Transcripts For CSPAN Comcast-Time Warner Cable Merger 20140413

I do not see American Travel as some kind of a reward for Good Behavior have the cuban government. We are unlikely to see that. It is finally a gettough policy with the cuban government. If i may say, the fy 2014 languages clear about the purpose and authorizations of these programs as well as which agency should be in the lead for their implementation. We intend to follow the law and that case and transition some of those issues to the National Endowment for democracy. The larger policy debate here, but i want to come back to assuring you that we believe our implementation and passed with this program has been consistent, that these are not covert, these have been publicly notified a number of times. Thank you, senator. Administrator, do you conduct Internet Access programs in other countries in the world . We do. At the direction of specific language in the congressional do you have an idea how many of those are . Part of what we do everywhere around the world, and Internet Access is one component of is supporting Civil Society so that you have an open and inclusive approach to development in a number of different contexts. Because a society that can come together and share what its goals are is part of the information as to what is sustainable programs we might be able to support. I would like you to give the chair a list of all the Internet Access programs you conduct. I may ask you for the same thing senator flake has asked for for all those programs, because it seems to be we are either going to judge whether or not we are going to be supportive of Internet Access in the world or not. And i think it is consistently unfair that one set of democracy programs has the greatest scrutiny of the federal government to the absence of all others. As the authorizing committee, we want to see what is happening across the entire spectrum. And i would ask you to give me information about all of those programs and all of the programming of those programs and all of the tweets and all of the emails and everything so that we can make an informed judgment here. And that share is of the view of the authorizing committee that either we believe in these programs collectively, which i generally think i do, in which case we support it, and not choose which country deserves it and which country does not as it relates to Internet Access, and whether or not the aid is the appropriate entity. Aid as part of its Overall Development program, the democracy programs that have been run by aid are critical. And so i am not one to advocate having aid all of a sudden be stripped of its democracy programs. Because democracy programs in and of itself, generally speaking, maybe they are in some open societies in which we seek to strengthen democratic institutions, but there are many in which they are not, which is why we are having democracy programs in the first place. These are not governments that are receptive at the end of the day. The are governments that oppose it and just as the voice of america and a whole host of other surrogate broadcasting was meant to bring broadcasting to different parts the world, it seems to me what were trained to do is to exactly that for which we have a global perspective and understanding the value of those programs and a commitment to it. Those commitments should not be decided by picking and choosing which country we somehow like and which countries we do not. If they fail to provide their people access to the basic flow of information, it seems to me we should be pursuing it. I would like the information on all programs. And if i could finish, and also, let me just say i would like to get a full sense of all your democracy programs beyond the internet as well. Because we are gone to judge all of those in context as well. And maybe i will ask for gao Inspector General reports on some of them. Because in my mind, there is a siege mentality. I respect that there is a difference of opinion as to what our policy should be. What i do not respect is the siege upon one part of our democracy programs to the exclusion of all others. So that is something we are going to have a full spectrum analysis of. Senator flake . I was going to care for, this program is not to provide Internet Access. It was social media content within access that already exists. This program was designed to provide access to information and create a platform. It did not provide Internet Access to any cuban that did not have before, correct . I will let my team respond later. But the program was intended to provide open access to information and a platform to communicate with each other. Clearly there is a basis that didnt exist because people thought to when they had the opportunity, if they have some other venue, they would use some other venue. Telephone access inside of cuba. The problem is the regime blocks access to both the internet and to these platforms. And so that is the challenge of a regime as other regimes of the world that simply do not want to allow its people have information, because when they have information, they may suddenly decide to make choices or to peacefully protest to try to create change in the government, which we generally in the world we look at turkey and what it is doing, and the world has come down on turkey for what is happening there. We look at iran and what has happened there. We look at china and the challenges there. And we condemn those. But in cuba, the cuban people deserve that flow of information. We are going to have a broad range of judgment. One final note, i know that senator flake has a different view, senator durbin expressed some of that, too, but the problem is that way and you do travel to cuba, there are millions of people going to cuba, millions, europeans, latin americans, canadians, and others, and yet the regime has become not less repressive but more repressive and more selective. When you travel and go, you end up feeding who . Unfortunately, not the cuban people, but the regime. Why . Because the regime is the one that has through its company, which is basically owned by the military, the entities by which those who go visit and largely stay at her either with a foreign partner or with entities that are totally owned by the military. So we ultimately feed a regime versus feed people. This is a legitimate debate. We have different views. What should not be a debate in my view, in this context, is the nature of our democracy programs and creating access the information, people, anywhere in the world. With the thanks of the committee, we will keep this record open for questions until the end of tomorrow, friday, and this hearing is adjourned. Rex a look at the politico with more on International Issues reporting on recent comments by the u. S. s ambassador to the u. N. , the headlines ramp up of russias sanctions possible after clashes over the last few days in Eastern Ukraine. On the sunday morning talk shows , she says the sanctions already in place have brought the ruble to an alltime low and depreciated the russian stock market by 20 will stop if clashes continue, there will be a ramping up of sanctions. On washington journal we talked about the unrest in ukraine. Here is some of that conversation. Continues. Host we have kurt volker. Guest thanks for having me. Host developments over the weekend continued unrest in Eastern Ukraine. Russia headlines indicate that russia is behind this. What is going on . Guest this is like what we saw in crimea a few weeks ago. The testers in Eastern Ukraine taking over government buildings protesters any string ukraine taking over government buildings, asserting they have the right to be independent or to be part of russia. They were very well armed. Intention of russia is to take these provinces back to the russian federation. Host this is a quote from the article. Es ukrainians, having seen what happened in crimea, are now prepared to respond more forcefully to try to take back these buildings. There is an antiterrorist operation to reassert control. Washington is warning them off taking those kinds of steps to assert control. Host what is next . Guest russia has 40,000 plus troops on the other side of the theer, inside russia, on ukrainian border. I think you will see an escalation on the russian side, fighting back against these antiterrorist operations. It will create an image of chaos. Ukraine cant control its own territory which russia will use as justification to put in some of those troops to maintain order and protect russian citizens, they may say. Host on april 22, about a week and a half, Vice President biden will be in ukraine. This is in advance of the elections in that country. What can he do . Guest this is a critical thing. We have both bidens visit and john kerrys phone call with foreign minister lavrov yesterday where he said there will be consequences. We need to start putting these consequences on the table so they are real, not just talk about them. Just showing up isnt enough. There have to be some strong actions now or russia is going to keep going. Host we will hear a moment what he had to say in a moment what he had to say. I want to get your reactions to senator john mccain, who said this to his Onetime Senate friend john kerry. [video clip] myon the issue of ukraine, hero, teddy roosevelt, used to a biglk softly but carry stick. What youre doing is talking softly and carrying a very small stick, in fact, a twig. As ahas been done so far result of the russian dismemberment of ukraine in violation of the treaty that they signed in returned for the Nuclear Inventory of ukraine, which was then the Third Largest individualer, some sanctions, some diplomatic sanctions, suspension, not removal from the g8, and now more threats to come. I predicted that putin would go into crimea, because he couldnt bear to give up sevastopol, because he is what he is. And i am now very concerned because of our lack of response, whether he will foment discontent in the manner which which will then demand autonomy for parts of Eastern Ukraine. Kurt volker, as former u. S. Ambassador to nato and now the executive director of the Mccain Institute for international leadership, your assessment of senator mccains comments. On hisi cannot comment comments. He speaks for himself. I think he accurately describes the situation we are seeing in ukraine. My view is similar. We have threatened unspecified consequences thus far for these next steps. We said that if russia goes further, we will then escalate a sanctions response to go further. The thing we havent done is put enough on the table right now that russia feels that it needs to negotiate a way out. It doesnt feel that way right now. It also believes, second, that military force trumps sanctions. To do is are willing put sanctions on the table, then it is going to use the forces on the ground that are there, whether special forces and protesters or real troops, to take the territory that it wants to take. Host his comments, carrying a big stick and saying that our policy is only a twig our policy is intertwined with europe. By europesrung need for Russian Energy resources . An issue of is european dependence on russian natural gas and European Economic interests in russia, but the combination of American Leadership and german leadership in europe, which both sides are quite rightly outraged over what russia is doing, can take this further and put more pressure on russia. There is a preparedness to do that, but it is going to take leadership from those two countries in particular. Host here is what secretary of state john kerry had to say before the Senate Foreign Relations Committee this past week. [video clip] equally as clear must be the reality that our United States and allies must will not hesitate to use 21st century tools to hold russia accountable for 19thcentury behavior. We stated again and again that and theerence preference of our friends and allies is deescalation and a diplomatic solution. But russia should not, for a single, solitary second, mistake the expression of that preference as an unwillingness to do what is necessary to stop any violation of the international order. At nato last week and in all of my conversations of the past weeks, it is clear that the United States and our closest partners are united in this spite the costs, willing to put in tough, new sanctions on those orchestrating this action and on key sectors of the russian economy, in energy, banking, mining. They are all on the table. And president obama has already signed an executive order to implement these sanctions if russia does not end its pressure and aggression on ukraine. Host kurt volker, your reaction to what secretary of state kerry had to say. Guest i know the administration has put together a strong list of sanctions. Russia has already continued its aggression against ukraine. Appliedings need to be to russia so that russia feels the need to negotiate a way out of this. Host what is a 20thcentury tool . What is a 21stcentury tool . Guest he is referring to military being 19thcentury, versus sanctions on sectors of the economy, travel sanctions, access to markets being 21st century. I think both apply in this case. Forces on the ground willing to kill people will take territory. At the same time, there can be pressure on russia through these sorts of financial and other sanctions. We should be using both the Financial Instruments at our disposal and putting in place a few more resources such as arming the ukrainian military, putting defense dividers in the ministry of defense, saying that nato has an interest in continued stability and territorial integrity, and then the baltic states, poland, or romania. Theres a lot we can do to show we are willing to use a little muscle to back up sanctions and diplomacy. Host bottom line as developments unfold ukraine, we see what is happening in russia, how is this going to be resolved . Guest my expectation is that unless something changes, if you look from today forward, russia is going to cement unrest in these provinces in ukraine. There will be a chaotic situation, and by supplying additional materials to the protesters, or perhaps even direct troop intervention, russia will take the the Associated Press is reporting on Vice President bidens trip to ukraine. You will be in kiev to focus on stabilizing and strengthening ukraines economy. Vice president will assist efforts to reform its constitution, crackdown on corruption, and hold free and fair president ial elections scheduled for may 26. Overlap with a trip president obama has scheduled to asia. Tomorrow, we will take a closer look at the international community, specifically the u. N. Comet daily operations and peacekeeping mission. Any amount of the u s concrete very contribution to the u. N. Before that, the Pew Research Center report shows a rise in stayathome mothers. Millman looks at some of the challenges faces the neck secretary of health and human services. We will be looking at your calls , tweets, and Facebook Comments all starting a here at 7 00 a. M. On cspan. Time warner and comcast executives talked before congress about their proposed merger. They were among a number of witnesses before the committee. This hearing man just over three hours. This hearing ran just over three hours. [captioning performed by national captioning institute] [captions Copyright National cable satellite corp. 2013] all took the oath. Welcome everybody here. The chair and Ranking Member of ,he committee with jurisdiction senators global char and lee will be taking over the hearing at some point during the morning. I appreciate the work both of them have done getting us here. The original business of the cable industry delivering programming. Television programming as we all know migrated to internet and the industrys been changing in response. Consumers can now watch what they want and when they want. If any of us have any question about it ask our children or grandchildren and theyll explain it to us. When Companies Like comcast and Time Warner Cable were founded the term Binge Watching was unheard of. Now it describes how Many Americans watch their favorite shows. Cable companies have moved beyond delivering televisions after the networks provide broadband. Theyre now the sole source of service for millions of americans, resulting in playing a dominant role in how many people in the country get their information. And consumers deserve to know how the combination of the two Largest Companies in the industry will impact them. Every senator has heard from their constituents saying what is this going to do to me . So were going to cover the current state of the video and broadband markets. Hear discussions of vertical integration, relevant markets, Public Interest standards, importance issues to consider when analyzing the mergers. Co consumers dont want to hear complex legal jargon, they just want to know why their cable bills keep going up. They want to know why they do not have more choice of providers, and Consumers Want to know, is this merger good for them or not. Frankly every one of us want to find out the same things. In 1996 i voted against the telecommunications act, in part because of concerns i have for look of competition in the cable tv market. Im still concerned. Similar questions are now being raised about the broadband industry where consumers feel they get large bills, inadequate choices. In vermont, we are deeply concerned about Net Neutrality but we dont want just lip service, on meaningful rules of the road to protect an open internet so anyone with an idea can have a chance to succeed in the online marketplace. And vermonters arent alone in this. Thousands of americans have flooded the fcc in recent weeks with comments supporting the restoration of open internet rules. And their voices have to be heard. I appreciate that comcast agreed to be bound by the fccs open internet rules as part of the Nbc Universal transaction. Its an important commitment. Especially now that core elements of the open Internet Order have been struck down. The commission that currently apply to comcast should not be seen as the end point but rather the minimum level, minimum level of protection. Should apply to promote competition online. And regardless of the outcome of this latest merger i hope that comcast will accept the extension of these rules beyond 2018. But still i urge them to support stronger rules that protect consumers and drive innovation. And the recent interconnection between comcast and netflix also raises important questions for advocates of Net Neutrality. When ipss can charge tolls and block access to networks, Net Neutrality policies may no longer be enough to protect consumers, or promote open internet. Companies have to Enter Special agreements to ensure adequate quality of their streaming video service. I worry about the potential impact on other band width intensive services. One i think of that worked on for years is telemedicine. And especially tying together medical centers, and rural areas. It is an annoyance for consumers when they cannot stream the most recent season of house of cards due to Internet Connection dispute. But where it is really serious, if it becomes a life or death for patients who cant reach health care for the same reasons. So the proposed transaction touches on a range of critical policy issues. Going beyond just broad band strength. Supporting diverse, independent video programming, and vibrant marketplace for online video. So we have to ask how its going to impact consumers. I urge the fcc and Justice Department to consider just as carefully, so i thank everybody for being here, going to yield to senator grassley, and then i understand you have a brief statement. Good morning. Thanks for the witnesses being here. Our judiciary committees role is not to decide whether or not what conditions comcast and time warner will be permitted to merge. The federal Communications Commission and the Justice Department are responsible for determining whether there are any issues with this transaction, but no doubt, a hearing like this as weve had in this committee on other merge ers is a very important part of the process because it does give the committee an opportunity to hear and to conduct proper oversight not only of this specific merger but to make sure that we understand the issues, and that the federal Communications Commission, and the Justice Department, is carrying out the law. Every year were seeing a new and exciting innovations in technology and communicationses. When i first came to congress, i didnt carry a phone around in my pocket like we do now. I never knew that one day there would even be such a thing as twitter and have 75,000 followers. Innovations like these have addically changed how we communicate and how we interact with each other how we learn, how we get news, how we conduct business and access entertainment. Access to the internet is quickly becoming an absolute necessity. Americans need to compete in this fastpaced, and more importantly, the globalized economy that has developed over the last 50 years and is going to be more important in the future. They need the internet to stay in touch not only with family and friends, but probably very much a part of their economic lifeline. And particularly when they have access to their choice and what a wide range of choice now. Right now were experiencing a bit of revolution in internet technology. Just examples, product like verizon fios and google fiber. Are changing the internets infrastructure by delivering faster access through fiber optic cables. And on the content site Companies Like netflix and hulu are allowing people to cut the cord. And access their media through internet and their handheld devices. Comcast and time warner control a significant amount of cable infrastructure that americans use to access high Speed Internet. They control the cable lines that go directly into the peoples homes. So theres a lot of interest in what will happen if the two companies merge and quite frankly, probably just stated a little bit different but i have the same interests that chairman leahy has expressed. Consumers want to know whether a combined comcasttime warner will be in a better position to expand high speed Internet Access. Will consumers have higher cable bills . Will they have more or less content choices . Will the merger inhibit growth and deployment of broad band services. Will it enhance competition with other companies . And what are the downstream effects of the merger. Another question is whether a combined comcasttime warner will Impact Television or internet content in a detrimental way. Will the company be able to block consumers access to content or will the merger allow the company to negotiate for better Licensing Arrangements from popular broadcasters like espn and disney . Because comcast creates some of its own programming some have suggested that this will put independent programmers at a disadvantage well all of those things are what this hearing is all about. Today we have an opportunity then to learn how these markets actually work and what a comcasttime warner merger could mean to competition and consumers. Theres no doubt that a combined comcasttime warner could significantly affect the markets for television programming, high speed Internet Access, and Program Access. And theres been no shortage of opinions expressed in the media since the companys announced the planned merger. So i look forward to a very important hearing. And also following up with high doj and fccs going to respond. Thank you mr. Chairman. Thank you senator. Senator klobuchar . Thank you, very much mr. Chairman. Thank you to you and senator grassley for holding this very important hearing. Competition in the cable industry is one of the most Critical Issues that this committee faces for a very simple reason. Cable is the primary way americans get pay tv and broadband Internet Access. This issue literally touches peoples lives every day, and it touches their wallets every month. As senator lee, the Ranking Member of our subcommittee, and i have said from the day the merger was announced, the proposed merger between comcast and Time Warner Cable, the two largest Cable Companies in the country, presents unique issues. From my perspective, while the Companies Service areas dont overlap, this cant not be our only focus of our discussion today. The combined company would control about 30 of the Pay Television market and 40 of the wire line broadband market with some estimates putting it at 50 . Its size and scope would give it the power to affect prices, service, and content offerings throughout the industry. And the future of online video competition. There are a number of critical questions that we need to ask. First, whats in this merger for consumers . Comcast has already said theyre not promising that their consumers will pay less or that their bills wont increase less quickly. What benefits do consumers stand to gain that they would not have gained without the merger . And do they outweigh the potential harms that could result if the merger is approved . This merger is also revoont for consumers who are outside of comcast and Time Warner Cables footprint. Competitive video providers to Time Warner Cable will now have to buy musthave nbc programming, including Regional Sports networks from their competitor. There are concerns that the merged companys larger presence throughout the country, especially in major markets like new york and l. A. , will give it even more leverage to charge competitors more for its programming. A cost that could be passed on to consumers. By combining its vertical integration of content ownership with an expanded share of the cable market, comcast would also have greater negotiating leverage with independent programmers. We hear regularly from these companies, many of whom are reluctant to go public because of how it might affect their negotiating positions. They say it is increasingly hard to negotiate carriage agreements in a market where content providers and distributors are consolidating. A postmerger comcast would sit on both sides of the fence. It would be the gatekeeper to a third of the cable market, and stand as one of the largest content providers. Consumers should know whether this merger enhances or limits the diversity of programming. Finally, as has been noted, we need to pay special attention to the impact this merger will have on the internet, and online video distributors like netflix, youtube and hulu. During the comcastnbc merger the fcc highlighted that comcast has, quote, the incentive and ability to hinder the development of rival online video offerings. Concerns have been raised that the merged entity would now have even greater ability to limit competition through data caps, discrimination against nonaffiliated content, and charging content providers for access to that last mile of network. What will happen to the next netflix that today is still just a dream in a garage . We want to make sure that the next new and competitive Online Service will be able to get their content to the merged Companies Growing consumer base. With control of nearly 40 of the National Broadband market comcast could potentially exert undue harm conditions and prices on online providers that are trying to serve their customers. The lines between cable and internet are rapidly blurring and ten years from now, americans will be consuming media in new and innovative ways. The question is, whos going to be delivering that content . Will that content be coming from comcast . Will it be coming from an independent online distributor . Or some combination . Will it be channeled through a cable box, or routed through the internet . The merger has implications for how much these services will cost, and what variety of programs and applications can be delivered in to our homes. Technology and market innovation should result in americans receiving Better Services and more value, not less service and less value. I look very forward to hearing from our witnesses today. Thank you very much. Senator lee . Thank you, mr. Chairman. Todays hearing has received significant attention throughout the country, and with some good reason. The proposed merger between comcast and time warner has implications for two markets that affect the everyday lives of most americans. Certainly a majority of the people in my state, and in the country as a whole, most americans pay a monthly bill for both video and Broadband Internet. In fact, as recently as 2012, 90 of u. S. Households with a television paid for a television subscription. In a recent study concluded that approximately 70 of u. S. Adults over the age of 18 have Broadband Access within their home. The parties to this proposed merger have carefully structured their transaction in an apparent effort to maximize their chances of gaining the necessary Regulatory Approval. The two companies assure us that they do not currently compete in each others footprint. And the combined company would have less than 30 of the video market. A number that some have suggested, as a figure within a sort of safe harbor for concentration within the relevant market. Comcast has vertically integrated with Nbc Universal. This is a complicating factor for a large distributor of video content and Broadband Internet thats seeking to become larger. But, as the Company Points out, it remains subject to conditions stemming from Regulatory Approval of that previous transaction. The proposed merger has nonetheless raised some potentially very serious concerns. This transaction takes place against the backdrop of significant preexisting concerns with respect to the competitive state of the market for video and for Broadband Internet. Ive heard concerns for some time that the effects of robust competition, whether experienced in terms of pricing, or quality of service, are not currently enjoyed in these markets. Its important that this committee take into account the state of competition in the markets for video and internet as preexisting issues, may make it more likely for a large transaction to pose some kind of a competitive threat. At the same time, it concerns related to this transaction result only from issues affecting those industries as a whole, it may arguably be unfair to the merging parties to impose only on them conditions designed to ameliorate competition. Regardless of the outcome of the agencys review of this transaction, i think its important for congress to continue to monitor the competitive state within these markets throughout the country. Concerns with this transaction also arise from the nature of the services at issue. Internet in particular is of obvious importance to american families. And to businesses. And it is of special importance to an increasing degree. The combined company will potentially control greater than 50 of high speed Internet Access across the country. Markets do, of course, change quickly and government must be careful not to step in where economic forces will Better Direct and better incentivize future investment and development of new products. But where the stakes are high, and surely they are high with respect to americans access to the internet, any potential for anticompetitive effects or for undue control of that market, must be scrutinized very carefully. Its also important to note here that this is an extremely large transaction affecting both the video market and the internet market. A complicating factor arises given that comcast owns Nbc Universal. Considering the significant share of the video and internet market that the newcombe would have and considering the wellknown political leanings of nbc ive heard concerns that comcast might have the incentive and the ability to discriminate against certain political content, including, for example, conservative political content. And that that capacity could be significantly enhanced as a result of this transaction. Now as with any matter before this committee or the relevant enforcement agencies, its essential that we apply proper Economic Analysis and ground our conclusions in the evidence before us by ensuring that we protect competition or rather than trying to protect any individual company or competitor from competition. We can help create Market Conditions that benefit consumers, and promote Economic Growth throughout the country. Thank you, mr. Chairman. Thank you very much. And i thank you, and senator klobuchar who worked on this. First one is david cohen executive Vice President of Comcast Corporation. His work covers a range of activities including government and regulatory affairs, legal affa affairs, corporate administration, no stranger to capitol hill. Mr. Cohen, please go ahead. Thank you, mr. Chairman, and members of the committee. I appreciate the opportunity to testify and explain the substantial benefits to consumers of the transaction between comcast and Time Warner Cable. Traditional boundaries between media, communications, and Technology Companies are becoming obsolete. While this transaction will make us bigger, thats a good thing, not a problem. Most of our real competitors are national and global and larger than us, like the bells, at Light Companies apple, google, sony and netflix. In fact the business reason for this transaction is to create the scale that will enable comcast to invest more in innovation and infrastructure, and enhance our ability to compete more effectively. And when we invest our competitors invest, too. At t has already said that our transaction, and i quote here, puts a heightened sense of urgency on other companies to invest more in their networks, and improve service and consumers will benefit from this competitive investment cycle. Our investment will bring Time Warner Cable invest tension customers faster internet speeds, more programming choices, our next Generation Next one entertainment operating system and more robust wifi. Business customers will benefit from a stronger new entrant offering more choice and better prices. Comcast has a record of investing in new technologies in networks. Two announcements were making today underscore that commitment. First our Xfinity Wifi Network achieved another milestone with a deployment of more than 1 million hot spots. Second weve just increased internet speeds again. Our 50 meg service in the northeast will increase to 105 meg. And our 10 5 meg service will increase to 150 meg at no Additional Charge to consumers. This is the 13th time weve increased internet speeds in 12 years. This transaction will generate other substantial Public Interest benefits, as well. Just two examples. First weve committed to extend to the entire Time Warner Cable foot print our industry leading Internet Essentials Program that has connected 1. 2 million low income americans to the internet and our commitment to abide by the judicially vacated open internet rules will also extend to Time Warner Cable customers. More investment, faster speeds, better technology, more americans connected, even with these compelling benefits, we understand the questions that arise any time two Big Companies combine. But objectively this is not a challenging transaction from an antitrust perspective. Our companies serve separate and distinct geographic areas. We dont compete for customers anywhere. So the transaction will not lead to any reduction of competition and Consumer Choice in any market. We also wont gain undue power over programs. After divestitures the combined company will manage subscribers representing less than 30 of the market. The fcc twice adopted a rule setting a 30 ownership cap to prevent a single cable operator from wielding bottleneck control over programmers. And the federal courts twice rejected it. Finding that no cable operator could exercise market power at 30 or even higher market shares. Lastly, American Consumers will enjoy the same choice among broadband providers after this transaction. There are no competition issues in that market, either. Mr. Chairman, comcast represents the american dream. We were founded 50 years ago with 1200 customers in tupelo, mississippi. Weve always strived to invest, innovate and lead our industry with a focus on the consumer. If this transaction is approved, it will give us the scale and reach to innovate and compete against our national and global competitors. Thank you for the opportunity to testify. Thank you very much. And as per our normal procedure the full statements, and of course you have a longer statement, full statements will be made part of the record of each of the witnesses. Next witness is arthur minson, executive Vice President and chief Financial Officer of Time Warner Cable. He oversees all of Time Warner Cables financial functions, including its financial operations, financial planning, analysis, treasury, accounting, tax, mergers and acquisitions, internal audit, investor relations. Please go ahead, mr. Minson. Mr. Chairman, and members of the committee, thank you for the opportunity to speak with you today. Im pleased to be here to discuss the proposed transaction between comcast and Time Warner Cable. Let me start by saying that i share davids view that the combination of our two companies will bring substantial benefits to our customers, our employees, and the local communities we serve. Cable Companies Operate in an incredibly dynamic marketplace. And we face robust competition from a wide range of sophisticated national and global powerhouses. We compete to develop the most Innovative Products and services. To attract and retain both customers and employees, and to Access Funding for our ongoing operating and capital investments. As a result, we must adapt in order to succeed. As chief Financial Officer, one of my responsibilities is overseeing our allocation of capital. Both human capital, as well as investments in our products, services, and physical infrastructure. We have invested billions in Capital Expenditures and made significant strides in developing and offering Innovative New products and services for our customers. But when the opportunity to combine with comcast arose we knew it would be a game changer. By joining our complementary technological strengths, and creating greater scale, the transaction will allow the combined company to bring next generation video, broadband, and Voice Services to customers faster than either company could do on its own. Let me provide some examples of the benefits our customers will see as a result of this transaction. Time warner cable recently announced plans to invest billions of dollars over the next three years to upgrade our network. Comcast has already completed similar upgrades to its network. As a combined company our subscribers will capitalize on comcasts experience to accelerate the rollout of these consumer benefits across the entire Time Warner Cable foot print. The transaction will also benefit the business market. Greater scale will enable the combined company to offer more advanced services to our existing, small, and mediumsized business customers, and also offer our competitive alternative to larger businesses in the regional and national marketplace. Given our limited geographic foot print we have been hindered in our ability to compete with National Telecom providers in serving multiregional and National Enterprise customers. After the transaction, the greater coverage of the combined company will encompass significantly more multiregional business locations. Allowing us to compete more aggressively and provide better alternatives for businesses than either Time Warner Cable or comcast could accomplish alone. Let me conclude by saying that we believe this transaction will create a world Class Provider of video, broadband, and voice products and services. Resulting in greater competition, and Consumer Choices in this already robust marketplace. Thank you for the opportunity to appear before you today. I look forward to answering your questions. Thank you very much mr. Minson. And our next witness is gene kimmelman. President and ceo of the washingtonbased Public Knowledge. Previously served as director of the Internet Freedom and human rights project, new america foundation. Chief counsel of the u. S. Department of justices antitrust division and is also well known to this committee. Please go ahead, mr. Kimmelman. Thank you, mr. Chairman. Members of the committee. Im here to represent the internet users. And the tv consumers. On behalf of Public Knowledge which is a nonprofit dedicated to an open internet, open access to lawful content and innovative technologies. I want to note that i worked at the department of justice during a previous comcast transaction, so i contacted doj ethics officials who provided guidance on what kinds of information cannot in any way, shape or form be used, and because i am confident that i can abide by those limitations, im very comfortable being here this morning to testify. Now after years of constant, substantial cable rate increases, and poor service, things are finally starting to change. Very slowly. A little bit. With new online video streaming services, new mobile devices, tablets, alternative settop boxes, these are all beginning to deliver consumers Innovative New services, more video choices at lower prices, and some new firstrun programming. This has some Cable Companies starting to think about offering a la carte individual channels. Some Cable Companies talking about going all broadband with their services. Some of the top Network Programmers beginning to think about selling firstrun content directly online. Now, as good as this sounds for consumers, these low cost choices are anathema to comcast, which maximizes revenue by keeping consumers in a highpriced, monthly cable bundled Xfinity Service package and by charging top dollar for nbcu networks, sports programming, driving up traditional cable bundle prices for all distributors nationwide. So the transaction could fundamentally undermine these new, wonderful, innovative options consumers are seeing. Comcast with its control of video, and high Speed Broadband, adding time warner systems, could lock in increased high prices for nbcu programming, and sports, and Regional Sports, and cable programming, expand cables ability comcasts ability to price down prices for other Quality Programming below market rates, harming quality in the marketplace, increase comcasts ability to dissuade other programmers from distributing high quality programs directly online, undermine innovation by controlling equipment and standards, and apps, and many consumer interfaces that block other Business Models in this marketplace. And finally, could provide favorable Internet Connection speeds, quality, pricing for Xfinity Services, compared to all competitors. These forms of leverage would come from the combined power of what looks almost like a nationwide octopus. With tentacles reflecting each of these leverage points. Massive tentacles, each individually capable of squeezing innovation in sectors all throughout the distribution chain. And each tentacle able to fill in when the other one is removed. In other words, this proposed transaction consolidates too much power in the combined video and high Speed Internet market, giving comcast a virtual gatekeeper role for fast internet delivered video, and Innovative New services. Mr. Chairman, members of the committee, the issue before antitrust officials and communication regulators is really very, very simple. If we want more innovative, lowpriced, internetdelivered services, this merger must be rejected. Thank you. And next witness james bosworth, chief executive officer of back9network, a network focused on the golf lifestyle. Mr. Bosworth previously held high level sales at marketing positions at a number of leading golf equipment companies. And we note that in college he led the seton hall pirates to big east golf championship. That might have been a few years ago. We wanted to remind everybody of that. Please go ahead. Thank you, chairman. Good morning, chairman leahy, Ranking Member grassley, and members of the committee. My name is Jamie Bosworth and im the chairman and ceo of the back9network an independent and aspiring 24 7 cable network. I very much appreciate the opportunity to testify before you today. Based in hartford, connecticut, back9network is an independent network focused on providing golf lifestyle programming. That attracts a larger, more diverse audience to the game. Americans spend 177 billion on golf lifestyle each year. And our Programming Centers on this market. We are tremendously proud of what weve accomplished over the past two years. Stateoftheart production facilities. Job creation, and the Fastest Growing online audience in golf. But when it comes to getting on the air, our story is very similar to that of other truly independent networks. We are up against a Distribution System that stifles innovation and Consumer Choice. Its dominated by a few large players. We are concerned that this merger may make a bad situation even worse. True independent Networks Like ours, with zero affiliation with any other channels or distributors, rely solely on advertising revenue in the early years. Therefore, there are only two requirements for a successful cable launch. One, the ability to produce or acquire Quality Programming. And two, initial carriage on one of the four Largest Video distributors, comcast, directv, dish network or Time Warner Cable. They are the only distributors that have the ability to reach the viewers in the top markets that the advertisers want and demand. But its not that simple. Satellite providers have severe bandwidth limitations and are hesitant to launch new channels. So today, new channels need permission to compete from one of the two cable providers, comcast or Time Warner Cable. And because of the comcastNbc Universal merger, comcast vert k58 integration makes it one of the largest content providers, as well. Now, if you marry that vertical integration with distribution in ten of the top ten markets, 23 of the top 25 markets, and 37 of the top 40 markets, then suddenly comcast alone has tremendous power to decide what gets on the air. Let me share with you what that means for our channel and for our aspiring independent networks. It doesnt matter that our programming has been praised by cable executives. It doesnt matter that were offering an attractive value proposition. Were competing directly with a comcastowned network, the golf channel. And that gives comcast every incentive to keep us off the air. More tellingly, productive conversations that we had with Time Warner Cable stalled as the merger was announced. We wouldnt worry about comcasts vertical integration if there were effective competition in distribution marketplace. We would put our programming up against the golf channel and let the audience decide whats compelling. But in the real world, new, independent networks need to be in the top ten markets. And that means you need to be in comcast and Time Warner Cable. In conclusion, the choice to testify today was very difficult. Because we want nothing more than to be in business with mr. Cohen and mr. Minson. But its important that we be here. We are fighting for the right to exist. For our investors. For our employees. And most importantly, for the consumer. If this merger goes through without effective, enforceable conditions, that force comcast to treat new channels fairly, we are concerned for both channel innovation and Consumer Choice in the future. But we remain cautiously optimistic. We hope comcast will be true to its leeb obligation and not discriminate based upon its ownership of the golf channel and we hope that comcast would judge us on the merits of our content and our carriage proposal. However, right now, they are both judge and jury. Thank you again for the opportunity to testify, i look forward to your questions. Thank you very much mr mr. Bosworth. Next witness richard sherwin, founder and ceo of spot on networks. Thats a provider of Wireless Telecommunications for the multifamily market. As i understand 30 years of experience in Wireless Communications, radio frequency transmissions, including significant experience with wireless and wired telecommunication ventures in europe. Mr. Sherwin, thank you for coming and please go ahead. Thank you, mr. Chairman. Thank you senators for the opportunity to present our experiences with both comcast and time warner. Spot on has been serving the multifamily Residential Community for a decade as you mentioned. We provide high quality, high speed Wifi Services to buildings which otherwise would have only limited and more expensive choices for high spied broadband. We believe in doing well by doing good. The multifamily Residential Community currently represents nearly 35 of the United States population. This segment includes a large percentage of affordable housing. The population residing in these communities use Wireless Communications almost exclusively for all their communication needs. This is a big change because of the demographic in the multifamily community. Spot on has been in the forefront of innovative design approaches, new technologies and more efficient ways to serve these multifamily communities. And although weve spent millions of dollars and a decade of hard work, building these businesses, we are still a david to the goliaths of the Cable Companies with whom we often compete. I am proud to say that spot ons services and those of our wifi competitors, our brethren are generally 30 less costly than Services Provided by the dominant cable providers. And spot on provides unique features not otherwise found in other wiretowireless Access Technologies or provided in offtheshelf or Cable Company supplied wireless reuters that merely redistribute a signal. The problem of serving multifamily communities is further exacerbated by green initiatives. Energy conservation in buildings which dictate the choice of building materials. These materials prevent cellular signals from penetrating inside these buildings and decrease the effectiveness of wireless to reach this segment of the population. These problems even present Public Safety concerns because not only are normal voice calls deterred and date to access limited but 911 calls are, at best, sketchy. Communitywide managed wifi service cannot only resolve these Service Issues but also deliver significantly larger capacity to residents inside these buildings. We bring high Speed Broadband to a building relying on a big, broadband supplier. Often a cable operator like comcast. Sometimes a fiber operator, as the source of the back hole b d bandwidth. It is important to understand how important our service and the service offered by Similar Companies to ours is to competition. Usually the Cable Company that supplies us also provides retail Cable Services and content in that particular area. Frequently, as the only retail supplier to that area, once we secure our broadband back hole we build our own facilities based Network Inside the building making use of the fcc allocated wifi spectrum. These users use our distribut distributed our Wireless Network to do all sorts of things. From social networking, video streaming, Smart Building applications, email, et cetera, and now even for voice calls. We need bandwidth to the buildings that come from Companies Like time warner, verizon fios, comcast business and charter. If we couldnt acquire that bandwidth from a large broadband provider, for whatever the reason, wed be basically out of business. Competition would be squelched, there would be no innovation. Comcast has refused to sell us bandwidth in many areas of the country over the last 12 months. Although prior to that they had continued to do so. So we think conditions need to be placed on this kind of a merger in which wholesale bandwidth is available to providers such as us, and we also believe that in certain markets, because comcast will be the only provider of high Speed Broadband service in the market, that they should be prohibited from using their financial powers to exclude alternate high speed providers from offering competitive high speed wireless Internet Access in multiFamily Residential communities. Thank you very much for your time. Thank you very much, mr. Sherman. Christopher hugh is a professor of law and communication, computer and Information Science at the university of pennsylvania. Also the director of the upn center for innovation, technology and competition. Professor yus research focuses on law and technology. The regulation electronic communications. We thank you for taking the time to be here, professor. Please go ahead. Thank you to you, mr. Chairman and the committee for inviting me. I am happy to have the opportunity to offer my views on the impacts of the proposed merger between comcast and Time Warner Cable would have on consumers. My written submission contains my complete testimony. Id like to focus on the impact of the merger for the market for traditional cable channels such as espn, the disney channel, and the like, and the impact on the market for broadband Internet Access. First, with respect to the distribution of Traditional Television networks, established principles of antitrust and Communications Law indicates that the merger is unlikely to harm consumers. The lack of any overlap in the areas served by comcast and Time Warner Cable means that the merger should not affect the prices the subscribers pay for Cable Television subscriptions. In short, consumers that have the same number of choices a multichannel video providers the day after the merger than they did the day before. Two Major Court Decisions in 2001 and 2009 also rejected arguments that companies that controlled only 30 of nationwide cable subscribers could inflict anticompetitive harm on Cable Networks. In light of the merging partys commitment to reduce their holdings so they control no more than 30 of the national market, these Court Decisions represent a potentially insuperable obstacle. Moreover, those Court Decision were issued in a different era, when the multichannel video market was competitive. Since 2009, the costs of Program Acquisition have risen substantially faster than cable rates, as Program Providers have driven increasingly tough bargains. At the same time, the number of options for video distribution has continued to increase, as verizons fios and at ts uverse networks have expanded their customer base. As others have emerged as important video platforms. This industry is not structured in a way that would make anticompetitive harm in the markets for video programming likely. Any residual concerns may be addressed by the Extensive Program rules that the fcc has developed to ensure that the entire industry has sufficient access to video content and distribution. The regulatory agencies have repeatedly recognized that such problems are better handled through general rules applicable to all industry players than through conditions that bind only merging parties. Turning to the market for broadband Internet Access, the lack of any overlap in the areas served by comcast and Time Warner Cable again makes it unlikely that the merger would affect the prices that subscribers pay. In addition, the structure of the market for Broadband Access makes harm less likely than the market for Cable Television. By my count, it was 32 of the nationwide broadband subscribers, but more importantly, the market for broadband Internet Access is really undergoing dynamic change. At ts project v. I. P. Is increasing download speeds to 45 megabits per second, and substantial footprints, google is extending its Fiber Initiative beyond kansas city and us the tin to 34 additional cities. Wireless broadband providers are racing to bill out lte, which is 12 megabits per second in a world where viewers only need eight megabits per second, lte promises to deliver speeds of 150 to 300 megabuiits per secon. It is fundamentally different from the cable system. Subscribers cant receive content, with respect to the internet, multiple consumers always exist. Comcast maintains relationships which ensures uz. Not preve th would be extended to Time Warner Cable. It bears keeping in mind how unstable it has been. It ended up being the end of 200 of time warner shareholder value. In addition, a few short years ago, many argued they would consign cable to history. How easy it is to overlook how innovation and willingness to undertake risk than anyone could have anticipated. Thank you very much. Your full statement will be part of the record. Obviously youve heard this, that cable and broadband customers, many are concerned how the merger will affect them. That as much as any issue were hearing on the hill. You said youll be able to compete more effectively as a result of increased scale. Said were certainly not promising the customer bills are going to go down or even increase less rapidly. So theyre not going to go down. They could increase. The merger will reduce the number of competing companies in both cable tv and Broadband Internet. How specifically does it help the consumer . Mr. Chairman, let me briefly address both halves of that question. Im very careful about what i commit to and what i promise. I can make you and the members of this committee one absolute commitment. Which is that theres nothing in this transaction that will cause anyones cable bills to go up. I have a nasty little habit of telling the truth, and when i was asked, are peoples cable bills going to go down, i said i cant make that commitment. But between the synergies in this deal, and whatever marginal, additional leverage we might have in programming and equipment supply purchasing, whatever economic benefits are generated will ultimately be to the benefit of consumers. And lets face it, consumers today are in the drivers seat. Both for broadband and in particular for video. There are a vast number of competitive choices. And thats why the scale that were trying to get here to stimulate investment, to provide a better experience for consumers is so important to us and to the american consumer. So im just going to tick off the litany of what consumers will get as a result of this transaction. Faster broadband. Greater Network Reliability and security. Better inhome wifi. Access to a more ubiquitous National Wifi network. Access to comcast revolutionary new x1 video viewing experience. Access to greater on demand choices. 50,000 on demand choices. Access to comcast industry leading tv everywhere experience where people can view video live and on demand on portable devices inside the home and outside the home. At the protections of the no blocking and nondiscrimination provisions of the open Internet Order. A more generic Public Interest benefits like extension of the Internet Essentials Program, to lowincome customers of Time Warner Cable, extension of our diversity and Community Investment commitments across the Time Warner Cable footprint. I think consumers are the big winners in this transaction. Also said that you apply the fccs open internet rules to Time Warner Cable until 2018. Will you do it beyond 2018 . I think the answer so that is that we will be doing it beyond 2018 because chairman wheeler and the fcc have already started a proceeding to put in place industry wide open internet protections. And i cant imagine that the commission is not going to have those rules in place well before 2018. Mr. Minson, you must be expecting this question, but youre a ceo who will get 80 million for his two months at work, before he agreed to sell the company. Youll get 27 million if the merger is approved for less than the year you were there. In your position. Do these golden parachutes help the shareholders . Let me, mr. Chairman, give you and you knew youd be ask that question, so go ahead. Let me give you our perspective on how we make operating and Strategic Decisions at the company, and really the north star for us is whats best for the consumer. And we concluded that this deal is far and away the best outcome for our consumers. The reason for that is in our marketplace, a few things really matter. Products matter. Innovation matters. And speed matters. And i think as a result of this deal, youll have positive outcomes. And the golden parachute . Im not wanting to interrupt by going back to my question. As it relates to the overall compensation packages, i would say for transactions this size and for transactions this complex, i think youll find that theyre in line. You may find that not all consumers agree, but it is what it is. Mr. Bosworth, if i might just take a moment for one more question. You take as long as you want, mr. Chairman. No, i want to give everybody else a chance. Youre fair. Thank you. Mr. Bosworth and ill have other questions for others for the record, but im intrigued by what you discussed about your network. Im not a golfer, but the fact that you have 24hour network and people want thats pretty amazing. You worked very hard at doing that. I understand your frustration that you cant get cable or satellite. Why is it critical for you to be carried by comcast . Could you simply operate could you simply operate as an Online Video Service . Thank you, senator. Thats actually a great question, and while online content and overthetop content is increasing, the average american still watches 20 times more video content via television, and the advertising rates mirror that as well. I will have other questions for the record. Im going to be leaving soon, but i will come back. The questions i want to submit for the record are important to this consideration. Also keep this record open to the end of the week for others who have questions or statements. And also, after i ask my questions, senator lee is going to take over as Ranking Member of the subcommittee. First of all, thank all of you for coming here. Im going to ask two questions first of mr. Cohen, but i want you others to listen because at the end of my question, i give you an opportunity to respond or add to, if you want to, but im not going to call on you. But that is part of my program. Mr. Cohen, if the merger is approved, comcastTime Warner Cable would become the largest Cable Television and Internet Service provider in our country. Its size would give the company increased ability to demand more favorable terms and rates, from content providers and equipment manufacturers. What effect will this its really three parts, so listen to all three parts. What effect will this have on smaller tv and Internet Providers. If content providers are forced to charge comcasttime warner significantly less, will they end up charging smaller providers more . And will consumers in places like my state of iowa, which is not served by comcast, pay higher tv and internet prices because of the merger . Okay, i think i only got two parts, but i think i can cover that. Okay. So let me do two parts to the answer and i think i can merge them all together, which is we currently have 22 million customers, comcast does, and were the largest Cable Company at 22 million customers. And i wish i could represent to you that i thought by moving to 30 million customers we would generate all this wonderful leverage and be able to really negotiate harsh programming deals, bring down the cost of programming, bring down the cost of equipment. But i dont think thats the reality. Programmers have inordinate market power, and attractiveness of their content. Ill just give you one statistic that i think drives this home. So this is for comcast, the largest Cable Company in the country. Over the last decade, our programming costs have gone up 98 , and while our cable rates over that period of time have gone up basically at half that rate. So it shows you the balance of power in the market, where programmers have so much more power at the negotiating table. So i dont think youre going to see dramatic shifts in programming costs, or in equipment costs as a result of this transaction. And by the way, thats one of the reasons why i say i cant guarantee that i think cable prices are going to go down as a result of this transaction. Because programming costs are our number one cost input in our business model. But for whatever we are able to move the needle even marginally in terms of negotiating better programming rates for our company, better equipment costs for our company, which will in order the benefit of our customers, i think any sound economic theory and any economist will tell you that that does not have an impact on what other Cable Companies are paying for their programmer equipment. The easiest way for me to explain this, since im not an economist, but how its been explained to me, if that is the case, if we get a programmer to drop their cost to us by 100, that theyll go out and try and collect that hundred dollars from another cable provider, that means that theyve left 100 on the table with that other cable provider. That as they negotiated the deal when they said we dont need that last hundred dollars, because were getting it from comcast. As soon as they dont get it from comcast, they have to go back and say oops, we need another hundred dollars. In fact, programmers and equipment manufacturers will negotiate to get the last dollar that they can from everyone who they are negotiating against, and this is a form of what i believe is called adjacent market economic theory, and theres no impact on what a programmer or an equipment manufacturer would charge to another multichannel video provider based upon the negotiations taking place with comcast. You want to respond . If i may, senator. Its a nice economic theory. With an additional eight million subscribe herbs, or ten million subscribers from Time Warner Cable, comcast will be in the drivers seat. Youre either on their system serving more than 30 million customers, or youre not. Will that impact the price . Youve got to believe it will. If that price goes down for other programmers, they could reduce the quality, or they could try to pass it along to other vendors. And even if mr. Yoo has some interesting statistics about other players in the market, this is a highly concentrated transmission market. There are very few players in any community who can offer internet or a big package of video programming. So the squeeze will come from comcast. Its logical. Theyll want to save money. I commend them for trying to do that. The ramifications will cascade through the economy, and could lead to significant price increases for others. Professor yoo . We are in a seminal moment in the history of the television history. Looking at traditional video in some ways masks the fact that they are losing subscribers. And what were seeing is a transformation to online Video Systems that is changing the economics, changing who the market leaders are and changing what the future outcomes are likely to be. Were also fortunate to live in a world where 98 of american households have three choices in providers, which is the best in the world. I think were in a moment where things are going to change, whether the Companies Like it or not and we need to allow them to respond to those changes in the environment. Mr. Sherwin. You raised the issue of the impact on service providers. Id like to address that for a moment. I mentioned to you in my opening that comcast refused to sell to us for the last year. They are the only provider of high Speed Broadband in a specific area, a geographic area, it makes it very difficult for us to provide services. In effect, then, what happens is the competition is limited. My suggestion to you would be that we find some compromised position in which a condition is imposed where wholesale internet wholesale broadband is available to Internet Service providers, which would address the issue you raised on the Internet Service provision. I think you go ahead, mr. Cohen, and im not going to take time with the committee for a second question. Ill submit it for answer in writing. Just a brief response to mr. Sherwin. I actually think his testimony sets forth in a pretty compelling fashion, where theres no need for such a condition in this transaction. He points out he has internet interconnection issues with comcast, time warner, verizon, at t and a number of other companies. I know that today and im just not aware of any refusal on the part of comcast to do business with mr. Sherwin. I know that today, we have about a hundred commercial agreements with mr. Sherwin in a hundred different buildings in america, and that in all of those cases, there is at least one other option that mr. Sherwin has to obtain services, and in some of those buildings, there may be three or four other options for him to be able to pursue. So the issue of wholesale unbundling of our network is an issue that was vigorously raised in the Nbc Universal transaction. One which we vigorously fought in that transaction, and one in which the department of justice and the fcc concluded that the market was sufficiently dynamic and competitive, that it was not going to compel wholesale and bundling of our Internet Service. Thank you very much. I know senator grassley is going to go and vote. If you notice that there arent many people left here, its because people are coming in and voting. Its not like theyve left for the day. I want to start with you, mr. Co h cohen. You talked about some of the benefits you saw coming from the merger. Would those not happen with the merger . I think the answer is that those things are going to happen faster and with more certainty than they would occur in the event there was not a merger. And i was really talking about the immediate consumer benefits. The reason those benefits have not occurred in the Time Warner Cable footprint is because the difference of scale between comcast and at Time Warner Cable, and its the scale that leads to the investment, that leads to the Rapid Deployment of those benefits. And when we move beyond the immediate, and when we look at our competitors and what they are investing and the innovation that they are rolling out, we believe Going Forward in the future, and in the absence of comparable scale to the national and global competitors that are our real competitors in this market, our customers will fall behind. We wont have the choice, the innovation and the technology to be able to offer them in the future. Ms. Bosworth, i know the environment for independent programmers isnt that easy right now. Ive heard from many of them. So what is it about this merger that you think will make it harder for independents, and why cant you simply go to other cable providers and satellite providers to get carriage from them . Why would you need comcast or time warner . I think i know the answer. Thank you, senator. Like we said, the combined merger would put them in 27 of the top 30 markets. And young networks need to generate their revenue through advertisers, and the advertisers demand that we be in those large markets. Comcast brings up apple and amazon, netflixs competitors and other outlets programmers can go to. Are these Viable Options for backing that network . Its an increasing marketplace. But yet still, the average american watches 20 times more video via television than they do online. Mr. Cohen, what Competitive Pressures is there to keep contest from dictating terms and creating high hurdles for programming like mr. Bosworths . So, three answers, if i can. First of all, comcast is probably the most independent programmerfriendly multichannel video distributor in the marketplace. We carry 160 independent programmers. Six out of every channels that we carry are independent programmers. In the last three years alone, we have provided expanded carriage to 120 independent programmers and we have launched five new independent programming networks, including four that are minority owned and minority controlled. And there have been numerous independent networks that have publicly expressed the views that im expressing here today about our independent programmer friendliness. Number two, the primarily Legal Protection for an independent programmer who wants to be carried in the Program Carriage rules that the fcc has. Those rules prohibit us from discriminating against the provider who wants carriage on our systems. But there have been some challenges, right . There have been a handful of challenges that we have tended to prevail on because there is an attitude or there is look, i dont begrudge independent programmers efforts to get carriages. You said in your question, it is tough to get carriage for any new networks today. By the way, comcast. Talk about our vertical integration. Weve dropped a network in the last three years because we had trouble getting carriage elsewhere for that network. So its tough to get carriage deals period. The space is very populated and its very difficult to be able to do that. But we try as hard as we can to have reasonable and rational discussions with independent programmers, and by the way, i would include the back nine network in that category of networks that we are talking to and that we are trying to reach arrangements with. They are meeting just this week between our Program Affiliation group and the back nine network, which was scheduled well before we knew the back nine network was going to be a witness at this you want to get to the third reason . And the third reason is that we carry these networks because we are always focused on the consumer. So if you have compelling content and you can make a case that our Consumers Want to watch this content, we will carry it. Thank you very much. I dont want to miss the paycheck fairness vote. Mr. Kimmelman, do you want to respond to that, and then ill be turning it over to mr. Franken or leahy. This is the real scale question, as the scale issue raised before about acquiring time warner. With 45 billion, you codo a lot of those other things without having to buy up the Second Largest Company in the market. But here on the scale side, you cant launch, you cant get out there, as mr. Bosworth said, unless you have advertisers willing to support you. Theyll only support you if you have enough distribution. So its a nowin game. The problem particularly is having been involved in crafting those original provisions more than 20 years ago, i throw up my hands because when youre vertically integrated and you have a golf channel and someone else comes along, how do you judge if its a fair way of putting someone on. We know they have a selfinterest. This becomes an almost impossible task. It has been extremely difficult for the fcc and so i question whether those rules can really do the job. Thank you. Do you think those rules should be changed or do you think as the Justice Department considers this merger that that should be part of the consideration . I think its appropriate for both reviewing agencies to consider all of its existing safeguards as they take on a new transaction to determine whether the old ones work. Because to just reply them without understanding whether they work would make no sense whatsoever. Okay, very good. Im going to turn this over to senator lee and then senator franken will be next. Thank you very much. Thank you, madam chair and thanks to all of you for being here today. Mr. Cohen, why dont i start with you. As i referenced briefly in my opening statement, ive heard some concerns related to content. Related to the idea of one Company Controlling a significant share of both internet and video distribution. With respect to politically affiliated networks or content or otherwise, ive heard some concerns expressed that the emerging comcast, the postmerger comcast might have the incentive or even the predilection, but certainly an enhanced capacity due to its larger size to discriminate against certain types of content, including political content. How would you respond to those concerns . So weve started talking about this just now. I think the easiest way to directly respond to that question is to say that its an important question, but its a question that is probably the most litigated question in the Telecom Space in the past 15 or 20 years. The fcc went through two lengthy proceedings in the late 90s and the first decade of the 21st century to determine what level of cable ownership, horizontal ownership would raise a concern that either the Cable Company could exercise power, extract unfair pricing from a programmer, or could serve as a bottleneck to prevent a programmer from reaching the american consumer. And in both cases, the commission established a 30 horizontal ownership cap, saying if you are over 30 , those risks were present, but if you are not over 30 , those risks were significantly mitigated. In both cases, the federal courts overturned the horizontal ownership cap, concluding that the fcc record was arbitrary and capricious, that the facts did not support a 30 cap, and that there are the law did not support it either. And that, in fact, the portion that the Cable Company with 30 does not control is known as the open field. Its known as the rest of the public that you can get to, and what the federal court said was a 70 open field was considerably larger, considerably greater than what a new programmer would need to be able to be launched and to be able to be viable. So in this transaction we announced on day one that we were prepared to divest about three million customers to bring us underneath 30 of the total mvpd market. By law, there is no 30 cap. But that 30 number is a bit of a hot button issue for those who watched this space, and by being under 30 , we believe that we have a compelling argument that the concerns that youre addressing in your question would not be significant concerns in this transaction. Mr. Kimmelman, ill have you respond to that. Things have changed since those rulings. Very importantly, a company with substantial vertical integration in programming. Nbc networks, nbc cable programming, sports, Regional Sports. So they have a variety of different forms of leverage here that arent simply addressed by this simple horizontal issue. I would say the thing that has changed the most since those rulings too is the internet. The growth of high Speed Internet delivery as weve seen in most places, we dont get much headtohead competition with two, three, five Cable Operators or multiple phone companies coming in. It just hasnt happened. So the internet has become the vehicle for this new potential form of competition. And with that, they have as many as 50 of the really high speed customers in the country. That could be a choke hold. So if i understand you correctly, youre saying that mr. Cohens response doesnt adequately take those two factors into account . Number one, the effect of changes in the internet market, and number two, the relationship between comcast and nbc. Is that in line . Thats correct, senator. Okay. Professor yoo, would you care to chime in on that . Of course. Thank you. To take a historical perspective, people are very concerned about vertical integration. If you look at the facts, vertical integration has been dropping line a stone for 25 years in the traditional cable industry. The industry has below 10 vertical integration and it continues to deceive. Concerns that this is a growing problem just arent borne out by the facts. I would say that the internet cuts the other way. It makes it less likely that people have trouble getting their message out. One of the great benefits of the internet is people who want to speak can speak. The transformation has happened, its becoming a video on demand world where people request content instead of getting what anyone thinks a programming decision has made, decides what they get to see. Actually, thats enriching the environment in ways that are almost if you want to see, look at our kids, see how theyre doing it, its just a completely different world. Im sure im going have more questions and will follow up on this, but my time has expired. Well turn it over to senator franken. Thank you, mr. Chairman. I want to thank chairman leahy for holding this hearing. What were talking about today is a 45 billion deal that would combine the nations biggest and the nations second biggest Cable Companies, and the nations biggest and the nations third biggest Internet Service providers. Theres no doubt that comcast is a huge influential corporation. I understand there are over 100 lobbyists making the case for this deal to members of congress and our staffs. But ive also heard from over 100,000 consumers who oppose this deal. And i think their voices need to be heard, too. As members of the Senate Judiciary committee, we are here to question whether this deal is good for competition, whether its in the Public Interests. Im against this deal. Because i believe it does not meet either test. I believe this deal will result in fewer choices, higher prices, and even worse service for my constituents. Comcast has argued that theres nothing to worry about here, because it doesnt compete with Time Warner Cable in any zip code. Mr. Cohen has told reporters, there is absolutely no competitive overlap between the two companies, none. What hes really saying is that these two companies, each of which controls many of their own local markets want to become one Larger Company that controls the national market. The new comcast would operate in 19 of the nations 20 biggest markets, 27 of the top 30, as mr. Bosworth said. That kind of expansion has serious impact on competition. For example, when comcast wanted to acquire Nbc Universal, comcast ceo told this committee not to worry about it because there were still other robust distributors. And he specifically named Time Warner Cable. Which would prevent comcast from setting anticompetitive prices for nbc content. The point is that comcast couldnt get away with that sort of behavior because the distributors, including Time Warner Cable wouldnt stand for it and go to the fcc to complain about it, too. Later in the hearing, comcast ceo also assured us, we are not getting any larger in cable distribution here. If this deal goes through, comcast will become larger in cable distribution, and if this deal goes through, comcast never again will have to negotiate with Time Warner Cable when it comes to setting prices for nbc content. And nbc content, everyone should remember is 20some networks. Comcast cant have it both ways. We cant say that the existence of Competition Among distributors, including Time Warner Cable was a reason to approve the nbc deal in 2010, and then turn around a few years later and say that the absence of competition with Time Warner Cable is a reason to approve this deal. Mr. Kimmelman, what do you make of comcasts argument that they dont compete against each other at all . Doesnt it really underestimate the anticompetitive implications of this deal . Absolutely, senator franken. Its true that they dont overlap geographically, but thats not the entire Competitive Analysis either for the department of justice or for the federal Communications Commission. Are there ways in which they can leverage unfairly . Do they have excess market power . Can they drive up prices . Can they harm quality and innovation . And there are numerous ways in which they can do that. If time warner can no longer discipline their pricing for nbc programming, prices will go up there, they probably will go up across the entire distribution chain. Harming consumers everywhere. Having the additional leverage of time warner as part of the comcast the internet develops the ability to offer new innovative services. What devices, what consumer interfaces work . If they have almost half of the customers in the country, thats what manufacturers will make. Products for that, meet their specifications. If they continue to want that to be through a bundled high priced set of services, im sure it will be. These are all enormous dangers that have Significant Competitive impacts and tremendous harm for consumers. Speaking of bundled services, well get to that later. Im out of time. Mr. Chairman, i very much hope well go to a second round. Im confident we will. Great. Thank you. Thank you, senator franken. The overriding objectives of antitrust law is to promote consumer welfare. Antitrust enforcement may seek to safeguard robust competition, but it must not become a tool to advantage or disadvantage particular competitors. I know that some of my friends here have never met a merger that they liked. Too often, Government Intervention in such matters risks harming consumer welfare. Absent clear evidence of market failure, consumers benefit when the government allows free markets to allocate resources in the most efficient manner possible. The markets for both Video Services and Broadband Internet are dynamic and innovative, with new entrants in evolving technologies. Government regulators must be careful not to intervene unwisely in such dynamic markets. The scope of the proposed merger between comcast and time warner raises issues that deserve attention. And i thank all the witnesses for being here today to discuss this manner. Let me ask you this, professor yoo. Id like to get this from the perspective of antitrust law. Although the fcc has a broader mandate to examine whether the merger serves the Public Interest, the Justice Department must look, in my opinion, solely at whether the transaction is consistent with antitrust law. According to your legal analysis, would this merger create for either video or broadband an industry structure resulting in anticompetitive harms under antitrust law, and in particular, can you speak to this to the rel vevant marke at issue in that analysis . Some critics stress that the combined company would control 50 of high speed Internet Access. A majority of cable subscribers and 30 of nypd customers. But are those the markets relevant to antitrust analysis in a video space that includes satellite providers and internet video platforms, or in an evolving broadband space that includes enhanced dsl fiber, in advanced lte services. Now, thats a lot of questions for you. But i just thought id ask them anyway. Theyre insightful questions, so i thank you for them. The people who have cited a number close to 50 of market share have not taken into account the latest technological advances that are going on right now. Dsl is rapidly improving in pulling a vast array of new technologies, including itd slams, a bunch of technical jargon, which i wont bother the committee with. At t is rolling out a new 45meg Service Across 80 of its footprint, and were not the only country. The uk, germany, a lot of Different Countries are on the strategy. When you start to see that, you see that dsl was actually coming back from the dead and the facts say that where dsl has not enhanced itself, yes, its losing market share from cable. The areas where at t has upgrade its network, its taking subscribers from cable. We see a market where the only way you can get the 50 number is if you pretend that dsl is not a competitor. The companies are losing numbers to dsl. The facts for them is there. This is the exact dynamic competition which we want, which is dsl, cable got better, put a challenge to dsl. It responded. And now dsl put the challenge back on cable. In a world where i think that you look at the analysis, even as of today, the markets are not structured in a way that any anticompetitive what antitrust level also tells you, what matters is not whats happening today, but what happens in the future should guide analysis. That world is going to become even more competitive than the facts today would lead you to believe. Thank you. Mr. Cohen or mr. Minson, we all know the broadband mark place is dynamic. Five years ago, many believed that no one could compete effectively. Today someone suggested no one would be able to compete against cable in providing broadband. What are the competitive conditions you now face and how do you see the broadband marketplace evolving in the near future . Either or both . Thank you, senator. I think we see a fiercely competitive broadband marketplace across our entire footprint. In each of the top msas in the country, there are double digit broadband competitors in that space. And ill give you, just to look at the combined footprint of comcast and Time Warner Cable, in 98. 4 of that footprint, the consumers have a choice between comcast, time warner, comcast or Time Warner Cable, and at least one top ten. Thats 98. 4 of our combined footprint. As professor yoo just pointed out, it is a virtuous investment cycle that is occurring here. We launched the cable industry launched Cable Modem Service that stimulated the bells to take dsl off the shelves. They invested in it and launched that product. We invested more in Cable Modem Service and made cable speeds much faster. That led them to move to fiberbased fiber to the home. Fiber to the neighborhood. Fios or uverse or other bell products that are like uverse. That led us to invest more and increased speeds, the new speed announcements that i announced today. Competitive responses to the bells offering faster and faster Internet Service. As professor yoo pointed out, that led the bells to put to the side old dsl and invest in modern dsl technology. They have more speeds. We announce this transaction and the ceo of at t immediately said that this is going to create a heightened sense of urgency for us to invest even more in being able to respond to this particular transaction. So in the end, consumers are the big winners. In the broadband space, or in the video space. It is really good to be a couple today because of this investment cycle. Thank you. What i would add is that you know, in my opening remarks, i noted that we have spent billions of dollars over the last several years in Capital Expenditures and a very High Percentage of that goes to increasing capacity in our broadband plan. Weve increased speeds from three meg to 100 meg across our footprint and we have pockets we offer at 300 meg service. So obviously on a price per meg basis, we offer much more value to consumers today than we did ten years ago. In addition, what i would say is that has allowed us that investment to offer different tiers of service. We offer over six different tiers of service. For example, early this year, we offered an Everyday Low Price offer for 14. 95, so that customers could get an offer that, you know, for that part of the population was priced very effectively for them. All in response to a very competitive marketplace. Thanks, mr. Chairman. Thank you. Thank you for all of your testimony. I realized that following some of the line of questioning of my colleagues, i think it is difficult to apply traditional antitrust analysis to a market where so much is changing so fast. Professor yoo said what the antitrust law should look to is what happens not today, but in the future. Which brings me to mr. Kimmelmans suggestion. No, mr. Bosworths suggestion that perhaps what should be happening is the doj should engage in basically continuing oversight, to make sure that new independent networks, others who want to come into the marketplace to provide choices for consumers will have a fair opportunity to compete. Would you agree that that would be something to consider in this market that is changing so rapidly . I would agree entirely. The fcc should engage in ongoing oversight. And in fact, it does. There is a very welldeveloped set of Program Access rules and carriage access rules to make sure that independent programmers have the ability to be carrying and to make sure that people who have content must share it with other Cable Operators and other satellite operators. There are some complaints, people that dont get what they want out of the process. The correct solution to fix that process, so its available for everyone instead of using a americaner to do a Company Specific solution that will only affect the merging party. For mr. Cohen. Your basic cable package is about 75 a month. Is that about right . Senator, we actually have many basic cable packages. So wed start with a lifeline type service, which would be broadcast channels and a few other channels that more typically would be around 20 a month. We have a Digital Economy package, which what is your median amount that your subscribers pay for your services . Median im not sure i know that. I can provide that to the committee. Its hard because we have half of our customers are in bundles and are getting a bundle of services for 99 a month, or 129 a month. That includes video, high speed data and telephone. Its that group that i want to address. The people who have the bundles. And there are consumers who might want to have more of a say in what kind of programming they want to pay for. So do you have any in the group that gets the bundled product, do you have any initiatives in mind that would create more of a choice, provide more of a choice for consumers to get the kind of program they actually want and not have to pay for, in my case, for example, it would be some sports programming . Right. So the answer is we do offer a variety of video bundles, most of which are available in bundles with high speed data and with telephone service. The whole issue of socalled a la carte programming where people can assemble their own packages is a very complicated question. And i would note that in every independent study that has ever been done of a la carte programming, the study is complet concluded that the result would be less choice for consumers and higher cost. The reason for that is the economics of cable programming involves both advertising and affiliation fees. I need to interrupt you. My time is running out. I think it just illustrates how dynamic this marketplace is. I would agree with that. How many different offerings and why perhaps the doj and fcc should continue to monitor to make sure that competition is actually occurring. I have a question about hawaii. Now, hawaii is not served by comcast at all. The oceanic has about 90 of all those cable subscribers and they have Internet Service where they have a particular internet address. Should this merger occur. Specific question. Would they be able to continue their same internet address or do they have to completely change whats happening with them . We havent gotten to that level of detail and transition planning. Other transitions relating to other transactions. We have tended to have a long phasein period for changes of internet addresses. And i think some people are still using their at t internet addresses, which was a transaction that was done in 2001. But we really have not gotten to that level of transition planning yet. I take it the idea would be to be as accommodating to your customers all across the country. We are totally focused on the Customer Experience and have a lot of experience and thats exactly what the concern is and what the planning process would be. Thank you. Ive run out of time. Thank you, madam chair. Thank you very much. Senator graham. Thank you, madam chairman. Mr. Cohen, how would this potential merger affect the South Carolina market . So, senator, good morning. South carolina is one of the states actually where comcast and Time Warner Cable both have a presence. It is a state that actually demonstrates the lack of competitive overlap between the two, although we are both in the state and we are in different parts of the state. So i think that south carolinians would gain the benefits of the investment, faster internet, better video experience. Rollout of the x1 platform. Better tv everywhere experience. And i think South Carolina is a state where bringing the two Cable Operators together will provide a more unified experience in the state. Although we will continue to compete. And you know the state well. Well continue to compete with directv, dish, and at t as major providers in the state of South Carolina. We dont compete with comcast in South Carolina, is that correct . That is correct. Do you agree with what he just said about the potential merger affecting South Carolina . I do. Im a directv subscriber. So had problems with cable. If i can say, youre proof of the point that i am making. Ive got problems with directv when the weather is bad. So im trying to revisit this. I really am. I dont know what to do. Im trying to figure out whats the best i think most Consumers Want as much as they can get as cheap as they can get it, right . At least i do. And the details kind of cloud us over. So the bottom line is this merger, youre not taking two people that compete in the same marketplaces. Am i right about that . That is correct. So my choices would be if the merger comes about, to stay with directv, go with dish, go with yall. Who else could i choose from . You could go with at t as a wire line competitor. Ive got four choices . Youve got four choices. And again, depending on where you live, other competitors in broadband and cable, are charter, home telecom, and wow in various places in South Carolina. So it could be up to seven or eight to ten choices. On a statewide basis. But to be fair, so mr. Kimmelman doesnt jump in and correct me, just like we dont compete with Time Warner Cable, we dont compete with charter either, so it really depends where you live as to whether one of those cable providers so basically, Cable Companies dont compete with each other generally speaking . Thats a result of that is correct and its really because of the way in which cable grew up as a matter of local franchising. Local franchises were granted originally when congress authorized them. They actually were exclusive. Ultimately congress got rid of exclusive franchises. But the cable business grew up community by community by community. So in my case, i wouldnt be losing a choice. The theory would be i could have a new choice with more services through the merger. Is that correct . I should let you take the witness seat. Thats exactly what ive been trying to say. So if somebody can sell me a product at this hearing, because i really dont know anybody to represent directv . Because i really dont know im thinking about changing, because ive had the satellite signal knocked out twice. Ive had to move the satellite twice. Before that, the cable went out right in the Fourth Quarter of a ball game. So from a content providers point of view, if im a content provider, am i at a disadvantage from this merger in your view . I believe that you are not. As a combined company would have under 30 of the market, and i do not think that that is a sufficient share of the market to create problems for programmers and maybe more importantly than my opinion, the federal courts in the d. C. Circuit have ruled on two occasions that having under 30 of the market does not create an undue risk of power or bottleneck authority. I will agree with something mr. Kimmelman said beforehand. That was a different time when the court made those rulings. But the way in which i think its different is that the multichannel video marketplace today is even more competitive than it was in 2001 and 2009 when the d. C. Circuit made those decisions. Tell me why i should switch back to cable. Im going to give you the comcast pitch, even though were not there yet. And then i think comcast provides the best in class video viewing experience in the country. Our x1 operating system changes the way people watch tv, better search, voice control, disabilities access and our tv everywhere experience, 50,000 choices on demand, which nobody comes close to. And tv everywhere gives you the ability to watch 50 live channels, inside or outside the home now. And tens of thousands of video choices on demand. Thank you very much. Senator blumenthal. Thanks, madam chairwoman. And thank you for your leadership in the antitrust area. And for participating in this hearing. First, let me say how delighted i am to see two connecticut residents here. The more thanning after another great triumph by our team. If you are around long enough, youll see me present senator rand paul my huskies tie, because he is obligated to wear it as part of the bet we made. Let me just say how much respect i have for thank you for being here and for your companies who do so much to enrich and enliven our lives, and to all of our witnesses, thank you on this very, very consequential, event historic issue thats before us and let me just say that i think what weve heard among some of our colleagues is a general sense of skepticism, which is reflected in the general public about how this deal will really help consumers. Prices wont go down. Weve already heard that. Where is the beef . Where is the there there for consumers . Apart from the fairly vague potential promises of good things happening, i think the case has yet to be made that consumers will really benefit in a tangible, real, substantial way. Im especially concerned that bullworks of competitive marketplace, choice, and aggressive rivalry. Not just competition, but aggressive headtohead rivalry have been diminished over the years, and these markets are plagued with anticompetitive conduct, industry grimace to limit Consumer Choice and skyrocketing monthly bills at triple the rate of inflation. Thats the reason why i think youre hearing a high degree of skepticism here. I think that the department of justice has to conduct a very comprehensive and thorough review of this merger, paying careful attention for the potential abuse of power and since i opened about sports let me focus for the moment on Regional Sports networks. Also known as rsns. The most recent manufacturings i have details comcast owning 11 rsn m countrys largest markets, and Time Warner Cable owning five rsns along with 16 local sports channels combined they would own the rights to a very formidable amount of local sports programming in the largest media markets in the country. These are unique products of tremendous value. Access to them is crucial to a paid tv providers ability to remain competitive and the cost of sports programming continues to rise with no end in sight. L. A. Times reported last week cable bills are expected to rise to 125 a month from 90 a month in the next few years. Almost entirely due to sports programming. Any competitors that wont pay your increase costs for sports programming get denied access, and thats led to some serious high profile disputes, as you well know, between comcast, timewarner, and your satellite and telco companies. In fact, i think there are still several outstanding disputes right now where Regional Sports programming continues to be with help from competitors from both comcast and time warner owned rsns. Im really concerned that the increased ownership of high value programming, like sports Regional Sports networks will give your companies, soon to be one company, both the means and incentive to overcharge your rivals. I think that is a practical, hard fact of life. Means and incentive to overcharge for a economically crucial element of programming involving sports, so i wonder if you would address these concerns. Should i go first and good morning, senator. I was wonder whenning you didnt come in here if you were still celebrating from last night. Actually, i will say i think everyone in the country shares your joy, and particularly if i can say, there is something unique about Womens Basketball and the sheer joy of the end of the game was last night something i think everyone in america can get a lot of pleasure out of. I will point out, by the way, that in the diversity of programming and the way in which were bringing this that, of course, the mens championship was on cbs, a broadcast network, and the womens was on espn, a cable network, and thats part of what cable has been able to enable in america to have this diversity about whats to show really exciting and incredible content like that. The rsn world, my numbers are a little different than yours, but i think the point is essentially well taken. I had said earlier that one of the reasons why i couldnt make a commitment that cable pricing was going to go down as a result of this transaction was because the number one driver of our cost structure is programming costs, and the biggest factor in programming cost is sports programming, so were in total agreement on that. In the rsn context, though, rsns are not national networks, and as you point out, theyre regional. Theyre offered in a particular market. Theres really nothing in this transaction that changes the dynamic in any market in the country. We already oen awe bunch of Regional Sports networks. Time warner cable has a few. But in the lets take the l. A. Lakers Regional Sports network in los angeles. Comcast isnt in los angeles. Time warner cable is. Whatever the competitive dynamic is today for Time Warner Cable negotiating Regional Sports network deals for multichannel video distributors in the l. A. Market for the lakers Regional Sports net will be exactly the same. Were not going to have any more power in the l. A. Market to negotiate different deals because we also own Regional Sports nets in chicago and philadelphia and the washington area. Those markets, the impact of Regional Sports net Bargaining Power is tied to the structure of the local markets where the Regional Sports nets are offered and theres nothing in this transaction that changes the competitive balance or competitive evening lib yum in those particular markets. There might be nothing in this deal that changes the configuration locally, but it increases the Bargaining Power on one side. The Bargaining Power for who . I mean, im trying to figure out the Bargaining Power for the entity that controls the programming. Its a bigger entity with more economic power and potentially more power over other programming in other markets and increases its strength, its ability to withstand potential hostile negotiations. I think that so its the collection if you view it only through the prism of the. In the comcast case, distributors have the right to demand arbitration for Regional Sports nets on a standalone basis along with no other channels. Just the sports net. So no one has done that. No one has availed themselves of the arbitration rights because weve been able to reach deals with people without the need for arbitration, but there is that extra protection that is present in the Nbc Universal ark. Why not senator bloomfeld, do you want to go in a second round . I apologize. Senator kunz. Thank you to our entire panel and the members of this committee who dedicated significant time today to reviewing this substantial transaction. Mr. Cohen, if i might, i would just like to start with a few questions about service, employment, and diversity. First, the main concerns i have heard from my constituents in delaware have to do with Customer Service, future price, and employment. Comcast is a major employer in the philadelphia region, and there are some real concerns among my constituents that this merger, if it goes forward, will not achieve significant improvement and Customer Service levels may lead to increase in price and may lead to a loss of jobs. Are there any assurances you could give us today about how the significant benefits that you have described both in writing and in testimony to this merger will in some ways not just to shareholders but also to customers who, frankly, more than not have contacted me with concerns about price and Customer Service. So let me do Service Price and jobs. Let me do price first because i have already addressed that. Im not sure i will make, again you know how careful i am. I will make my one Firm Commitment that there is absolutely nothing in this transaction that will result in the increase in prices for comcast customers. Nothing. Whatever economic benefits we can derive, whether its through synergies or whatever marginal additional leverage we might receive for programming negotiations and equipment negotiations, ultimately those are to the benefit of consumers. That is thats my response on price. On service so service, im glad you raised the question. Senator franken has talked about this and, you know, senator franken actually appreciates what you have said about service because i want to tell you with our company, we have an incredible focus on this, and it bothers us that we have so much trouble delivering a really High Quality Service level to our customers on a consistent basis. It is not something were ignoring. It is not something that we are not serious about. We have spent billions of dollars over the past five years improving our networks to try to make them more reliable on additional training for technicians and for our Call Center Employees. We have created new call Center Centers of excellence, one of which is in delaware where you have specially trained Call Center Representatives with a design of trying to enhance the level of Customer Service. We have focused on a whole host of Measure Service improvements including creating one and twohour appointment windows across most of our footprint, which we actually meet now 97 of the time statistically. Were not happy that we dont meet it 3 of the time. This is a place where were having issues. I can just tell you that as a company we are laser focused on trying to improve the Customer Experience and do the very best we can to be the best to offer the best Customer Service and best Customer Experience in the country. Internally and externally, and there are a lot of surveys around, and some of them are very difficult for us to read. I will tell you that over the last three years in jd power and associates, which i think is viewed as the cadillac survey of customer attitudes and customer value, Comcast Service comcast score and jd power has gone up about 100 points in video and about 80 points in broadband, and those are the largest increases for minimum in our industry. So the investments that were making and the commitment that we have internally to improving the Customer Experience are beginning to bare fruits, but we are deeply disappointed as to where we are and all i can tell you is that that the scores that we receive, the comments that people like senator franken have made, the conversations that i have had with you, they just spur us to do even better and to really try and enhance the Customer Experience. In terms of jobs youre welcome. I meant i really mean that. This is a place where external voices have absolutely had that impact, and we think in the end were going to be a Better Company as a result of it. Thank you. In terms of jobs, obviously unlike the Nbc Universal transaction where we could stand up and say this is a vertical transaction and there isnt any overlap and jobs and were not going to be laying people off in fact, we expect to grow jobs. This is a transaction where there is some overlap of jobs, but its Head Quarters and shared Services Jobs. Its not the basic operations of the cable system. The state of delaware we dont have headquarters or shared Services Jobs in the state of delaware. We dont have them in the we dont have them in the state of connecticut. We dont have them in the state of minnesota. We dont have them in the state of utah. I can comment on that for now. We havent gotten deeply enough into looking at where the potential overlap is for me to be more specific than that, but cable because cable is such a local business, most of our jobs are the customer facing jobs technicians and we dont anticipate any reductions many those jobs. Thank you. I see im about to run out of time. Let me ask one more question about sort of terms and conditions. The significant rollout of the Internet Essentials Program which is a very Promising Program to provide low cost high speed Internet Access for low income households to help address the achievement gap to help improve access and deal with the Digital Divide and there are also commitments made about diversity of programming and im interested in both diversity in the work force and diversity in programming and the accessibility of your Service Platform to a wide variety of content providers. Let me focus you as an example on tv one and africanamerican focused channel. If you would speak briefly in closing to both of those, and then mr. Kimmelman, if you might, on whether terms and conditions are really the appropriate way to address concerns that some might have about this merger, so mr. Cohen, if you would, on your progress towards delivery of internet essentials, your progress towards meeting commitments made about diversity and programming and then mr. Kimmelman. So internet essentials at the time we proposed it in 2010 was an experiment. We had no idea if it would work. We had ray concept for a Program Based on research, and as we have rolled it out, it is now the most important Community Investment of Comcast Corporation and it is a program which i think not only the executives in the company but rankandfile employees have an enormous amount of pride in. In 30 months we have successfully connected about 300,000 families, 1. 2 million low income americans to the internet, most of them for the first time in their lives. 80 of those families are minority, and when we survey those customers and say what do you do with the internet, the number one answer is our kids do homework on it. 94 of the families say that their kids do homework on it, and of those 94 of the families 90 of them say they think their kids are doing better in school as a result of having the internet at home. Its a program that is an amazing success. We are. We together with thousands of Community Partners its not just us are really making a difference in closing the Digital Divide, and we are incredibly proud and enthusiastic of being able to extend that Program Throughout the Time Warner Cable footprint. There have been multiple references to the size of this company being in 19 of the 20 largest cities in america and 37 of 40 in whatever all the numbers are. I look at those numbers, and when i think about internet essentials, im excited. Were bringing the largest Adoption Program to 19 of the 20 largest cities in america, 37 of the 40 largest cities, and i really think were going to make a difference in moving the needle. In terms of diversity of programming, were very proud of our record there too. We agreed to launch ten new independent networks, at least eight of which would be minority owned and controlled on a schedule, consistent with that schedule. Weve watched five, including four networks that are minority owned and controlled. Tv one, by the way, which you referenced, was a network that we originally helped to launch after the tv one transaction, being an investor and giving it its first carriage deal. Were enormously proud of our record for enhancing minority owned and minority focused networks both in terms of creating Wealth Creation opportunities for minority entrepreneurs and in terms of making sure we have programming that is being designed by and run by diverse ownership and management teams to be able to provide that type of programming to the particular ethmick communities and Diverse Communities that are represented. Thank you, mr. Cohen. Mr. Kimmelman, can you comment as well . Ill only address the competitive kinds of conditions that i think are important here to customers, users, consumers. In the kinds of regulations that have been sited in this hearing and the kinds of benchmarks that have been there and used in the past that some are trying to rely on. The difficulty here is that none of them are absolute. None of them are you may absolutely do x and you may absolutely not do y. Now ill have to rely upon reasonable business practices, common practices of the lead companies in the industry, and the difficulty here is with the size of comcast combined with time warner, they could drive what those practices are. It becomes a bit of a circular reasoning of what is reasonable is what they do, what is acceptable in the industry is what they decide. The standards are determined by them. Thats the concern. My suggestion, senator, would be that for all conditions in a transaction like this the Oversight Agency should go back and review whether they work and have worked in the past and whether they can work given the factors involved in the transaction. Thank you for your testimony. I would like to get back to you to followup on a question that senator bloomenthal asked earlier about a Regional Sports network. How do you respond to this question, this concern thats been expressed about the rsns that the merged entity may own and the potential for this ownership to be used in an anticompetitive manner . Do you see a risk of this . To i dont for the most part because if, for example, to use the l. A. Lakers, right now the fact that time warner if previously time warner had owned the l. A. Regional Sports Network and theyre bargaining with other l. A. Oriented video providers and that company is now coowned by comcast, it doesnt really change the bargaining leverage of the l. A. Lakers network against any of those other l. A. Based video distributors, and so this is, again, because l. A. Programming is only primarily interesting to people in l. A. , the fact that its now coowned by a person who also owns a Regional Sports network in philadelphia doesnt really change their Bargaining Power in the l. A. Market. On a broader scale i suppose youre presup possing that all rsns would have a regional fan base. That is correct. That wont always be the case. For the most part it is because if they dont, they tend not to the programming tends to migrate to the national Sports Networks as opposed to the regionals and countries have a choice about where theyre going to place that programming. On a much broader level, weve been fighting about rsns before this transaction. Were going to be fighting about it after this transaction. This is a classic example of a problem that i believe is not mergerspecific. We are working on a dispute resolution mechanism as part of the Program Access provisions thats overseen by the fcc and has been around for a very long time, and that, in fact, is believed to be a reasonably effective means for involving disputes. Theyve been very high profile. If there is a problem, the real solution lies in fixing that process because then all programmers, all regardless of whether theyre affected whether theyre operating in areas governed by Time Warner Cable or comcast will gain the benefit of it because this is a bigger problem that precedes and goes beyond what the merger requires. Okay. Thank you. Mr. Kimmelman, shifting gears. I want to talk for a minute about the advertising spot market. I understand comcast is saying its acquisition will provide Something Like a one stop shop for cable advertising. Do you have any concerns with regard to the market for cable advertising and how the merger might impact that market . Yes. I think its a very important area to look at because this, after all, is all about eyeballs and all about viewership, and i think it 8 ought to be looked at through antitrust review as to whether this consolidates it. Onestop shopping is great on one level. On the other level, if it leads to market power and the ability to dominate in the market, it may strip off Advertising Opportunities for potential competitors to comcast, particularly on the programming side. Okay. I think a lot of the local advertising is the importance here is that for every whether its Regional Sports if you are talking local advertise and local Cable Systems, keep in mind that the kind of competitors were talking about on some level are Satellite Companies that are nationwide competitors. If were talking about internet provided services, those may also be increasingly marketed nationwide. There are some National Implications here, but it would all be drin by the levels of concentration and looking at those specific markets. Love is of concentration that could lead to fewer options for right, nor. Markets relate to cable and the internet have tended change rapidly in recent years as a result of changes in technology, and at the same time i think history has shown that large incumbents will at times take actions that are designed to protect their incumbancy and sometimes when they do that, that thendz to prevent or slow rapid changes in technology that might otherwise bring about a morrow bust competitive environment. There are those who have expressed concerns that this merger might have that affect and some of those who make this point will point to relatively new offerings such as netflix, roku, amazon fire tv. These are products that compete arguably with Comcast Cable video offering, and those who have expressed this concern have been concerned that perhaps because some of the service that is i just mentioned can be accessed only through high Speed Internet. If theyre worried about the fact that that market, the market for high Speed Internet is a market in which the merged company would have a very significant share. Does that cause you any concern . I want to make one comment about local advertising. Cable represents 7 of the local advertising market. Its a relatively small part, and whether the level of concentration is a material impact. 7 of the local advertising revenue is on cable. If you are a local advertiser are 3 of your money is going elsewhere, and the 7 concentration level under any antitrust standard is irrelevant. Okay. Got you. There is a tendency to think of the internetbased video distribution world as just an extension of the cable world, and we take the intuitions and knowledge from cable and just move them over. Its just not true. In the cable world the kinds of carriage agreements that independent Cable Networks are trying to get going are trying to cut, well, if they cant come to an agreement with a cable provider, thats it. They dont get covered. Thats just not the case with the internet. One of the things one of the realities is every Internet Provider maintains thousands of connections. There are thousands of ways. Comcast itself has 40 settlement free and 8,000 transit arrangements, and if one of those connections doesnt negotiate well on terms, theres actually a multitude of options elsewhere, and the leverage is not yes or no. The leverage is the difference of the price i get through this connection versus my next best connection. When you start to look at it that way the a. Leverage they have over providers becomes very, very narrow. The only way they could stop that is by monitoring all decide oh, im going to hurt this provider, and im going to figure out where they are by monitoring 8 thousands of my connections and figuring out which with traffic of thousands of different kinds of streams, and im going to pick on the this providers stream out of that stream and discriminate against that. You are saying that would not make sense as a business proposition and would be technologically difficult. And barred by law under comcast agreement under the nbc agreement under the merger. Yes. Absolutely. Technically very hard to do. Really bad idea from a business sense, and, in fact, many Cable Companies, cable vision said publicly in the wall street journal they may get out of the programming business and just carry people over the top players because the Program Costs are so high. Why should they be squeezed in the middle . Why not allow over the top providers to negotiate on a much broader basis . Thats part of the dynamic change in the world were living in. Thank you. My time is expired. Thank you, madam chair. Senator bloomenthal had one followup question, and senator franken and i will leave my questions to the end. I much appreciate that, madam chairman, and thanks also to senator franken. Just a quick question. You and i agree that the cost of sports programming are rising, in fact. They are rising astronomically and should better reflect consumer demand. Really arent consumers the best judge of what a fair price for programming should be and wouldnt prices come down if they had more choice, specifically the way to break this cycle of ever increasing costs for sports programming instead of give consumers some more choice through ala carte programming, and i wonder if you could comment on the potential effects of disciplining the market and bringing down the costs of cable as a result of ala carte. Thank you. I truly believe you are correct. I think that one of the concerns that wasnt addressed earlier was that we have numerous studies that show with vertical integration we end up with higher prices on the Regional Sports channel that is are integrated than the ones that are independent, and one of the related concerns there is that competitors who want sports programming in that market have had a very difficult time negotiating a reasonable price for that even if the price is higher than it should be. So it seems to me one of the things to look at, as you have recommended legislatively more broadly is to offer channels ala carte, offer more programs ala carte, give consumers the choice as to whether they really want to prey pay the price that is being passed through. Thank you, madam chairman. Thank you very much, senator franken. Thank you, madam chair, and i have three questions. Itsoning if i go over a little bit . You would not be alone. Mr. Cohen, im worried that this deal simply continues a trend of media consolidation, a trend thats led to increasing prices for consumers that have seen their bill go up more than twice the rate of inflation since the mid 1990s. Earlier this week news broke out about a jp morgan report in which wall street analysts apparently recommended the Cable Companies continue to raise prices on consumers, and as you have admitted, prices might go up even faster. Weve talked about your comment. Mr. Cohen, dont your investors, people invest in comcast, expect comcast to leverage its market share by getting as much money as it can out of consumers . I think our investors want us to have the best multichannel video and broad bant business in the country, and i think that includes getting whatever prices the market will bare, but it also includes providing an xeerdly high quality video and broad bant experience, and i think we have made you can look at our analyst calls. We have made it a point of significant discussion not only for us, but for the entire cable industry about our need to continue to invest to be able to compete better against national and global competitors who are increasingly coming into this space. Where he to your question, but also to be fair, yes to the business reasoning underlying this transaction, which is to provide us with the opportunity to create a better experience for consumers. Well, my concern is that as comcast continues to get bigger, it will have more power to exercise that leverage, to squeeze consumers, and part of the reason im concerned about this is because comcasts own cfo has told wall street that thats what comcast does. During a fall 2012 Conference Call an analyst from Goldman Sachs knowing that cable had a big share of the broadband market, and asked comcast cfo is there a way to exercise pricing leverage to a greater extent . Comcast cfo said, i think that we have actually exercised some pricing leverage. Weve increased the costs of the service by roughly 4 to 5 per customer per month over the last pew years. Its understandable that comcast has responsibility to look out for its investors, but im concerned that the bigger and more dominant the company becomes, the less incentive they have to look out for consumers. And the more power they have to squeeze them. Mr. Kimmelman i think this goes to bundling too. I know that in some of those talks right after the talk of the acquisition there was pledges to push bundling, to up sell your product. Mr. Kimmelman, wont this give comcast more leverage . Absolutely, senator franken. Theyre giving us examples of things that show the market is highly concentrated but not monopolistic. We did use the numbers in our analysis. Theres enormous market power that could be leveraged, and on top of that, there is the very popular nbcu programming. That can be leveraged. That, understandably, maximizes profits for comcast to keep it in a big bundle, to charge as much as possible, and the increasing trend for consumers is to buy at least two services. Broadband and video, if not three. So they know that they can drive up prices to competitors and benefit from raising their rivals costs and if some people want to drop those rival services, says most likely going to be business going to them. That is where their financial senate lies, and we would expect them to follow through on that. Those are the kinds of concerns that on the Public Record where in the fcc ruling on nbcu and comcast, and in the doj and i imagine they would be relevant here as well. Senator franken, can i jump in on that . Sure. Thank you. Understandably, this is a really complicated matter. I think if we boil it down, the folks at home that bills keep going up, are expecting more. Theyre not getting more channels and theyre not getting more choice, and so, you know, mr. Cohen pointed out that, you know, content costs are up 98 while their subsubscription fees are only up 50 . Thats extreme pressure on their gross margins. Any Business Owner would know that why whats the incentive to add more product when its your highest gross margin product and its your number one cost . There has to be effecttivity ways to encourage the marketplace. The marketplace were going into is 170 billion marketplace. Its larger than all four major sports combined. There are 60 networks that are fighting over that space in the sports area. The golf lifestyle market has won, and the only channel is that of golf channel, which is owned by mr. Cohen. Now, a good real world example that i think everybody ought to know of how hard it is for original programmers is that we understood that golf channel was owned by comcast, so we didnt start there. They didnt have a huge incentive to launch us, but what we did is we started with time warner sxabl some other folks. Time warner cable from the ceo to the programming people could not have been more constructive in their help to help us get our programming on the air. As soon as this merger was announced, that definitely softened quite a bit. Im sheer that Time Warner Cable did a wonderful job trying to get more products to the consumer, and since that time when this was announced, its become a lot more difficult for us. The only thing i can think about is because they own the only competitor in the space. Thank you for your indifficulting ens, madam chair. You look surprised, mr. Cohen, when i talked about upselling and bundling. Neil schmidt, an executive at comcast, went on a phone call with a wall street analyst and said this. As i said i think the re new synergies are greater than the cost synergies. On the revenue sin erj jis side the fist would be in the residential area where we would seek to bundle more and that is call center training. Thats teaching people to sell another rtu on a call, on a service call, fix the billing problem. Up sell a third product. So just bundling burt. Thats what i was talking about. You look kind of puzzled when i brought it up. I wasnt sure what you were referring to. I think obviously for us and for others m cable industry have been valuable for and yous something consumers like. You were told by the fcc to actually stop that and to stop pushing bundles and but i got other questions. Okay. I wanted to be very short, and i know sometimes im too long. I will say that the fcc did not tell us to stop bundling and pushing bundles. They simply asked us to have a standalone broadband offering which we did have and which we continue to have. The fcc sent you a letter saying that a Consent Decree imposes a detailed plan that requires comcast to take numerous and training its customer representatives and retail salesperson nell to reinforce their awareness and familiarity with a performance starter service. Thats the single the deal was we would create a new Broadband Service which was a standalone service, six meg down, for 49. 95 a month, and we did create that tier, and the commission raised concerns about how we were marketing the tier, whether our Call Center Employees knew about it. We quickly resolved the matter. We may have had a difference of opinion. We quickly resolved the matter, extended the commitment for another year so you paid a fine. We did make we did pay a fine. All im saying is there was no and you were told no prohibition. Tell your call Center People to emphasize the standalone, not to upsell. Offer. Very different to the condition. We were offering. Nothing in the fcc order to prevent us from bundling. I just want to say that we agreed in addition to our bundling strategy for somebody who called and said i only want to buy broadband to have an option, standalone broadband option. When you train people to upsell, you are not training them to make people want to go for the standalone broadband. Something that you were fine for not doing. We are allowed to train people to upsell. All we have to do is when somebody says i want to buy broadband alone, that our Call Center Employees have to be aware of the standalone product and sell it to people. You seem like a pretty good salesman, and i know people on call centers can emphasize certain things over others, and i think thats my fear here. I want to talk about two other things. I am so sorry, madam chair, but mr. Kimmelman, comcast has argued that this deal wont jeopardize the open nature of the internet. In the Public Interest statement that it filed with the fcc yesterday, comcast promised regulators that it has no incentive to enter fear with internet traffic. If this goes through comcast will control 40 or more of the broadband market, and it wont just own all those pipes. It will also own a bunch of content because it bought Nbc Universal a few years ago, and the 20 or so Cable Networks that came with it. Mr. Kimmelman, doesnt that give comcast both the power and the incentive to manipulate internet traffic in its favor and didnt we see a preview of that with the recent deal comcast struck with netflix. Senator franken, if you go back to all the big numbers mr. Cohen had and professor yu had about the many myriad interconnections of the internet all around, all accurate in that space, but when you get close to the home, to the customer, the last mile, the ports that have to bring in the video traffic, one player, two players, sometimes more, hardly ever and one of them is comcast combining with time warner. That part of the market is quite concentrated. There are a lot of changes going on in the internet. There are a lot of different kind of interconnection relationships. What we also see is a lot of proposals for usagebased pricing that wasnt there before. Data caps. Can you explain what those are . Just that instead of getting a flat fee for eat as much as you want for your internet usage, that above a certain level, your prices go up. Or you pay per certain a. Usage and unless its a comcast product like xfinity. There are some products that are dealt differently with by Cable Companies and under different set of standards and arguably preferential to what a competitor has. There are dangers when the market is concentrated at that point of ways to manipulate, and this is where i go back to my analogy of an octopus that has all these tent cals out there. Theres Net Neutrality, and then there are the different pricing schemes and then there are the different interconnection and arrangements. There are many ways in which a number of tentacles could be used to favor one product over another if its financially advantageous to that broadband provider with market power. That would be comcast time warner. I have one last question, and its going to be short, i think. You have a section called promises changed and promises kept. You say when we make promises, we keep them. You talk about the conditions that the fcc imposed on comcast when it acquired Nbc Universal, and here is what i found puzzling. You say out of these conditions, the fcc has only found it necessary to look at one issue, and that was the issue we just talked about on standalone broadband. Isnt it that they looked at neighboring isnt it the condition that prohibited you from favoring nbc content. When cnbc is neighborhooded, you were neighborhooding it with all the other 24hour cable news channels with cnbc w thbs with msnbc, fox, cnn, but you put bloomberg way out in the nose bleed seats. People couldnt find bloomberg. Because they couldnt find bloomberg, they wouldnt go to bloomberg, and bloomberg could charge less for its advertising and nbc would get more eyeballs for people who were interested in 24hour business news, and you could charge more. Isnt that another condition that that they looked at . Sir, generally speaking, that characterization is just not accurate. What we had in the bloomberg neighborhooding area was were interpretive differences between bloomberg and comcast as to what the condition meant. The fcc certainly looked at it, didnt it . There was a complaint filed, and when we lost at the fcc, we have resolved the matter with bloomberg. We are in compliance with that condition. Let me ask you, is this true then that out of these conditions, the fcc has only found it necessary to look at one issue. Is that still true . What is true is that we only had a compliance issue with one condition. That bloomberg issue is not a compliance issue. It was an interpretive issue. When the interpretation was resolved we were able to resolve our differences and our partnership with bloomberg. We remain bloombergs largest distributor and we have an excellent here is the fccs order. In this memorandum opinion, an order. We affirm media bureau orders that direct comcast that plays Bloomberg Television in news neighborhoods consistent with the condition of the comcast Nbc Universal order. That is looking at that. We have right here in your testimony and youre sworn under oath here you say out of these brackets conditions. Thats what were referring to. The fcc has found it. Only found it necessary to look at one issue, and youre saying they didnt look at this issue . Im saying it was not a compliance issue. It was an interpretation issue. Ill give you an example. The out order of the media bureau was that we had to neighborhood bloomberg where i believe it was either four or more or five or more other news channels. The fcc order didnt have that definitional issue. We didnt know what a news neighborhood was. We tend not to neighborhood our news channels the way you described in your question where all the news channels are together, but what are the interpretive issues that we needed to have resolved was what was a news neighborhood . Thats what thats what the dispute in front of the commission was. Madam chair, this is the end. My friend. By the way, any of the witnesses have to use the rest room, we really can come back, and i know its been going on a couple of hours. You really undercut my big conclusion. I was going to say senator franken, please continue. I really meant that. I was just going to let them know. I was going to say that i think the interpretation here is on what the look word look means. I think everyone knows what the word look means. If i can, i will acknowledge that the word look may not have been the best chosen word. The point i was trying to get at was whether there were compliance issues, and i dont think that was a compliance issu issue. Ly acknowledge that we needed a better use of words. I apologize for that. Accepted. Thank you. I have a few more questions. I wanted to followup on what some of the other senators have asked about and the first thing was about what senator graham was asking about, the wireless competition. I guess ill start with you. In the antisubsubcommittee antitrust subcommittee hearing that senator lee and i had about wireless competition, witnesses agreed that a wireless is out there, but its not yet a substitute for wire line. There is a discussion about you can have these alternatives with wireless. Do you think thats really true in a big way . I would like that to be the case. I dont see it now. Professor yu has indicated that the speeds are increasing. The service is better. The technology is better. When you look at the price for the major wireless providers with their data cap for wireless compared to a comcast price, for example, the price for the same amount is about ten times higher. Thats not what i would usually think of as a good consumer you mean to get that kind of high speed data. Yes, exactly. Were hopeful and maybe that would be the future. Again, as professor yu has admonished us to be more careful about what conditions we put in, transactions with predictions of the future, ill just say that we have to also be careful about polyanish predictions about levels of competition. 15 years ago we thought there would be video over Energy Company wires, and we had a few of them. Theres rcn out there, but not much. Some of the predictions can be wrong going the other way as well, and maybe this is the kind of thing where for wireless to be a real competitor, we ought to wait a few years and see if it really develops that way. Mr. Sher win, you havent been able to talk very much here. You look like you want to say something. I do. First of all, most of the discussion has been about programming, and thats out of my baileywick, but when it comes to wireless, thats in my baileywick, and the technology is such today that if fiber or with any kind of fiber or some kind of back haul is brought to a building, especially a multifamily building, then the resident can have speeds of in excess of 100 megabits per second wirelessly. I think thats an important point. The Technical Knowledge has caught up. It is not the cellular wireless, as you know it, and that i think is what professor yu is referring to. It is wifi wireless, and that is a big difference. Though it wouldnt be capable of carrying the or it would cost more. Im trying to figure out here. I understand the difference between wifi and cellular, but are you saying it wouldnt have the same capabilities as the cable . Im sorry. Im asking. Are you saying one of the things points that mr. Kimmelman made was that its a lot more expensive if are you going to get that kind of Data Coverage and that is actually not the case. If the back haul is reasonably priced in a Family Residential situation, wireless is 30 less expensive than wired. Thats number one. Number two, it offers much more capability, much more functionality. Not only is it less expensive, it has greater functionality, and theres no need for cap if the back haul is done correctly. Mr. Kimmelman, you want to respond . I cant disagree with mr. Sher win for a specific set of circumstances he is describing, and he is also describing circumstances where he faces a bottleneck of being able to get the wholesale product so that he can deliver that service at a lower cost. Also only in comcast areas. The other interesting issue, if you go down this path with all the increased need for wifi downloading because of limit to spectrum, all the wireless carriers also ultimately very much need a wired service to connect get closer to the customer. Many of those are owned by comcast and time warner or by some of the phone companies. There are other choke points here that need to be looked at in terms of cost. I agree with that. One followup on the advertising questions that were asked. Professor, you talked about 8 . 7. 7 of the market was cable, and so there was a wall street journal article quoting an snl kagen, and they said that a small local advertisers are worried about facing higher prices because they would have roughly comcast would have roughly half of the ad sales market. What is this about . Half paired to . Is it just a different market youre looking at . Are you including everything. Im looking at the s. E. C. s video competition where they do an assessment of different sectors on a National Level and local level, and nationwide numbers, what theyre looking at is that the total local advertising budget for cable is 7 . Thereby District Of Columbia theres possibly submarkets where they dont have as much choice. Anyone agree with that . I will get back to you. All i would add is, you know, our ad sales business tends to be about onethird local, onethird regional, and onethird national in terms of how we sell, and clearly on the National Front there are a number of competitors, and on the local and regional front weve actually been the competitors who have gone in and weve competed against broadcasts stations, et cetera, and there are also with online and the ability to target lots of different avenues to reach customers from an advertising perspective. Okay. Mr. Kimmelman. Im sorry. Yeah. It makes it difficult when the quasi public utility also has 50 of the ad market space, and also controls the content. So that will make for higher prices . Higher prices, less choice. One thing thats a little off on this, professor yu, different topic, but in your testimony you talk about how the emergencier doesnt pose competitive concerns because theres no geographic overlap, theres been a lot of discussion about this between the two Cable Systems. Under this theory would consolidating all nonoverlapping Cable Systems in one or two companies be of concern to you if that happened in the country. To be specific, in the testimony Cable Operators basically serve three purposes. They sign up subscribers to individual households. They contract with Cable Networks and they sell advertising. The point about the lack of overlap refers to the transactions between Cable Companies and end users. In that sense mergers do not have an impact different areas do not have an impact. You do have to do the separate analysis of the markets in which you do local advertising, which is the same but with respect to programming, if you didnt merge to monopoly, you would see an adverse competitive xwashgt impact in that market. Then you do the antitrust analysis to look at the various concentration levels. To pick p the conversation before, one of the interesting questions is what is a real competitor to cable broadband . Then weve heard this defined different ways. One of the interesting things is mr. Kimmelman says we should not worry about we shouldnt speculate too much about the future. Lets think about facts. One of the interesting facts is 10 of american citizens now rely entirely on their Wireless Connection for broadband, but you are seeing, in fact, in other countries they now regard wireless and fixed line as the same market for antitrust purposes because theres so much substitution, and if you look at the directions where all these are going and the bets that companies and countries are making, its quite likely that theres a real world out there, and thats not in the future. Its today where wireless is for increasing number of americans every year a real substitute for fixed line broadband. I have a few specific questions here. Comcast has experimented with data caps and usagebased price aring for its Broadband Service and is testing new usage based pricing, and for you, Time Warner Cable tried using similar caps, but quickly abandoned them. We actually took the approach that its an Unlimited Service unless you would like to reduce your bill by 5 a month if you agreed a cap. I think what ill let mr. Cohen jump in, but i think the market is very much a test and learn mentality right now. Weve had our usage base caps out there for a while. Weve seen some uptake in them, but we where we have landed is the unlimited tier, giving people the ability to have an unlimited tier with a right to reduce the bill if they agree to a cap. Okay. Prior to the merger, Time Warner Cable also spoke positively about giving its consumers complete access to their channel lineup without requiring a set top box rental. Consumers would then have their choice to watch all the channels using either apple tv, xbox, or any of the other internet connected devices, and it would create a far more competitive system. In contrast, comcast new internet connected x one set top box seems to create a more closed ecosystem where only comcast approved apps and contents are allowed in. I thought it was interesting that you guys were willing to give up that cable box and what moefsh ated it . How does the decision benefit consumers and whats going to happen if the merger is approved . Sure. I think what are you seeing in the marketplace is lots of different approaches to delivering the video experience in the home. I think you will always have the set top box experience for that portion of the population who likes totwoway interactivity of the set top box, and there are certain features like the next generation guides, et cetera, that work best or only work in some instances on the new set top box. But you announced you werent going to require it. Well, as the home evolves and there are often multiple tv rooms in a home, what we have been comfortable with is allowing our customers to bring their own device, whether it be to your point a roku or a similar device and let them consume their content on that device. What we have found is often what you have is one room of the house has a