[Federal Register Volume 77, Number 164 (Thursday, August 23, 2012)]
[Notices]
[Pages 51048-51064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-20740]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States et al. v. Verizon Communications Inc. 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. 16(b)-(h), that a proposed Final Judgment,
Stipulation 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. Verizon Communications Inc. et al., Civil
Action No. 1:12-cv-01354. On August 16, 2012, the United States filed a
Complaint alleging that the proposed commercial agreements among
Verizon Communications Inc., Cellco Partnership d/b/a Verizon Wireless,
Comcast Corporation, Time Warner Cable Inc., Cox Communications, Inc.,
and Bright House Networks, LLC, would violate Section 1 of the Sherman
Act, 15 U.S.C. 1. The proposed Final Judgment, filed the same time as
the Complaint, requires modifications to the commercial agreements and
prohibits certain conduct in order to preserve the incentive and
ability for Verizon Communications to compete aggressively with each of
the cable companies.
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 60 days of the date of this
notice. Such comments, including the name of the submitter, and
responses thereto, will be posted on the U.S. Department of Justice,
Antitrust Division's Internet Web site, filed with the Court and, under
certain circumstances, published in the Federal Register. Comments
should be directed to Lawrence M. Frankel, Assistant Chief,
Telecommunications and Media Enforcement Section, Antitrust Division,
Department of Justice, Washington, DC 20530, telephone: 202-514-5621.
Patricia A. Brink,
Director of Civil Enforcement.
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
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UNITED STATES OF AMERICA, Department of Justice, Civil Action No.: Filed:
Antitrust Division, 450 5th Street, N.W., Suite
7000, Washington, DC 20530, and STATE OF NEW YORK,
Office of the Attorney General, 120 Broadway, New
York, NY 10271, Plaintiffs, v. VERIZON
COMMUNICATIONS INC., 140 West Street, 29th Floor,
New York, NY 10007; CELLCO PARTNERSHIP, d/b/a
VERIZON WIRELESS, One Verizon Way, Basking Ridge,
NJ 07920; COMCAST CORPORATION, One Comcast Center,
Philadelphia, PA 19103; TIME WARNER CABLE INC., 60
Columbus Circle, New York, NY 10023; COX
COMMUNICATIONS, INC., 1400 Lake Hearn Drive,
Atlanta, GA 30319, and BRIGHT HOUSE NETWORKS, LLC,
5000 Campuswood Drive, East Syracuse, NY 13057,
Defendants.
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[[Page 51049]]
COMPLAINT
The United States of America, acting under the direction of the
Attorney General of the United States, and the State of New York,
acting under the direction of its Attorney General (collectively,
``Plaintiffs''), bring this civil antitrust action against
Defendants Verizon Communications Inc. (``Verizon''); CellCo
Partnership d/b/a Verizon Wireless (``Verizon Wireless'';
collectively with Verizon, ``Verizon Defendants''); Comcast
Corporation (``Comcast''); Time Warner Cable Inc. (``Time Warner
Cable''); Cox Communications, Inc. (``Cox''); and Bright House
Networks, LLC (``Bright House Networks''; collectively with Comcast,
Time Warner Cable, and Cox, ``Cable Defendants'') to obtain
equitable relief to prevent and remedy violations of Section 1 of
the Sherman Act, 15 U.S.C. Sec. 1.
Plaintiffs allege as follows:
I. INTRODUCTION
1. In December 2011, Verizon Wireless and the Cable Defendants
entered into a series of commercial agreements (the ``Commercial
Agreements'') that allow them to sell bundled offerings that include
Verizon Wireless services and a Cable Defendant's residential
wireline voice, video, and broadband services, including ``quad-
plays.'' In addition, the Commercial Agreements allow the Defendants
to develop integrated wireline and wireless telecommunications
technologies through a research and development joint venture.\1\
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\1\ At the same time that they negotiated the Commercial
Agreements, the Cable Defendants agreed to sell to Verizon Wireless
a significant number of wireless spectrum licenses that they
purchased in 2006 but have not used. In June 2012, Verizon Wireless
agreed to resell some of that spectrum to T-Mobile USA, the smallest
of the nation's four nationwide wireless carriers. Plaintiffs are
not here challenging those spectrum-related agreements, which
facilitate the active use of an important national resource.
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2. In certain parts of the country, Verizon, which is Verizon
Wireless's parent, offers fiber-based voice, video, and broadband
services under the trade name ``FiOS.'' Verizon sells its wireline
FiOS services in several geographic areas where one of the Cable
Defendants also sells wireline voice, video, and broadband services,
including parts of New York City, Philadelphia, and Washington, DC.
In those areas of geographic overlap, the Commercial Agreements
would result in Verizon Wireless retail outlets selling two
competing quad-play offerings: one including Verizon Wireless
services and a Cable Defendant's services and the other including
Verizon Wireless services and Verizon FiOS services. In addition to
setting up this unusual structure where one part of the Verizon
corporate family (Verizon Wireless) must sell products in
competition with another (Verizon Telecom), the Commercial
Agreements contain a variety of mechanisms that are likely to
diminish Verizon's incentives and ability to compete vigorously
against the Cable Defendants with its FiOS offerings, and they
create an opportunity for harmful coordinated interaction among the
Defendants regarding, among other things, the pricing of competing
offerings.
3. The Commercial Agreements also harm the Defendants' long-term
incentives to compete insofar as they create an exclusive sales and
product development partnership of potentially unlimited duration.
Innovation and technological change mark the telecommunications
industry, but the Commercial Agreements fail to reasonably account
for such change and instead freeze in place relationships that, in
certain aspects, may be harmful in the long term. For an unlimited
term, the Cable Defendants collectively are restricted to one
wireless partner, Verizon Wireless, and the participants in the
joint technology venture are restricted to that forum--and limited
to working with the partners in that venture--for integrated
wireline and wireless product development. Moreover, Verizon
Wireless's ability to sell Verizon's FiOS product is restricted to
the currently planned FiOS footprint, even if in future years
Verizon contemplates further FiOS expansion. Exclusive sales
partnerships and research and development collaborations between
rivals that have no end date can blunt the long-term incentives of
the Defendants to compete against each other, and others, as the
industry develops.
4. Through this suit, the United States and the State of New
York ask this Court to declare the Defendants' Commercial Agreements
illegal and enter injunctive relief to prevent and remedy violations
of the antitrust laws.
II. DEFENDANTS
5. Verizon Communications Inc. is a Delaware corporation
headquartered in New York. Verizon's consumer wireline segment,
Verizon Telecom, is one of the nation's largest providers of
wireline telecommunications services, including both video and
broadband services as well as bundles that contain those products.
6. Cellco Partnership d/b/a Verizon Wireless is a Delaware
general partnership headquartered in New Jersey, and is the nation's
largest provider of wireless services. Verizon Wireless is a joint
venture owned by Verizon Communications Inc. (55%) and Vodafone
Group Plc (45%), but is operated and managed by Verizon
Communications.
7. Comcast Corporation is a Pennsylvania corporation
headquartered in Pennsylvania. It is one of the nation's largest
providers of wireline telecommunications services, including both
video and broadband services as well as bundles that contain those
products.
8. Time Warner Cable Inc. is a Delaware corporation
headquartered in New York. It is one of the nation's largest
providers of wireline telecommunications services, including both
video and broadband services as well as bundles that contain those
products.
9. Cox Communications, Inc. is a Delaware corporation
headquartered in Georgia. It is a large multi-state provider of
wireline telecommunications services, including both video and
broadband services as well as bundles that contain those products.
10. Bright House Networks, LLC is a Delaware limited liability
company headquartered in New York. It is a large multi-state
provider of wireline telecommunications services, including both
video and broadband services as well as bundles that contain those
products.
III. JURISDICTION, VENUE, AND INTERSTATE COMMERCE
11. Plaintiff United States of America brings this action
pursuant to Section 4 of the Sherman Act, 15 U.S.C. Sec. 4, to
obtain equitable and other relief to prevent and restrain the
Defendants' violations of Section 1 of the Sherman Act, 15 U.S.C.
Sec. 1.
12. Plaintiff the State of New York, by and through its Attorney
General and other authorized officials, brings this action in its
sovereign capacity and as parens patriae on behalf of the citizens,
general welfare, and economy of the State of New York under its
statutory, equitable, and common law powers, and pursuant to Section
16 of the Clayton Act, 15 U.S.C. Sec. 26, to prevent the Defendants
from violating Section 1 of the Sherman Act.
13. This Court has subject matter jurisdiction over this action
under Section 4 of the Sherman Act, 15 U.S.C. Sec. 4, and 28 U.S.C.
Sec. Sec. 1331, 1337(a), and 1345.
14. Each Defendant is engaged in interstate commerce and in
activities that substantially affect interstate trade and commerce.
The Cable Defendants and Verizon each sell broadband and video
services in their respective regional footprints across the United
States, and Verizon Wireless sells wireless services throughout the
United States.
15. Each Defendant has consented to personal jurisdiction and
venue in this judicial district.
IV. FACTUAL BACKGROUND
16. Residential voice, video, and broadband services are
commonly purchased together in bundles with one another. For
example, Verizon offers a triple-play bundle of voice, video, and
broadband FiOS services, and over 90% of FiOS customers subscribe to
some form of bundle. Similarly, over 60% of Comcast customers
subscribe to some form of bundle.
17. Bundles are typically offered by providers that themselves
provision each component service. However, some providers that
cannot supply each component service partner with complementary
providers to bundle their services in the marketplace.
18. Today, most consumers do not purchase wireless services in
bundles including residential voice, video, and broadband services.
For instance, Verizon sells some quad-play offerings in its FiOS
territory, but its sales of quad-play bundles pale in comparison to
the number of triple-play bundles it sells.
19. Technological developments, such as the advent of the
smartphone and the increasing availability of and demand for
streaming video content, have the potential to increase demand for
integrated wireline and wireless services.
20. The Commercial Agreements enable the Defendants to offer
bundles combining wireline and wireless services, including in many
local markets where they are unable to do so on their own because
they do not themselves sell all of the constituent services.
[[Page 51050]]
21. Specifically, in December 2011, Verizon Wireless and the
Cable Defendants entered into a series of Commercial Agreements,
which in combination (1) allow them to sell each other's services;
(2) create a structure for them to develop new products and services
that integrate wireline and wireless services; and (3) create a
future option for the Cable Defendants to operate a virtual wireless
network using Verizon Wireless's network:
a. On December 2, 2011, (1) Verizon Wireless and, respectively,
Comcast, Time Warner Cable, and Bright House Networks entered into
reciprocal ``Agent'' (sales agency) agreements to sell each other's
products on a commission basis; (2) Verizon Wireless, Comcast, Time
Warner Cable, and Bright House Networks entered into a Joint
Operating Entity agreement (``the JOE'') to collectively develop and
market integrated wireline and wireless products; and (3) Verizon
Wireless and, respectively, Comcast, Time Warner Cable, and Bright
House Networks entered into ``Reseller'' agreements to provide
Comcast, Time Warner Cable, and Bright House Networks the option to
operate a virtual wireless network using Verizon Wireless assets;
and
b. On December 16, 2011, defendants Verizon Wireless and Cox
entered into (1) reciprocal ``Agent'' (sales agency) agreements to
sell each other's products on a commission basis; and (2) a
``Reseller Agreement'' to provide Cox with the option to operate a
virtual wireless network using Verizon Wireless assets.
22. Provisions in the Commercial Agreements require Verizon
Wireless to sell the Cable Defendants' products even where Verizon
has its own directly competing FiOS products. Under these
provisions, Verizon Wireless must sell the Cable Defendants' video
and broadband services through its sales channels. Verizon currently
uses a significant number of Verizon Wireless stores to sell FiOS.
Under related provisions of the Commercial Agreements, Verizon
Wireless is to receive a commission for each sale of one of the
Cable Defendants' products, even in regions where Verizon offers
competing FiOS services.
23. The Commercial Agreements also contain an explicit restraint
on Verizon FiOS sales, providing that Verizon Wireless may only sell
FiOS services if it also offers the Cable Defendants' services on an
``equivalent basis.'' The ``equivalent basis'' provision limits
Verizon's ability to offer, promote, market, and sell FiOS services
in competition with the Cable Defendants' services through any
Verizon Wireless distribution channel.
24. The Commercial Agreements also contain an exclusivity
provision that prohibits the Cable Defendants from partnering with
any other wireless services company. Moreover, although the
Commercial Agreements allow the Cable Defendants eventually to
resell wireless services using Verizon Wireless's network under
their own brands, the Cable Defendants must wait four years before
they can do so.
25. The Commercial Agreements create the Joint Operating Entity
(``the JOE''), a joint venture to develop and market integrated
wireline and wireless technologies. The JOE is to serve as its
members' exclusive vehicle for research and development of certain
wireline and wireless products: While they remain in the JOE,
Defendants Verizon Wireless, Comcast, Time Warner Cable, and Bright
House Networks cannot independently conduct any research and
development on subjects within the JOE's exclusive field, even on
projects that the JOE declines to pursue.
26. The Commercial Agreements are potentially unlimited in
duration. The Agent agreements have an initial five-year term, which
renews automatically for another five-year term, and is subject to
automatic renewals every five years thereafter. The JOE agreement
has no fixed expiration.
V. RELEVANT MARKETS
27. Video providers acquire the rights to transmit video content
(e.g., broadcast and cable programming networks, television series,
individual programs, or movies), aggregate that content, and
distribute it to their subscribers or users. The distribution of
professional video programming services to residential customers
(``video services'') is a relevant product market.
28. Consumers purchasing video services select from among those
firms that can offer such services directly to their home. Although
direct broadcast satellite and online video services can serve
customers across the United States, wireline video providers such as
the Cable Defendants and Verizon are only able to offer services
where they have, with the requisite approvals from local
authorities, built out their networks to homes in a particular area.
Thus the relevant geographic markets for video services include the
local markets throughout the United States where Verizon offers, or
is likely soon to offer, FiOS within the franchise territory of a
Cable Defendant. A small but significant price increase by a
hypothetical monopolist of video services in any of these geographic
areas would not be made unprofitable by consumers switching to other
services.
29. Residential broadband Internet services providers connect
residential customers' electronic devices to the Internet at high
speeds and in high data volumes, typically for a monthly fee. These
services allow customers to access content containing large
quantities of data, such as high-quality streaming video, gaming,
applications, and various forms of interactive entertainment. The
provision of broadband Internet services to residential customers
(``broadband services'') is a relevant product market.
30. Consumers purchasing broadband services select from among
those firms that can offer such services directly to their home. The
relevant geographic markets for broadband services include the local
markets throughout the United States where Verizon offers, or is
likely soon to offer, FiOS within the franchise territory of a Cable
Defendant. A small but significant price increase by a hypothetical
monopolist of broadband services in any of these geographic areas
would not be made unprofitable by consumers switching to other
services.
31. Mobile wireless telecommunications services providers allow
customers to engage in telephone conversations and obtain data
services using radio transmissions without being confined to a small
area during a call or data session and without requiring an
unobstructed line of sight to a radio tower. Mobile wireless
telecommunications services include both voice and data services
(e.g., texting and Internet access) provided over a radio network
and allow customers to maintain their telephone calls or data
sessions wirelessly when travelling. The provision of mobile
wireless services (``wireless services'') is a relevant product
market.
32. Consumers typically purchase wireless services from
providers that offer and market services where they live, work, and
travel on a regular basis, and nationwide competition among wireless
services providers affects those local markets. The relevant
geographic markets for wireless services include the local markets
throughout the United States where Verizon offers wireless services
and the Cable Defendants offer wireline services. A small but
significant price increase by a hypothetical monopolist of wireless
services in any of these geographic areas would not be made
unprofitable by consumers switching to other services.
VI. THE CABLE DEFENDANTS' MARKET POWER
33. The Cable Defendants are dominant in many local markets for
both video and broadband services, with a reported national market
share for incumbent cable companies of greater than 50% for both
broadband and video services, although their shares may be higher or
lower in any particular local market for any particular service.
Each Cable Defendant has market power in numerous local geographic
markets for both broadband and video services.
34. The concentrated nature of both the broadband and video
services product markets, and the Cable Defendants' market power,
are largely due to historical factors. In most geographic areas, the
local cable network was originally constructed pursuant to a local
franchise agreement that gave the cable carrier exclusive rights to
provide service in that area in exchange for a commitment to build
out broad cable coverage. The copper-wire telephone network was the
only other telecommunications infrastructure built out to most
households, and it too was subject to an exclusive license. For
decades, the telephone companies were not permitted to offer cable
services, and vice versa.
35. The Telecommunications Act of 1996 (the ``Act'') was
intended to foster enhanced competition between the telephone
companies and the cable companies. Among other changes to national
telecommunications policy, the Act removed regulatory constraints on
competition between the telephone and cable companies in each
other's markets.
36. In 2005, Verizon began offering FiOS services over its newly
constructed fiber-optic network. FiOS has been, and remains, a
significant competitive threat to cable in the regions where it has
been built. As Verizon has expanded FiOS to cover many millions of
households, it has consistently
[[Page 51051]]
won significant market share in both broadband and video in the
local markets where it offers those services. Verizon is still
expanding FiOS, as it has additional build obligations pursuant to a
number of local franchise agreements it signed with cities and
counties in order to obtain the rights to provide local video
services.
37. Well before entering into the Commercial Agreements, Verizon
publicly announced its decision not to invest in further FiOS
expansion beyond its obligated builds. Verizon's business plans with
respect to future FiOS expansion have not changed significantly
since it entered into the Commercial Agreements. Nonetheless,
Verizon still considers, from time to time, whether to invest
further in the expansion of its FiOS infrastructure. Its decision
whether to do so will be affected by, among other things, whether
technological or business conditions become more conducive to
additional buildout in future years.
VII. ANTICOMPETITIVE EFFECTS
38. The Commercial Agreements, and in particular the following
provisions thereof, harm competition in the markets for the
provision of video and broadband services (and competition to
provide bundles that include those products) in the areas in which
Verizon's FiOS territory overlaps with the wireline territory of a
Cable Defendant because they impair the ability and incentives for
Verizon and the Cable Defendants to compete aggressively against
each other:
a. Verizon is restrained from marketing or selling FiOS in
Verizon Wireless stores unless it also sells a Cable Defendant's
services on an ``equivalent basis.'' This restriction reduces
Verizon's ability and incentives to compete aggressively against the
Cable Defendants' products and facilitates anticompetitive
coordination among the Defendants.
b. Verizon Wireless is required to sell each Cable Defendant's
services in direct competition with FiOS, and Verizon Wireless is to
receive a commission for each such sale. This requirement reduces
Verizon's incentives and ability to compete aggressively against the
Cable Defendants with FiOS and facilitates anticompetitive
coordination among the Defendants.
39. The Commercial Agreements diminish the incentives and
ability of Verizon and the Cable Defendants to compete in those
areas where the Cable Defendants' territories overlap with those in
which Verizon has built, or is likely to build, FiOS infrastructure.
They transform the Defendants' relationships from ones in which
Verizon and the Cable Defendants are direct, horizontal competitors
to ones in which they are also partners in the sale of the Cable
Defendants' services. Rather than having an unqualified, uninhibited
incentive and ability to promote its FiOS video and broadband
products as aggressively as possible, Verizon will be contractually
required and have a financial incentive to market and sell the Cable
Defendants' products through Verizon Wireless channels in the same
local geographic markets where Verizon also sells FiOS. The
Commercial Agreements deprive Verizon of the ability to exploit
fully a valuable marketing channel and alter Verizon's incentives
with respect to pricing, marketing, and innovation. They
unreasonably diminish competition between Verizon and the Cable
Defendants--competition that is critical to maintaining low prices,
high quality, and continued innovation.
40. The Commercial Agreements also unreasonably diminish future
incentives to compete for product and feature development pertaining
to the integration of broadband, video, and wireless services.
Although the JOE technology joint venture has the potential to
produce useful innovations that benefit consumers, the JOE has a
potentially unlimited duration, and it contains restrictions on its
members' ability to innovate outside of the JOE. These aspects of
the JOE agreement unreasonably reduce the Defendants' incentives and
ability to compete on product and feature development, and create an
enhanced potential for anticompetitive coordination.
41. The Commercial Agreements also unreasonably diminish the
Cable Defendants' incentives and ability to pursue in the future--as
they have in the past--their own wireless services offerings for
their customers who want a bundle including such services. Although
the agreements permit the Cable Defendants eventually to act as
wireless competitors using Verizon Wireless's network at least in
part, the Cable Defendants are explicitly prohibited from doing so
for the first four years of the agreements, and meanwhile they may
only offer Verizon Wireless services as sales agents. Whereas most
wireless resellers do not serve as a significant competitive
constraint on facilities-based providers, the Cable Defendants have
extensive network facilities and other commercial advantages that
could enhance their relevance as competitors, and they have explored
how to leverage those assets to their advantage. A four-year delay
in the ability of the Cable Defendants to develop their own wireless
offerings, relying in part on Verizon Wireless's network, diminishes
the incentive to invest in potential wireless offerings and inhibits
the ability to bring those offerings to market in a timely manner.
42. The Commercial Agreements also unreasonably restrain future
competition for the sale of broadband, video, and wireless services
to the extent that the availability of these services as part of a
bundle, including a quad-play bundle, becomes more competitively
significant. Although the exclusivity provisions of the agreements
may be reasonably necessary to bind the parties into a cooperative
relationship for the next several years, the unlimited duration of
the wireless exclusivity is unreasonable and unnecessarily restrains
competition in the long term, when partnerships between the Cable
Defendants and other wireless providers can serve as an important
source of competition for the sale of integrated wireline and
wireless bundles. Should the ability to offer integrated bundles
develop into an important characteristic of competition, these
agreements would unreasonably prevent wireless carriers from
offering those bundles with the most significant providers of
broadband and video services. The reduction in future competition to
offer bundled products would result in harm in the markets for each
constituent product.
43. The Commercial Agreements also significantly and adversely
affect Verizon's long-term competitive incentives to reconsider, in
future years, its pre-existing decision not to build out FiOS beyond
its current commitments. Although Verizon's current plans do not
contemplate additional FiOS buildout beyond the currently obligated
areas--and therefore significant additional buildout is unlikely for
at least the next several years--developments in the technology and
economics of FiOS deployment, or macroeconomic changes, may cause
Verizon to re-evaluate the possibility of additional buildout. The
requirement and financial incentives for Verizon Wireless to sell
the Cable Defendants' services, combined with the unlimited duration
of the Commercial Agreements, creates a disincentive to additional
buildout in areas within Verizon's wireline territory but outside
the currently planned FiOS footprint, particularly in those Verizon
DSL territories in which buildout might be most profitable.
44. The Commercial Agreements also unreasonably restrain
competition due to ambiguities in certain terms regarding what
conduct Verizon can, and cannot, engage in. As written, the
ambiguous terms could be interpreted to prevent Verizon Wireless
from engaging in certain competitive activities, including selling
wireless services as a residential (as opposed to mobile) service
and allowing Verizon to sell Verizon Wireless services along with
other companies' services.
VIII. VIOLATION ALLEGED
Violation of Section 1 of the Sherman Act by Each Defendant
45. The United States hereby incorporates paragraphs 1 through
44.
46. The Commercial Agreements unreasonably restrain competition
in numerous local markets for broadband, video, and wireless
services throughout the United States in violation of Section 1 of
the Sherman Act, 15 U.S.C. Sec. 1.
47. The Commercial Agreements deny consumers the benefits of
unrestrained competition between the Verizon Defendants and the
Cable Defendants. The likely effect of the agreements is to
unreasonably restrict competition for broadband, video, and wireless
services.
IX. REQUESTED RELIEF
Plaintiffs request that:
a. the Court adjudge and decree that the aforesaid contract,
combination, or conspiracy violates Section 1 of the Sherman Act, 15
U.S.C. Sec. 1;
b. the Defendants be permanently enjoined and restrained from
enforcing or adhering to existing contractual provisions that
restrict competition between them;
c. the Defendants be permanently enjoined and restrained from
enforcing or adhering to any other combination or conspiracy having
a similar purpose or effect in violation of Section 1 of the Sherman
Act, 15 U.S.C. Sec. 1;
[[Page 51052]]
d. Plaintiffs be awarded their costs of this action; and
e. the Court grant such other relief as the Plaintiffs may
request and that the Court deems just and proper.
Dated:
Respectfully submitted,
For Plaintiff United States of America:
/s/ Joseph F. Wayland
Joseph F. Wayland,
Acting Assistant Attorney General.
/s/ Renata B. Hesse
Renata B. Hesse,
Deputy Assistant Attorney General.
/s/ Patricia A. Brink
Patricia A. Brink,
Director of Civil Enforcement.
/s/ Laury E. Bobbish
Laury E. Bobbish,
Chief, Telecommunications & Media Enforcement Section.
/s/ Lawrence M. Frankel
Lawrence M. Frankel
(D.C. Bar 441532),
Assistant Chief, Telecommunications & Media Enforcement Section.
/s/ Yvette F. Tarlov
Yvette F. Tarlov
(D.C. Bar 442452),
/s/ Jared A. Hughes
Jared A. Hughes,*
Michael Bonanno
(D.C. Bar 998208),
Alvin Chu,
Lauren J. Fishbein
(D.C. Bar 451889),
Peter A. Gray,
David B. Lawrence,
Robert A. Lepore,
Lorenzo McRae,
Frank Qi,
Stephen Yelderman,
Attorneys, U.S. Department of Justice, Antitrust Division,
Telecommunications & Media Enforcement Section, 450 Fifth Street
NW., Suite 7000, Washington, DC 20530, Phone: (202) 598-2311,
Facsimile: (202) 514-6381, E-mail: [email protected].
* Attorney of Record
For Plaintiff State of New York:
/s/ Scott Hemphill
Scott Hemphill, Esq.,
Chief, Antitrust Bureau, NYS Office of the Attorney General, 120
Broadway, New York, NY 10271, Telephone: (212) 416-8282, Facsimile:
(212) 416-6015, E-mail: [email protected].
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
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UNITED STATES OF AMERICA, and STATE OF NEW YORK, Civil Action No.:
Plaintiffs, v. VERIZON COMMNICATIONS INC., CELLCO
PARTNERSHIP d/b/a VERIZON WIRELESS, COMCAST CORP.,
TIME WARNER CABLE INC., COX COMMUNICATIONS, INC.,
and BRIGHT HOUSE NETWORKS, LLC, Defendants.
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COMPETITIVE IMPACT STATEMENT
Plaintiff United States of America (``United States''), pursuant
to Section 2(b) of the Antitrust Procedures and Penalties Act
(``APPA'' or ``Tunney Act''), 15 U.S.C. Sec. 16(b)-(h), files this
Competitive Impact Statement relating to the proposed Final Judgment
submitted for entry in this civil antitrust proceeding.
I. NATURE AND PURPOSE OF THE PROCEEDING
The United States and the State of New York brought this lawsuit
against Defendants Verizon Communications Inc. (``Verizon''), Cellco
Partnership d/b/a Verizon Wireless (``Verizon Wireless''), Comcast
Corporation (``Comcast''), Time Warner Cable Inc. (``Time Warner
Cable''), Bright House Networks LLC (``Bright House Networks''), and
Cox Communications, Inc. (``Cox'') on August 16, 2012, to remedy
violations of Section 1 of the Sherman Act, 15 U.S.C. Sec. 1. The
Complaint alleges that certain agreements among Comcast, Time Warner
Cable, Bright House Networks, Cox (collectively, ``Cable
Defendants''), and Verizon Wireless unreasonably restrain trade and
commerce.
At the same time the Complaint was filed, the United States also
filed a Stipulation and Order, and a proposed Final Judgment, which
is described in more detail in Section III below. The United States,
the State of New York, and the Defendants have stipulated that the
proposed Final Judgment may be entered after compliance with the
APPA, unless the United States withdraws its consent. 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 violations
thereof.
II. DESCRIPTION OF THE EVENTS GIVING RISE TO THE ALLEGED VIOLATION
A. Introduction
Residential voice, video, and broadband services are often
purchased and provisioned in bundles with one other; such product
bundles are commonly referred to as ``double-plays'' or ``triple-
plays.'' Telecommunications providers, such as the Defendants, have
shown increasing interest in including mobile wireless services in
these bundles, and creating integrated wireline-wireless bundles.
These integrated wireline-wireless bundles include ``quad-plays,''
i.e., bundles of each residential telecommunications service--voice,
video, and broadband--along with a subscription to mobile wireless
services. Few consumers today purchase wireline-wireless bundles or
quad-plays, more often opting to purchase their wireless services
separately from their wireline services.
In December 2011, Verizon Wireless and the Cable Defendants
entered into a series of commercial agreements (the ``Commercial
Agreements'') that allow them to sell bundled offerings that include
Verizon Wireless services and a Cable Defendant's residential
wireline voice, video, and broadband services, including ``quad-
plays.'' In addition, the Commercial Agreements allow Defendants to
develop integrated wireline and wireless telecommunications
technologies through a research and development joint venture, Joint
Operating Entity LLC (``the JOE'').\2\
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\2\ At the same time that they negotiated the Commercial
Agreements, the Cable Defendants agreed to sell to Verizon Wireless
a significant number of wireless spectrum licenses that they
purchased in 2006 but have not used. In June 2012, Verizon Wireless
agreed to resell some of that spectrum to T-Mobile USA, the smallest
of the nation's four nationwide wireless carriers. Plaintiffs are
not here challenging those spectrum-related agreements, which
facilitate the active use of an important national resource.
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In certain parts of the country, Verizon, which is Verizon
Wireless's parent, offers fiber-based voice, video, and broadband
services under the trade name ``FiOS.'' Verizon sells its wireline
FiOS services in several geographic areas where one of the Cable
Defendants also sells wireline voice, video, and broadband services,
including parts of New York City, Philadelphia, and Washington, D.C.
In those areas of geographic overlap, the Commercial Agreements
would result in Verizon Wireless retail outlets selling two
competing quad-play offerings: one including Verizon Wireless
services and a Cable Defendant's services and the other including
Verizon Wireless services and Verizon FiOS services. In addition to
setting up this unusual structure where one part of the Verizon
corporate family (Verizon Wireless) must sell products in
competition with another (Verizon Telecom), the Commercial
Agreements contain a variety of mechanisms that are likely to
diminish Verizon's incentives and ability to compete vigorously
against the Cable Defendants with its FiOS offerings and create an
opportunity for harmful coordinated interaction among the Defendants
regarding, among other things, the pricing of competing offerings.
The Commercial Agreements also harm the Defendants' long-term
incentives to compete insofar as they create a product development
partnership of potentially unlimited duration. Innovation and
technological change mark the telecommunications industry, but the
Commercial Agreements fail to reasonably account for such change and
instead freeze in place relationships that, in certain aspects, may
be harmful in the long term. For an unlimited term, the Cable
Defendants collectively are restricted to one wireless partner,
Verizon Wireless, and the participants in the joint technology
venture are restricted to that forum--and limited to working with
the partners in that venture--for integrated wireline and wireless
product development. Moreover, Verizon Wireless's
[[Page 51053]]
ability to sell Verizon's FiOS product is restricted to the
currently planned FiOS footprint, even if in future years Verizon
contemplates further FiOS expansion. Exclusive sales partnerships
and research and development collaborations between rivals that have
no end date can blunt the long-term incentives of the Defendants to
compete against each other, and others, as the industry develops.
B. The Defendants
Verizon is a Delaware corporation headquartered in New York.
Verizon's consumer wireline segment, Verizon Telecom, is one of the
nation's largest providers of wireline telecommunications services,
including both video and broadband services as well as bundles that
contain those products.
Verizon Wireless is a Delaware general partnership headquartered
in New Jersey, and is the nation's largest provider of wireless
services. Verizon Wireless is a joint venture owned by Verizon (55%)
and Vodafone Group Plc (45%), but is operated and managed by
Verizon.
Comcast is a Pennsylvania corporation headquartered in
Pennsylvania. It is one of the nation's largest providers of
wireline telecommunications services, including both video and
broadband services as well as bundles that contain those products.
Time Warner Cable is a Delaware corporation headquartered in New
York. It is one of the nation's largest providers of wireline
telecommunications services, including both video and broadband
services as well as bundles that contain those products.
Cox is a Delaware corporation headquartered in Georgia. It is a
large multi-state provider of wireline telecommunications services,
including both video and broadband services as well as bundles that
contain those products.
Bright House Networks is a Delaware limited liability company
headquartered in New York. It is a large multi-state provider of
wireline telecommunications services, including both video and
broadband services as well as bundles that contain those products.
C. Industry Background
Residential voice, video, and broadband services are commonly
purchased together in bundles with one another. For example, Verizon
offers a triple-play bundle of voice, video, and broadband FiOS
services, and over 90% of FiOS customers subscribe to some form of
bundle. Similarly, over 60% of Comcast customers subscribe to some
form of bundle. Telecommunications providers perceive several
advantages to offering services in bundles: (1) Provisioning more
than one service at a time often generates cost efficiencies for the
provider; (2) purchasers of bundles tend to spend more; and (3)
purchasers of bundles are less likely to switch to another provider.
Consumers frequently choose bundled plans, which allow them to have
a single relationship for customer service, installation, and
billing. Bundles are typically offered by providers that themselves
provision each component service. However, some providers that
cannot supply each component service partner with complementary
providers to bundle their services in the marketplace.
Today, most consumers do not purchase wireless services in
bundles including residential voice, video, and broadband services.
For instance, Verizon sells some quad-play offerings in its FiOS
territory, but its sales of quad-play bundles pale in comparison to
the number of triple-play bundles it sells.
Technological developments, such as the advent of the smartphone
and the increasing availability and demand for streaming video
content, have the potential to increase demand for integrated
wireline and wireless services. Verizon recognizes this potential
and perceives an opportunity for growth in the development of
products and features that integrate wireline and wireless services.
But Verizon cannot fully exploit the perceived growth potential
presented by wireline-wireless bundles on its own. Although Verizon
Wireless offers service almost nationwide, Verizon offers FiOS in
only a limited portion of the country. The Cable Defendants are
particularly attractive potential partners because they each have a
large customer base, and together they cover a broad geographic
footprint. The Cable Defendants also owned valuable unused wireless
spectrum that Verizon Wireless wished to acquire. Ultimately,
Verizon Wireless and the Cable Defendants agreed to enter into the
Commercial Agreements as well as agreements for the sale of the
Cable Defendants' wireless spectrum to Verizon Wireless.
D. The Commercial Agreements
The Commercial Agreements enable Defendants to offer bundles
combining wireline and wireless services, including in many local
markets where they are unable to do so on their own because they do
not themselves sell all the constituent services.
Specifically, in December 2011, Verizon Wireless and the Cable
Defendants entered into a series of Commercial Agreements, which in
combination (1) allow Verizon Wireless and each Cable Defendant,
respectively, to sell each other's services; (2) create a structure
for them to develop new products and services that integrate
wireline and wireless services; and (3) create a future option for
each of the Cable Defendants to operate a virtual wireless network
using Verizon Wireless's network.
a. On December 2, 2011, (1) Verizon Wireless and, respectively,
Comcast, Time Warner Cable, and Bright House Networks entered into
reciprocal ``Agent'' (sales agency) agreements to sell each other's
products on a commission basis; (2) Verizon Wireless, Comcast, Time
Warner Cable, and Bright House Networks entered into a ``Joint
Operating Entity'' agreement to collectively develop and market
integrated wireline and wireless products; and (3) Verizon Wireless
and, respectively, Comcast, Time Warner Cable, and Bright House
Networks entered into ``Reseller'' agreements to provide Comcast,
Time Warner Cable, and Bright House Networks the option to operate a
virtual wireless network using Verizon Wireless assets; and
b. On December 16, 2011, defendants Verizon Wireless and Cox
entered into (1) reciprocal ``Agent'' (sales agency) agreements to
sell each other's products on a commission basis; and (2) a
``Reseller Agreement'' to provide Cox with the option to operate a
virtual wireless network using Verizon Wireless assets.
The Commercial Agreements contain a number of provisions that
are likely to harm competition in the markets for broadband, video,
and wireless services. First, the Commercial Agreements require
Verizon Wireless to sell the Cable Defendants' products even where
Verizon has its own directly competing FiOS products. Under these
provisions, Verizon Wireless must sell the Cable Defendants' video
and broadband services through its sales channels even though
Verizon itself currently uses a significant number of Verizon
Wireless stores to sell FiOS. In addition, Verizon Wireless receives
a commission for each sale of one of the Cable Defendants' products,
even in regions where Verizon offers competing FiOS services.
Second, the Commercial Agreements also contain an explicit
restraint on Verizon FiOS sales, providing that Verizon Wireless may
not market or sell FiOS services unless it also offers the Cable
Defendants' services on an ``equivalent basis.'' The ``equivalent
basis'' provision limits Verizon's ability to offer, promote,
market, and sell FiOS services in competition with the Cable
Defendants' services through any Verizon Wireless distribution
channel.
Third, the Commercial Agreements contain a long-term exclusivity
provision that prohibits the Cable Defendants from partnering with
any other wireless company.
Fourth, although the Commercial Agreements allow the Cable
Defendants eventually to resell wireless services using Verizon
Wireless's network under their own brands, the Cable Defendants must
wait four years before they can do so.
Finally, the Commercial Agreements create the JOE, a joint
venture to develop and market integrated wireline and wireless
technologies. The JOE is to serve as its members' exclusive vehicle
for research and development of certain wireline and wireless
products: While they remain in JOE, Defendants Verizon Wireless,
Comcast, Time Warner Cable, and Bright House Networks cannot
independently conduct any research and development on subjects
within the JOE's exclusive field, even on projects that the JOE
declines to pursue. The technology developed within the JOE is
exclusively available for use by Verizon, the Cable Defendants that
are members of the JOE, and potentially other cable companies that
agree to sell Verizon Wireless services as agents.
The Commercial Agreements are potentially unlimited in duration.
The Agent agreements have an initial five-year term, which renews
automatically for another five-year term, and is subject to
automatic renewals every five years thereafter. The JOE agreement
has no fixed expiration.
E. Relevant Markets
1. Video Services
Video providers acquire the rights to transmit video content
(e.g., broadcast and
[[Page 51054]]
cable programming networks, television series, individual programs,
or movies), aggregate that content, and distribute it to their
subscribers or users. The distribution of professional video
programming services to residential customers (``video services'')
is a relevant product market.
Consumers purchasing video services select from among those
firms that can offer such services directly to their home. Although
direct broadcast satellite and online video services can serve
customers across the United States, wireline video providers such as
the Cable Defendants and Verizon are only able to offer services
where they have, with the requisite approvals from local
authorities, built out their networks to homes in a particular area.
Thus, the relevant geographic markets for video services include the
local markets throughout the United States where Verizon offers, or
is likely soon to offer, FiOS within the franchise territory of a
Cable Defendant. A small but significant price increase by a
hypothetical monopolist of video services in any of these geographic
areas would not be made unprofitable by consumers switching to other
services.
2. Residential Broadband Internet Services
Residential broadband Internet services providers connect
residential customers' electronic devices to the Internet at high
speeds and in high data volumes, typically for a monthly fee. These
services allow customers to access content containing large
quantities of data, such as high-quality streaming video, gaming,
applications, and various forms of interactive entertainment. The
provision of broadband Internet services to residential customers
(``broadband service'') is a relevant product market.
Consumers purchasing broadband services select from among those
firms that can offer such services directly to them at their homes.
The relevant geographic markets for broadband services include the
local markets throughout the United States where Verizon offers, or
is likely to soon offer, FiOS within the franchise territory of a
Cable Defendant. A small but significant price increase by a
hypothetical monopolist of broadband services in any of these
geographic areas would not be made unprofitable by consumers
switching to other services.
3. Mobile Wireless Telecommunications Services
Mobile wireless telecommunications services allow customers to
engage in telephone conversations and to obtain data services using
radio transmissions without being confined to a small area during a
call or data session, and without requiring an unobstructed line of
sight to a radio tower. Mobile wireless telecommunications services
include both voice and data services (e.g., texting and Internet
access) provided over a radio network and allow customers to
maintain their telephone calls or data sessions wirelessly when
travelling. The provision of mobile wireless services (``wireless
services'') is a relevant product market.
Consumers typically purchase wireless services from providers
that offer and market services where they live, work, and travel on
a regular basis; hence geographic markets are local. However, the
largest and most successful wireless providers have national
footprints and offer pricing, plans, and devices that are available
nationwide. Therefore, nationwide competition among wireless
services providers affects competition across local markets. The
relevant geographic markets for wireless services include the local
markets throughout the United States where Verizon offers wireless
services, and where the Cable Defendants offer wireline services. A
small but significant price increase by a hypothetical monopolist of
wireless services in any of these geographic areas would not be made
unprofitable by consumers switching to other services.
F. The Cable Defendants' Market Power
The Cable Defendants are dominant in many local markets for both
video and broadband services, with a reported national market share
for incumbent cable companies of greater than 50% for both broadband
and video services, although their shares may be higher or lower in
any particular local market for any particular service. Each Cable
Defendant has market power in numerous local geographic markets for
both broadband and video services.
The concentrated nature of both the broadband and video services
product markets, and the Cable Defendants' market power, are largely
due to historical factors. In most geographic areas, the local cable
network was originally constructed pursuant to a local franchise
agreement that gave the cable carrier exclusive rights to provide
service in that area in exchange for a commitment to build out broad
cable coverage. The copper-wire telephone network was the only other
telecommunications infrastructure built out to most households, and
it too was subject to an exclusive license. For decades, the
telephone companies were not permitted to offer cable services, and
vice versa.
The Telecommunications Act of 1996 was intended to foster
enhanced competition between the telephone companies and the cable
companies. Among other changes to national telecommunications
policy, the Act removed regulatory constraints on competition
between the telephone and cable companies in each other's markets.
In 2005, Verizon began offering FiOS services over its newly
constructed fiber-optic network. FiOS has been, and remains, a
significant competitive threat to cable in the regions where it has
been built. Verizon's FiOS offerings have been aggressive in terms
of both price and quality, and the cable companies have reacted to
FiOS by upgrading their broadband networks and improving the quality
of their video products. As Verizon has expanded FiOS to cover
millions of households, it has consistently won significant market
share in both broadband and video in the local markets where it
offers those services.
Verizon continues to build FiOS infrastructure pursuant to a
number of local franchise agreements. Well before entering into the
Commercial Agreements, Verizon publicly announced its decision not
to invest in further FiOS expansion beyond its obligated builds.
Verizon's business plans with respect to future FiOS expansion have
not changed significantly since it entered into the Commercial
Agreements. Nonetheless, Verizon still considers, from time to time,
whether to invest further in the expansion of its FiOS
infrastructure. Its decision whether to do so will be affected by,
among other things, whether technological or business conditions
become more conducive to additional buildout in future years.
G. Anticompetitive Effects of the Agreements
The Commercial Agreements, and in particular the following
provisions thereof, harm competition in the video, broadband, and
wireless markets because they impair the ability and incentives for
Verizon and the Cable Defendants to compete aggressively against
each other:
a. Verizon is restrained from marketing or selling FiOS in
Verizon Wireless stores unless it also sells a Cable Defendant's
services on an ``equivalent basis.'' This restriction reduces
Verizon's ability and incentives to compete aggressively against the
Cable Defendants' products and facilitates anticompetitive
coordination among the Defendants.
b. Verizon Wireless is required to sell each Cable Defendant's
services in direct competition with FiOS, and Verizon Wireless
receives a commission for each such sale. This requirement reduces
Verizon's incentives and ability to compete aggressively against the
Cable Defendants with FiOS and facilitates anticompetitive
coordination among Defendants.
The Commercial Agreements diminish the incentives and ability of
Verizon and the Cable Defendants to compete in those areas where the
Cable Defendants' territories overlap with those in which Verizon
has built, or is likely to build, FiOS infrastructure. They
transform the Defendants' relationship from one in which the firms
are direct, horizontal competitors to one in which they are also
partners in the sale of the Cable Defendants' services. Rather than
having an unqualified, uninhibited incentive and ability to promote
its FiOS video and broadband products as aggressively as possible,
Verizon will be contractually required and have a financial
incentive to market and sell the Cable Defendants' products through
Verizon Wireless channels in the same local geographic markets where
Verizon also sells FiOS. The Commercial Agreements deprive FiOS of
the ability to exploit fully a valuable marketing channel and alter
Verizon's incentives with respect to pricing, marketing, and
innovation. They unreasonably diminish competition between Verizon
and the Cable Defendants--competition that is critical to
maintaining low prices, high quality, and continued innovation.
The Commercial Agreements also unreasonably diminish future
incentives to compete for product and feature development pertaining
to the integration of broadband, video, and wireless services.
Although the JOE technology joint venture may produce useful
innovations that benefit consumers, the JOE has a potentially
unlimited duration, and it contains
[[Page 51055]]
restrictions on its members' abilities to innovate outside of the
JOE or to collaborate using JOE technology with any partner that is
not also a member of the JOE. These aspects of the JOE unreasonably
reduce the incentives and ability of Defendants to compete on
product and feature development, and create an enhanced potential
for anticompetitive coordination.
The Commercial Agreements also unreasonably restrain the ability
of the Cable Defendants to offer wireless services on a resale
basis. Although the agreements permit the Cable Defendants
eventually to act as wireless competitors using Verizon Wireless's
network at least in part, the Cable Defendants are explicitly
prohibited from doing so for the first four years of the agreements,
and meanwhile they may only offer Verizon Wireless services as sales
agents. Whereas most wireless resellers do not serve as a
significant competitive constraint on facilities-based providers,
the Cable Defendants have extensive network facilities and other
commercial advantages that could enhance their relevance as
competitors, and they have explored how to leverage those assets to
their advantage. A four-year delay in the ability of the Cable
Defendants to develop their own wireless offerings, relying in part
on Verizon Wireless's network, diminishes their incentive to invest
in potential wireless offerings and inhibits their ability to bring
those offerings to market in a timely manner.
The provisions of the Commercial Agreements that make Verizon
Wireless the exclusive wireless partner of the Cable Defendants also
unreasonably restrain competition in the market for wireless
services. Although the exclusivity provisions of the agreements may
be reasonably necessary to bind the parties into a cooperative
relationship for the next several years, the unlimited duration of
the wireless exclusivity is unreasonable and unnecessarily restrains
competition in the long term, if the ability to sell wireless
services in combination with video or broadband services becomes an
important component of wireless competition. Should the ability to
offer integrated bundles develop into an important characteristic of
competition for wireless services, these agreements would
unreasonably prevent wireless carriers from offering those bundles
with the most significant providers of video and broadband services.
The Commercial Agreements also significantly and adversely
affect Verizon's long-term competitive incentives to reconsider, in
future years, its pre-existing decision not to build out FiOS beyond
its current commitments. Although Verizon's current plans do not
contemplate additional FiOS buildout beyond the currently obligated
areas--and therefore significant additional buildout is unlikely for
at least the next several years--developments in the technology and
economics of FiOS deployment and competition in the markets for
video and broadband services more broadly, may cause Verizon to re-
evaluate the possibility of additional buildout. The requirement and
financial incentive for Verizon Wireless to sell the Cable
Defendants' services, combined with the unlimited duration of the
Commercial Agreements, could, in the long-term, create a
disincentive to additional buildout in some areas within Verizon's
wireline territory but outside the currently planned FiOS footprint.
The Commercial Agreements also unreasonably restrain competition
due to ambiguities in certain terms regarding what conduct Verizon
can, and cannot, engage in. As written, the ambiguous terms could be
interpreted to prevent Verizon Wireless from engaging in certain
competitive activities, including selling wireless services as a
residential (as opposed to mobile) service and allowing Verizon to
sell Verizon Wireless services along with other companies' services.
III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT
The proposed Final Judgment is designed to remedy the violation
alleged in the Complaint while, at the same time, minimizing
interference with possible procompetitive benefits of the agreements
and maintaining flexibility to account for changing market
conditions and technology. In particular, the proposed Final
Judgment contains relief designed to eliminate the anticompetitive
provisions, or aspects, of the Commercial Agreements while at the
same time allowing the aspects that might be procompetitive to
proceed. In a number of instances, the proposed Final Judgment
contains a prohibition of certain conduct that goes into effect
several years into the future, but allows the Defendants to petition
the United States to continue that conduct, thereby allowing the
restrictions of the decree to adjust depending on future
developments.
The proposed Final Judgment sets forth (1) certain prohibited
conduct, (2) certain amendments required to be made to the
Commercial Agreements, (3) anti-collusion provisions and compliance
training requirements, and (4) reporting requirements to enable the
United States to ensure the Defendants' compliance with the proposed
Final Judgment.
A. Prohibited Conduct
1. No Sales of Cable Services in the FiOS Footprint
Sections V.A and V.B of the proposed Final Judgment seek to
maintain Verizon's incentives to aggressively market FiOS against
the Cable Defendants in the areas in which both services are
available and to ensure vigorous competition in the future. These
sections prohibit Verizon Wireless from selling the Cable
Defendants' services (``Cable Services'') in areas in which Verizon
offers, or is likely to offer in the near term, FiOS service. This
is necessary to ensure that Verizon receives no financial return
from sales diverted from FiOS to the Cable Defendants.\3\
Specifically, Verizon Wireless is barred by Section V.A from (a)
selling Cable Services to residents who live within the FiOS
Footprint; and (b) selling Cable Services in Verizon Wireless retail
stores located within the FiOS Footprint.
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\3\ The proposed Final Judgment does not bar the Cable
Defendants from selling Verizon Wireless services anywhere. The
Cable Defendants do not have their own wireless products and do not
have any reduced incentive to market their various offerings as a
result of these agreements. Therefore, there is no significant
competitive concern with the Cable Defendants selling Verizon
Wireless and the proposed Final Judgment does not interfere with
these sales.
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The ``FiOS Footprint'' is defined to include not only areas that
are currently served by FiOS, but those areas for which Verizon has
a legal obligation to build FiOS facilities or is authorized to do
so.\4\ Verizon has publicly stated that it does not presently intend
to build FiOS beyond the areas it has committed to local authorities
to build. However, the proposed Final Judgment accounts for the
possibility that developments in the technology and economics of
FiOS deployment may in the future make additional buildouts
profitable. It does this in two ways. First, any new areas where
Verizon acquires additional authorizations to build FiOS also are
included in the definition of ``FiOS Footprint.'' This ensures that
if Verizon does build out FiOS in additional areas, its incentive to
aggressively market and sell FiOS will not be blunted by the
commissions it receives from the Cable Defendants for selling their
competing products. Second, Section V.B extends the prohibition on
Verizon Wireless's selling of Cable Services more broadly on the
five year anniversary of the agreements. After December 2, 2016,\5\
Verizon Wireless is prohibited from selling Cable Services both to
residents who live within the ``DSL Footprint'' and in DSL Footprint
Stores. The DSL Footprint consists of territory, other than the FiOS
Footprint, where Verizon Telecom provides DSL service to more than a
de minimis number of customers. Section V.B thus ensures that, as
its planned buildout of FiOS is completed, Verizon's decision
whether to extend the FiOS network will not be affected by its
ability to sell, on a commission basis, Cable Services in lieu of
developing its own products.
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\4\ Verizon has legally binding agreements with several local
authorities to continue building its FiOS network. Should Verizon
build out its network only so far as those agreements require, it
will reach over 19 million homes by the end of 2018. The ``FiOS
Footprint'' as defined in the proposed Final Judgment thus includes
all areas covered by those commitments.
\5\ This date is five years after the signing of several of the
Commercial Agreements, and is the initial term set by the
agreements, absent a renewal.
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Verizon Wireless may, at least 120 days before December 2, 2016,
petition the United States to allow it to continue to sell Cable
Services in the DSL Footprint or some portion thereof. Upon such a
request, the United States shall, in good faith, expeditiously
examine market conditions in the relevant area to determine whether
such sales will adversely impact competition and decide, in its sole
discretion, whether to approve such a request.\6\ This provision
gives
[[Page 51056]]
the United States important flexibility in administering the
proposed Final Judgment to adapt to changes in technology or
business models over the next several years. For instance, to the
extent that Verizon is reasonably able to expand its ability to
compete against the Cable Defendants using its own video and
broadband products (with either FiOS or some other technology)
within the DSL Footprint or any subset thereof, and would have the
incentive to do so in the absence of the Commercial Agreements, the
United States may deny any request from Verizon Wireless under this
provision. In making this determination, the United States may rely
in part on the periodic reports that Verizon is required to submit
under Section VI.D, as discussed in more detail below.
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\6\ The proposed Final Judgment requires the United States to
grant or deny petitions under this section, and several others,
within sixty (60) days. Should the United States require more time
to make a decision due to lack of sufficient information, it may
deny the petition without prejudice until such information is
available.
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The proposed Final Judgment permits Verizon Wireless to engage
in certain limited activities that do not adversely affect
competition. Section V.C provides that Verizon Wireless may
advertise Cable Services in national or regional advertising that
may reach residents of the FiOS Footprint or DSL Footprint, as long
as it does not specifically target such advertising in local areas
where Verizon Wireless is prohibited from selling Cable Services
pursuant to Sections V.A and V.B. This provision preserves the
ability of Verizon Wireless to engage in advertising to an
efficient-sized area while, at the same time, preventing any
advertising directed specifically at areas where Verizon Wireless is
not permitted to sell Cable Services. To the extent that Verizon
Wireless engages in such advertising and, as a result, a customer
seeks to acquire Cable Services from a Verizon Wireless store in the
FiOS (or DSL) Footprint, Verizon Wireless is permitted to provide
factual information about Cable Services, as discussed further
below, but may not sell Cable Services in such stores. Rather,
Verizon Wireless will promote Verizon's services where available.
Verizon Wireless stores also may provide customers who purchase
wireless services through one of the Cable Defendants' sales
channels with the actual device that the customer purchased. This
provision enables a customer who has already made the decision to
purchase Verizon Wireless service from a Cable Defendant, and indeed
has done so, to have a convenient way of obtaining the purchased
device. Because the Cable Defendants do not operate retail stores on
a widespread basis, they may rely on Verizon Wireless stores to
actually deliver wireless devices to customers who purchase
wireline-wireless bundles from them. The consumer benefits from
being able to obtain a wireless device from a store; competition is
not harmed because the Verizon Wireless store merely acts as a
distribution outlet for a device that has already been acquired.
Finally, Verizon Wireless may provide information to potential
customers regarding Cable Services in the FiOS (or DSL) Footprint,
as long as Verizon Wireless receives no compensation for making such
information available. This provision is designed to enable Verizon
Wireless to provide limited factual information to a customer who
wishes to purchase Cable Services but is confused about a particular
Verizon Wireless store's ability to sell those services.
2. Limited Duration, and Other Restrictions, on the JOE
While the JOE technology joint venture has the potential to
produce useful innovations that benefit not only the JOE members,
but consumers as well, the unlimited term of the JOE agreement
threatens to lessen competition among its members. As the Department
of Justice and Federal Trade Commission have stated before, in
general, the longer that would-be competitors collaborate with one
another on a joint venture, the less likely they are to compete
against one another.\7\ Accordingly, Section V.F requires the
Defendants who are members of the JOE to withdraw from the JOE by
December 2, 2016. This provision is designed to allow the JOE time
to develop wireline-wireless technologies that could benefit
consumers, while ensuring that any procompetitive benefits are not
outweighed by possible exclusionary or collusive conduct. Any
Defendant that is a member of the JOE may, at least 180 days before
December 2, 2016 and prior to 150 days before December 2, 2016,
petition the United States for permission to continue its
participation in the JOE. Upon such a request, the United States
shall, in good faith, expeditiously examine market conditions to
determine whether the Defendant's continued participation in the JOE
will adversely impact competition. In making this determination, the
United States may rely in part on the periodic reports that Verizon
Wireless is required to submit under Section VI.D, which will
contain information regarding the products and technologies under
development by the JOE.
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\7\ See U.S. Dep't of Justice & Fed. Trade Comm'n, Antitrust
Guidelines for Collaborations Among Competitors Sec. 3.34(f) (Apr.
2000), available at http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf (``The Agencies consider the duration of the
collaboration in assessing whether participants retain the ability
and incentive to compete against each other and their collaboration.
In general, the shorter the duration, the more likely participants
are to compete against each other and their collaboration.'').
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The proposed Final Judgment also ensures that the JOE Agreement
does not unreasonably restrict its members from independently
developing new services or working with non-JOE members after a
member exits the JOE or the JOE is dissolved. Under the JOE
Agreement, each JOE member is prohibited from independently
developing technologies within the ``exclusive field,'' which
consists, inter alia, of the integration of wireline and wireless
services. As the JOE's primary owners, Verizon Wireless (50%
ownership) and Comcast (31.8%) set its product roadmap and
development priorities, with input from Time Warner Cable and Bright
House Networks. If, for example, Time Warner Cable were to
prioritize a particular product or feature as high but Verizon
Wireless prioritizes it as low, then the JOE could decide not to
develop the feature and leave Time Warner Cable with no path to
develop the feature on its own. Section IV.D thus requires the
Defendants to amend the JOE Agreement to allow Time Warner Cable and
Bright House Networks to independently develop any technology that
Time Warner Cable or Bright House Networks has presented to the JOE
for potential development but that the joint venture has declined or
ceased to pursue.
Section IV.E requires that, upon exiting the JOE, the exiting
Defendant will be granted an immediate, irrevocable, perpetual,
royalty-free fully paid-up non-exclusive license with immediate
rights to sublicense, exploit, and commercialize any intellectual
property then owned by the JOE. Section IV.E thus permits the Cable
Defendants to license JOE-developed technology to other wireless
carriers if they choose to do so upon leaving the JOE.
3. Ban on Wireless Exclusivity
Exclusivity may have procompetitive benefits, such as preserving
incentives to invest and preventing free-riding. Under the
Commercial Agreements, Verizon Wireless is the exclusive wireless
partner of the Cable Defendants. This could, potentially, have
procompetitive benefits, particularly in the short term while
integrated wireline-wireless offerings are in their infancy and most
customers do not buy wireline and wireless services together in a
bundle. However, because the Verizon Wireless Agent Agreements can
be renewed indefinitely, the exclusivity here is of an unreasonably
long--potentially unlimited--duration. Depending on how the
marketplace develops, particularly with respect to the success of
wireline-wireless bundles (e.g., ``quad plays''), the exclusivity
could unnecessarily and unreasonably restrict wireless competition
in the future by foreclosing other wireless carriers from access to
the most valuable wireline partners long-term. This could reduce the
number of competing bundles, as well as the ability of various
wireless carriers to provide constituent parts of those bundles.
Accordingly, Section V.D prohibits Verizon Wireless from enforcing
any exclusivity provisions of the Commercial Agreements that would
bar any of the Cable Defendants from selling wireless services on
behalf of a carrier other than Verizon Wireless after December 2,
2016.
Verizon Wireless may, at least 120 days before December 2, 2016,
petition the United States for permission to continue its exclusive
sales agreements with the Cable Defendants. Upon such a request, the
United States shall, in good faith, expeditiously examine market
conditions to determine, in its sole discretion, whether the Cable
Defendants' continued exclusivity to Verizon Wireless will adversely
impact competition. In making this determination, the United States
may rely in part on the periodic reports that Verizon is required to
submit under Section VI.D, as discussed in more detail below.
Because competitive conditions may change more than four years
hence, this provision allows the United States flexibility to
determine at that time whether continued exclusivity would be
beneficial or harmful to competition going forward.
[[Page 51057]]
4. No New Agreements
To prevent the Defendants from frustrating the purpose of the
proposed Final Judgment, Sections V.G and V.H prohibit the
Defendants from modifying the Commercial Agreements without prior
written approval of the United States in its sole discretion.
Section V.G also ensures that the amendments made to satisfy the
requirements of the proposed Final Judgment are implemented in a way
that satisfies the United States that they achieve the decree's
purposes. Sections V.E, V.G, V.H, and V.I prohibit the Defendants
from entering new agreements that would serve a similar purpose, or
have similar effects, as the Commercial Agreements without prior
written approval of the United States in its sole discretion.
B. Required Amendments to the Agreements
As originally written, the Commercial Agreements allowed Verizon
Wireless to market FiOS, but only on an ``equivalent basis'' with
its marketing of Cable Services, and they did not allow Verizon
Wireless to market other Verizon wireline products at all. As noted
above, these provisions would impede Verizon's ability to market its
wireline products in competition with the Cable Defendants by
unreasonably depriving it of the unfettered use of an important
marketing channel; they also could lead to enhanced coordination.
Accordingly, Section IV.B requires the Defendants to amend the
Commercial Agreements such that there is unambiguously no
restriction or condition on Verizon Wireless's ability to sell
Verizon's wireline products, including DSL. Although the proposed
Final Judgment already also prohibits Verizon Wireless from selling
Cable Services in areas where FiOS operates, or is likely to operate
in the future, Section IV.B ensures that the Defendants actually
modify the problematic agreements and do not condition Verizon
Wireless's ability to sell Verizon's wireline services on Verizon
Wireless's efforts or success in selling Cable Services in the areas
where it remains able to make such sales.
The Defendants disagree among themselves about the meaning of
certain terms in the Commercial Agreements. Because these terms
could be interpreted in a way that results in diminished
competition, they are potentially unreasonable. Sections IV.A and
IV.C require the Defendants to amend the Commercial Agreements to
clarify these terms and to do so in a way that enhances rather than
restricts competition. As written, the Commercial Agreements could
be interpreted to prevent Verizon Wireless from selling wireless
services as a residential (as opposed to mobile) service in
competition with the Cable Defendants. The Commercial Agreements
also arguably prohibit Verizon Telecom from selling Verizon Wireless
services along with other video services. The proposed Final
Judgment requires the Defendants to resolve these ambiguities in
such a way as to make clear that Verizon Wireless is free to engage
in these competitive activities. If these provisions were left
unchanged, the Cable Defendants could threaten to enforce the
offending provisions in order to prevent Verizon Wireless from
taking competitive actions against them.
Under the Commercial Agreements, the Cable Defendants may
eventually elect to become resellers of Verizon Wireless's service.
As resellers using, at least in part, Verizon Wireless's network,\8\
the Cable Defendants could provide additional competition in
wireless as well as, potentially, wireline-wireless bundles, but
they are unreasonably prohibited from doing so--even if they would
otherwise find it commercially feasible and profitable--until March
2016. Meanwhile they may only offer Verizon Wireless services as
sales agents.
---------------------------------------------------------------------------
\8\ The Cable Defendants could, for example, use their own Wi-Fi
assets to supplement their use of Verizon Wireless's network in
offering retail wireless services.
---------------------------------------------------------------------------
Section IV.F requires the Defendants to modify the Commercial
Agreements so that a Cable Defendant electing to operate as a
reseller of Verizon Wireless services shall have the right to make
such services commercially available six months after making such
election. However, the amended Commercial Agreements may condition a
particular Cable Defendant's election to operate as a reseller of
Verizon Wireless Services on another Cable Defendant's first making
such election. For ease of administration, the original Commercial
Agreements gave certain Cable Defendants the right to elect to
become resellers of Verizon Wireless Services only after a lead
Cable Defendant made such an election, and tied the choice for one
Cable Defendant to the choice made by another Cable Defendant.
Section IV.F preserves that structure while ensuring that, once a
Cable Defendant is authorized to elect to become a reseller and in
fact makes such an election, it may begin reselling Verizon Wireless
Services soon thereafter.
C. Anti-Collusion Provisions and Compliance Program
The proposed Final Judgment prohibits any form of
anticompetitive collusion and contains provisions designed to ensure
the Defendants' compliance. This is particularly important because
the implementation of the Commercial Agreements, and realization of
legitimate business objectives, will require some communication
between Verizon Wireless and the Cable Defendants. In order to
ensure that such communications are limited to legitimate business
purposes and do not extend to anticompetitive collusion, the
proposed Final Judgment contains certain safeguards discussed below.
Section V.J prohibits the Defendants from facilitating or
reaching any agreement between Verizon's wireline segment and any
Cable Defendant relating to the price, terms, availability,
expansion, or non-expansion of wireline telecommunications services.
This provision makes clear that although Verizon Wireless and the
Cable Defendants will work together to deliver bundled wireless and
wireline services to consumers, such joint efforts must not include
any agreements between Verizon's wireline segment that would lessen
competition with the Cable Defendants.
Section V.K ensures that no competitively sensitive information
passes between the Cable Defendants and Verizon's consumer wireline
business, in order to prevent collusion or other lessening of the
intensity of the competitive rivalry between FiOS and the Cable
Defendants. To the extent that the Cable Defendants share
competitively sensitive information with Verizon Wireless, Verizon
Wireless must take precautions to prevent such information from
reaching Verizon Telecom. To that end, no employee of Verizon or
Verizon Wireless may have access to both competitively sensitive
Verizon Telecom information and competitively sensitive information
from a Cable Defendant, except in certain limited, specifically
enumerated circumstances. First, Section V.K allows the exchange of
certain aggregated information pursuant to firewall provisions in
the existing Commercial Agreements. Second, employees or officers of
Verizon Wireless who are responsible for implementing or evaluating
joint offers between (1) Verizon Wireless and the Cable Defendants,
and (2) Verizon Wireless and Verizon Telecom, may have access to
nonpublic information regarding both Verizon Telecom and the Cable
Defendants, but in no event may these officers and employees share
the nonpublic information of any Cable Defendant with Verizon
Telecom, or vice versa. These officers and employees will be
required to participate in the antitrust compliance and education
program, described further below, which will help ensure that they
understand their obligations under the proposed Final Judgment.
Section VI.A requires each Defendant to describe to the United
States and New York the actions it has taken to comply with the
proposed Final Judgment. Section VI.B requires each Verizon
Defendant to submit a proposed compliance plan to the United States
and New York, which the United States will either approve or reject.
Should the United States and a Verizon Defendant be unable to agree
on a compliance plan, the Court may be called upon to determine
whether the Verizon Defendant's proposed compliance plan is
reasonable. These provisions are important to ensure that Defendants
take all the steps necessary to adhere to the proposed Final
Judgment's substantive requirements, and that the United States is
fully aware of these steps.
Section VI.C requires each Defendant to furnish to the United
States and New York copies of any amendment to the Agreements along
with a narrative explanation of the purposes and effect of such
amendment. This provision allows the Plaintiffs to monitor future
amendments to ensure they do not violate the decree.
Section VIII sets forth various mandatory procedures to ensure
Defendants' compliance with the proposed Final Judgment, including a
requirement that the Defendants (a) provide each of its officers,
directors, senior executives, and employees whose responsibilities
involve management of the JOE or the implementation of any of the
Commercial Agreements with copies of the proposed Final Judgment and
this Competitive Impact Statement; and (b)
[[Page 51058]]
annually furnish to each such person a description and summary of
the meaning and requirements of the proposed Final Judgment and the
antitrust laws generally.
D. Reporting Requirements
Section VI.D of the proposed Final Judgment requires Verizon and
Verizon Wireless to make periodic reports to the U.S. Department of
Justice and the Federal Communications Commission to allow those
agencies to better monitor the state of competition during the
pendency of the decree. Verizon Wireless must submit reports
regarding its sales of Cable Services, its sales of FiOS services,
and the activities of the JOE. Verizon must submit reports regarding
its ongoing FiOS buildout and its sales of DSL service. These
reports will enable the United States to monitor the development of
competition over the term of the proposed Final Judgment, in order
to allow it to determine whether to grant or deny any requests made
by a Defendant for relief from any provision in the proposed Final
Judgment. The reports will also be useful in alerting the United
States to potential violations of the decree that would merit
investigation.
Section VII includes standard provisions allowing the United
States to obtain information from the Defendants in order to
investigate potential violations of the proposed Final Judgment, as
well as to determine whether the proposed Final Judgment should be
modified or vacated, or to exercise any discretion granted by the
proposed Final Judgment. To facilitate the exercise of these
compliance inspection and visitorial powers, Sections VI.E and VI.F
require the Defendants to collect and maintain all communications
relating to the Agreements between a Verizon Defendant on the one
hand and a Cable Defendant on the other hand.
IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS
Section 4 of the Clayton Act, 15 U.S.C. Sec. 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. Sec. 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 United States, the State of New York, and the 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 United States 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 sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding
the proposed Final Judgment. Any person who wishes to comment should
do so within sixty (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 U.S.
Department of Justice, 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 United States will
be filed with the Court. In addition, comments will be posted on the
U.S. Department of Justice, Antitrust Division's Internet Web site,
filed with the Court, and, under certain circumstances, published in
the Federal Register.
Written comments should be submitted to: Lawrence M. Frankel,
Assistant Chief, Telecommunications & 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
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, a full trial on the merits against Defendants. The
United States could have continued the litigation and sought
preliminary and permanent injunctions against the agreements in
their entirety. The United States is satisfied, however, that the
revisions to the agreements described in the proposed Final
Judgment, along with the prohibition of sales by Verizon Wireless of
the Cable Defendants' services in areas where Verizon offers FiOS in
competition with the Cable Defendants, will preserve competition for
the provision of video and residential broadband service in the
relevant markets identified by the United States. Thus, the proposed
Final Judgment would achieve all or substantially all of the relief
the United States would have obtained 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. Sec. 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. Sec. 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 generally
United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007)
(assessing public interest standard under the Tunney Act); United
States v. InBev N.V./S.A., 2009-2 Trade Cas. (CCH) ] 76,736, 2009
U.S. Dist. LEXIS 84787, No. 08-1965 (JR), 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
mechanism to enforce the final judgment are clear and
manageable.'').\9\
---------------------------------------------------------------------------
\9\ 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.
Sec. 16(e) (2004), with 15 U.S.C. Sec. 16(e)(1) (2006); see also
SBC Commc'ns, 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. See 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
[[Page 51059]]
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).\10\
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 Commc'ns, 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 United States' prediction as to the
effect of proposed remedies, its perception of the market structure,
and its views of the nature of the case).
---------------------------------------------------------------------------
\10\ 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 would have imposed a greater remedy). To meet this
standard, the United States ``need only provide a factual basis for
concluding that the settlements are reasonably adequate remedies for
the alleged harms.'' SBC Commc'ns, 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 the APPA 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 (``The
`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 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 Commc'ns, 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. Sec. 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 Commc'ns, 489 F. Supp. 2d at
11.\11\
---------------------------------------------------------------------------
\11\ 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.'').
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VIII. DETERMINATIVE DOCUMENTS
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Dated: August 16, 2012
Respectfully submitted,
/s/Jared A. Hughes
Jared A. Hughes,
Trial Attorney, U.S. Department of Justice, Antitrust Division,
Telecommunications & Media Section, 450 Fifth Street NW., Suite
7000, Washington, DC 20530, Telephone: (202) 598-2311, Facsimile:
(202) 514-6381, [email protected].
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
UNITED STATES OF AMERICA, and STATE OF NEW YORK, Civil Action No.:
Plaintiffs, v. VERIZON COMMNICATIONS INC., CELLCO
PARTNERSHIP d/b/a VERIZON WIRELESS, COMCAST CORP.,
TIME WARNER CABLE INC., COX COMMUNICATIONS, INC.,
and BRIGHT HOUSE NETWORKS, LLC, Defendants.
----------------------------------------------------------------------------------------------------------------
[PROPOSED] FINAL JUDGMENT
WHEREAS, Plaintiffs, United States of America and the State of
New York, filed their Complaint on August 16, 2012, 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 purposes of
remedying the unlawful restraints of trade alleged in the Complaint;
AND WHEREAS, Defendants have represented to Plaintiffs that
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 the
parties, 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
[[Page 51060]]
Defendants under Section 1 of the Sherman Act, 15 U.S.C. Sec. 1.
II. Definitions
As used in this Final Judgment:
A. ``BHN'' means defendant Bright House Networks, LLC, a
Delaware limited liability company with its headquarters in East
Syracuse, New York, its successors and assigns, and its
Subsidiaries, divisions, groups, Partnerships and Joint Ventures,
and their directors, officers, managers, agents, and employees.
B. ``Broadband Internet services'' means the provision to end-
users of high-speed (capable of download speeds exceeding 760 kbps)
connectivity to the Internet.
C. ``Cable Defendants'' means Comcast, TWC, BHN, and Cox, acting
individually or collectively, as appropriate.
D. ``Cable Service'' means any wireline Broadband Internet
service, telephony service, or Video Programming Distribution
service offered by a Cable Defendant, or any bundle thereof,
provided over facilities owned or operated by such Cable Defendant.
E. ``Comcast'' means defendant Comcast Corporation, a
Pennsylvania corporation with its headquarters in Philadelphia,
Pennsylvania, its successors and assigns, and its Subsidiaries,
divisions, groups, Partnerships and Joint Ventures, and their
directors, officers, managers, agents, and employees.
F. ``Commercial Agreements'' means: (1) the Reseller Agreement
for Comcast Cable Communications, LLC, by and between VZW and
Comcast Cable Communications, LLC, (2) the Comcast Agent Agreement,
dated December 2, 2011 by and between Comcast Cable Communications,
LLC and VZW, (3) the VZW Agent Agreement, dated December 2, 2011, by
and between VZW and Comcast Cable Communications, LLC, as amended by
Amendment Number 1, effective as of December 2, 2011, (4) the
Reseller Agreement for Time Warner Cable Inc., by and between VZW
and TWC, (5) the TWC Agent Agreement, dated December 2, 2011 by and
between TWC and VZW, (6) the VZW Agent Agreement, dated December 2,
2011, by and between VZW and TWC, as amended by Amendment Number 1,
effective as of December 6, 2011 and Amendment Number 2, effective
as of June 4, 2012, (7) the BHN Agent Agreement, dated December 2,
2011 by and between BHN and VZW, (8) the VZW Agent Agreement, dated
December 2, 2011, by and between VZW and BHN, (9) the Reseller
Agreement for Bright House Networks, LLC, by and between VZW and
BHN, (10) the Cox Agent Agreement, dated December 16, 2011 by and
between Cox and VZW, (11) the VZW Agent Agreement, dated December
16, 2011, by and between VZW and Cox, as amended by Amendment Number
2, effective as of May 14, 2012, (12) the Reseller Agreement for
Cox, by and between Cox and VZW, and (13) all schedules, exhibits,
and amendments variously thereto.
G. ``Competitively Sensitive Cable Information'' means any non-
public information relating to the price, terms, availability, or
marketing plans of Cable Services.
H. ``Competitively Sensitive VZT Information'' means any non-
public information relating to the price, terms, availability, or
marketing plans of VZT Services.
I. ``Cox'' means defendant Cox Communications, Inc., a Delaware
corporation with its headquarters in Atlanta, Georgia, its
successors and assigns, and its Subsidiaries, divisions, groups,
Partnerships and Joint Ventures, and their directors, officers,
managers, agents, and employees.
J. ``DSL Footprint'' means any territory that is, as of the date
of entry of this Final Judgment, served by a wire center that
provides Digital Subscriber Line (``DSL'') service to more than a de
minimis number of customers over copper telephone lines owned and
operated by VZT, but excluding any territory in the FiOS Footprint.
K. ``DSL Footprint Store'' is any Verizon Store that shares a 5-
digit zip code with any street address in the DSL Footprint, but
excluding any FiOS Footprint Stores.
L. ``Defendants'' means Verizon, Verizon Wireless, Comcast, TWC,
BHN, and Cox, acting individually or collectively, as appropriate.
M. ``FiOS Footprint'' means any territory in which Verizon at
the date of entry of this Final Judgment or at any time in the
future: (i) has built out the capability to deliver FiOS Services,
(ii) has a legally binding commitment in effect to build out the
capability to deliver FiOS Services, (iii) has a non-statewide
franchise agreement or similar grant in effect authorizing Verizon
to build out the capability to deliver FiOS Services, or (iv) has
delivered notice of an intention to build out the capability to
deliver FiOS Services pursuant to a statewide franchise agreement.
N. ``FiOS Footprint Store'' is any Verizon Store that shares a
5-digit zip code with any street address in the FiOS Footprint.
O. ``FiOS Service'' means any wireline Broadband Internet
service, telephony service, or Video Programming Distribution
service offered by Verizon that operates over fiber to the home over
facilities owned or operated by Verizon.
P. ``JOE Agreement'' means the Limited Liability Company
Agreement of Joint Operating Entity, LLC, dated December 2, 2011,
among JOE LLC, Comcast, VZW, Time Warner Cable LLC, and BHN, and all
schedules, exhibits, and amendments thereto.
Q. ``JOE LLC'' means Joint Operating Entity, LLC, a Delaware
limited liability company, its successors and assigns, and its
Subsidiaries, divisions, groups, Partnerships and Joint Ventures,
and their directors, officers, managers, agents, and employees.
R. ``Non-Verizon Wireless Service'' means any wireless service
provided to an end-user over any network operating over wireless
spectrum licensed by the Federal Communications Commission (``FCC'')
pursuant to the FCC's rules and offered by an entity other than
Verizon Wireless.
S. ``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.
T. ``Sell'' (including the correlative terms ``Sale'' and
``Selling'') means offer, promote, market, or sell.
U. ``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, provided that (1) BHN is not a Subsidiary,
Partnership, or Joint Venture of TWC for any purpose of this Final
Judgment; (2) Hulu, LLC is not a Subsidiary, Partnership, or Joint
Venture of Comcast for any purpose of this Final Judgment; (3)
Midcontinent Communications is not a Subsidiary, Partnership, or
Joint Venture of Comcast for any purpose of this Final Judgment; (4)
JVL Ventures, LLC is not a Subsidiary, Partnership, or Joint Venture
of Verizon Wireless for any purpose of this Final Judgment; and (5)
TCM Parent, LLC (d/b/a Travel Channel) is not a Subsidiary,
Partnership, or Joint Venture of Cox for any purpose of this Final
Judgment.
V. ``TWC'' means defendant Time Warner Cable Inc., a Delaware
corporation with its headquarters in New York, New York, its
successors and assigns, and its Subsidiaries, divisions, groups,
Partnerships and Joint Ventures, and their directors, officers,
managers, agents, and employees.
W. ``Verizon'' means defendant Verizon Communications Inc., a
Delaware corporation with its headquarters in New York, New York,
its successors and assigns, and its Subsidiaries, divisions, groups,
Partnerships and Joint Ventures, and their directors, officers,
managers, agents, and employees.
X. ``Verizon Defendants'' means Verizon and Verizon Wireless,
acting individually or collectively, as appropriate.
Y. ``Verizon Store'' is any retail store, kiosk, or other
physical location open to the public that is in any part owned or
operated, directly or indirectly, by Verizon or Verizon Wireless.
Stores that are authorized to sell Verizon Wireless Services but
that are not in any part owned or operated by Verizon or Verizon
Wireless are not Verizon Stores.
Z. ``Verizon Wireless'' or ``VZW'' mean defendant Cellco
Partnership d/b/a Verizon Wireless, a joint venture between Verizon
Communications Inc. and Vodafone Group, plc.
AA. ``Verizon Wireless Equipment'' means any end-user equipment
designed to allow a user to access a Verizon Wireless Service.
BB. ``Verizon Wireless Service'' means any retail wireless
service offered by Verizon Wireless and provided to an end-user over
any network operating over wireless spectrum licensed by the Federal
Communications Commission (``FCC'') pursuant to the FCC's rules.
CC. ``Video Programming Distribution'' means the distribution of
professional video programming to residential customers.
DD. ``VZT'' means any subsidiary or entity within Verizon that
offers consumer wireline services in the United States.
EE. ``VZT Service'' means any Broadband Internet service,
telephony service, Video Programming Distribution service, or any
other consumer service offered by VZT, or any bundle thereof,
including FiOS Services, over facilities owned, operated, or leased
by VZT.
[[Page 51061]]
FF. ``Wireless Exclusivity Provision'' means any contractual
provision that restricts or prohibits the sale of a Non-Verizon
Wireless Service by a Cable Defendant.
III. Applicability
This Final Judgment applies to Verizon, Verizon Wireless,
Comcast, TWC, BHN, and Cox, as defined above, 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
Within thirty (30) calendar days after the filing of the
Complaint in this matter, or five (5) calendar days after notice of
the entry of this Final Judgment by the Court, whichever is later:
A. Defendants shall amend the Commercial Agreements so that
there is unambiguously no restriction or condition on the sale by
Verizon Wireless of any Verizon Wireless Service. Under the amended
Commercial Agreements, Verizon Wireless shall be free to sell Home
Fusion, Home Phone Connect, or any other Verizon Wireless Service.
B. Defendants shall amend the Commercial Agreements so that
there is unambiguously no restriction or condition on the sale by
Verizon Wireless of any VZT Service. Under the amended Commercial
Agreements, Verizon Wireless shall not be required to sell Cable
Services on an ``equivalent basis'' as VZT Services, nor shall
Verizon Wireless's freedom to sell VZT Services relate in any way to
Verizon Wireless's efforts or successes in selling Cable Services.
C. Defendants shall amend the Commercial Agreements so that
there is unambiguously no restriction on Verizon Wireless's ability
to authorize, permit, or enable VZT to sell a Verizon Wireless
Service in combination with VZT Services or any Person's Broadband
Internet, telephony, or Video Programming Distribution service.
Notwithstanding the foregoing, the amended Commercial Agreements may
prohibit Verizon Wireless from initiating or marketing such a
combined Sale.
D. Verizon Wireless, Comcast, TWC, and BHN shall amend the JOE
Agreement to give each of TWC and BHN the right to independently
develop any technology that TWC or BHN has first presented to the
Board of Managers of JOE LLC. The amended JOE Agreement may,
however, prohibit TWC or BHN from developing such technology that
JOE LLC has determined to pursue for so long as JOE LLC continues to
actively pursue such technology.
E. Verizon Wireless, Comcast, TWC, and BHN shall amend the JOE
Agreement to clarify that any member of JOE LLC that exits JOE LLC
shall, upon exit from JOE LLC (including an exit required pursuant
to V.F), be granted an irrevocable, perpetual, royalty-free fully
paid-up non-exclusive license with immediate rights to sublicense,
exploit, and commercialize any intellectual property rights owned by
JOE LLC as of the applicable exit date, except that if JOE LLC
dissolves, the members at the time of dissolution may receive joint
ownership of the intellectual property rights owned by JOE LLC as of
the date of dissolution instead of receiving such a license.
Notwithstanding the foregoing, any such license may be subject to
(i) any restrictions contained in any third-party licenses granted
to JOE LLC, (ii) obligations of confidentiality with respect to
trade secrets (including source code) of JOE LLC, and (iii)
termination based on the licensee or any of its affiliates bringing
certain intellectual property infringement claims against JOE LLC or
any of its other direct or indirect licensees.
F. Defendants shall amend the Commercial Agreements so that a
Cable Defendant electing to operate as a reseller of Verizon
Wireless Services shall have the right to make such services
commercially available six (6) months after such an election.
Notwithstanding the foregoing, the amended Commercial Agreements may
condition a particular Cable Defendant's election to operate as a
reseller of Verizon Wireless Services on another Cable Defendant's
first making such an election.
G. Defendants shall amend the Commercial Agreements to
incorporate the prohibitions reflected in V.A, V.B, and V.D.
V. Prohibited Conduct
A. Verizon Wireless shall not sell any Cable Service: (a) for a
street address that is within the FiOS Footprint or (b) in a FiOS
Footprint Store. Verizon Wireless shall not permit any other Person
to sell any Cable Service in a FiOS Footprint Store.
B. Verizon Wireless shall not, after December 2, 2016, sell any
Cable Service: (a) for a street address that is within the DSL
Footprint or (b) in a DSL Footprint Store. Verizon Wireless shall
not, after December 2, 2016, permit any other Person to sell any
Cable Service in a DSL Footprint Store. Verizon Wireless may, at any
time prior to 120 days before December 2, 2016, petition the United
States to allow sales of Cable Services in any subset or subsets of
the DSL Footprint (up to and including the entire DSL Footprint)
after December 2, 2016. Upon such a request, the United States
shall, in good faith, expeditiously examine market conditions in
each subset of the DSL Footprint proposed by Verizon Wireless, to
determine whether such sales will adversely impact competition. If
the United States determines, in its sole discretion, that such
sales in any or all of the subsets of the DSL Footprint proposed by
Verizon Wireless will adversely impact competition, it may deny the
petition as to those subsets. The United States shall grant or deny
such a petition within sixty (60) calendar days of receiving each
such petition. This provision is without prejudice to and does not
limit any Defendant's right to seek any modification of the Final
Judgment pursuant to Fed. R. Civ. P. 60(b)(5).
C. Notwithstanding V.A and V.B, Verizon Wireless may market
Cable Services in national or regional advertising that may reach or
is likely to reach street addresses in the FiOS Footprint or DSL
Footprint, provided that Verizon Wireless does not specifically
target advertising of Cable Services to local areas in which Verizon
Wireless is prohibited from selling Cable Services pursuant to V.A
and/or V.B. Further notwithstanding V.A and V.B, Verizon Wireless
may, in any Verizon Store:
i. service, provide, and support Verizon Wireless Equipment sold
by a Cable Defendant; and
ii. provide information regarding the availability of Cable
Services, provided that Verizon Wireless does not enter any
agreement requiring it to provide and does not receive any
compensation for providing such information in any Verizon Store
where Verizon Wireless is prohibited from selling Cable Services
pursuant to V.A and/or V.B.
D. Verizon Wireless shall not enforce any Wireless Exclusivity
Provision after December 2, 2016. Verizon Wireless may, at any time
prior to 120 days before December 2, 2016, petition the United
States to allow Verizon Wireless to enforce one or more Wireless
Exclusivity Provisions after December 2, 2016. Upon such a request,
the United States shall, in good faith, expeditiously examine market
conditions to determine whether such exclusivity will adversely
impact competition. If the United States determines, in its sole
discretion, that such exclusivity will adversely impact competition,
it may deny the petition. The United States shall grant or deny such
a petition within sixty (60) calendar days of receiving each such
petition. This provision is without prejudice to and does not limit
any Defendant's right to seek any modification of the Final Judgment
pursuant to Fed. R. Civ. P. 60(b)(5). Nothing in the foregoing
requires any Cable Defendant to enter into an agreement with any
wireless carrier or to otherwise engage in activities that would
have violated any Wireless Exclusivity Provision if such provision
had continued in effect after December 2, 2016.
E. Defendants shall not at any time, without the prior written
approval of the United States in its sole discretion, enter any
technology-development Joint Venture or Partnership that will as a
result of such entry include both a Verizon Defendant and a Cable
Defendant.
F. Any Defendant that is a member of JOE LLC shall not, without
the prior written approval of the United States, remain in the JOE
LLC after December 2, 2016. However, any Defendant that is a member
of JOE LLC may, at any time after 180 days before December 2, 2016,
and prior to 150 days before December 2, 2016, petition the United
States for permission to remain a member of JOE LLC. Upon such a
request, the United States shall, in good faith, expeditiously
examine market conditions to determine whether the Defendant's
continued membership in JOE LLC will adversely impact competition.
If the United States determines, in its sole discretion, that such
continued membership will adversely impact competition, it may deny
the petition. The United States shall grant or deny each such a
petition within sixty (60) calendar days of receiving such petition.
This provision is without prejudice to and does not limit any
Defendant's right to seek any modification of the Final Judgment
pursuant to Fed. R. Civ. P. 60(b)(5).
G. Defendants shall not, without the prior written approval of
the United States in its sole discretion, enter into or execute any
amendment, supplement, or modification to the Commercial Agreements
or the JOE
[[Page 51062]]
Agreement (including any amendments necessary to comply with this
Final Judgment). This provision does not apply to: (1) agreements
expressly permitted by V.I(1) or V.I(2) below, or (2) agreements
changing the compensation that a Cable Defendant receives from
Verizon Wireless for selling Verizon Wireless Services, provided
that such changes are broadly implemented for both Cable Defendant
and non-Cable Defendant agents of Verizon Wireless. The United
States shall grant or deny a request for an exercise of its sole
discretion pursuant to this paragraph within sixty (60) calendar
days of receiving such a request.
H. Defendants shall not, without the prior written approval of
the United States in its sole discretion, effect any change in any
compensation Verizon Wireless receives from any Cable Defendant for
selling Cable Services, except as otherwise provided for in the
Commercial Agreements. The United States shall grant or deny a
request for an exercise of its sole discretion pursuant to this
paragraph within sixty (60) calendar days of receiving such a
request.
I. No Verizon Defendant shall enter into any agreement with a
Cable Defendant nor shall any Cable Defendant enter into any
agreement with a Verizon Defendant providing for the sale of VZT
Services, the sale of Verizon Wireless Services, the sale of Cable
Services, or the joint development of technology or services without
the prior written approval of the United States in its sole
discretion. This provision does not apply to (1) agreements executed
in connection with ordinary course implementation or operations of
the Commercial Agreements or the JOE Agreement; (2) agreements
executed in the ordinary course in connection with the sale of
products or services pursuant to the Commercial Agreements or the
JOE Agreement; (3) the negotiation of and entering into content
agreements between the Verizon Defendants and Cable Defendants who
provide video programming content; (4) the purchase, sale, license
or other provision of commercial or wholesale products or services
(including advertising and sponsorships) and the lease of space in
the ordinary course among or between the Defendants; (5) any
interconnection agreement between any Cable Defendant and the
Verizon Defendants; or (6) any agreement in connection with broad-
based industry technology development consortia or standards setting
organizations. The United States shall grant or deny a request for
an exercise of its sole discretion pursuant to this paragraph within
sixty (60) calendar days of receiving such a request.
J. No Defendant shall participate in, encourage, or facilitate
any agreement or understanding between VZT and a Cable Defendant
relating to the price, terms, availability, expansion, or non-
expansion of VZT Services or Cable Services. The foregoing does not
apply to (1) intellectual property licenses between JOE LLC and VZT,
(2) the negotiation of and entering into content agreements between
Verizon Defendants and Cable Defendants who provide video
programming content, (3) the purchase, sale, license or other
provision of commercial or wholesale products or services (including
advertising and sponsorships) and the lease of space in the ordinary
course among or between the Defendants, or (4) any interconnection
agreement between any Cable Defendant and the Verizon Defendants.
However, in no event shall a Defendant participate in, encourage, or
facilitate any agreement or understanding between VZT and a Cable
Defendant that violates the antitrust laws of the United States.
K. No Verizon Defendant shall disclose competitively sensitive
VZT information to any Cable Defendant, nor shall any Cable
Defendant disclose any competitively sensitive Cable information to
VZT. If a Cable Defendant discloses competitively sensitive Cable
information to Verizon Wireless, Verizon Wireless shall take
reasonable precautions to prevent such information from being
communicated or otherwise made available to VZT. No employee of a
Verizon Defendant shall have access to both competitively sensitive
VZT information and competitively sensitive Cable information,
except (1) to the extent sharing aggregated information is expressly
permitted by the Commercial Agreements or the JOE Agreement, or (2)
by Verizon Wireless officers or employees responsible for
implementing or evaluating joint offers between Verizon Wireless and
the Cable Defendants, and joint offers between Verizon Wireless and
VZT.
VI. Document Retention and Disclosures
A. Within forty (40) calendar days of the filing of the
Complaint in this matter, or ten (10) calendar days after notice of
the entry of this Final Judgment by the Court, whichever is later,
each Defendant shall deliver to the United States and the State of
New York an affidavit that describes in reasonable detail all
actions it has taken to comply with Sections IV and V of this Final
Judgment. In the case of Verizon Wireless, such affidavit should
include, but not be limited to, a description of the systems in
place to identify whether a street address is within the FiOS
Footprint prior to any sale of a Cable Service by Verizon Wireless.
Each Defendant shall deliver to the United States and the State of
New York an affidavit describing any changes to the efforts and
actions outlined in its earlier affidavits filed pursuant to this
Section within fifteen (15) calendar days after the change is
implemented. Notwithstanding the foregoing, Defendant Cox shall have
no obligation to provide any such affidavits to the State of New
York.
B. Within forty (40) calendar days of the filing of the
Complaint in this matter, or ten (10) calendar days after notice of
the entry of this Final Judgment by the Court, whichever is later,
each Verizon Defendant shall submit to the United States and the
State of New York a document setting forth in detail the procedures
implemented to effect compliance with Section V.K of this Final
Judgment. The United States shall notify the Defendant within ten
(10) business days whether it approves of or rejects the Defendant's
compliance plan, in its sole discretion. In the event that a Verizon
Defendant's compliance plan is rejected, the reasons for the
rejection shall be provided to the Defendant and that Defendant
shall be given the opportunity to submit, within ten (10) business
days of receiving the notice of rejection, a revised compliance
plan. If the United States and the Defendant cannot agree on a
compliance plan, the United States shall have the right to request
that the Court rule on whether the Defendant's proposed compliance
plan is reasonable.
C. Within ten (10) calendar days of executing any amendment or
modification to the Commercial Agreements or the JOE Agreement, any
Defendant that is a party to the amended or modified agreement shall
furnish to the United States and the State of New York a copy of
such amendment or modification, along with a narrative explanation
of the purpose and effect of such amendment or modification.
Notwithstanding the foregoing, Defendant Cox shall have no
obligation to provide any such amendment, modification, or narrative
explanation to the State of New York.
D. The Verizon Defendants shall furnish the periodic reports
described in Appendix A by the respective deadlines established
therein. Such reports may be modified by agreement between the
United States and the Verizon Defendants. The obligation to furnish
such reports shall expire ninety (90) calendar days after the later
of: (1) the termination of all of the Commercial Agreements and (2)
the date on which no Defendant is a member of JOE LLC.
E. The Cable Defendants shall collect and maintain all
communications with the Verizon Defendants relating to the
Commercial Agreements or the JOE Agreement. A Cable Defendant's
obligation to collect and maintain such documents may be modified by
agreement between the United States and the Cable Defendant. A Cable
Defendant's obligation to collect and maintain such documents shall
expire ninety (90) calendar days after the later of: (1) the
termination of all of the Commercial Agreements and (2) the date on
which no Defendant is a member of JOE LLC.
F. The Verizon Defendants shall collect and maintain all
communications with the Cable Defendants relating to the Commercial
Agreements or the JOE Agreement. The obligation to collect and
maintain such documents may be modified by agreement between the
United States and the Verizon Defendants. The obligation to collect
and maintain such documents shall expire ninety (90) calendar days
after the later of: (1) the termination of all of the Commercial
Agreements and (2) the date on which no Defendant is a member of JOE
LLC.
VII. Compliance Inspection
A. For the purposes of determining or securing compliance with
this Final Judgment, of determining whether the Final Judgment
should be modified or vacated, or of exercising any discretion
granted by this Final Judgment, and subject to any legally
recognized privilege, from time to time authorized representatives
of the United States Department of Justice Antitrust Division and,
in conjunction with the United States, the Antitrust Bureau of the
Office of the New York Attorney General, including consultants and
other persons retained by the
[[Page 51063]]
United States and the State of New York, shall, upon written request
of an authorized representative of the Assistant Attorney General in
charge of the Antitrust Division or, in conjunction with the United
States, the Antitrust Bureau of the Office of the New York Attorney
General, and on reasonable notice to Defendants, be permitted:
(1) access during Defendants' office hours to inspect and copy,
or at the option of the United States and the State of New York, to
require Defendants to provide 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; and
(2) to interview, either informally or on the record,
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 response to written
interrogatories, under oath if requested, relating to any of the
matters contained in this Final Judgment as may be requested.
C. No information or documents obtained by the means provided in
this Section or pursuant to Section VI shall be divulged by the
United States or the State of New York to any person other than an
authorized representative of the (1) executive branch of the United
States, (2) the Federal Communications Commission, or (3) the Office
of the New York Attorney General, 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
Defendants to the United States or the State of New York, Defendants
represent and identify 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 Defendants mark 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 or the
State of New York shall give Defendants ten (10) business days'
notice prior to divulging such material in any legal proceeding
(other than a grand jury proceeding).
VIII. Antitrust Compliance and Education Program
Each Defendant shall:
A. Furnish a copy of this Final Judgment and related Competitive
Impact Statement within sixty (60) calendar days of entry of the
Final Judgment to its officers, directors, and senior executives,
and to its employees whose job responsibilities involve management
of JOE LLC or the implementation of any of the Commercial
Agreements;
B. Furnish a copy of this Final Judgment and related Competitive
Impact Statement to any person who succeeds to a position described
in Section VIII.A within thirty (30) days of that succession;
C. Annually furnish to each person designated in Sections VIII.A
and VIII.B a description and summary of the meaning and requirements
of this Final Judgment and the antitrust laws generally. Such annual
description and summary shall make clear that no provision of this
Final Judgment permits conduct that would violate the antitrust
laws, including but not limited to agreements related to prices or
future build-out plans; and
D. Obtain from each person designated in Sections VIII.A and
VIII.B, within sixty (60) days of that person's receipt of the Final
Judgment, a certification that he or she (1) has read and, to the
best of his or her ability, understands and agrees to abide by the
terms of this Final Judgment; (2) is not aware of any violation of
the Final Judgment that has not been reported to the Defendant; and
(3) understands that any person's failure to comply with this Final
Judgment may result in an enforcement action for civil or criminal
contempt of court against each Defendant and/or any person who
violates this Final Judgment.
IX. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this
Final Judgment 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.
X. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire ten (10) years from the date of its entry.
XI. No Limitation on Government Rights
Nothing in this Final Judgment shall limit the right of the
United States or the State of New York 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; provided, however, that nothing in this Final
Judgment shall be construed to waive any jurisdictional defense of
Defendant Cox to any investigation, claim, or action of the State of
New York.
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. Sec. 16, including making
copies available to the public of this Final Judgment, the
Competitive Impact Statement, and any comments thereon and the
United States's 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 of Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16--------------------------------------
United States District Judge
Appendix A--Periodic Reports
1) Verizon Wireless shall furnish to the United States (with a
copy to the FCC and, as to information for the State of New York, to
the Antitrust Bureau of the Office of the New York Attorney General)
a periodic report regarding the sales of Cable Services by Verizon
Wireless. Such report shall state, separately for each calendar
month since January 2012, for each Cable Defendant, and for each
geographic area (as agreed to by the United States in its sole
discretion), the number of sales of each Cable Service. Verizon
Wireless shall furnish such report within thirty (30) calendar days
of the entry of this Final Judgment, and every three (3) months
thereafter.
2) Verizon Wireless shall furnish to the United States (with a
copy to the FCC and, as to information for the State of New York, to
the Antitrust Bureau of the Office of the New York Attorney General)
a periodic report regarding the sales of VZT Services by Verizon
Wireless. Such report shall state, separately for each calendar
month since January 2012 and for each geographic area (as agreed to
by the United States in its sole discretion), the number of sales of
each VZT Service. Verizon Wireless shall furnish such report within
thirty (30) calendar days of the entry of this Final Judgment, and
every three (3) months thereafter.
3) Verizon shall furnish to the United States (with a copy to
the FCC and, as to information for the State of New York, to the
Antitrust Bureau of the Office of the New York Attorney General) a
periodic report regarding the areas where Verizon has built out the
capability to deliver FiOS Services. Such report shall contain the
number of houses in each geographic area (as agreed to by the United
States in its sole discretion) where FiOS Services are available,
the number of houses in each geographic area (as agreed to by the
United States in its sole discretion) where FiOS Services have
become available for the first time in the previous twelve months,
an estimate of the actual costs incurred by Verizon to make FiOS
Services available to such houses, a disclosure of any franchise
agreement entered into by Verizon within the previous twelve months,
a disclosure of any request by Verizon to modify or cancel a
franchise agreement in the previous twelve months, a disclosure of
any breach of an obligation to build out the capability to deliver
FiOS Services in the previous twelve months, an estimate of the
number of houses in each geographic area (as agreed to by the United
States in its sole discretion) where FiOS Services are expected to
become available for the first time in the next twelve months, and
an estimate of the number of houses in each geographic area (as
agreed to by the United States in its sole discretion) that are
expected to become available for the first time in the next five
years. Verizon shall furnish such report within ninety (90) calendar
days of the entry of this Final Judgment, and every year thereafter.
[[Page 51064]]
4) Verizon shall furnish to the United States (with a copy to
the FCC and, as to information for the State of New York, to the
Antitrust Bureau of the Office of the New York Attorney General) a
periodic report regarding Verizon's DSL service. Such report shall
state, separately for each month since January 2010, where
available, and for each wire center, the number of households where
Verizon offers DSL service, the average data revenue per Verizon
residential DSL account, the number of lines subscribing to Verizon
DSL service, the number of lines initiating Verizon DSL service, and
the number of lines disconnecting Verizon DSL service. Such report
shall further state, separately for each month since January 2010,
where available, and for each of the United States, the number of
lines subscribing to Verizon DSL service by speed tier, and the
number of Verizon DSL lines identified in Verizon's system as
disconnected to subscribe to a FiOS Service. Verizon shall furnish
such report within ninety (90) calendar days of the entry of this
Final Judgment, and every six (6) months thereafter.
5) Verizon Wireless shall furnish to the United States (with a
copy to the FCC and to the Antitrust Bureau of the Office of the New
York Attorney General) a periodic report regarding the activities of
JOE LLC. Such report shall contain, at a minimum, a description of
the technology and products under development by JOE LLC, a
description of any products for sale employing technology developed
by JOE LLC, a list of any pending patent applications assigned to
JOE LLC, and a summary of any intellectual property licensing
agreements entered into by JOE LLC. Verizon Wireless shall furnish
such report within ninety (90) calendar days of the entry of this
Final Judgment, and every year thereafter.
[FR Doc. 2012-20740 Filed 8-22-12; 8:45 am]
BILLING CODE 4410-11-P