Full distribution. We have to compete. As an independent network, i feel the pain that miss ziman feels. At access tv we gear ourselves as a Music Network geared toward the 45plus. We dont like to tell our advertisers that but thats who watches more tv and its a challenge for to us get distribution, but with the new methods of distribution like directv now, and others, in a has opened the door. In the past, the distribution was constrained, as miss ziman mentioned because of band width. You couldnt put on another High Definition network particularly with standard definition which took up even more band width. Now new methods of distribution, theres new hope. Theres more hope for independent Networks Like ours, and i think this merger opens up doors. As an example on directv now, access tv is distributed in their 35 bundle. Hd net movies is not. Weve got to do a better job at hd net movies to convince them to carry us. That onus is on me. To your point earlier its very competitive. Its a free market still in a lot of respects and i think this combination opens doors. I think they recognize now that band width is more available through online offerings. They can support more independent networks, more minority owned networks and weve seen that start to happen. I think the combination of them owning content, theres a lot of things looking at online content and particularly television distributed content and we say why dont they do that, it just makes perfect sense for us to have remote dvrs or other features and as a content owner, id love to offer the features as a smaller content owner but until the big guys start doing it and set the precedent, us little guys dont get to offer it. The new precedents that are set i think will really push the way for Better Services and more consumer friendly services, and really expand the ability for independent networks to compete. Thank you. Mr. Bewkes, could you talk about what factors today add friction to your ability, this is predeal, before the deal, as you exist today, what causes friction to your ability to innovate and how would this merger with at t help your content developers provide better and quicker and cheaper content for at t consumers . Thank you, senator. The main friction now is that we have to put our networks through the existing cable satellite distribution plant, which had a certain technological ability to it. Only recently did it have the ability to do video on demand. Increasingly were competing against video being delivered over broadband only that has full twoway video on demand and where the Broadband Services have the direct retail data of what youre watching, who you are, where youre buying your stuff, so it implicates advertising and subscription. What weve been trying to do is to, and we did it with hbo first and then with turner second, but we really havent opinion been successful in the broad 100 channels we have in our homes. We tried to make our channels all video on demand in a way you could go as a viewer and search back and forth, watch full seasons, really get the same because theres theres more and more networks and content available but you need to be able to search the way do you on it netflix or apple tv, that kind of thing. Most of the Distribution Companies particularly cable companies, have not uniformly offered that, and the way that American Consumers get a change in their habit about something as important as television is it has to be consistent across all the channels, and it has to be national. And we think if we can get this going, competition with lower prices, better smaller bundles, more effective advertising, can bring more competition in all of these areas, we dont obviously and we cant determine what all the other Media Companies do. We dont have that big of a market share, but if we can put a competitive innovation in the hands of consumers, we think consumers liking it can get those changes to be universal adopted. That would give us a chance against these giant Technology Companies that by their own definition have massive global scale. Thank you, mr. Chairman. I have other questions id like to submit to the witnesses in writing. Without objection, theyll be admitted, thank you. Senator blumenthal . Thanks mr. Chairman for having this hearing and thank you all for being here. I have serious concerns about this transaction. I have yet to be convinced that the benefits outweigh the harms to competition, and possibly to consumers. It is a vertical merger. It doesnt take out a competitor, but it potentially has seriously negative impacts on competition and on consumers, and it is different from the nbc comcast merger which as mr. Kimmelman points out has had problems itself and had to be modified by regulators. It involves wireless. Its a national platform, and it involves more than one platform, but speaking very bluntly, what i think, what any of my colleagues think may make no difference whatsoever, because donald trump has said hes going to block this merger, and i take him at his word. Why . We operate as an act here. I know that mr. Stephenson youve met with the Trump Transition Team. Have you met with the Trump Transition Team . No, senator, i have not. Well then what remains on the record is that the president of the United States or i should say the future president of the United States has said hes going to block this merger and he said it emphatically and unequivocally and he has said it because, and i quote, its too much concentration of power in the hands of too few. A classic antitrust analysis from the president elect. Im a strong supporter of antitrust enforcement, and i may well agree with donald trump. What concerns me is the reason that he gave an additional reason which is that he is very unhappy with the cnn News Coverage and for a public official to use the blunt, heavy instrument of Law Enforcement to try to silence or change coverage by a News Department of any company is, for me, absolutely abhorrent. Would you agree . Are you referring to me . Im sorry. Im asking both you, mr. Stephenson and mr. Bewkes. Senator, im a novice in the world of politics so i would struggle to engage at that level. My expectation was when we announced this deal and is today that the department of justice will be the one reviewing this transaction and making the determination whether its competitive or not and is it competitive under the law so our expectation is to present our facts. We believe the facts will be compelling and good that this is procompetitive and proconsumer so ill leave it at that. Mr. Bewkes . Yes, and i entirely agree with what mr. Stephenson just said. In terms of the independence of our journalism, and i hope all the or journalistic owlets, we have always vigorously defended that for decades, whether when we were at time inc. Or whether we had cnn, and were going to continue defending and being an independent journ lalistic voic. Everyone that watches us may have their own opinion about whether we succeed in being objective. We try hard everyday and were going to continue to do that. You understand that what troubles me is that the president elect has said that his Justice Department will enforce a different standard of law depending on what kind of coverage his administration receives. Will you commit that your News Coverage will in no way be influenced or impacted by what the president of the United States says about this transaction . Yes. Mr. Stephenson . Yes, sir, of course. Yeah. And wouldnt you agree with me that for anyone in the department of justice or any Law Enforcement agency to threaten or use more vigorous or aggressive Law Enforcement in effect in retaliation for News Coverage that doesnt please that public official would be an abuse of power . Would, if youre asking me. Im asking you and ill turn to other members of the panel as well but youre the ones who will be making decisions about cnn and, by the way, the president has made similar kinds of remarks about nbc and about the Washington Post in terms of the enforcement of laws potentially against them. The president elect. May i make a comment . Please do. I dont think we should be selective about retweeting here or restating the various comments that various elected officials or those running for office made upon the announcement of this merger because there were comments made by candidates on all sides, including mr. Sanders, mr. Tim kaine saying they were against the merger, again, before any of them had the information. What randall and i are saying is were confident that once everyone, including all the questions you asked today, hears the facts and has the appropriate Competitive Analysis on this, that it will be seen and concluded by everyone, even with the concerns you have stated, that this will have procomppetitive effects, that will benefit both competitive structures, diversity of voices and Consumer Price alternatives. We believe it and we think we can prove it. And i just want that i want to make clear that my point here is not that other candidates may have commented or not about this merger. It is perfectly appropriate for a public official or a candidate to comment on the merits of antitrust enforcement. But to threaten more vigorous or adverse enforcement against a particular company because he doesnt like the News Coverage is a threat to the first amendment. Thats the fundamental point here. Im a believer in strong antitrust enforcement, i welcome president elect trumps interest in this area. I find absolutely abhorrent the threat against a News Organization based on its content of more vigorous or adverse enforcement against it simply because of a dislike of that coverage and i welcome your commitment that his statements will have absolutely no impact on the content of cnns coverage. I hope the same will be true of nbc and the Washington Post because this kind of potential abuse of power is a threat to iss i fundamental liberties way larger than the issues were discussing right here. Thank you. Senator tillis, youre up to bat. Thank you, mr. Chairman. I want to get back to the merger. [ laughter ] and the potential acquisition and actually i would like to start, mr. Bewkes, or mr. Stephenson, if you could briefly explain to me how this directv now product that youre offering and distributing through at t network, how that how you may enter into other relationships with other wireless providers to accomplish the same thing and how would those transactions look . Yes, thank you, senator. Actually, we stole the concept for directv now with free data included from prior deals that we have done. In effect this premise of free data, if you will, with directv now, it actually goes back decades. The first instance of it was a 1800 service when you called sears and roebuck, you dialed 1800 and sears and roebuck picked up the tab for the Long Distance service. And that actually drove Long Distance prices down over time. Suddenly everybody started using that type facility to get people to call their franchise so what happened then in 2008 is amazon launched a really groundbreaking product called the kindle and we did a deal with amazon where they actually when you delivered a book to the kindle, you paid 10 for your book, that included the data charge. Amazon paid at t directly that data charge. Thats the concept we took advantage of with directv now. Directv is paying the charge for the data to the mobility business. And by the way, that is our lowest wholesale rate available in the marketplace today to directv, to amazon, to any big, small, Mediumsized Company that wants to do this same approach, were actually convinced that just like 800 service drove Long Distance prices down this will also drive video prices down as people leverage the same capability. I think thats right. And mr. Cuban, i almost hesitate to speak with a hoosier after the devastating loss of the tar heels a week or so ago but im going to anyway. Consolidation we dont see going on. When i went through the list with facebook, amazon, all the content, the primary content came through acquisitions. Their biggest content plays were acquisitions. Whats happening now is theyre not acquiring Big Companies like time warner, theyre acquiring Disruptive Companies that are choosing not to go public for a hundred Million Dollars or a billion dollars that flies completely under the radar. Thats how theyre competing. Ill give you a perf example how the nature, and its kind of silly, but how the nature of content is changing. I wanted to test Facebook Live just to see what kind of audience i could get. No lie, i took my breakfast, empty plate, one pepper on it put up Facebook Live and within a minute, i had 1,500 live viewers. Within 30 minutes i had 10,000 live viewers. I thought, okay, maybe thats just Facebook Live, its new. I went to a new platform called lively. I was with my kids. Again, i try to be a geek and keep up with this. My kids were going down a slide into the lake. And i just put it on them. On lively within 20 minutes i had 35,000 live viewers. For an independent network, 35,000 live simultaneous viewers is huge. Thats changing the news. Cnn, a great program, is 2. 5 Million Viewers watching it at a given point in time. Thats nothing on Facebook Live compared to and other platforms. Its changing whether we want to admit it or not and its having significant impacts and the biggest challenge is getting people to watch tv. Thats going to be you know, with all these things, youre hoping to find new ways where people go back and say, okay, i want to try watching tv again. And that will increase and we see it with the nba and the nfl and all forms of content. And i think Something Else that one of my colleagues mentioned was well, first off, if i take a look at hbo, hbo became a premier channel not because they charge people to watch it but because they have extraordinarily good content. Extraordinarily good content that people will be willing to pay a premium for but theres a lot of times when im channel surfing which usually happens late at night when im back in my i dont get to channel surf as much when im at home because my wife can control the remote. But when im working, im going through all these channels going, why am i going through all these, and am i paying for them . Nbc is not free. Abc is not free. Theyre all negotiating some baseline cost that go into your baseline cable bill and i would like to reach a point in time where i have a freedom to have options, a sportsless option seems like a very sad place to me, but some options. To where i dont necessarily have channels that i consider extraneous based on my viewing habit, and from time to time, ill pay a premium if i want to go and access content that maybe on a channel that i would not regularly want to pay for because i dont have a need or desire to have that. Thats the model were getting to and i think if we dont as a matter ill leave it to the antitrust division in the department of justice to ask you the right questions to make sure youre not wading in any antitrust areas. But if we as a body resist, if we just continue to focus on where the puck is, versus where the puck is going to be in terms of content delivery, in this industry ten years from now, i think were at a disadvantage to real innovators. Theres legitimate issues that need to be addressed but we need to be very, very careful or were going to cause some of the leading innovators in the world not to be able to innovate because constraints were putting on people using old world models to assess where the new horizons are for content delivery. Thank you. Senator flake. Thank you, chairman. Thanks for having this hearing. Its been enlightening. Im trying to view this through the lens of my own kids. I have two married kids, newly married, who would no more sign up for directv or dish or broadcast than they would to get a land line in their home. Its just not something they would consider. They might try to crib off of my directv, find out the password and use it but they would never think of that. And thats why when i hear mr. Zimmerman talk about this and the competitive angle, it seems like an excellent argument youre giving that would have been more appropriate ten years ago or 15 years ago. But it doesnt seem to be where the puck is or certainly where the puck is going. I think we have to consider more who the competition really is, that this isnt traditional antitrust Competition Among broadcast media but among the edge providers and mr. Cuban you talked in your statement about the real competition. Do you want to talk a little more about that . About who the real competitors are. Apps compete for our time now. As i mentioned, when we look for something to do or a way to kill time, we look at our phone. All you have to do is look at the rise of snapchat, the rise of lively, the rise of instagram. Thats what consumes our attention. Kids dont go to tv anymore. You mention your children. I have a 7yearold, and i went to help coach his baseball team, and none of them knew the rules. Because none of them ever watched tv and watch baseball like we grew up doing. They didnt know the rules for football. I mean i cant even bribe my son to go to a cowboy game. Thats just not how it is. But if i take away his minecraft videos, he throws a hissy fit. And sure our Consumption Habits change as we age, but and im sure they will for all my kids but at the same time on demand inhand viewing through streaming is how people consume content and its going to be a challenge and i think they face additional challenges from a tech perspective. Randall mentioned 5g coming along and i think it will get here sooner rather than later. There will be people cutting the broadband cord. And just like you mentioned your kids wont think about a land line, i tend to think there we wont think about wired broadband. As wiig commonplace. Thats going to create a whole new list of challenges for them. So Technology Marches on whether we like it or not and i think we cant look backwards and look at historical norms in order to predict the value of this merger. When senator blumenthal talked about the incoming president talking about going against this merger simply because of the size of it, how does the size of the merged company, how does the size compare to the real competitors were talking about, some of the Edge Companies . Any figures there . Mr. Randall . Yes, senator, if you put our two companies together the combined market cap depending on the day you look at the market is 350 billion. The companies that mark has referenced, whether it be google, facebook, apple, these companies have market caps that are about two times that size so as we talk about size and the significance of size in a deal like this i think we have to recalibrate what size means in this new world. Because were about half the size of most of these companies that are providing the competitive threat to our core businesses today. Mr. Kimmelman, do you have any response to that in terms of where are we discussing what the market is or it was a few years ago . Senator, i totally concur in your assessment. My kids do the same thing as yours. I think we should skate to where the puck is and we should look at where the market is going. Ill just note, on the margin, young people are doing different things. 90 , though, plus of the revenue comes from traditional sources and the companies will skate to where the puck is. They will try to control as much of that new distribution as possible. On the Online Platforms, i totally agree, there is a lot of attention but what we used to do on phones a lot of kids are now doing on snapchat. What we used to do in terms of listening to records is now itunes. Its not that tv has disappeared or video doesnt matter, its that people are doing it in new forms so im all for looking at who the other players are, but none of them charge me 200 a month to get access to that online content. Thats where your kids get it and if theyre mooching off of your directv, thats probably why they dont want to pay 200 a month to get all this stuff so somebodys paying and i want to make sure its a fair price but there is no question that the Online Platforms are going to be big players here but they dont control that wire, wireless, whatever it is, even if its not wired broadband. They dont control that into our homes and you can probably only get it from a couple players. Thats where there is a antitrust problem. Thats where theres a control problem that we want the enforcers to look at. Is that whos paying for content, is that really relevant to the competitive nature of these kinds of mergers . Mr. Cuban . I would say if you arent paying for the content, you are the content. Youre being sold and advertising is paying for it and id also say, my 10yearold daughter doesnt have a cell phone account, but she has a phone. And she gets access to wireless through wifi at various distribution points. And she knows where they are, and she goes there. Im not just talking inside my house. Im talking outside the home. So the notion that a wireless provider is the only way to access this content isnt necessarily the case anymore, and those options are expanding rapidly, and i would say flurry, which is an app Monitoring Company said for nontraditional tv type content, all consumers are consuming 133 minutes, more than two hours, per day, of nontv like content on their phones. The world is changing, and its not driven by pure mobile. Thank you, mr. Chairman. Thank you, senator flake. Were going to start our second round of questions. Mr. Stephenson, lets go back to you. Section 5 of the ftc act, as youre aware, permits the ftc to take action to prevent unfair or deceptive acts or practices in or affecting commerce. However, that provision contains a carveout. It contains an exception for common carriers and as im sure youre aware the u. S. Court of appeals for the ninth circuit extended this exception to cover even aspects of at t and its activities that are noncarrier activities. Is it your position that time warners business will become exempt from section 5 of the ftc act if this transaction is approved and kicks in . Im not a lawyer so ill try to address your question as best i can. Obviously with the Net Neutrality provisions, at t is our privacy standards and so forth are under the purview of the fcc. As with time warner, so verizon has the same issue of buying aol, buying yahoo so comcast and nbc you have this same issue where theres this confusion about a company under the purview of the ftc, a common carrier, per se, is under the purview of the fcc. It is confusing. And i would suggest that this is an area perhaps where Congress Really should consider taking up bringing some clarity because its not that we have regulation gaps in this area, its that we have regulation overlaps and its a bit confusing as to who controls who. So i would encourage perhaps maybe legislative effort to address this issue. Sure. And i get that. I get that we have regulation overlap. Were not talking about regulation overlap here, were talking about a gap. Were talking about a carveout and i would imagine you would have to agree that if that were the case, if the exemption for section 5 currently enjoyed by at t also extended to time warner if this transaction were completed that would be cause for concern by some. I assume you would acknowledge that . I believe the law is that if at t owned time warner they would come under the fccs purview in terms of regulating these issues. Okay. Ive got to another line of questions id like to extend both to you mr. Stephenson and mr. Bewkes jointly. So when comcast and nbc completed their merger back in 2011, you recall there were some concerns expressed by cnbc and others and or rather concerns expressed by bloomberg and others relative to cnbc. And there were conditions put in place to guarantee that bloomberg would have access. It ended up taking three years of litigation to bring that about. Shouldnt we be concerned about the possibility that any conditions put in place here designed to guarantee access to your network might not be followed in much the same way that this required three years of litigation, expensive timeconsuming litigation occurred in the wake of this other merger. Ive been asked a lot about conditions imposed on other companies in this regard and im not knowledgeable about the ability of those companies to comply with those conditions. I would tell you we have had several mergers where conditions have been posed on us. I think you would find our track record in adhering to those has been very strong. I would also suggest the department of justice has not seemed to have any lack of resources in pursuing areas where they believe we were out of compliance with conditions so i fully expect that if any conditions are applied to this particular transaction, wed comply with those just as we have every other transaction. Did you have anything to add to that, mr. Bewkes . Yes. I think the same is true in the history with time warner. We had a merger of aol where some agreements of carriage were made. And they were followed with no incident. In the turner and time warner merger we had conditions which also were followed without incident. So our record is without there is no instance in which we did not comply with any conditions we had in our various mergers. All right. And, of course, im not talking about your companies in particular but your companies in particular are the ones that want to become one company right now and you can understand why some people would express this concern when you do own some news entities and there are other news entities that have expressed concerns that they might be blocked out for one reason or another, either through pricing models or as a result of where you locate them, what number they are assigned. What channel theyre assigned, whether its put in the same grouping as other news outlets or otherwise. Do you understand why people might have that concern . Yes, sir, i do and i dont think those are terribly unique to other concerns people have expressed in past mergers that weve been a party to, and i do believe that those have been adequately addressable with concessions and conditions. And again, i will repeat, i think both companies have a stellar, flawless track record in complying with those conditions. Ms. Ziman, you state overthetop distribution is a oneway ticket to bankruptcy, as you put it. Can you explain why this is not what you would consider a viable Business Model for independent networks . Well, right now the ott market doesnt have the amount of subscribers that make it a business. Number one, its a maze of confusion, as i said before. Its a Search Engine nightmare for a lot of people that arent used to it. Mr. Cubans children are more used to it than people that are older. At the same time, in order to get, number one, license fees, thats impossible. And in order to get advertisers to advertise with you in such a small market, it wouldnt work. Plus you need to be able to use the linear service in order to actually get your brand known to the public and at the same time you need to be able to show the public that youre delivering a network that is curated and that meets their interests and needs in order for them to then also want vods in the market. We are actually distributing an ott market but the reality is its a very fragmented market right now and confused market. And therefore if we relied on it solely, it would be a oneway ticket to bankruptcy because you cant survive. You have the obligation, we are all gatekeepers to the communication media. Thats a fiduciary responsibility to deliver to the public content that is quality oriented, that they deserve. That means that you have to spend money in either licensing content or original productions. I disagree with some of the people that think that hbo is there because of distribution. Hbo is there because of quality. Many people, many stars, come to us as a Small Company and give their services for very small amount of money because of the quality of the programming that we ask them to participate in. The reality is we still have to spend money. We still have to convince advertisers to go along with some of this, thats impossible. In order to get an advertiser interested you have to have a distribution of 55 million subscribers. Thats almost impossible right now because the mvpds are shutting the doors on independents, on innovation, on good quality, original programming. Unless you are bundled, you dont have any negotiating power. I mean, mr. Cuban is partners with cbs. Its a different story. And even he couldnt get a time warner. Its an impossible marketplace right now and we need to improve it and if we really look at what is happening here, were moving towards an oligopoly. And if you look at taiwan with six conglomerates owning all the media, when they want different content they simply trade at the cost of the public, which is rising and rising and at the cost of free speech. Thank you. Senator klobuchar. Thank you very much. I apologize for leaving. Senator mikulski was giving a closing speech of her Senate Career and then we had a big event on cuba, and i carried the bill to lift the embargo, so as opposed to mr. Cuban, i was with the cubans. I want to go back to these cost issues, mr. Kimmelman, the money the typical American Household which you mentioned spends on these services, 2700 per year, continues to trouble me, and im concerned that this transaction wont reduce that burden, and i think you argue there could be a chance that it would increase it. Is this a legitimate concern, and why . Senator klobuchar, i think that thats the baseline and it is the result, if you look at a 20year period, of consolidation and limited Regulatory Oversight during periods of that that have enabled prices to be inflated. There is competition on the margin, theres new competition coming from new sources but its hard to squeeze that out. I will say that with what is being offered now in the market that includes what time warner is offering and at t, there is hope. The Online Platform is opening up some and theyre offering new products and new services and some at lower prices. The real fear is whether the combined company once it gets looks at its overall interests will favor itself. And potentially harm competitors. So thats where the rub comes on the prices, they might offer a better price and they may offer it for some time but in the long run will the competitive process be benefitted . Thats what i think enforcers need to look at. So you see this as there is a chance it could be another model rather than just monthly cable . Absolutely. In some ways i think thats our only hope for all the reasons everyone here has stated. Okay, but youre concerned about a few things. One is that the price may initially be 60 bucks or something and then it goes up and then it would be 35 for 100 channels and it goes up so youre worried about that and youre worried that there would be less competition for, say, content and things like that, and eventually we have problems because of that. And you think you could build some conditions into that or not . Let me just say, part of the reason for the longer term concern is that comcast is already vertically integrated and has all the nbc use suite of programming. Here you have time warner programming. Will they compete aggressively against each other . I certainly hope so. But in a market where there are few vertically integrated companies, there is a danger that they will buy more, cbs, viacom, who knows to escalate against each other but also possibly follow the same basic market Business Structure and deal with each other maybe even at pretty high prices because they pass those on to the consumer in their own market but then charge them through to every other distributor in the market. Now, again, if somebody can come up with something comparable to hbo, they can compete against it. Its been tough, there are only a few major content providers that provide that highquality professional content and we get locked into that. So yes you buy other things on the side but that just means youre paying more for other things. Thats why the bill is so high. I know youre going tover that, but 35 for 100 channels is a good deal, but isnt that an Introductory Price and its going to go up to 60 bucks or Something Like that . These two go together but i think its important to understand why we put a 35 product out in the marketplace and its because the other system, the old system is just flat out broken. Content costs continue to escalate. Cable bills continue to go up and were at a 100 average cable tv bill and 20 million households have opted out. Theyve left the system. They said we dont want this product anymore, its too expensive so we brought this product to market to address those 20 million households and its proving, we found, the sweet spot so its not as though we have Pricing Power down here. The Pricing Power doesnt exist because the customer said we opt out if you dont meet this price point. So we have tried to get the cost down, the content cost down, the distribution cost down, no set top boxes to insure we can get into a market and hit a price point that the customers will come back in to the pay tv system, and theyre doing it. I think as soon as we think we can move prices up and take advantage of that, they have demonstrated theyll leave us again so i think were bound on this and i think we have reached a place with the consumer that theyre happy and willing to enter this marketplace again. To get at some of ms. Zimans points, in your testimony, you say, mr. Stephenson, in short, were still going to purchase high Quality Content from all corners of the content community and well continue to distribute time warner programming widely. Am i understanding your position correctly then that after the acquisition, at t would not discriminate against independent content providers in favor of time warner content . I dont think we have a choice. The business proposition is you better have a wide array of content, there are too many alternatives, you will lose customers if you do not. Now i think weve pointed out an interesting dilemma here. We want a broad, wide range of content brought into this ecosystem and everybody wants to get paid for their content whether it gets broad viewership or not. At the same time were being challenged can you get prices down, get prices down, get prices down . The two are inconsistent so we have to figure out what content do the customers want . Not what do we want, not what does the government want, but what do the customers want. Get it, but at the same point what im asking about is will you discriminate against nontime warner content because no. Theres no advantage to it nor would we do it. How do we determine at this point where contract negotiations between providers and distributors are long, difficult and complicated, how do we determine whether at t has lived up to that commitment . I think we ought to allow the department of justice to formulate an approach for doing that. Mr. Bewkes, my last question here. In your testimony you explained that time warners goal has always been to distribute our content broadly across all distributors and platforms. So am i understanding this correctly . That after the acquisition, time warner will not limit the availability of time warner content to content distributors that compete with at t . Right. Correct. And weve heard that one can deny content through the offered terms and prices. How would we determine that at t or you were living up to this commitment if theres some kind of discrimination based on prices . Again, i think the doj would be able to easily see that. Weve got fairly uniform contract provisions across all distribution platforms so all of the if you think of verizon, at t, comcast, all the different companies, theyve all quite vigorous in the negotiation and its a very competitive situation and so everyone would know because they would not accept terms that were not equal for what they could get on other from other content providers. My last question, mr. Kimmelman because ive had the incomings of some of these complaints, the comcast Nbc Universal merger was approved with conditions, as you know. How effective do you think those conditions were in preventing anticompetitive harm . Because i think it will inform the Justice Department and agencies and this committee as we go forward in terms of what conditions we think would be appropriate. Senator, i think its a mixed bag, i think that the fact that netflix has grown, the fact that sling tv has been able to get comcast nbc programming are the more positive signs. Some of the Big Companies have been able to take advantage of that, i think Smaller Companies have come up short, even bloomberg went through a threeyear painful dispute over that, the problem with conditions is exactly the questions you were just asking. Is it discrimination . Are the prices the same . Here its even more complicated than with comcast because its nationwide distribution. Its wireless which has inherent latency problems and issues where bandwidth isnt enough and theres legitimate reasons why youre not getting the quality you want but there could be some finger on the scale and i will say as much as i firmly respect the Justice Departments ability to enforce conditions i know they do not have the engineers and the Network Experts to look at all these kind of issues. Theyre very aware of that. So these are very difficult areas to thoroughly police if there is an inclination to discrimination. Very good, all right, thank you, all of you. Senator franken. Thank you, mr. Chairman. So i googled on my phone Wayne Gretzky and where the puck is going. [ laughter ] and the first entry is in the annals of overused corporate cliches [ laughter ] few match the immortal words of Walter Gretzky as passed on to the world through his son wayne, skate to where the puck is going not to where it has been. So congratulations to several of us for using the most overused corporate cliche. I must have really missed something. You did. You were listening to Barbara Mikulski talk about i doubt about hockey. I want to ill tell you where the puck is going, its going to wireless. Okay . So mr. Stephenson, i want to talk briefly about datafree tv which allows at t customers to stream directv without incurring any data charges. At ts white paper on the topic suggests that this offering is not discriminatory against other programmers or overthetop competitors because they can pay the exact same rate that directv pays at t for the privilege. However, as i understand it, the fcc has done the math and estimates that it would cost an unaffiliated mobile Video Service provider like netflix or hulu far more to participate in the program than the 35 a month that directv currently charges. The fcc argues then that participation in the program would make it difficult if not infeasible for a directv now competitor to offer its customers a competitively priced service. So my question is, mr. Stephenson, explain again how your company is not taking money out of the how this isnt anticompetitive because youd be taking money out of your right pocket and putting it in your left pocket if directv is paying a lower if youre paying a lower price lower pric basically supplementing them. And as the f. C. C. Asks in its most recent letter to you, how exactly does directtv make payments to at t mobility for this service and do the respective entities record such payments . I dont know what exactly the payment mechanism is across entities. I think it would be good that you did know it. I dont know if we do a Wire Transfer or just a journal entry to record the transfer, but at the end of the day, the results of directtv do indeed reflect that cost thats paid to our mobility business, they do. So when you look at the margins of direct tv they reflect that cost in it. There is a cost. Incurred by delivering mobility. Its a variable cost business to put another meg a byte. How do we know that you cant be favoring something that you own, directtv as opposed to some entity that would like to have their data delivered free to the consumer . We are charging everybody the same, the lowest wholesale price for data transport that we have. Everybody gets the same, Big Companies, small companies. Im not sure about that assurance, how do we know that. We can provide the data, the Justice Department can look at this and get themselves comfortable with the data. Its just the data question, right, and we can make the data available. Thats not a difficult thing to do. Is that what the question is . We dont know how much how did you compute that . I mean this is basically unlimited data for your user, directtv, in other words, if some other provider is parallel to directtv wanted to get frieda ta or wanted that service on delivered by at t, to stream them, how do we know that you are not given directtv a deal, because you own it . This is a mechanism that has been used in our industry for decades and there is a pricing mechanism, same terms and conditions, we will not discriminate against others who want to provide the same service. Its been going on for decades. Could you speak to mr. Stevensons characterization of at ts track record on complying with commitments as spotless . Senator, all i can say, i think its a Great Company and i think they are a very aggressive competitor. Sometimes aggressive competitors can step over the line. There have been varieties of complaints at different points in time. I dont think its worth going into in great detail. These will be reviewed by the agencies, theyre a wonderful company. Everybody who is competing hard, sometimes competes a little too hard. And thats nothing new in the marketplace. The issue is a year ago, at t was slapped with a 25 million fine for failing to protect its sub describers personal information. Mr. Stevenson, about a year ago, he and i discussed how his company lobbied to prevent municipalities from building their own Broadband Networks to meet their communitys needs. This is using your competitive advantage. And i would love to see that data. And i think that, by the way, i would like to see the f. C. C. Involved in this. When bloomberg, in the bloomberg dispute, wasnt that that was the f. C. C. Dealing with that, that was not you said doj has all these resources, that was the f. C. C. Dealing with boomberg, right . Thats correct, senator. Yeah. But the consent decrees in these things are with the department of justice. Well, in a number of these cases, senator, there have been parallel commitments that the f. C. C. With an understanding the f. C. C. Would do the enforcement because they are the regulator of the industry with expertise. So i will say there were, for example on access to programming and comcast nbcu, there were restrictions put in place, the department of justice decided not to impose those because the f. C. C. Was putting those in place. There were parallels for trying to block Online Innovation and video. They said they would defer to the f. C. C. For enforcement action in most or nearly all instances. So each one of those, at least, involve dual Agency Action with a reliance on the f. C. C. For the deep industry expertise. May i also just mention one thing, mr. Chairman, you had raised the section five issue, i want to point out that we believe that the Court Decision was horrible and it needs to be appealed, but there is a gap here that i think mr. Stevenson missed which is that if they purchased time warner and they have content, the f. C. C. Can only regulate their common carriage business regardless of how the court wanted to look at it. They are restricted by congress to only looking at common carriage assets which i do not believe these assets would be and many of their other valued added services. There is a gap there that i think is significant. I would note, im not smart enough, knowledgeable enough of that particular area, particularly as it relates to content to refute that. I just do think it points out, though, there is a need to get clarity around the regulations over these issues. Well go to a third round or can i complete my questioning . If you got another question, go ahead. Mr. Stevenson, i want to turn now to something you said at a wall street journal live event. You shrugged saying that deal, that neutrality has largely been resolved. Now, that event happened prior to november 8th, so im going to give you another chance to address the comparison. Mr. Stevenson, do you still think the concern over ensuring that neutrality has largely been resolved, and as an historic component of that neutrality, are you going to urge president elect trump to enforce the open Internet Order and ask republicans in congress to halt their plans for legislation repealing the order, in order to get the deal approved . I would like to first suggest i am not a strong proponent of Net Neutrality. We have, i have, 2010, been an advocate of the Net Neutrality principles, no blocking, no discrimination, no paid prioritization. We helped craft the rules that we hoped would become law. We actually worked didnt you go to court i just we went to court against title two, categorization of our services. That is not synonymous with Net Neutrality. Net neutrality has historic callie been defined by this body in the senate and historically at the f. C. C. As no blocking no discrimination, no prioritization. The f. C. C. Made a broader approach and put wireless and Broadband Services under title two regulations, a 1939 based regulation for the services that are moving and transitioning fast. I do you went to court before they did that. You went to court, which basically forced them to do that. No, sir, we did not. No, we did not. The 2010 rules that were imposed, verizon imposed those in court, we did not. We supported them and helped craft them. Then i stand corrected, i guess. Its not the first time. So thank you. I just wanted to i guess im done. I would like to see the f. C. C. , by the way, have jurisdiction here. Would you . Yes, senator, again, i think that there is a legitimate role. There is a question of exactly how that jurisdiction is divided and what assets is involved, thats for the companies and the f. C. C. To work out. As compared to previous transaction thats are similar, i think it would be beneficial to the Public Policy process. But mr. Stevenson, you have not committed to submitting your deal for review by the f. C. C. , thats correct . Were working through that process right now, senator. The trigger for f. C. C. Review is whether we assume any licenses from time warner. Were going through they own access to over a hundred licenses, were going through license by license discerning which lins do we need to actually transfer. Until we get through that review, we cant state whether there will be an application with the f. C. C. Or not. Now, i would suggest to you that the doj, as was pointed out, looks at the f. C. C. On these matters for expertise. I have no doubt the doj will continue to work with the f. C. C. As they go through the review. Well keep the f. C. C. Posted on our process, whether we do a formal filing or not. Its just that there is a different level that you have to meet. Whether its f. C. C. Or doj and f. C. C. , their merger review requires that any proposed deal actually benefits consumers. So i would think that the message you are sending to us and the current and potentially at t consumers, if you cant confidently assert that this deal benefits the american public, is not a great message. Do you think the f. C. C. Should review this deal . Yes. If its within their jurisdiction at all, i believe they should. I think it would add a benefit to the overall Public Policy analysis. Okay. Thank you. I want to thank all of you for coming and participating today, for answering the record will remain open for a week. For additional questions and submissions. This hearing will be adjourned. Next week is authors week on washington journal feature segments each day beginning at beginning sunday december 18th. Monday december 19th Charles Murray will join us to talk about his book, in our hands the plans to replace the welfare state. Tuesday, december 20th, Mark Levinson will discuss his book an extraordinary time. Then on wednesday, december 21st, Carol Anderson will talk about her book, white rage the unspoken truth of our racial divide. Thursday, december 22nd, twielight warriors friday december 23rd, the book the politics of resentment. And the rise of scott walker. Then on saturday, december 24th, two authors will join us, a Great American immigration story and robert jones with his book the end of White Christian america finally on sunday, december 25th, with shall we wake the president. Be sure to watch on washington journal beginning sunday december 18th at 8 30 a. M. Eastern. Lisa mon coassistant talked to reporters about the obama administrations record on fighting terrorism and addressing security threats around the world. She also answered questions about the white house transition to the trump administration. This hourlong event was hosted by the Christian Science monitor. Here we go. Thank you for coming, im dave cook, our guest is lisa monaco, assistant to the president for Homeland Security and counterterrorism. Were delighted she is here for her first visit with our band of reporters, as speaker she tells us when the director of the fbi came a while ago. A long while ago. Lisa grew up in newton, massachusetts, she says our teachers taught you are you are going to go places. Our guest graduated from harvard, eernlearned a law degr can clerked for a judge for the third circuit. Counsel to attorney jnet reno, federal prosecutor in the Us Attorneys Office and was named to the enron task force. From there she went to the fbi where she was counsel and chief of staff to robert muller, Deputy Attorney Generals Office and con mermation she held h her current position. She calls my cave or bunker in the white house a Windowless Office in the situation room and thank god. Now on to my colleagues eat their sausage while i rattle on. Now on to the so compelling recitation of ground rules, were on the record here. Please no live blogging or tweeting and no filing of any kind while the breakfast is under way to give us time to listen to what our guest says. There is no embargo when the session ends. To help you curb that selfie urge well send pictures to all the reporters as soon as the breakfast ends. As regular a ten dees know, if you want to ask a question do the traditional thing and send me a signal and i will call on as many reporters as we can in the time we have. Well have her up and moving at 9 55 to get back to the white house. Well offer the guest the opportunity to make opening comments, then move to questions from around the table. With that, thank you for doing this. The floor is yours. Thank you, david. Im curious what is a non threatening signal . Its one of those things like obscenity, i know it when i see it. Thanks. Its good to be here. I thought what i would do is spend a few minutes, obviously want to get to your questions, talking about the moment that were in, both it is a transition moment, quite obviously, and also one that has given me an opportunity, quite obviously to reflect on the threats we face and frankly the landscape that the next team will be coming into. So let me just take a few minutes to do that and then get to your questions. On the terrorism front, the landscape we face obviously was addressed by the president earlier this week in his speech at Mcdill Air Force base down in tampa. And what i would say on the terrorist threat front is after putting and continuing to put relentless pressure on alqaeda, we have largely decimated core alqaeda that operates from the afghanistan pakistan region. Killed bin laden and continue to place pressure on alqaedas affiliates, most nobly in yemen and its largest affiliate in syria, alqaeda in syria. Weve been placing relentless pressure also on isil which i believe poses what i call a hybrid threat. It is at once both an Insurgent Army rolling through territory as weve seen over the last few years in iraq and syria, a terrorist group that mounts, organizes and directs attacks as we saw in paris, brussels and elsewhere, but most importantly, i think and most distinguishing of the threat is the feature it possesses as what i call a social men om non. Its terrorist group and social phenomenon in its ability to use social media, to inspire individuals to act wherever they are with whatever they can act with. And now, extolled followers, use a knife, use a truck if that is what you have, so this ability to rad ka lies individuals and to ex toll adherence to act wherever they are so they dont have to travel and get training put us in a new and different phase in the terror fight. We are, however, making progress against isil on all three of these dimensions. It has lost more than 50 of the territory it once held in iraq and syria. The number of foreign fighters is down, that they could use to direct attacks as it did in paris and brussels and importantly, its ability to distribute and get its message out has also been reduced. Weve seen the private sector acting much more aggressively to address the abuse of their platforms by isil. But nevertheless, we face a very, very real threat, both with repect to external operations as i said from alqaedas affiliates in yemen and syria. We cant take our eye off that ball and of course isils efforts at directing external operations. But the radicalization or isils ability to rad ka lies individuals to act where they are poses probably the most immediate threat that we face. And that is going to be a landscape that the next team and my successor will certainly inherit. But the president spoke to the fact that because thats the case and this is a long struggle, we have to take a long view. And he articulated earlier this week the sustainable approach that he has put forward and we have now executed on for nearly eight years. Thats working with partners from every where from south asia, whether its governments, whether its allies, a coalition in the counterisil campaign, whether its partners on the ground in iraq and syria. But it also means acting unilaterally, where we must, to address threats to the United States and to u. S. Persons abroad. And it means going after the drivers that have fueled the rise of groups like isis and the ability of it to, as i said, abuse the greatest engine that weve seen in the last century, the internet, the greatest engine for progress and free speech. And going after isils ability to abuse that platform. So the president talked about that sustainable approach that hes put in place and importantly the fact that we need to execute on that consistent with our values and frankly as transparently as we possibly can, while maintaining the tools that we need to protect the United States because that is going to ensure both the legitimacy of our operations, the confidence of the American People in those operations and our ability to sustain those operations against what is a longterm threat. On the cyber front. In 2009, the president came into office and very quickly described the cyber threat as one of the greatest both National Security and Economic Security threats that we face. And i think there, what we have seen is frankly, a an approach that has been transformed. In other words, we no longer view the vcyber threat as bu rather a threat certainly in the National Security space that we need to deploy all tools against. And the way i have approached this is to take some of the lessons, many of the lessons, quite frankly, that we have learned in the counterterrorism realm and apply them to how we are fighting the cyber threat. The overlap isnt 100 fit, but i think we have learned a lot in the counterterrorism space that we can allies to the cyber threat. That means using all elements of National Power against a cyber threat, whether Law Enforcement, intelligence, military, diplomacy, sanctions, financial tools, et cetera, we got to put all of those tools on the table to combat the cyber threat. And weve been very clear that we will act to protect our interests, we will impose costs on a range of actors when we see their cyber activity addressing or going after u. S. Interests. Im going to do my they pay me the what they call big bucks, but anyway they pay me to be rude to guests, if you could wrap it up we will go with questions so they dont come in with torches. We dont want the torches. What a way to end a career. The next team will inherit a rapidly growing threat in this space across all dimensions, the number and range of actors that we see from state actors to non state actors, activists to criminal actors. The range of and diversity of vek tors through which these actors are conducting malicious cyber activity, the internet of things is going to pose, i predict, a huge challenge that the next team will increasingly need to focus on. And of course, the tactics that theyre using, everything from destructive attacks to attacks that make us may make us question the integrity of data. Last thing i would say is the other area that is particular to my wheelhouse is a range of Crisis Management that one has to do in my role in the white house. This is everything from natural disasters to School Shootings to p pendemica. What you have seen through the last eight years is a federal approach that has been honed that has been tested, quite frankly across a range of crises, but what we have done is shown the need for a unity of effort across federal, state, local and international actors, and the importance of resilience across all of those across all of those actors and across the unity of effort that we put to these threats. The threat, i would highlight here for the next team quite frankly is emerging Infectious Diseases. So without any malicious introduction or origin, Something Like zika has caused tremendous challenges to puerto rico. Ebola in west africa two or three years ago. So that is, i would argue, the type of threat today as we transition that i will be saying to my successor, we need to focus on and they need to focus on very much like in 2008, 2009, the Outgoing Team highlighted to the incoming team the cyber threat. And i think that the emerging Infectious Disease threaten the border and the ability for it to move rapidly across borders and cause tremendous dislocation and crises is something the next team will have to confront. So its a long to do list, its growin growing, ever growing and ever unpredictable. I will keep working it until the very last day until we pass the baton. Let me ask you about passing the baton and then go to my colleagues. Jeff mason, jay gibson, mark so many ton of time and phil rutger of the post and well do our best to disabuse you have the idea its a boys club. I notice all the questioners are men, not a good thing. Let me ask you about the transition. The political reported that while president elect trumps landing team has been in place for a while, not all of them got the necessary security clearances, have you met your successor, how is the effort going to transfer the body of knowledge from you to whoever is going to be responsible for this 0 on january 20 . I have not met my sucticesso. I am eager to sit down with that person. This role, i think as many of, you know, is one that was created in a post 9 11 environment and was specifically called down by the Bush Administration and in this administration to have one person who is focused on Homeland Security counterterrorism with direct and immediate access to the president. When i go upstairs about 50 paces from my cave office in the west wing up to the oval office, the president knows its because something bad has happened, quite frankly. Domestically usually, or to u. S. Persons abroad. That is my focus and he knows it and as a result, i have immediate access to the president. And thats critically important in the world we live in today. So i hope that i have the opportunity to engage with my successor. Weve done a tremendous amount of work, the staff at the National Security council has, to put together reams of information to carry out whats been the president s direction, which is a smooth, comprehensive and professional transition. Its i participated in this process, as you mention the i was chief of staff to bob muller, in 2008 to 2009, what i saw was a very professional transition from the Bush Administration to the obama administration, something the president has spoken of, was very important to him. And he told us we needed to meet that bar and exceed it. Do you get any sense, last thing from me theres been talk about lack of interest by the president elect in the daily president ial brief and what that might or might not say about his interest in the intelligence community. Do you get any sense of a lack of interest on the Homeland Security and cyber front . I dont. Again, i have not had the opportunity to sit down with the person who will be my successor, but obviously the president elect and his team is moving through to name a range of personnel. As i said, i hope that i have the opportunity very soon to sit down with my successor. Great. Josh . Thank you. I wanted to ask, theres been a concerted effort by the administration in the last few months to lay down publicly a lot of the policies, both abroad and a strategic kind of thing the president is talking about recently, a lot of detailed memos that were kept secret for a long time are now being put on the record. What is the goal of that . Do you think that makes those policies more durable, how durable do you think they will be in a new administration, since many are executive directives. Given that you guys seem to be on a Real Transparency kick at the moment, is the president thinking about setting in motion the release of the full socalled torture report from the senate that several members of the senate have requested him to do by making it sort of an executive branch document that would evee eventually be declassified. I would challenge one of your premises that there has been a transparency kick as of late. I think the president has talked about the importance of transparency for the last eight years and you can point to any number of actions consistently across those eight years that have demonstrated that commitment to transparency and we can rattle them off in just the second term, when ive been in the white house. From commitment to disclosing civilian casualties, to making available the president ial policy guidance document, albeit in a redacted form, in order to protect our ability to continue to conduct operations, revisions of the state secrets policy and on and on and on. I think there is a robust record of the president s commitment to transparency. And i would say not transparency for transparency sake. The point here is to put down, as much as possible, the rational and the principles behind the operations we conduct. Because that will both lend confidence and legitimacy and therefore hopefully longevity and sustainability to those operations, because were going to need to continue to conduct them as a result of the threat that we face. And that i outlined at the outset. So the purpose for laying these things down is exactly that. I would point to earlier this week the laying out of, in an unprecedented way, the legal and policy frameworks, the use of military force around the world for counterterrorism and other purposes, whether detention, interrogation, prosecution, et cetera. Here again, that was an unprecedented move. I think some of the commentators on this had said no other state has done this. And the reason and the president talked about this earlier this week, is to make clear the bar we have set for ourselves to try and also go some way to sets norms and to lend confidence and legitimacy to the work were doing. Do i think it will be sustained throughout the next administration and Going Forward . That remains to be seen. Obviously the next team will come in and review operations and make their own decisions. I would say that there is a difference when you are in the room and you are privy to the intelligence and to the threats and to understanding fully and have the benefit of the professionals who work these issues extremely hard, extremely professionally, and with tremendous integrity. So that remains to be seen. Certainly our hope is that when the new team comes in and sees and confronts all the information that theyll be privy to, that theyll take a long view. Just to follow up on the end of that question. Given that the president supported the release of the executive summary of the report, what is the logic in not supporting the release of the entirety of the report with appropriate parallel redactions . So i think i dont have any new news to make on this score. I think as we said, when we released or rather provided to the congress for them to release a redacted version of the executive summary of that report, it was after a very careful and painstaking process to ensure that National Security sources and methods and individuals could be protected and that was a lengthy process. That the president very much supported and wanted to make sure that we got done and thought it was important to do. From the l. A. Times. The administration took a took the extra step of coming up with a legal memo in 2011 to approve killing american citizen terrorists, suspected terrorists overseas without trial. What things are in place as you transition to the next administration to ensure that that powerful capability is not abused and also when it comes to the use of torture, the Senate Report documented many cases of americans working for the government who exceeded the approved techniques, and yet, those individuals were not held to account. So what is in place to prevent a future administration from allowing things like that to happen . So with regard to the legal memorandum that you referenced, that with regard to using force against americans who pose a threat to the United States or to u. S. Persons, the protections there and the rationale there is laid out in that memorandum. The transparency around that memorandum allows, i think, persons like yourself and others, to hold Government Accountability. In fact, the one of the other comments on the president ial memorandum and report that was issued earlier this week, described it as fundamentally Government Accountability document. In other words, a way for the public, the press, other governments to look at how the United States is accounting for and laying out the rationale for its actions and it is a way to point to Going Forward. Here is a bar, here is the way one administration did it. At the end of the day, elections have consequences, and the the constitution, but ultimately apply, but ultimately policy will be governed by the next team. By putting it out there, by making it clear, there is a mechanism for the public and the press to point to and other governments to hold the United States to that bar potentially. Jeff mason . Thank you. Lisa, one of the other long list of things that you cover in your job has been guantanamo bay. The president has acknowledged the difficulties in getting it closed before he leaves office, seems to be leaving the door open for further action. The Vice President expressed optimism just a couple months ago that it would be closed. What is your take on the possibility that it will be closed by january 20th . How would that happen
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