[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.'').
---------------------------------------------------------------------------

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