's experience in MVPD 
arbitration disputes, should protect MVPDs' access to the JV's 
programming without need of another commercial arbitration mechanism 
for MVPDs under this proposed Final Judgment.
---------------------------------------------------------------------------

    \24\ For example, the FCC Order allows an MVPD claimant to 
demand arbitration of programming on a stand-alone basis in certain 
circumstances. It also allows a claimant whose contract with the JV 
has expired to continue to carry the JV's programming during the 
pendency of the dispute, subject to a true-up. The FCC Order also 
contains further modifications to the arbitration process relating 
to smaller MVPDs.
---------------------------------------------------------------------------

    In addition to the protections contained in the FCC Order, the 
proposed Final Judgment, in Section V.A, prohibits Defendants from 
discriminating against, retaliating against, or punishing any MVPD for 
obtaining video programming, for furnishing any information to the 
United States about any noncompliance with the proposed Final Judgment, 
or for invoking the arbitration provisions of the FCC Order. Section 
V.D also prevents Defendants from requiring or encouraging their local 
broadcast network affiliates to deny MVPDs the right to carry the local 
network signals. To aid the enforcement of this prohibition, pursuant 
to Sections IV.J and IV.K, Comcast and NBCU are required to maintain 
not only their network affiliate agreements, but also all documents 
discussing whether any of their affiliates has withheld or threatened 
to withhold retransmission consent from any MVPD.

C. Term of the Proposed Final Judgment

    Section XI of the proposed Final Judgment provides that the Final 
Judgment will expire seven years from the date of entry unless extended 
by the Court. The FCC Order also lasts for seven years. The Department 
believes this time period is long enough to ensure that the JV cannot 
deny access to Comcast's OVD competitors at a crucial point in their 
development but otherwise short enough to account for the rapidly 
evolving nature of the video distribution market.

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys' fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 
16(a), the proposed Final Judgment has no prima facie effect in any 
subsequent private lawsuit that may be brought against Defendants.

V. Procedures Available for Modification of the Proposed Final Judgment

    The Department and Defendants have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the Department has not withdrawn 
its consent. The APPA conditions entry upon the Court's determination 
that the proposed Final Judgment is in the public interest.
    The APPA provides a period of at least 60 days preceding the 
effective date of the proposed Final Judgment within which any person 
may submit to the Department written comments regarding the proposed 
Final Judgment. Any person who wishes to comment should do so within 60 
days of the date of publication of this Competitive Impact Statement in 
the Federal Register, or the last date of publication in a newspaper of 
the summary of this Competitive Impact Statement, whichever is later. 
All comments received during this period will be considered by the 
Department, which remains free to withdraw its consent to the proposed 
Final Judgment at any time prior to the Court's entry of judgment. The 
comments and the response of the Department will be filed with the 
Court and published in the Federal Register.
    Written comments should be submitted to: Nancy M. Goodman, Chief, 
Telecommunications and Media Enforcement Section, Antitrust Division, 
United States Department of Justice, 450 Fifth Street, NW., Suite 7000, 
Washington, DC 20530.
    The proposed Final Judgment provides that the Court retains

[[Page 5458]]

jurisdiction over this action, and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    The United States considered, as an alternative to the proposed 
Final Judgment, seeking preliminary and permanent injunctions against 
Defendants' transaction and proceeding to a full trial on the merits. 
The United States is satisfied, however, that the relief in the 
proposed Final Judgment will preserve competition for the provision of 
video programming distribution services in the United States. Thus, the 
proposed Final Judgment would protect competition as effectively as 
would any remedy available through litigation, but avoids the time, 
expense, and uncertainty of a full trial on the merits.

VII. Standard of Review Under the APPA for the Proposed Final Judgment

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a sixty-day comment period, after which the court shall 
determine whether entry of the proposed Final Judgment ``is in the 
public interest.'' 15 U.S.C. 16(e)(1). In making that determination, 
the court, in accordance with the statute as amended in 2004, is 
required to consider:

    (A) the competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) the impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if 
any, to be derived from a determination of the issues at trial.

15 U.S.C. 16(e)(1)(A), (B). In considering these statutory factors, the 
court's inquiry is necessarily a limited one as the government is 
entitled to ``broad discretion to settle with the defendant within the 
reaches of the public interest.'' United States v. Microsoft Corp., 56 
F.3d 1448, 1461 (DC Cir. 1995); see also United States v. InBev N.V./
S.A., No. 08-1965 (JR), 2009-2 Trade Cas. (CCH) ] 76,736, 2009 U.S. 
Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that the 
court's review of a consent judgment is limited and only inquires 
``into whether the government's determination that the proposed 
remedies will cure the antitrust violations alleged in the complaint 
was reasonable, and whether the mechanisms to enforce the final 
judgment are clear and manageable.''). See generally United States v. 
SBC Comm., Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public 
interest standard under the Tunney Act).\25\
---------------------------------------------------------------------------

    \25\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for court to consider and amended the 
list of factors to focus on competitive considerations and to 
address potentially ambiguous judgment terms. Compare 15 U.S.C. 
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Comm., 
489 F. Supp. 2d at 11 (concluding that the 2004 amendments 
``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------

    As the United States Court of Appeals for the District of Columbia 
Circuit has held, under the APPA a court considers, among other things, 
the relationship between the remedy secured and the specific 
allegations set forth in the government's complaint, whether the decree 
is sufficiently clear, whether enforcement mechanisms are sufficient, 
and whether the decree may positively harm third parties. Microsoft, 56 
F.3d at 1458-62. With respect to the adequacy of the relief secured by 
the decree, a court may not ``engage in an unrestricted evaluation of 
what relief would best serve the public.'' United States v. BNS, Inc., 
858 F.2d 456, 462 (9th Cir. 1988) (citing United States v. Bechtel 
Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d 
at 1460-62; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 
(D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Courts have 
held that:

[t]he balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\26\ In 
determining whether a proposed settlement is in the public interest, a 
district court ``must accord deference to the government's predictions 
about the efficacy of its remedies, and may not require that the 
remedies perfectly match the alleged violations.'' SBC Comm., 489 F. 
Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 (noting the need 
for courts to be ``deferential to the government's predictions as to 
the effect of the proposed remedies''); United States v. Archer-
Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that 
the court should grant ``due respect to the government's prediction as 
to the effect of proposed remedies, its perception of the market 
structure, and its views of the nature of the case'').
---------------------------------------------------------------------------

    \26\ Cf. BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree''); United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the 
court is constrained to ``look at the overall picture not 
hypercritically, nor with a microscope, but with an artist's 
reducing glass''). See generally Microsoft, 56 F.3d at 1461 
(discussing whether ``the remedies [obtained in the decree are] so 
inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest' '').
---------------------------------------------------------------------------

    Courts have greater flexibility in approving proposed consent 
decrees than in crafting their own decrees following a finding of 
liability in a litigated matter. ``[A] proposed decree must be approved 
even if it falls short of the remedy the court would impose on its own, 
as long as it falls within the range of acceptability or is `within the 
reaches of public interest.''' United States v. Am. Tel. & Tel. Co., 
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United 
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd 
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also 
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 
1985) (approving the consent decree even though the court might have 
imposed a greater remedy if the matter had been litigated). To meet 
this standard, the Department ``need only provide a factual basis for 
concluding that the settlements are reasonably adequate remedies for 
the alleged harms.'' SBC Comm., 489 F. Supp. 2d at 17.
    Moreover, the court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its Complaint, and does not authorize the court to 
``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459; see also InBev, 2009 
U.S. Dist. LEXIS 84787, at *20 (``[T]he `public interest' is not to be 
measured by comparing the violations alleged in the complaint against 
those the court believes could have, or even should have, been 
alleged.''). Because the ``court's authority to review the decree

[[Page 5459]]

depends entirely on the government's exercising its prosecutorial 
discretion by bringing a case in the first place,'' it follows that 
``the court is only authorized to review the decree itself,'' and not 
to ``effectively redraft the complaint'' to inquire into other matters 
that the United States did not pursue. Microsoft, 56 F.3d at 1459-60. 
As this Court recently confirmed in SBC Communications, courts ``cannot 
look beyond the complaint in making the public interest determination 
unless the complaint is drafted so narrowly as to make a mockery of 
judicial power.'' SBC Comm., 489 F. Supp. 2d at 15. In its 2004 
amendments, Congress made clear its intent to preserve the practical 
benefits of utilizing consent decrees in antitrust enforcement, adding 
the unambiguous instruction that ``[n]othing in this section shall be 
construed to require the court to conduct an evidentiary hearing or to 
require the court to permit anyone to intervene.'' 15 U.S.C. 16(e)(2). 
The language wrote into the statute what Congress intended when it 
enacted the Tunney Act in 1974, as Senator Tunney explained: ``[t]he 
court is nowhere compelled to go to trial or to engage in extended 
proceedings which might have the effect of vitiating the benefits of 
prompt and less costly settlement through the consent decree process.'' 
119 Cong. Rec. 24,598 (1973) (statement of Senator Tunney). Rather, the 
procedure for the public interest determination is left to the 
discretion of the court, with the recognition that the court's ``scope 
of review remains sharply proscribed by precedent and the nature of 
Tunney Act proceedings.'' SBC Comm., 489 F. Supp. 2d at 11.\27\
---------------------------------------------------------------------------

    \27\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the 
court to make its public interest determination on the basis of the 
competitive impact statement and response to comments alone''); 
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ] 
61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt 
failure of the government to discharge its duty, the Court, in 
making its public interest finding, should * * * carefully consider 
the explanations of the government in the competitive impact 
statement and its responses to comments in order to determine 
whether those explanations are reasonable under the 
circumstances.''); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6 
(1973) (``Where the public interest can be meaningfully evaluated 
simply on the basis of briefs and oral arguments, that is the 
approach that should be utilized.'').
---------------------------------------------------------------------------

VIII. Determinative Documents

    Appendix F to the FCC's Memorandum Opinion and Order, In re 
Applications of Comcast Corp., General Electric Co. and NBC Universal, 
Inc. for Consent to Assign Licenses and Transfer Control of Licensees, 
FCC MB Docket No. 10-56 (adopted Jan. 18, 2011), was the only 
determinative document or material within the meaning of the APPA 
considered by the Department in formulating the proposed Final 
Judgment. The Department will file a notice and link to this document 
as soon as it is posted on the FCC's Web site.

Dated: January 18, 2011.

Respectfully submitted,

/s/--------------------------------------------------------------------

Yvette F. Tarlov (D.C. Bar 442452)
Attorney, Telecommunications & Media Enforcement, Antitrust 
Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 
7000, Washington, DC 20530, Telephone: (202) 514-5621, Facsimile: 
(202) 514-6381, Email: [email protected].

In the United States District Court for the District of Columbia

United States of America, State of California, State of Florida, 
State of Missouri, State of Texas, and State of Washington, 
Plaintiffs, v.
Comcast Corp., General Electric Co., and NBC Universal, Inc., 
Defendants.

Civil Action No.

[Proposed] Final Judgment

    Whereas, Plaintiffs, the United States of America and the States of 
California, Florida, Missouri, Texas, and Washington, filed their 
Complaint on January 18, 2011, alleging that Defendants propose to 
enter into a joint venture that will empower Defendant Comcast 
Corporation to block competition from video programming distribution 
competitors in violation of Section 7 of the Clayton Act, as amended, 
15 U.S.C. 18, and Plaintiffs and Defendants, by their respective 
attorneys, have consented to the entry of this Final Judgment without 
trial or adjudication of any issue of fact or law, and without this 
Final Judgment constituting any evidence against or admission by any 
party regarding any issue of fact or law;
    And whereas, Defendants agree to be bound by the provisions of this 
Final Judgment pending its approval by the Court;
    And whereas, Plaintiffs require Defendants to agree to undertake 
certain actions and refrain from certain conduct for the purpose of 
remedying the loss of competition alleged in the Complaint;
    And whereas, Defendants have represented to the United States that 
the actions and conduct restrictions can and will be undertaken and 
that Defendants will later raise no claim of hardship or difficulty as 
grounds for asking the Court to modify any of the provisions contained 
below;
    Now therefore, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of 
Defendants, it is ordered, adjudged, and decreed:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of and each of 
the parties to this action. The Complaint states a claim upon which 
relief may be granted against Defendants under Section 7 of the Clayton 
Act, as amended, 15 U.S.C. 18.

II. Definitions

    As used in this Final Judgment:
    A. ``AAA'' means the American Arbitration Association.
    B. ``Affiliated'' means directly or indirectly controlling, 
controlled by, or under common control with a Person.
    C. ``Broadcast Network'' means The Walt Disney Company (ABC), CBS 
Inc. (CBS), News Corporation (FOX), NBCU (NBC and Telemundo), or any 
other Person that provides live or recorded Video Programming for 
broadcast over a group of local television stations.
    D. ``Broadcast Network Peer'' means (1) CBS Inc. (CBS), News 
Corporation (FOX), or The Walt Disney Company (ABC); or (2) any of the 
top four Broadcast Networks, measured by the total annual net revenue 
earned by the Broadcast Network from the broadcast of live or recorded 
Video Programming over a group of local television stations. Defendants 
are not Broadcast Network Peers, even if they are one of the top four 
Broadcast Networks.
    E. ``Business Model'' means the primary method by which Video 
Programming is monetized (e.g., ad-supported, subscription without ads, 
subscription with ads, electronic sell through, or pay per view/
transactional video on demand).
    F. ``Cable Programmer'' means Time Warner, Inc., The Walt Disney 
Company, News Corporation, Viacom, Inc., NBCU, or any other Person that 
provides Video Programming for distribution through MVPDs. A Person 
that provides Video Programming to MVPDs solely as a Broadcast Network 
or as a Network Affiliate, O&O, or local television station operating 
within its licensed territory is not a Cable Programmer.
    G. ``Cable Programmer Peer'' means (1) News Corporation, Time 
Warner, Inc., Viacom, Inc., or The Walt Disney Company; or (2) any of 
the top five Cable Programmers, measured by the total annual net 
revenue earned by the Cable Programmer from its cable networks, as 
reported by SNL Kagan (or another source commonly relied upon in the 
television industry), excluding revenues earned from regional sports 
networks. Defendants are not Cable

[[Page 5460]]

Programmer Peers, even if they are one of the top five Cable 
Programmers.
    H. ``Comcast'' means Comcast Corporation, a Pennsylvania 
corporation with its principal place of business in Philadelphia, 
Pennsylvania, its successors and assigns, and its Subsidiaries (whether 
partially or wholly owned), divisions, groups, Partnerships, and Joint 
Ventures, and their directors, officers, managers, agents, and 
employees.
    I. ``Defendants'' means Comcast, General Electric, and NBCU, acting 
individually or collectively, as appropriate. Where the Final Judgment 
imposes an obligation to engage in or refrain from engaging in certain 
conduct, that obligation shall apply to each Defendant individually and 
to any Joint Venture established by any two or more Defendants.
    J. ``Department of Justice'' means the United States Department of 
Justice Antitrust Division.
    K. ``Experimental Deal'' means an agreement between an OVD and a 
Peer for a term of six months or less.
    L. ``Film'' means a feature-length motion picture that has been 
theatrically released.
    M. ``Final Offer'' means a proposed contract identifying the Video 
Programming Defendants are to provide to OVDs pursuant to Section IV.A 
or IV.B of this Final Judgment and containing the proposed price, 
terms, and conditions on which Defendants will provide that Video 
Programming.
    N. ``General Electric'' means General Electric Company, a New York 
corporation with its principal place of business in Fairfield, 
Connecticut, its successors and assigns, and its Subsidiaries (whether 
partially or wholly owned), divisions, groups, Partnerships, and Joint 
Ventures, and their directors, officers, managers, agents, and 
employees.
    O. ``Hulu'' means Hulu, LLC, a Delaware limited liability company 
with its headquarters in Los Angeles, California, its successors and 
assigns, and its Subsidiaries (whether partially or wholly owned), 
divisions, groups, Partnerships, and Joint Ventures, and their 
directors, officers, managers, agents, and employees.
    P. ``Internet Access Service'' means a mass-market retail 
communications service by wire or radio that provides the capability to 
transmit data to and receive data from all or substantially all 
Internet endpoints, including any capabilities that are incidental to 
and enable the operation of the communications service, but excluding 
dial-up Internet access service. Internet Access Service does not 
include virtual private network services, content delivery network 
services, multichannel video programming services, hosting or data 
storage services, or Internet backbone services (if those services are 
separate from Internet Access Services).
    Q. ``MVPD'' means a multichannel video programming distributor as 
that term is defined on the date of entry of this Final Judgment in 47 
CFR 76.1200(b).
    R. ``NBCU'' means NBC Universal, Inc., a Delaware corporation with 
its principal place of business in New York, New York, its successors 
and assigns, and its Subsidiaries (whether partially or wholly owned), 
divisions, groups, Partnerships, and Joint Ventures, and their 
directors, officers, managers, agents, and employees.
    S. ``Network Affiliate'' means a local television station that 
broadcasts some or all of the Video Programming of Defendants' 
Broadcast Networks (i.e., NBC or Telemundo). A Network Affiliate is 
owned and operated by Persons other than Defendants.
    T. ``O&O'' means a local television station owned and operated by 
Defendants that broadcasts the Video Programming of one of Defendants' 
Broadcast Networks (i.e., NBC or Telemundo).
    U. ``OVD'' means any Person that distributes Video Programming in 
the United States by means of the Internet or another IP-based 
transmission path provided by a Person other than the OVD. This 
definition (1) includes an MVPD that offers Video Programming by means 
of the Internet or another IP-based transmission path outside its MVPD 
footprint as a service separate and independent of an MVPD 
subscription; and (2) excludes an MVPD that offers Video Programming by 
means of the Internet or another IP-based transmission path to homes 
inside its MVPD footprint as a component of an MVPD subscription.
    V. ``Peer'' means any Broadcast Network Peer, Cable Programmer 
Peer, or Production Studio Peer, its successors, assigns, and any 
Person that is managed or controlled by any Broadcast Network Peer, 
Cable Programmer Peer, or Production Studio Peer. Defendants are not 
Peers.
    W. ``Person'' means any natural person, corporation, company, 
partnership, joint venture, firm, association, proprietorship, agency, 
board, authority, commission, office, or other business or legal 
entity, whether private or governmental.
    X. ``Plaintiff States'' means the States of California, Florida, 
Missouri, Texas, and Washington.
    Y. ``Production Studio'' means Time Warner, Inc. (Warner Bros. 
Television and Warner Bros. Pictures), News Corporation (20th Century 
Fox Television and 20th Century Fox), Viacom, Inc. (Viacom's television 
production subsidiaries and Paramount Pictures), Sony Corporation of 
America (Sony Pictures Television and Sony Pictures Entertainment), The 
Walt Disney Company (Disney-ABC Studios and the Walt Disney Motion 
Pictures Group), NBCU (Universal Pictures, Focus Films, and Universal 
Studios), and any other Person that produces Video Programming for 
distribution through Broadcast Networks or Cable Programmers.
    Z. ``Production Studio Peer'' means (1) News Corporation, Viacom, 
Inc., Sony Corporation of America, Time Warner, Inc., or The Walt 
Disney Company; or (2) any of the top six Production Studios, measured 
by the total annual net revenue earned by the Production Studio from 
the sale or licensing of Video Programming. Defendants are not 
Production Studio Peers, even if they are one of the top six Production 
Studios.
    AA. ``Qualified OVD'' means any OVD that has an agreement with a 
Peer for the license of Video Programming to the OVD (other than an 
agreement under which an OVD licenses only short programming segments 
or clips from the Peer), where the OVD is not Affiliated with the Peer.
    BB. ``Specialized Service'' means any service provided over the 
same last-mile facilities used to deliver Internet Access Service other 
than (1) Internet Access Services, (2) services regulated either as 
telecommunications services under Title II of the Communications Act or 
as MVPD services under Title VI of the Communications Act, or (3) 
Defendants' existing VoIP telephony service.
    CC. ``Subsidiary,'' ``Partnership,'' and ``Joint Venture'' refer to 
any Person in which there is partial (25 percent or more) or total 
ownership or control between the specified Person and any other Person.
    DD. ``Value'' means the economic value of Video Programming based 
on, among other factors, the Video Programming's ratings (as measured 
by The Nielsen Company or other Person commonly relied upon in the 
television industry for television ratings), affiliate fees, 
advertising revenues, and the time elapsed since the Video Programming 
was first distributed to consumers by a Broadcast Network or Cable 
Programmer.
    EE. ``Video Programming'' means programming provided by, or 
generally considered comparable to programming

[[Page 5461]]

provided by, a Broadcast Network or Cable Programmer, regardless of the 
medium or method used for distribution, and includes programming 
prescheduled by the programming provider (also known as scheduled 
programming or a linear feed); programming offered to viewers on an on-
demand, point-to-point basis (also known as video on demand); pay per 
view or transactional video on demand; short programming segments 
related to other full-length programming (also known as clips); 
programming that includes multiple video sources (also known as feeds, 
including camera angles); programming that includes video in different 
qualities or formats (including high-definition and 3D); and Films for 
which a year or more has elapsed since their theatrical release. For 
purposes of this Final Judgment, Video Programming shall not include 
programming over which General Electric possesses ownership or control 
that is unrelated to its ownership interest in NBCU.

III. Applicability

    This Final Judgment applies to Defendants and all other Persons in 
active concert or participation with any of them who receive actual 
notice of this Final Judgment by personal service or otherwise.

IV. Required Conduct

Provision of Economically Equivalent Video Programming Terms to OVDs

    A. At the request of any OVD, Defendants shall provide, for 
distribution to consumers through a linear feed (plus any associated 
video-on-demand rights), all Video Programming they provide to any MVPD 
in the United States with more than one million subscribers, on terms 
that are Economically Equivalent to the terms on which Defendants 
provide Video Programming to that MVPD.
    For purposes of this Section IV.A:
    1. ``Economically Equivalent'' means the price, terms, and 
conditions that, in the aggregate, reasonably approximate those on 
which Defendants provide Video Programming to an MVPD, and shall take 
account of, among other things, any difference in advertising revenues 
earned by Defendants through OVD distribution and those earned through 
MVPD distribution; any limitation of Defendants' legal rights to 
provide Video Programming as a linear feed over the Internet or other 
IP-based transmission path; any generally applicable, market-based 
requirements regarding minimum subscriber and penetration rates; and 
any other evidence concerning differences in revenues earned by 
Defendants in connection with the provision of Video Programming to the 
OVD rather than to an MVPD.
    2. Defendants shall provide to any requesting OVD all Video 
Programming subject to Defendants' management or control and all Video 
Programming, including Video Programming owned by another Person, over 
which Defendants possess the power or authority to negotiate content 
licenses.
    3. At the request of the OVD, Defendants shall provide any bundle 
of channels, and all quality formats (e.g., high definition, 3D) and 
video-on-demand rights that Defendants provide to any MVPD in the 
United States with more than one million subscribers.
    4. Subject to other provisions of this Section IV.A, Defendants 
shall not apply to an OVD any terms or conditions contained in 
Defendants' agreements with MVPDs that would not be technically or 
economically practicable if applied generally to Video Programming 
distributed by OVDs (e.g., that the OVD distribute Video Programming 
over an MVPD system).
    5. In any agreement they enter into with an OVD under this Section 
IV.A, Defendants may require that the OVD not distribute Defendants' 
Video Programming to consumers (a) if Defendants' Video Programming 
constitutes more than 45 percent of the OVD's Video Programming 
(measured by hours available to subscribers), and (b) until at least 
one Peer has agreed to provide Video Programming to the OVD (including, 
if the Defendants agree to provide NBC Video Programming to the OVD, at 
least one Broadcast Network Peer).
    6. Defendants may condition their provision of Video Programming to 
an OVD under this Section IV.A on the OVD's (a) Agreement not to 
distribute the Video Programming to consumers through a Web site 
promoting or communicating the availability or accessibility of 
pornography, gambling, or unlawful activities; (b) reasonable 
demonstration of its ability to meet its financial obligations; (c) 
demonstration of its ability to satisfy reasonable quality and 
technical requirements for the display and secure protection of 
Defendants' Video Programming; (d) agreement to limit the distribution 
of an O&O's Video Programming linear feed solely to that O&O's 
designated market area or ``DMA''; or (e) agreement to limit the 
distribution of Defendants' Video Programming to the territory of the 
United States.

Provision of Comparable Video Programming to OVDs

    B. At the request of any Qualified OVD, Defendants shall provide 
Comparable Video Programming to the Qualified OVD on terms that are 
Economically Equivalent to the price, terms, and conditions on which 
the Qualified OVD receives Video Programming from a Peer.
    For purposes of this Section IV.B:
    1. ``Economically Equivalent'' means price, terms, and conditions 
that, in the aggregate, reasonably approximate those on which the Peer 
provides Video Programming to the Qualified OVD, and shall take account 
of, among other things, any difference between the Value of the Video 
Programming the Qualified OVD seeks from Defendants and the Value of 
the Video Programming it receives from a Peer.
    2. ``Comparable'' Video Programming means Defendants' Video 
Programming that is reasonably similar in kind and amount to the Video 
Programming provided by the Peer, considering the volume (i.e., number 
of channels or shows) of Video Programming and its Value.
    3. The following, among other types of Video Programming, are not 
Comparable:
    a. First-day Video Programming and Video Programming distributed 
after Defendants' first-day distribution of that Video Programming to 
consumers;
    b. Repeat, prior-season Video Programming and original, first-run 
Video Programming;
    c. Non-sports Video Programming and sports Video Programming;
    d. Broadcast Video Programming and cable Video Programming;
    e. Video Programming directed to children and Video Programming not 
directed to children;
    f. Local news Video Programming and Video Programming that is not 
local news;
    g. Film and non-Film Video Programming; and
    h. Film between one and five years from initial distribution and 
Film over five years from initial distribution.
    4. In any agreement they enter into with an OVD under this Section 
IV.B, Defendants shall not be required to include exclusivity 
provisions for Comparable Video Programming even if the Qualified OVD's 
Peer agreement includes exclusivity provisions, provided that the 
price, terms, and conditions on which Defendants provide Video 
Programming to the Qualified OVD shall be adjusted so that, in the 
aggregate, they reasonably approximate the price, terms, and

[[Page 5462]]

conditions on which the Peer provides Video Programming to the 
Qualified OVD.
    5. If a Qualified OVD receives Video Programming from two or more 
Peers in any single Peer category (i.e., Broadcast Network Peers, Cable 
Programmer Peers, or Production Studio Peers) and pursuant to the same 
Business Model, Defendants shall provide, pursuant to this Section 
IV.B, Video Programming Comparable to the Video Programming of one Peer 
in that category selected by the Qualified OVD. If a Qualified OVD 
receives Video Programming from a Peer in two or more Peer categories, 
Defendants shall provide Video Programming Comparable to the Peer in 
both or all categories. If a Qualified OVD receives Video Programming 
from two or more Peers in the same Peer category but pursuant to 
different Business Models, Defendants shall provide Video Programming 
Comparable to each Peer pursuant to the Business Model specified in 
each Peer contract.
    6. In responding to a request from a Qualified OVD to which 
Defendants have provided Video Programming under this Section IV.B, 
Defendants shall not be required to provide additional Video 
Programming unless the Qualified OVD enters into a Video Programming 
agreement with (a) A Peer in a different Peer category (i.e., Broadcast 
Network Peers, Cable Programmer Peers, or Production Studio Peers), (b) 
the same Peer under a different Business Model, or (c) the same Peer 
for additional Video Programming pursuant to the same Business Model.
    7. At the request of an OVD with which Defendants have an agreement 
to provide Video Programming that subsequently becomes a Qualified OVD, 
Defendants shall provide additional or different Video Programming so 
the Video Programming Defendants provide to the Qualified OVD 
(including any Video Programming the Defendants have previously agreed 
to provide to the OVD) is Comparable to that which the Qualified OVD 
receives from the Peer.
    8. Defendants may require the Qualified OVD to distribute Video 
Programming obtained from Defendants pursuant to the Business Model 
under which the Qualified OVD distributes the Peer's Video Programming.
    9. The number of Experimental Deals to which Defendants, at the 
request of Qualified OVDs, must respond by providing Comparable Video 
Programming is limited to the maximum number of Experimental Deals any 
single Peer has entered into with OVDs.
    10. If a Cable Programmer Peer provides substantially all of its 
cable channels to a Qualified OVD for distribution to consumers through 
a linear feed, Defendants may meet their obligation under this Section 
IV.B to provide Comparable Video Programming by providing to the 
Qualified OVD and requiring the Qualified OVD to distribute 
substantially all of Defendants' channels.

OVD Rights to Commercial Arbitration

    C. If, after negotiations, in which Defendants shall participate in 
good faith and with reasonable diligence, Defendants and any OVD fail 
to agree on appropriate Economically Equivalent terms on which 
Defendants must provide Video Programming under Sections IV.A or IV.B 
of this Final Judgment or on Comparable Video Programming under Section 
IV.B of this Final Judgment, the OVD may apply to the Department of 
Justice (but not to the Plaintiff States) for permission to submit its 
dispute with Defendants to commercial arbitration in accordance with 
Section VII of this Final Judgment. For so long as commercial 
arbitration is available for the resolution of such disputes in a 
timely manner under the Federal Communications Commission's rules and 
orders, the Department of Justice will ordinarily defer to the Federal 
Communications Commission's commercial arbitration process to resolve 
such disputes; provided that the Department of Justice reserves the 
right, in its sole discretion, to permit arbitration under this Final 
Judgment to advance the competitive objectives of this Final Judgment. 
Nothing in this Section IV.C shall limit the right of the United States 
to apply to this Court, pursuant to Section IX of this Final Judgment, 
either before or in place of commercial arbitration under Section VII 
of this Final Judgment, for an order enforcing Defendants' compliance 
or punishing their noncompliance with their obligations under Sections 
IV.A and IV.B of this Final Judgment.

Disposition of Control Over Hulu

    D. Within ten days after entry of this Final Judgment, Defendants 
shall (1) delegate any voting and other rights they hold pursuant to 
their ownership interest in Hulu in a manner that directs and 
authorizes Hulu to cast any votes related to such ownership interest in 
an amount and manner proportional to the vote of all other votes cast 
by other Hulu owners; and (2) relinquish any veto right or other right 
to influence, control, or participate in the governance or management 
of Hulu; provided that such delegation and relinquishment shall 
terminate upon Defendants' complete divestiture of their ownership 
interests in Hulu.
    E. Defendants shall not read, receive, obtain, or attempt to obtain 
any confidential or competitively sensitive information concerning Hulu 
or influence, interfere, or attempt to influence or interfere in the 
management or operation of Hulu. Notwithstanding the foregoing, 
Defendants may request and receive from Hulu regularly prepared, 
aggregated financial statements and information reasonably necessary 
for Defendants to exercise their rights to purchase advertising 
inventory from Hulu and to comply with their obligations under Section 
IV.G of this Final Judgment.
    F. Defendants shall not obtain or acquire any ownership interest in 
Hulu beyond that which it possessed on January 1, 2011. Nothing in this 
Section IV.F shall prohibit Defendants from receiving a proportional or 
less than proportional distribution of Hulu equity securities in 
connection with any future conversion of Hulu into a corporation, 
provided that Defendants' economic share in Hulu may not increase in 
connection with such distribution.
    G. Defendants shall continue to provide Video Programming to Hulu 
of a type, quantity, ratings, and quality comparable to that of the 
Broadcast Network owner of Hulu providing the greatest quantity of 
Video Programming to Hulu. Provided that the other current Broadcast 
Network owners of Hulu renew their agreements with Hulu, Defendants 
also either shall continue to provide Video Programming to Hulu on 
substantially the same terms and conditions as were in place on January 
1, 2011, or shall enter into agreements with Hulu on substantially the 
same terms and conditions as those of the Broadcast Network owner whose 
renewed agreement is the most economically advantageous to Hulu.

Clear Delineation of Rights

    H. Any agreement Defendants enter into with any Production Studio 
concerning Defendants' distribution of the Production Studio's Video 
Programming shall include, unless inconsistent with common and 
reasonable industry practice and subject to any agreements not 
prohibited by Section V.B of this Final Judgment, either (1) an express 
grant by the Production Studio to Defendants of the right to provide 
the Video Programming to OVDs, or (2) an express retention of that 
right by the Production Studio.

[[Page 5463]]

Document Retention and Disclosures

    I. Comcast and NBCU shall furnish to the Department of Justice and 
the Plaintiff States quarterly electronic copies of any communications 
with any MVPD, OVD, Broadcast Network, Cable Programmer, or Production 
Studio containing allegations of Defendants' noncompliance with any 
provision of this Final Judgment.
    J. Comcast and NBCU shall collect and maintain one copy of each of 
the following agreements, currently in effect or established after 
entry of this Final Judgment:
    1. Each affiliation agreement between Defendants and any Network 
Affiliate;
    2. Each agreement under which a Network Affiliate authorizes 
Defendants to negotiate on its behalf for carriage or retransmission on 
MVPDs;
    3. Each agreement for the carriage or retransmission of an O&O's or 
a Network Affiliate's (to the extent Defendants possess the power or 
authority to negotiate on behalf of the Network Affiliate) Video 
Programming on an MVPD; and
    4. Each syndication agreement under which Defendants provide Video 
Programming to an O&O or Network Affiliate for distribution to 
consumers.
    K. Comcast and NBCU shall collect and maintain each document in 
their possession, custody, or control discussing an O&O's or a Network 
Affiliate's denial or threat to deny Video Programming to an MVPD or 
OVD. Defendants shall notify the Department of Justice and the 
Plaintiff States within 30 days of learning that an O&O or a Network 
Affiliate has denied or threatened to deny Video Programming to any 
MVPD or OVD.
    L. Comcast and NBCU shall collect and maintain documents sufficient 
to show the compensation each O&O and each Network Affiliate (about 
which Comcast or NBCU possesses information) receives from any MVPD or 
OVD.
    M. Comcast and NBCU shall collect and maintain complete copies of 
any final agreement or unsigned but operative agreement (1) under which 
Defendants provide Video Programming (other than short programming 
segments or clips) to any MVPD or OVD, and (2) for Defendants' carriage 
or retransmission on their MVPD of Video Programming from a Network 
Affiliate, a local television station, a Broadcast Network, or a Cable 
Programmer. For any ongoing negotiations that have not yet produced a 
final or operative agreement, Comcast and NBCU shall also collect and 
maintain electronic copies of the most recent offer made to Defendants 
by an MVPD or OVD seeking Video Programming or by a Network Affiliate, 
local television station, Broadcast Network, or Cable Programmer 
seeking carriage or retransmission on Defendants' MVPD, and Defendants' 
most recent response or offer to any such Persons.
    N. Comcast and NBCU shall identify for the Department of Justice 
and the Plaintiff States semiannually
    1. the name of each Person that in writing has requested or 
submitted to Defendants a contractual offer for Video Programming 
(other than short programming segments or clips) for distribution to 
consumers, the date of such Person's most recent written request or 
contractual offer, and the date of Defendants' most recent response or 
offer to such Person; and
    2. the name of each Person that in writing has requested or 
submitted a contractual offer for carriage or retransmission of the 
Person's Video Programming on Defendants' MVPD, the date of such 
Person's most recent written request or contractual offer, and the date 
of Defendants' most recent response or offer to such Person.
    O. Comcast and NBCU shall collect and maintain each document sent 
to or received from General Electric relating to (1) Defendants' 
provision of Video Programming to any MVPD or OVD, (2) any OVD's 
distribution of any Person's Video Programming to consumers, (3) 
carriage or retransmission of any Person's Video Programming on 
Defendants' MVPD, or (4) Defendants' compliance or noncompliance with 
the terms of this Final Judgment.

V. Prohibited Conduct

Discrimination and Retaliation

    A. Defendants shall not discriminate against, retaliate against, or 
punish (1) any Broadcast Network, Cable Programmer, Production Studio, 
local television station, or Network Affiliate for providing Video 
Programming to any MVPD or OVD, or (2) any MVPD or OVD (i) for 
obtaining Video Programming from any Broadcast Network, Cable 
Programmer, Production Studio, local television station, or Network 
Affiliate, (ii) for invoking any provisions of this Final Judgment, 
(iii) for invoking the provisions of any rules or orders concerning 
Video Programming adopted by the Federal Communications Commission, or 
(iv) for furnishing information to the United States or the Plaintiff 
States concerning Defendants' compliance or noncompliance with this 
Final Judgment.

Contractual Provisions

    B. Defendants shall not enter into any agreement pursuant to which 
Defendants provide Video Programming to any Person in which Defendants 
forbid, limit, or create economic incentives to limit the distribution 
of such Video Programming through OVDs, provided that, nothing in this 
Section V.B shall prohibit Defendants from entering into agreements 
consistent with common and reasonable industry practice. Evidence 
relevant to determining common and reasonable industry practice may 
include, among other things, Defendants' contracting practices prior to 
December 3, 2009, and the contracting practices of Defendants' Peers. 
Notwithstanding any other provision in this Section V.B, in providing 
Comparable Video Programming to a Qualified OVD under Section IV.B of 
this Final Judgment, Defendants may include exclusivity provisions only 
to the extent those provisions are no broader than any exclusivity 
provisions in the Qualified OVD's agreement with a Peer.
    C. Defendants shall not enter into or enforce any agreement for 
Defendants' carriage or retransmission on their MVPD of Video 
Programming from a local television station, Network Affiliate, 
Broadcast Network, or Cable Programmer under which Defendants forbid, 
limit, or create incentives to limit the local television station's, 
Network Affiliate's, Broadcast Network's, or Cable Programmer's 
provision of its Video Programming to one or more OVDs, provided that, 
nothing in this Section V.C shall prohibit Defendants from
    1. entering into and enforcing an agreement under which Defendants 
discourage or prohibit a local television station, Network Affiliate, 
Broadcast Network, or Cable Programmer from making Video Programming 
for which Defendants pay available to consumers for free over the 
Internet within the first 30 days after Defendants first distribute the 
Video Programming to consumers;
    2. entering into and enforcing an agreement under which the local 
television station, Network Affiliate, Broadcast Network, or Cable 
Programmer provides Video Programming exclusively to Defendants, and to 
no other MVPD or OVD, for a period of time of not greater than 14 days; 
or
    3. entering into and enforcing an agreement which requires that 
Defendants are treated in material parity with other similarly situated 
MVPDs, except to the extent application of other

[[Page 5464]]

MVPDs' terms would be inconsistent with the purpose of this Final 
Judgment.

Control or Influence Over Other Persons

    D. Except as permitted by Section V.B of this Final Judgment, 
Defendants shall not require, encourage, unduly influence, or provide 
incentives to any local television station or Network Affiliate to
    1. Deny Video Programming to (a) any MVPD that provides Video 
Programming to consumers in any zip code in which Comcast also provides 
Video Programming to consumers or (b) any OVD; or
    2. Provide Video Programming on terms that exceed its Value.
    E. Notwithstanding any other provisions of this Final Judgment, 
including the definitions of ``Defendant,'' ``Comcast,'' ``NBCU,'' 
``General Electric,'' ``Subsidiary,'' ``Partnership,'' or ``Joint 
Venture,'' unless Comcast, NBCU, or General Electric possesses or 
acquires control over The Weather Channel, TV One, FearNet, the 
Pittsburgh Cable News Channel, or Hulu, or the right or ability to 
negotiate for any of those Persons or to influence negotiations for the 
provision of any such Person's Video Programming to MVPDs or OVDs, such 
Person is not a Defendant subject to the obligations of this Final 
Judgment.
    F. Defendants shall not exercise any rights under any existing 
management or operating agreement with The Weather Channel to 
participate in negotiations for the provision of any of The Weather 
Channel's Video Programming to any MVPD or OVD, to advise The Weather 
Channel concerning any such negotiations, or to approve or obtain any 
information (other than aggregated financial reports) about any 
agreement between The Weather Channel and any MVPD or OVD. If, in the 
future, Defendants acquire the right to negotiate for The Weather 
Channel or to exercise any control or influence over The Weather 
Channel's negotiation of agreements with MVPDs or OVDs, Defendants 
shall provide The Weather Channel Video Programming to OVDs when 
required to do so under Sections IV.A or IV.B of this Final Judgment.

Practices Concerning Comcast's Internet Facilities

    G. Comcast shall abide by the following restrictions on the 
management and operation of its Internet facilities:
    1. Comcast, insofar as it is engaged in the provision of Internet 
Access Service, shall not unreasonably discriminate in transmitting 
lawful network traffic over a consumer's Internet Access Service. 
Reasonable network management shall not constitute unreasonable 
discrimination. A network management practice is reasonable if it is 
appropriate and tailored to achieving a legitimate network management 
purpose, taking into account the particular network architecture and 
technology of the Internet Access Service.
    2. If Comcast offers consumers Internet Access Service under a 
package that includes caps, tiers, metering, or other usage-based 
pricing, it shall not measure, count, or otherwise treat Defendants' 
affiliated network traffic differently from unaffiliated network 
traffic. Comcast shall not prioritize Defendants' Video Programming or 
other content over other Persons' Video Programming or other content.
    3. Comcast shall not offer a Specialized Service that is 
substantially or entirely comprised of Defendants' affiliated content.
    4. If Comcast offers any Specialized Service that makes content 
from one or more third parties available to (or that otherwise enables 
the exchange of network traffic between one or more third parties and) 
its subscribers, Comcast shall allow any other comparable Person to be 
included in a similar Specialized Service on a nondiscriminatory basis.
    5. Comcast shall offer Internet Access Service that is sufficiently 
provisioned to ensure, in DOCSIS 3.0 or better markets, that an 
Internet Access Service subscriber can typically achieve download 
speeds of at least 12 megabits per second. The United States or 
Defendants may petition this Court, based upon a showing that 
comparable Internet Access Service providers (e.g., Persons using 
hybrid fiber-coax technology to provide service on a mass-market scale) 
have generally increased or decreased the speed of their services after 
the entry of this Final Judgment, to modify Comcast's required download 
speeds. This Section V.G does not restrict Comcast's ability to impose 
byte caps or consumption-based billing, subject to the other provisions 
of this Final Judgment.
    6. Nothing in this Section V.G
    a. Supersedes any obligation or authorization Comcast may have to 
address the needs of emergency communications or law enforcement, 
public safety, or national security authorities, consistent with or as 
permitted by applicable law, or limits Comcast's ability to do so; or
    b. Prohibits reasonable efforts by Comcast to address copyright 
infringement or other unlawful activity.

VI. Permitted Conduct

    Nothing in this Final Judgment prohibits Defendants from refusing 
to provide to any MVPD or OVD any Video Programming (1) for which 
Defendants do not possess copyright rights; (2) not subject to 
Defendants' management or control or over which Defendants do not 
possess the power or authority to negotiate content licenses; or (3) 
the provision of which would require Defendants' to breach any contract 
not prohibited by Sections V.B or V.C of this Final Judgment.

VII. Arbitration

    A. Defendants shall negotiate in good faith and with reasonable 
diligence to provide Video Programming sought by an OVD pursuant to 
Sections IV.A and IV.B of this Final Judgment and, upon demand by an 
OVD approved by the Department of Justice pursuant to Section IV.C of 
this Final Judgment, shall participate in commercial arbitration in 
accordance with the procedures herein.
    B. Defendants and an OVD may, by agreement, modify any time periods 
specified in this Section VII.
    C. Any OVD seeking to invoke commercial arbitration under this 
Final Judgment must, pursuant to Section IV.C of this Final Judgment, 
apply to the Department of Justice for permission to do so. If the 
Department of Justice determines the commercial arbitration should 
proceed, the OVD shall furnish a written notice to Defendants and the 
Department of Justice expressly (1) waiving all rights to invoke any 
dispute resolution process under Federal Communications Commission 
orders and rules to resolve a dispute with Defendants concerning the 
same Video Programming; and (2) stating that the OVD consents to be 
bound by the terms in the Final Offer selected by the arbitrator. 
Arbitration under this Final Judgment is not available if a dispute 
between an OVD and Defendants concerning the same Video Programming is 
the subject of any Federal Communications Commission dispute resolution 
process. Defendants shall not (a) commence arbitration of any dispute 
under the arbitration procedures contained in this Final Judgment, or 
(b) upon receipt of the notice from the OVD that it intends to commence 
arbitration under this Final Judgment, commence any Federal 
Communications Commission dispute resolution process to resolve the 
same dispute with the OVD.
    D. Arbitration pursuant to this Final Judgment shall be conducted 
in accordance with the AAA's Commercial

[[Page 5465]]

Arbitration Rules and Expedited Procedures, except where inconsistent 
with specific procedures prescribed by this Final Judgment. As 
described below in Sections VII.P and VII.Q, the arbitrator shall 
select the Final Offer of either the OVD or the Defendants and may not 
alter, or request or demand alteration of, any terms of those Final 
Offers. The decision of the arbitrator shall be binding on the parties, 
and Defendants shall abide by the arbitrator's decision.
    E. The AAA, in consultation with the United States, shall assemble 
a list of potential arbitrators, to be furnished to the OVD and 
Defendants as soon as practicable after commencement of the 
arbitration. Within five business days after receipt of this list, the 
OVD and Defendants each may submit to the AAA the names of up to 20 
percent of the persons on the list to be excluded from consideration, 
and shall rank the remaining arbitrators in their orders of preference. 
The AAA, in consultation with the United States, will appoint as 
arbitrator the candidate with the highest ranking who is not excluded 
by the OVD or Defendants.
    F. Defendants shall continue to provide Video Programming to an OVD 
pursuant to the terms of any existing agreement until the arbitration 
is completed. If the arbitrator's decision changes the financial terms 
on which Defendants must provide Video Programming to the OVD, 
Defendants or the OVD, as the case may be, shall compensate the other 
based on application of the new financial terms for the period dating 
from expiration of the existing agreement (plus appropriate interest).
    G. Within five business days of the commencement of an arbitration, 
the OVD and the Defendants each shall furnish a writing to the other 
and to the Department of Justice committing to maintain the 
confidentiality of the arbitration and of any Final Offers and 
discovery materials exchanged during the arbitration, and to limit the 
use of any Final Offers and discovery materials to the arbitration. The 
writing shall expressly state that all records of the arbitration and 
any discovery materials may be disclosed to the Department of Justice..
    H. Defendants shall not be bound by the provisions of this Section 
VII if an OVD commences arbitration under this Final Judgment more than 
60 days prior to the expiration of an existing Video Programming 
agreement, or less than 30 days after an OVD first requests Defendants 
to provide Video Programming under Section IV.A or IV.B of this Final 
Judgment.
    I. After an OVD receives approval from the Department of Justice, 
pursuant to Section IV.C of this Final Judgment, the OVD may commence 
arbitration by filing with the AAA and furnishing to Defendants and to 
the Department of Justice.
    1. An assertion that Defendants must provide Video Programming to 
the OVD pursuant to Section IV.A or IV.B of this Final Judgment; and
    2. If the Qualified OVD's assertion is based, pursuant to Section 
IV.B of this Final Judgment, on Comparable Video Programming provided 
by a Peer or Peers, each agreement with any such Peers.
    J. Simultaneously with the commencement of arbitration, the OVD 
must file with the AAA its Final Offer for the Video Programming it 
believes Defendants must provide.
    K. Within five business days of the commencement of an arbitration, 
Defendants shall file with the AAA and furnish to the Department of 
Justice their Final Offer for the Video Programming sought by the OVD.
    L. After the AAA has received Final Offers from the OVD and 
Defendants, it will immediately furnish a copy of each Final Offer to 
the other party.
    M. At any time after the commencement of arbitration, the OVD and 
Defendants may agree to suspend the arbitration, for periods not to 
exceed 14 days in the aggregate, to attempt to resolve their dispute 
through negotiation. The OVD and the Defendants shall effectuate such 
suspension through a joint writing filed with the AAA and furnished to 
the Department of Justice. Either the OVD or the Defendants may 
terminate the suspension at any time by filing with the AAA and 
furnishing to the Department of Justice a writing calling for the 
arbitration to resume.
    N. The OVD and the Defendants shall exchange written discovery 
requests within five business days of receiving the other party's Final 
Offer, and shall exercise reasonable diligence to respond within 14 
days. Discovery shall be limited to the following items in the 
possession of the parties:
    1. Previous agreements between the OVD and the Defendants;
    2. Formal offers to renew previous agreements;
    3. Current and prior agreements between the Defendants and MVPDs or 
other OVDs;
    4. Current and prior agreements between the OVD and other Broadcast 
Networks, Cable Programmers, or Production Studios;
    5. Records of past arbitrations pursuant to this Final Judgment;
    6. Documents reflecting Nielsen or other ratings of the Video 
Programming at issue or of Comparable Video Programming; and
    7. Documents reflecting the number of subscribers to the OVD. There 
shall be no discovery or use in the arbitration of documents or 
information not in the possession, custody, or control of the OVD or 
the Defendants, of draft agreements or other documents concerning 
negotiations between the OVD and the Defendants (other than formal 
offers to renew previous agreements, pursuant to Section VII.N.2 of 
this Final Judgment), or of the costs associated with Defendants' 
production of their Video Programming.
    O. In reaching his or her decision, the arbitrator may consider 
only documents exchanged in discovery between the parties and the 
following:
    1. Testimony explaining the documents and the parties' Final 
Offers;
    2. Briefs submitted and arguments made by counsel; and
    3. Summary exhibits illustrating the terms of Defendants' 
agreements with MVPDs or other OVDs or of the party OVD's agreements 
with other Broadcast Networks, Cable Programmers, or Production 
Studios.
    P. Arbitrations under Section IV.A of this Final Judgment shall 
begin within 30 days of the AAA furnishing to the OVD and to the 
Defendants, pursuant to Section VII.L of this Final Judgment, each 
party's Final Offer. The arbitration hearing shall last no longer than 
ten business days, after which the arbitrator shall have five business 
days to inform the OVD and the Defendants which Final Offer best 
reflects the appropriate Economically Equivalent terms under Section 
IV.A of the Final Judgment.
    Q. Arbitrations under Section IV.B of this Final Judgment shall be 
conducted in two stages, the first of which shall begin within 30 days 
of the AAA furnishing to the Qualified OVD and to the Defendants, 
pursuant to Section VII.L of this Final Judgment, each party's Final 
Offer. The first stage shall last no longer than ten business days, 
after which the arbitrator shall have five business days to inform the 
Qualified OVD and the Defendants which Final Offer encompasses the 
appropriate Comparable Video Programming under Section IV.B of this 
Final Judgment. Within five business days of the arbitrator's decision, 
the Qualified OVD and the Defendants shall file with the AAA, furnish 
to the Department of Justice, and exchange revised Final Offers 
containing proposed financial terms for the Comparable Video 
Programming selected by the arbitrator. The second stage of the 
arbitration shall

[[Page 5466]]

commence within ten days of the exchange of the revised Final Offers 
and shall last no longer than ten business days, after which the 
arbitrator shall have five business days to inform the Qualified OVD 
and the Defendants which Final Offer best reflects the appropriate 
Economically Equivalent terms under Section IV.B of this Final 
Judgment.

VIII. Compliance Inspection

    A. For purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time duly authorized representatives of the Department of 
Justice, including consultants and other persons retained by the 
Department of Justice, shall, upon written request of an authorized 
representative of the Assistant Attorney General in charge of the 
Antitrust Division, and on reasonable notice to Defendants, be 
permitted
    1. Access during the Defendants' office hours to inspect and copy, 
or at the option of the United States, to require Defendants to provide 
to the United States and the Plaintiff States hard copy or electronic 
copies of, all books, ledgers, accounts, records, data, and documents 
in the possession, custody, or control of Defendants, relating to any 
matters contained in this Final Judgment, including documents 
Defendants are required to collect and maintain pursuant to Sections 
IV.J, IV.K, IV.L, IV.M, or IV.O of this Final Judgment; and
    2. To interview, either informally or on the record, the 
Defendants' officers, employees, or agents, who may have their 
individual counsel present, regarding such matters. The interviews 
shall be subject to the reasonable convenience of the interviewee and 
without restraint or interference by Defendants.
    B. Upon the written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
Defendants shall submit written reports or respond to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment as may be requested. Written 
reports authorized under this paragraph may, at the sole discretion of 
the United States (after consultation with the Plaintiff States), 
require Defendants to conduct, at their cost, an independent audit or 
analysis relating to any of the matters contained in this Final 
Judgment.
    C. No information or documents obtained by the means provided in 
this section shall be divulged by the United States to any person other 
than an authorized representative of (1) the executive branch of the 
United States, (2) the Plaintiff States, or (3) the Federal 
Communications Commission, except in the course of legal proceedings to 
which the United States is a party (including grand jury proceedings), 
or for the purpose of securing compliance with this Final Judgment, or 
as otherwise required by law.
    D. If at the time information or documents are furnished by a 
Defendant to the United States and the Plaintiff States, the Defendant 
represents and identifies in writing the material in any such 
information or documents to which a claim of protection may be asserted 
under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure, and the 
Defendant marks each pertinent page of such material, ``Subject to 
claim of protection under Rule 26(c)(1)(G) of the Federal Rules of 
Civil Procedure,'' then the United States and the Plaintiff States 
shall give the Defendant ten calendar days notice prior to divulging 
such material in any civil or administrative proceeding.

IX. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to apply to 
this Court at any time for further orders and directions as may be 
necessary or appropriate to carry out or construe this Final Judgment, 
to modify any of its provisions, to enforce compliance, and to punish 
violations of its provisions. Notwithstanding the foregoing, the 
Plaintiff States shall have no right to apply to the Court for further 
orders or directions with respect to Sections IV.C, IV.D, IV.E, IV.F, 
V.G, or VII of this Final Judgment. In particular, the Plaintiff States 
shall not be able to apply to this Court to carry out, construe, 
modify, enforce, or punish violations of Sections IV.C, IV.D, IV.E, 
IV.F, V.G, or VII of this Final Judgment.

X. No Limitation On Government Rights

    Nothing in this Final Judgment shall limit the right of the United 
States or the Plaintiff States to investigate and bring actions to 
prevent or restrain violations of the antitrust laws concerning any 
past, present, or future conduct, policy, or practice of the 
Defendants.

XI. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire seven years from the date of its entry.

XII. Public Interest Determination

    Entry of this Final Judgment is in the public interest. The parties 
have complied with the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16, including making copies available to the 
public of this Final Judgment, the Competitive Impact Statement, and 
any comments thereon and the United States' responses to comments. 
Based upon the record before the Court, which includes the Competitive 
Impact Statement and any comments and response to comments filed with 
the Court, entry of this Final Judgment is in the public interest.

Date:------------------------------------------------------------------

    Court approval subject to procedures set forth in the Antitrust 
Procedures and Penalties Act, 15 U.S.C. 16
/s/--------------------------------------------------------------------

United States District Judge

[FR Doc. 2011-1821 Filed 1-28-11; 8:45 am]
BILLING CODE 4410-11-P