425 1 dp49111_425.htm FORM 425
Filed by Comcast Corporation
(Commission File No.: 001-32871)
Pursuant to Rule 425 of the Securities Act of 1933
and deemed filed pursuant to Rule 14a-6(b)
of the Securities Exchange Act of 1934
 
Subject Company: Time Warner Cable Inc.

Commission File No. for Registration Statement
on Form S-4 filed by Comcast Corporation: 333-194698

The following third-party letters were made available on Comcast’s website:
 
Before the
Federal Communications Commission
Washington, D.C. 20554
 
In the Matter of:
)
 
 
)
 
Applications of Comcast Corp., Time Warner
)
GN Docket No. 14-57
Cable Inc., Charter Communications, Inc. and
)
 
And SpinCo
)
 
     
For Consent to Assign or Transfer Control of
)
 
Licenses and Authorizations
)
 
 
Comments of Roslyn Layton1
 
August 25, 2014
 
As an American academic making international comparisons of broadband markets, I offer commentary on topics relevant to the evaluation of the Comcast-Time Warner Cable transaction. This comment addresses the FCC’s process to evaluate the merger, dynamic competition in cable market, the access market for cable and broadband, international cable comparisons between the US and the EU, and a few points relevant to interconnection. Following are the key conclusions of this comment.
 
 
·
It is important that the FCC evaluate this transaction on its merits. While public comment is helpful to consider, it is important that the FCC remain independent and not influenced by politics or public opinion. The FCC needs to do its utmost to focus on the facts, not the emotions stirred by the media about this transaction. The FCC must also ensure that it evaluates the facts in light of the antitrust standard of whether the merger will substantially lessen competition. To the extent that the FCC investigates public interest, it should be guided by matters that are effected by the merger, not other policy goals.
 
 
·
The American broadband market is highly dynamic. It is characterized by high levels of investment and innovation in technology. Technological development of the market is the key driver of the market. In dynamic markets where investment and innovation create continued disruption, the FCC needs to recognize that its ability to predict the future of markets is limited. This suggests that there is a risk that the FCC can make regulatory errors (e.g. mischaracterizing the market and/or the merger) by not approving the transaction. That being said, the FCC could approve the merger today based on its merits, but should it find anticompetitive activity in the future, it can intervene as it can do with all network service providers, not just Comcast.
 
 
·
Comcast has a number of serious competitors in the broadband internet access business as well as the video and voice businesses. Its competitors in broadband include other network providers of broadband through fiber, DSL and copper networks (especially the next generation standard for copper, VDSL); next generation mobile wireless providers; and other technologies. Comcast has many competitors in the video business, from the range of over the top (OTT) video providers such as Netflix, YouTube, Hulu, Amazon, and so on as well technologies such as Roku, a standalone set-top box that delivers hundreds of channels via broadband. Moreover the content/entertainment part of Comcast’s business is highly
 
 

1 I am an American citizen working as a Ph.D. Fellow in internet economics at the Center for Communication, Media and Information Studies at Aalborg University in Denmark. I am also a Visiting Fellow at the American Enterprise Institute. These comments are my own. More information about me is available at http://roslynlayton.com/about/.
 
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elastic and subject to heterogeneous consumer preferences. Not only do consumers have a myriad of choices of how to spend their time online (from Facebook to online books to streaming music), consumers’ choice of leisure and entertainment activities are limited only to their imagination and need not involve Comcast in any way. In fact this requested merger largely reflects the increasingly competitive world that Comcast faces. I see no evidence that competition will be lessened by this transaction.
 
 
·
Comcast and TWC do not compete in any relevant market for broadband, video or voice services. Therefore this merger will not remove a competitor, which means that this merger will not reduce competition or consumer choice.
 
 
·
There is no evidence that consumers would be harmed by the Comcast-TWC transaction. Comcast has many incentives to serve its customers and has made a number of significant improvements over the years. Indeed it has met all of the promises required as a part of its merger with NBC, and has exceeded a number of measures including enrolling low-income families in its Internet Essentials program, increasing broadband speeds beyond requirements, and exceeding coverage expectations. Comcast is presently the only company in America that upholds the FCC’s 2010 Open Internet rules, now struck down in court. In fact there are a number of areas where the merger can enhance consumer welfare, namely in technology upgrades and enhanced scale economies for TWC customers.
 
 
·
There is no evidence that content or application providers would be harmed by this merger. On the contrary the deployment of improved network technology to TWC customers will likely enhance services from third party content and application providers. Indeed the growth of such content and applications helps to drive demand for Comcast’s services.
 
 
·
When compared to other countries, the American broadband and cable market is highly competitive and efficient. My research shows that Americans consume increasing amounts of internet data and video at decreasing costs on a wider variety of networks. This proposed transaction will support Comcast’s ability to invest in important initiatives such as neighborhood Wi-Fi and has spurred other network providers to step up their competitive strategies.
 
 
·
Mergers and acquisitions create a number of benefits for companies such as deploying better business models across a larger customer base, accessing new technologies, improving terms for financing, and activating hidden or nonperforming assets in the target company. Mergers can also help to lower and make more efficient use of administration. They can make more efficient use of sales and marketing activities and improve utilization infrastructure. These efficiencies provide benefits to customers in the form of lower unit costs of service, improved quality and value of service, and new technologies and innovation. Moreover transactions such as these are important to drive the dynamism of broadband market. Innovation and investment are about risk-taking, and companies need to take risks to fulfill these objectives.
 
 
·
For the reasons set out above and discussed in more detail below, I see no reason to oppose this transaction.
 
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Internet interconnection should have no role in the merger review – Internet interconnection is a highly competitive market
 
Some commentators claim the danger of this merger is that Comcast will use increased share of broadband Internet subscribers to foreclose streaming video competition. These critics claim that the increase in Comcast’s share of broadband subscribers will somehow enable it to extract rents from so-called edge firms such as Netflix. This argument is false for three reasons.
 
 
(1)
The theory and practice of two-sided markets demonstrates that Comcast, as a platform between content providers such as Netflix and broadband subscribers, has incentives to maximize the participation of both sides of the market. This is a robust literature of some 360,000 articles covering a variety of industries. The theory of two-sided platforms, first promoted by Rochet & Tirole (2006), have an inherent incentive to price efficiently, meaning that market failures are unlikely to occur. It is not inherent that firms will attempt to act in way that deters consumer welfare, innovation, or efficiency. Platforms want to get both sides of the market “on board” so they tend to maximize—not foreclose—the participation of the parties. Anything that Comcast does to foreclose one side or the other reduces its profits.
 
 
(2)
If it was the intention of Comcast to foreclose a competitor such as Netflix, then it would have done so already. It makes no sense that Comcast would nurture a competitor into a global player, only to foreclose it later when it becomes even more expensive and difficult. On the contrary, Netflix has grown into the world’s leading streaming video provider precisely because Comcast and other American broadband providers offer networks and subscribers to Netflix. These kinds of arguments about Comcast using the merger to abuse other firms are plain conjecture and fear mongering and should be rejected outright.
 
 
(3)
Should Comcast attempt to exploit Netflix, then Comcast will face a difficult time defending its actions to the FCC and with competition law. Indeed Netflix has many defenses against such practices, not just antitrust, but its formidable power in public relations.
 
Netflix as single largest source of traffic on America’s broadband networks has an incentive to game the regulatory process and the Comcast-TWC merger to win favorable conditions for itself. Netflix is astute to use public relations and its dubious speed tests as a means to win public opinion and to pressure policymakers to give into its demands. I am in process of cataloguing Netflix’s practices in other countries where it uses a number of manipulative tactics to force broadband providers to connect to its content delivery network, to house Netflix servers within their infrastructure, and to avoid paying transit fees. A particular case was observed in Norway in 2012 with the Netflix launch. Telenor, the largest operator in the country, deployed generation networks across the country along with its proprietary content delivery network (CDN). At more than 1000 miles, Norway is the longest country in Europe and has one of the harshest climates. So the upfront and continuing costs of broadband infrastructure are considerable.
 
Netflix had a global agreement with Level 3 to ensure the efficient content delivery to many countries in the world, but not to Norway. Telenor offered to cache Netflix content in its own network for a standard fee. Netflix countered that Telenor connect to Netflix’s nearest exchange, located in Stockholm, Sweden and run by competitor Telia. Netflix claims that OpenConnect is free, but there are real costs for Telenor to connect to an exchange in another country. Routing content for the Norwegian market via Sweden is not an optimal solution for customer experience for Norwegian users. A local solution provides better quality of experience. Telenor declined Netflix’s option both for cost reasons and because the formatting employed in Netflix is not optimal for Telenor’s network.
 
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As articles from the Norwegian press document, Netflix threatened to use its speed test to expose Telenor as having a slow network because no CDN solution was employed. Telenor refused to comply. Netflix published the report as promised, and Telenor received a number of negative articles in the press as a result.2
 
If Netflix were an airline, its actions would be similar to selling a ticket to Washington Reagan National Airport but landing instead at Dulles Airport and then expecting Reagan National Airport to pay the passengers’ transport cost to the city. It should be observed that Netflix is unique in using these types of tactics. Operators and content providers around the world exchange traffic with little to no problem and with little regulatory oversight. Among leading content providers, only Netflix is calling for price controls (setting transit rates at zero). In any event, after some time, Netflix and Telenor were able to negotiate an agreement, and it did not require regulatory intervention.
 
For a profitable and growing company such as Netflix, its complaints about being oppressed and its demands for price controls are disingenuous. It audaciously couches its argumentation in the hallowed language of net neutrality while it lobbies for self-serving business conditions. This disrespects many human rights activists around the world who see net neutrality as their First Amendment.
 
As stated earlier, there is no reduction in competition as a result of this merger. Thus Comcast’s negotiating power relative to others in the Internet ecosystem will not change. This means the FCC should pay no attention to the claims that this merger will stifle edge providers. It is important to realize, however, that not all content providers are the same. There are “hypergiants” such as Netflix and YouTube which generate disproportionate amounts of traffic, upwards of half of all traffic on American networks. And there are millions of other content providers, whose marginal traffic addition is negligible.
 
Research undertaken by MIT and UCSD discovered that content providers do not have a problem accessing Comcast’s customers. There are over 40 peering and transit paths into Comcast. The MIT-UCSD study did find that Netflix occasionally had an issue connecting with Comcast, but there was no reason to consider it a widespread problem. The study “Measuring Internet Congestion: A Preliminary Report” investigates transit and peering links offers the following preliminary conclusions,
 
Congestion at interconnection points does not appear to be widespread. Apart from specific issues such as Netflix traffic, our measurements reveal only occasional points of congestion where ISPs interconnect. We typically see two or three links congested for a given ISP, perhaps for one or two hours a day, which is not surprising in even a well-engineered network, since traffic growth continues in general, and new capacity must be added from time to time as paths become overloaded... congestion does not always arise over time, but can come and go essentially overnight as a result of network reconfiguration and decisions by content providers as to how to route content.3
 
In the case of large content providers (or hypergiants) such as Netflix, congestion may occur because of its enormous content loads amount to a third of network traffic. That one of millions of content providers should have an issue with congestion from time to time is not a reason to conclude that the market interconnection is not working. The issue is whether Netflix will maintain interconnection norms and negotiate commercial terms with broadband providers such Comcast, or whether it will abuse the regulatory process to win price controls and
 
 

2 http://www.dagensit.no/article2529131.ece, http://www.dagensit.no/article2529667.ece
3 MIT, Measuring Internet Congestion: A Preliminary Report, Page 2 https://ipp.mit.edu/sites/default/files/documents/Congestion-handout-final.pdf
 
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favorable business conditions at the expense of all broadband subscribers, even those that don’t subscribe to its service.4
 
It should be noted that with its Comcast agreement, Netflix was able to get better interconnection conditions, presumably lower costs because otherwise it would not have entered into it, and improved quality for its customers, as its own speed index reports. It should be noted that these two large parties resolved their dispute with adjudication. There is no market failure here that needs remedy.
 
The market for interconnection works on the forces of supply and demand, just like any other market. Most traffic is exchanged for free, as long as it roughly equal, which is used as a proxy for the contribution of similar value by the two parties. However some traffic is more highly demanded and comes in a greater quantity than other traffic. Netflix traffic is the best example of this. However Comcast is bounded by the demands of its customers, and if it doesn’t deliver Netflix, it will lose customers. As such Comcast faces a strong incentive to find an equilibrium with Netflix. I doubt that Comcast would erect tolls on Netflix even if it could.
 
It should also be mentioned that large edge content providers have the potential to route their enormous traffic in such a way to create congestion on purpose, which can then be used as leverage to extract rents from broadband providers such as Comcast. The example that I noted from Norway is just one example of the types of tactics that Netflix is able to use to extract leverage. The point for the FCC is not base its analysis on conjecture. It needs to look at the facts and evidence in evaluating the merger.
 
As a general matter, Congress and the FCC have been reluctant to regulate internet protocol interconnection for good reason. The market for IP interconnection has been emerging and evolving. Moreover with continuing diversification of actors and business models, it is competitive. It is remarkable how well the regime has operated for over two decades with so little intervention.
 
However a market can quickly become uncompetitive when government creates distortions through price controls , manipulations, and lack of transparency. Not surprisingly, when the FCC entertains the possibility of regulation of IP interconnection and Title II utility regulation, it signals that it is “open for business” and creates perverse incentives. Firms line up at its door asking for handouts. A case in point is the FCC’s Notice of Proposed Rulemaking 14-28 on net neutrality in which Mozilla egregiously requests the creation of a “remote delivery service”, essentially creating a regulatory category to satisfy its business goals, and Netflix blatantly calls for favorable treatment through price controls in transit.
 
Apart from Netflix’s complaining, which is largely a public relations stunt, there are no systematic problems in the IP interconnection market in need of fixing. As the last two decades have shown, the market for interconnection has worked without government oversight or intervention. Not only is this demonstrative of the competitive nature of the market, but it shows that actors have incentives to cooperate and find efficient outcomes. The FCC should have the wisdom and judgement to consider the Netflix complaint as a reflection of that company’s perspective, not the characterization of the interconnection market as a whole, which the evidence and experience show is working well. The now resolved situation with Netflix is not a reason to oppose the merger.
 
 

Adam Thierer, “Unnatural Monopoly: Critical Moments in the Development of the Bell System Monopoly,” Cato Journal, 1994.
4 To read about Netflix’s practices, see http://www.usnews.com/opinion/economic-intelligence/2014/07/03/netflixs-net-neutrality-double-standard
 
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The FCC should evaluate the merger on its merits
 
The emergence of information communication technology (ICT) has allowed Americans new, low-cost and effective ways to participate in the public process. The growth of broadband networks by copper, cable, fiber, satellite, mobile, Wi-Fi and other technologies supports an panoply of devices, platforms, content, and media. In the past if someone wanted to start broadcasting company, he had to go through a flippant and labyrinthine process at the FCC. Today online news services are started literally in garages without the FCC’s permission. Individuals have numerous ways to express themselves and to join like-minded groups. Comcast along with 1700 over broadband providers in America facilitate this development of expression through the provision of high speed broadband internet networks. This has been the trend, and there is no reason it will not continue should the broadband market be left alone.
 
At the same time as ICT technologies enable expression, they also allow parties to game the regulatory process. The same technologies that democratize communication can also be manipulated. I observe that there is a campaign against this merger with the primary message of “big is bad” and “Comcast is bad” without providing critical substance or analysis. This campaign against this transaction flourishes primarily through shrewd marketing, slogans, and fear mongering. The campaign is further suspect when one considers that it is funded by a group of wealthy foundations, companies, and individuals who have distinct ideological positions that broadband should be a utility or have commercial objectives of winning a favorable regulatory environment for their companies at the expense of other industries and companies. Indeed the same parties that oppose this transaction also attempt to paint the picture that America’s broadband market is “bad”. Their objective is to build a case for the imposition of utility regulation through reclassification of broadband under Title II of the Communications Act. As I have noted in my comment5 on the NPRM for the Open Internet, the allegations about the conduct of broadband companies come from theoretical concerns and conjecture, not demonstrated evidence.
 
A number of journalists and academics have an ideological view that communications is a human right and therefore should be provided by the government, not private entities. Others still do not believe in copyright and resent the earning of profit on intellectual property. They would prefer an internet with little to no commercial activity. While people have the right to their opinions, it is not the province of the FCC to make such value judgments. Indeed these arguments are better directed to the legislative process in Congress and in elections, not in the regulatory process. It is the FCC’s job to enforce the law, not to bend it to special interests.
 
In my estimation, Comcast has many incentives to act in a responsible way. The market for broadband is increasingly competitive as noted by studies by the FCC itself,6 the Federal Trade Commission,7 the White House’s Office of Science and Technology Policy,8 the OCED,9 the ITU,10 and a number of policy analysts and academics both in the US and abroad. See the work of Christopher Yoo,11 Jeffrey Eisenach12, Richard
 
 

5 http://roslynlayton.com/wp-content/uploads/2014/07/Roslyn-Layton-NPRM-14-28.pdf
6 http://www.fcc.gov/reports/measuring-broadband-america-2014
7 http://www.ftc.gov/sites/default/files/documents/reports/broadband-connectivity-competition-policy/v070000report.pdf
8 http://www.whitehouse.gov/sites/default/files/broadband_report_final.pdf
9 http://www.oecd.org/sti/broadband/oecdbroadbandportal.htm
10 “Measuring the Information Society,” International Telecommunications Union, 2013, 82, http://www.itu.int/en/ITU-D/Statistics/Documents/publications/mis2013/MIS2013_without_Annex_4.pdf.
11 Yoo, Christopher. “US vs. European Broadband Deployment: What Do the Data Say?”, University of Pennsylvania 2014.
12 See http://www.gsmamobilewirelessperformance.com/ and
http://www.navigant.com/~/media/WWW/Site/Insights/Economics/Navigant-Mobile-Wireless-Canada-FINAL.ashx
 
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Bennett,13 Everett Ehrlich, Scott Wallsten, Gregory Sidak, Jonathan Liebenau, Silvia Elaluf-Calderwood, Fernando Herrera Gonzalez, and Edmond Baranes who clearly establish the dynamic and competitive nature of access to video, broadband and voice services. Consumers can and do switch cable and broadband providers, and they have an excellent free tool called the National Broadband Map which lists broadband provider information for every zip code. Furthermore the media scrutinizes Comcast’s every move, and Comcast’s customers are active on social media should any customer service standard slip. Not only does the FCC have the power to decide of the fate of this merger, but it has all of the powers provided by law to regulate Comcast.
 
There is no doubt that the Comcast-TWC merger is hotly debated, and this is why the independence of the FCC is paramount. The FCC must judge the transaction on its merits—whether it will harm competition or negatively impact the public interest--not the opinions of interested parties. That being said, it is a courtesy that the FCC allows a public comment period. It’s not something afforded by the courts.
 
Broadband competition in America is dynamic and robust
 
Much of the discussion about the broadband and cable market tends to focus on national and macroeconomic statistics. For this transaction however, it is important to investigate how cable is provided at the local level through franchises, which means all services provided by cable – broadband, video and voice – are provided at the local level. It is absolutely the case—and can be independently demonstrated—that a merger between Comcast and TWC poses no concerns from a horizontal perspective. These companies do not compete in the same local markets where consumers purchase video, broadband, and voice services. A customer in Los Angeles cannot get broadband from Comcast because Comcast is not in the Los Angeles market. All that would change in Los Angeles, should the merger be approved, is that TWC would become Comcast. Consumers in Los Angeles will have the same number of providers. So, the claim by critics that the merger will reduce competition is not based on fact.
 
In her book Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age, Susan Crawford asserts that there is a cable-telco duopoly for broadband and that four firms—AT&T, Verizon, Comcast, and Time Warner—control America’s broadband market, charge unfair prices, and leave their networks to languish.14 My research debunks Crawford’s claims including that American broadband providers do not invest in networks. On the contrary, they are leaders in broadband investment. Americans, just 4% of the world’s population, have enjoyed nearly a quarter of the world’s broadband investment for more than a decade and an investment rate that is nearly twice that of the EU per capita.15
 
As for American broadband prices, they scale with consumption, and American unit costs for broadband are lower than those of most countries in the world. Not only does the International Telecommunication Union’s 2013 report “Measuring the Information Society” (based on 2012 data) show the US to have some of the lowest entry level broadband prices in the world, the FCC recognizes16 that the US has the third lowest price of gigabit
 
 

13 Information Technology & Innovation Foundation, “The Whole Picture: Where America’s Broadband Networks Really Stand” (Feb. 12, 2013). http://www.itif.org/publications/whole-picture-where-america-s-broadband-networks-really-stand
14 Susan Crawford, Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age (New Haven, CT: Yale University Press, 2013).
15 Michael Horney and Roslyn Layton, Innovation, Investment and Competition in Broadband and the Impact on America’s Digital Economy (Mercatus Center at George Mason University, August 15, 2014), http://mercatus.org/sites/default/files/Layton-Competitionin-Broadband.pdf.
16 FCC, “International Broadband Data Report” http://www.fcc.gov/reports/international-broadband-data-report-third, (Aug. 21, 2012).
 
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of data among the countries surveyed (following Denmark and Estonia). Crawford’s sweeping assertions fail to account for important differences across countries, such as network type, speed, taxation, subsidies, media license fees, homeowner fees for broadband, and so on. It is interesting to note that many of the countries that Crawford praises (Sweden, South Korea, Japan, etc.) have fewer broadband providers per capita, each with higher market shares than those in the United States.
 
Furthermore, Sweden has lower overall coverage for NGA or next-generation access (57% of households) to broadband and significantly lower coverage in rural areas (only 6% of households) than the US. Comparing the US to the EU as a whole is even more interesting. While only 54% of EU households can access a broadband technology that delivers 25 Mbps or more, some 82% of American households can. Moreover 48% of America’s rural households can get these technologies while just 12% of those in the EU.17
 
Based upon the FCC’s own evidence, I reject Crawford’s assertion that there is a cable-telco duopoly. The FCC reports more than 1,700 providers of broadband in the country.18 There are hundreds of providers that account for two-thirds of connections provided by cable and DSL in the US.19 The FCC20 itself reports the following
 
 
·
99% of households (in census tracts) have two or more wired broadband providers as of Jun 31, 2013.
 
 
·
78% of households have three or more wired broadband providers as of June 31, 2013.
 
 
·
Between December 2012 and June 2013 data, there was an extraordinary increase in broadband choice. The FCC notes, The reported data show a 30% annual increase in the number of residential fixed-location connections that are at least 6 Mbps downstream and 1.5 Mbps up stream, (from 34.5 million in June 2012 to 45 million in June 2013) and a 31% annual increase in the number of connections that are at least 10 Mbps downstream and 1.5 Mbps up stream (from 34.1 million in June 2012 to 44.8 million in June 2013).
 
Despite what critics claim, there is vibrant competition in access to broadband, and given the accelerated investment by AT&T and CenturyLink to upgrade their networks to VDSL and fiber to the premises (FTTP), and Google Fiber’s entry into several markets, the choice and competition enjoyed by consumers will only increase. Furthermore some 99 percent of Americans can access wireless broadband speeds of 16 Mbps download via satellite, four times the minimum defined by the FCC and higher than most of the world’s broadband connections.
 
But competition should not be measured just in the number of firms; it should be measured by the variety of networks and the level of technology. The United States has a more evenly distributed subscribership across broadband technologies (DSL, cable, 4G/LTE mobile, fiber). Only a handful of countries, mainly small, highly
 
 

17 Christopher Yoo, U.S. vs European Broadband Deployment: What Do the Data Say? (Philadelphia, PA: Penn Law, Center for Technology, Innovation and Competition, June 2014), https://www.law.upenn.edu/live/files/3352-us-vs-european-broadband-deployment.
18 Ajit Pai (FCC commissioner), “The IP Transition: Great Expectations or Bleak House?” (remarks before the Internet Innovation Alliance, Washington, DC, July 24, 2014), http://www.fcc.gov/document/commissioner-pai-remarks-internet-innovation-alliance.
19 Leichtman Research Group, “2.6 Million Added Broadband from Top Cable and Telephone Companies in 2013,” Press Release, March 17, 2014, http://www.leichtmanresearch.com/press/031714release.html.
20 FCC, Internet Access Services: Status as of June 30, 2013, June 2014 (Release Date) at p. 9. Jun 2013 Data http://www.fcc.gov/document/fcc-releases-new-data-internet-access-services-1 Dec 2012 Data http://www.fcc.gov/document/fcc-releases-new-data-internet-access-services-8
 
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populated European countries and city-states (Malta, Netherlands, Belgium, Luxembourg) have higher penetration of different networks.
 
As such, the United States should not aspire to have many providers simply for the numbers’ sake. Broadband quality is not appropriately measured by the number of providers or even the speed of broadband. A proper measurement of broadband needs to take into account of how broadband is used to make a society more productive and improve social and economic value.
 
In any event, those concerned about market power and concentration should look not at the market for broadband access, but at the markets for mobile operating systems (two leading players), search engines (one dominant player), and social networking (one dominant player). A more salient example of duopoly is the market for search engines. Google accounts for two-thirds of all searches in the United States. Microsoft and Yahoo (which both run Microsoft search engine technology) account for 28.7 percent of all searches. Together these firms account for 96.2 percent of all searches in the United States.21
 
Google takes the lion’s share of search advertising revenue and much online revenue in general. Google accounts for more than 40 percent of the revenue of online advertising, though Facebook is gaining, currently at 8.2 percent.22 But market power and concentration are not problematic in themselves, only in their abuse. Indeed, these companies are innovative even though they have high market concentration. The same is true for the cable industry and Comcast. Indeed market concentration can have many benefits for consumers. Think of the many benefits that Amazon has created for consumers and competition.
 
At $397 billion Google has a larger market capitalization than any broadband provider in America, and it operates its own fiber to the premises networks. Facebook is also significant at with a market cap of $194 billion and offers a communications platform with voice, text, and data that serves by 1.3 billion users.23 Facebook is in fact the world’s largest communications company by number of users.
 
Both Google and Facebook have larger user bases than any American broadband provider, and they are both de facto network providers given their large infrastructure footprints, data centers, and server farms. Facebook recently acquired the world’s leading OTT provider of messaging with 450 million users, WhatsApp, for $19 billion.24 While telco, cable, and cellular providers face significant regulation, Google, Facebook and other OTT providers are essentially unregulated in their provision of communication and information services.
 
Crawford declares that broadband is too important to be left to the market and calls for a nationalization of the nation’s networks to into a national fiber to the home project. The same statement can be turned around to say that the sheer needs of information and decision-making are so vast and the nature of the technology so rapidly changing that broadband cannot be left to the government. Rather than the FCC deciding the broadband future (as the regulatory process is highly subject to errors), America is better served by a multitude of competing broadband providers in a market-led, technology-neutral framework. Each network offers a different set of advantages for consumers who should be free to choose the packages that suit their needs and budget.
 
 

21 “US Search Engine Rankings,” comScore, March 18, 2014,
http://www.comscore.com/Insights/Press_Releases/2014/3/comScore_Releases_February_2014_U.S._Search_Engine_Rankings.
22 “Mobile Growth Pushes Facebook to Become No. 2 US Digital Ad Seller,” eMarketer, December 19, 2013, http://www.emarketer.com/Article/Mobile-Growth-Pushes-Facebook-Become-No-2-US-Digital-Ad-Seller/1010469.
23 “Company Info,” Facebook, December 2013, http://newsroom.fb.com/company-info/.
24 “Facebook to Acquire WhatsApp,” Facebook Newsroom, February 19, 2014,
http://newsroom.fb.com/news/2014/02/facebook-to-acquire-whatsapp/.
 
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Big is not necessarily bad – It is frequently good
 
Another theme that is used to argue against this merger is that big is bad – that is, allowing this merger will allow Comcast to get even bigger and that would be bad. But, big is not always bad and regulators frequently make mistakes when they make decisions based on such rhetoric. Consider how the FTC denied the acquisition of Hollywood Video by Blockbuster Video in 2005 on the notion that Blockbuster was “too big”. Blockbuster is all but a memory today. Consumer choice and a better technology, namely Netflix, replaced it. Being big is a signal to entrepreneurs and innovators to find a new business model or technology to tap a revenue stream.
 
It is interesting to consider what might have happened had the FTC had allowed the merger to happen. It is possible that the merger might have allowed Blockbuster to make a streaming service to compete with Netflix. Alternatively Netflix might have grown even quicker, as much of consumers’ drive to switch to Netflix was driven by dissatisfaction with Blockbuster. Ironically by the FCC failing to approve the Comcast-TWC merger, the FCC may delay, if not, preclude the next disruptive innovation.
 
In the evaluation of this transaction, it is important to separate emotions from fact. Many commenters on this process are inconsistent in their opinions about mergers and market power. The assertion that “big is bad” is selectively applied. Broadband providers are scourged while internet companies are praised. It’s not logical that big is okay when it’s Google, but not okay when it’s Comcast. An informed analysis shows that these two industries are highly interconnected and overlapping.
 
Part and parcel of the American identity is to be big. The US is a world superpower. Americans crave political, military, and economic power. That America is the world’s biggest economy by gross demoestic has been predicated by having big companies. To be sure, “big” is a relative term and can fluctuate depending on the unit of measure whether revenue, market cap, customers, users, geographic coverage and so on. On the whole, big is something Americans embrace.
 
While “big is bad” may resonate by the loudest opponents, it does not standup to critical reasoning. Furthermore this discussion of big is not associated with any level of market share that is important from a competition perspective. Thus “bigness” is not an appropriate metric for this merger review.
 
Networks underpin the Internet economy – FCC shouldn’t make value judgments between parts of the Internet economy
 
One of the most important economic developments in the last generation has been the emergence and growth of America’s internet companies—built on America’s networks. By 2009, the gross domestic product (GDP) of just the Internet of the United States was already greater than the total GDP of Sweden, Ireland, Switzerland, or Israel.25 Mary Meeker’s annual report of the internet industry for 2014 shows the United States with 13 of the top 20 Internet companies, and these companies comprise 90 percent of the market value and 80 percent of the revenue for the top 20 firms.26
 
 

25 Matthieu Pélissié du Rausas et al., “Internet Matters: The Net’s Sweeping Impact on Growth, Jobs, and Prosperity” (report, McKinsey Global Institute, McKinsey & Company, May 2011), http://www.mckinsey.com/insights/high_tech_telecoms_internet/internet_matters.
26 Mary Meeker, “2014 Internet Trends,” Kleiner Perkins Caufield Byers, May 28, 2014, slide 138, http://www.kpcb.com/internet-trends.
 
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America’s internet companies are a source of pride for Americans, but these companies never would have been realized if networks had not been in place and broadband providers had not continued to invest. This also goes for countless small and medium-sized companies that would have never existed without America’s networks.
 
Because of America’s broadband networks and their millions of subscribers, Netflix has transformed itself from a DVD by mail company to world’s leading streaming video on demand provider. At 50 million subscribers, it has more customers and reach that any cable company in the world. Netflix invests in its own content delivery network, but if broadband networks were not already there and not up to speed, no is no way that more than 30 million Americans could enjoy Netflix every day.
 
According to Cisco’s Visual Networking Index, an annual report of global Internet traffic, the rate of Internet consumption per capita in the United States is on the rise and growing faster than in most countries.27 The US is in second place and on track to surpass South Korea. Internet consumption has been growing exponentially around the globe but has picked up considerable speed in the US since 2010, accounting for over 30 percent of all global traffic in 2012. Consumer video over fixed networks generates the largest share of Internet traffic.28 People are consuming more internet content than ever at declining unit costs. It cannot be the case that there is a problem in the US broadband market with competition if consumers are getting more data at better prices.
 
The Internet is a network of networks comprising not just last mile connection, but international cables, exchanges, backbones, content delivery networks, peering arrangements, transit agreements, and other elements. It is not the job of the FCC to carve up the Internet between networks and edge providers and then make value judgments on what needs regulation what can be left alone. The ecosystem is far too complex. Much of the success of the internet is owed to the fact that government and regulators have left the Internet alone to evolve.
 
Intuitively people support the notion of efficiency, economies of scale, and the benefits of mergers through synergy and cost reduction. These platform and network effects are exactly what allow companies such as Google, Facebook, Apple, and Amazon to grow and profit. But there is no logic to allow internet companies and their users to enjoy the benefits of mergers but not cable companies.
 
Essentially a policy to apply a tougher standard to cable providers than other industries is capricious and arbitrary. It’s a front for old-fashioned, “regulate my rival” industrial policy which has no place in the digital age. With the move to an all internet protocol world, the FCC should retire the outdated classifications of networks. Consumers would be best served by a single standard that applies to all networks, technologies, business models, services, and applications.
 
Many of the critics who argue against this merger base their arguments on value judgments about parts of the Internet. As I noted earlier, mergers by Internet content providers and others are largely ignored while this merger is loudly opposed because in their judgment, content/application providers such as Google or Netflix need to be protected, even if they are often more powerful than Comcast based on market capitalization, market share, and user base. The FCC should see this hypocrisy and avoid succumbing to those arguments, which are attempt to manipulate the merger review process.
 
 

27 “Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2013–2018,” Cisco, February 5, 2014, http://www.cisco.com/c/en/us/solutions/collateral/service-provider/visual-networking-index-vni/white_paper_c11-520862.html.
28 Patrick Brogan, “Internet Usage Data Show U.S. Expanding International Leadership” (USTelecom, Washington, DC, November 7, 2013), http://www.ustelecom.org/sites/default/files/documents/110613-usage-research-brief.pdf.
 
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Dynamic Competition
 
Dynamic competition refers to technology that drives competition, not the number of providers for a given product or service. Dynamic competition is characterized by innovation, investment, and product differentiation. That is, competition comes from creating different solutions and platforms. We can see dynamic competition in the way that Netflix competes with cable; how Uber, an intelligent transportation application, competes with the traditional regulated taxi industry; and how the online accommodations platform of AirBNB competes with hotels. An understanding of dynamic competition means that a market can’t be judged with a static snapshot of counting the number of players. The level of technology must be considered.
 
The elementary idea of a perfectly competitive market is one with many buyers, many sellers, perfect information, a homogeneous good, no taxation, and no barriers to entry. These conditions exist almost nowhere in the world in any industry. The textbook examples of perfect competition typically involve at least two farmers selling the same crop. This might be termed as neoclassical or static competition, multiple firms competing to deliver the same or similar products. However as soon as new farming methods are introduced, the competitive forces change. Two farmers could sell the same crop, but one of the farmers could employ a technology enhancements such as a tractor, fertilizer, or better seeds.
 
The notion of dynamic and static competition in the broadband market has to do what degree firms are allowed to compete on technologies. On account of the high fixed costs and entrance barriers, traditional telecommunications was run as a government monopoly. Most countries in the world began their telecom industry as a government monopoly. Since 1990, the number of telecom regulators in the world has exploded from 14 to 155, as countries transitioned their state-owned networks to regulated monopolies. Regulators were tasked with creating static competition through a framework that provides entrant firms access to the old network.
 
The trade-off of static competition is to favor superficially low end user prices over the forces of dynamic competition. It’s a short term win that shortchanges consumers in the long term. Consumers and internet companies lose because no firm has the incentive to invest in new networks or competing technologies. The incumbent firm does not want to invest because it has to offer access to its competitors, and entrants see no need to deploy capital when a network service is readily available for reselling.
 
The US experience is different. The beginnings of America’s telecommunication industry were marked by a number of competing providers. A governmental decree turned AT&T into a monopoly and subsequent legislation such as the 1934 Communications Act enshrined how the monopoly would operate. Once the Act was promulgated, it took 50 years to undo its deleterious effects. Finally in 1984 the Ma Bell monopoly was broken apart.29 After some time, new telecom providers emerged and seeing the advantages of television, experimented with technologies to deliver data and video over telephone wires, and the technology of DSL (digital subscriber line) was born.
 
Cable emerged in the late 1940s as a project to connect America through television. As remote parts of the country could not be reached by terrestrial TV signals, cable lines were brought to many homes. While many companies emerged locally, they eventually merged to deliver increasing innovation and cost efficiencies to customers. It has been observed that telecommunication regulation was used as a way to stymie the development of the cable industry which represented significant competition to telecom providers.30
 
 

29 Adam Thierer, “Unnatural Monopoly: Critical Moments in the Development of the Bell System Monopoly,” Cato Journal, 1994.
30 http://www.cato.org/publications/commentary/are-we-really-deregulating-telecom
 
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The game changer for cable was Data over Cable Service Interface Specification, or DOCSIS, in 1997, a standard for data delivery across coaxial cable. This, along with the cable modem, which provides bidirectional communication, allowed cable providers to turn themselves into broadband providers. The cable industry has developed a hybrid fiber coaxial (HFC) cable network, making it a full-fledged broadband provider, offering high-speed data as well as voice in addition to television.31
 
Cable’s strategy in its competition with Internet television has been to make the cable experience richer, better, and more diverse. The cable industry has innovated its offering so that television appears in high definition, not standard definition. It also provides a number of tools and devices to improve the viewing experience, such as content discovery. Finally, cable also offers TV everywhere, through the ability to stream cable and broadband content to connected devices.
 
Subscribers use cable technology not just for television and Internet access, but also for telephony. Some 26 million Americans selected cable as their voice provider as of 2012. Cable operators now make up five of the top ten residential phone companies in the country.32 Users can purchase services a la carte, but many opt for a value-priced bundle of cable television, broadband Internet, and voice in a single subscription, also called triple play. Thus the US provided an example early on that competition can come from new technology, arguably more efficiently, than from government fiat.
 
Dynamic competition is a notion partly arrived from the work of Joseph Schumpeter in his re-interpretation of Marx in Capitalism, Socialism and Democracy33 in 1942. Giving the example of the dearth of wood forcing a need to find energy substitutes, he promoted the idea that necessity creates invention. Rather than see the business cycle as a Marxist process of accumulation and annihilation of wealth, Schumpeter proposed creative destruction as an engine of renewable economic growth. Creative destruction is a force “that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”. Schumpeter saw entrepreneurs as creating economic growth and destroying established industries and monopolies. He would have likely celebrated the emergence of over the top technologies (OTTs).
 
With different technologies a broadband market can have just a few private players—for example, a cable and a DSL provider—and still be competitive. Cable companies and DSL providers continue to upgrade their networks with fiber while employing different technologies to deliver broadband, such as DOCSIS and very fast bit rate or VDSL. This cycle of investing to beat the other is a highly legitimate form of competition in markets where technology is quickly evolving.
 
Competition in the market is driven not just in the networks themselves, but the services over the top of the network. This is where we see Skype competing with voice for long distance; Netflix competing with cable for video; and WhatsApp competing with mobile operators’ proprietary messaging platforms.
 
Another upstart is Roku, a standalone set-top box that brings hundreds of channels to an Internet device via broadband. There are a number of other providers with different business models, including YouTube, Hulu, Amazon, and Vimeo. With such a robust, indeed disruptive, market for broadband, it is curious that regulators
 
 

31 “Evolution of Cable Television,” Federal Communications Commission, March 14, 2012,
http://www.fcc.gov/encyclopedia/evolution-cable-television.
32 “Impact of Cable,” National Cable and Telecommunications Association, accessed January 15, 2014, http://www.ncta.com/impact-of-cable.
33 J.A. Schumpeter, Capitalism, Socialism, and Democracy. (Harper, 1942).
 
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should want to legislate the video market rather than allow the consumer-driven interplay with providers to continue to evolve.
 
Comcast has continued to innovate and invest in its platform, increasing speeds, coverage, and content. In 2011, it unveiled an hybrid-coaxial cable network reaching gigabit speeds.34 This network platform will continue to yield bandwidth increases for the foreseeable future, and there is no reason to deny the customers of TWC those benefits. With node splitting, spectrum utilization, better modulation, 24-channel bonding, and DOCSIS upgrades, cable coaxial networks can continue to meet consumer demand for many years.
 
The scale of cable provider Comcast has allowed it to invest in another broadband technology, neighborhood Wi-Fi. Comcast is turning the homes and neighborhoods of its subscribers into millions of Wi-Fi hot spots around the country. To enable this, Comcast offers customers an all-in-one device that combines a customer’s wireless router, cable modem, and voice adapter. This device broadcasts two Wi-Fi signals, one securely configured for the subscriber and the other for the neighborhood, which can be accessed by anyone in the vicinity. Using unlicensed spectrum, Comcast’s neighborhood Wi-Fi program is an important innovation and creates competition for mobile broadband providers.35
 
To be sure, dynamic competition and disruptive innovation don’t fit into a tidy box for regulators. New competitors are not under traditional obligations such as interconnection requirements, data portability, licensing, and so on. In an era marked by rapid change, regulators should have the courage to allow the industry to evolve and retire regulations when they are obsolete.
 
It’s not surprising that soon after Comcast announced its proposed transaction, it was followed by a transaction announced by AT&T and DirecTV. This is indicative of the competition not just in the broadband market, but by OTT video providers. This is an encouraging trend that illustrates how quickly companies can evolve in the marketplace.
 
Investment is the key driver of dynamic competition because it allows companies to come up with new business models through innovation. Comcast’s X1, an interactive voice platform for the delivery of video is an example of the kind of innovations that are driven by investments. Without investment, there is no innovation and no dynamic competition. In highly capital intensive industries, scale efficiencies are important considerations for investment. Approving this deal will allow Comcast to generate more innovation through its investment in technology. This allows dynamic competition to flourish.
 
Access Market
 
The law of demand states that as the price of a good or service increases, demand will decrease. It follows that if cable prices are too high without commensurate value, consumers will demand less. They will downgrade from high speed packages to low speed packages. Alternatively they will find substitutes, e.g. 4G/LTE, DSL, wifi etc.
 
 

34 Tony Werner, “Comcast CEO Brian Roberts Demonstrates 1Gbps Speed Broadband Connection and Next Generation Video Product,” Comcast, June 16, 2011, http://corporate.comcast.com/comcast-voices/comcast-ceo-brian-robert-demonstrates-1gbps-speed-broadband-connection-and-next-generation-video-pro.
35 “Comcast Unveils Plans for Millions of Xfinity WiFi Hotspots through Its Home-Based Neighborhood Hotspot Initiative,” Comcast, June 10, 2013, http://corporate.comcast.com/news-information/news-feed/comcast-unveils-plans-for-millions-of-xfinity-wifi-hotspots-through-its-home-based-neighborhood-hotspot-initiative-2.
 
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However the opposite in happening in the cable and broadband market overall. Consumers are tending to upgrade their packages, buying packages that cost more, but offer more value in terms of speed, services, content, and functionality. In this way, consumers are getting lower unit costs for their broadband consumption. The comparative data that I referred to earlier from the ITU and the FCC clearly establishes this as a fact. Moreover, Americans spend more on housing, energy, transportation, education, clothing, and even discretionary vacation, than they do on cable or broadband. In fact cable prices offer some of the best value of anything Americans consume. Considering the value of connectivity, we probably pay too little. This was asserted by David Clark,36 one of the key architects of the internet.
 
A study by Boston Consulting Group showed that Americans’ perceived value of the Internet ranged between $1,456 and $3,506 per year, which is an estimate of what they would be willing to pay for the Internet if they did not have a broadband subscription.37 Indeed, most consumers pay significantly less than this for broadband, so this measure shows that consumers get more value than what they pay.
 
Another study is the “Broadband Bonus” by Shane Greenstein and Ryan McDevitt, published by the OECD in 2012, which measured the consumer surplus of broadband in 30 OECD countries. It estimates the percentage of GDP per capita that is a “broadband bonus” or consumer surplus. In 2010, 0.28 percent of GDP per capita, or $135.40, was the average excess benefit for each American. This percentage gradually increased from 2006 to 2010. The study suggests that this trend will continue as Internet traffic in the United States increases.38
 
The International Telecommunications Union (ITU) also recognizes that American prices are reasonable. According to its 2013 report “Measuring the Information Society,” broadband prices should be no more than 5 percent of income. The United States scored third in the world in 2012 for entry-level affordability of fixed-line broadband. It is tied with Kuwait, with fixed-line broadband prices at just 0.4 percent of gross national income per capita. This means that for as little as $15 per month, Americans could get a basic broadband package at purchasing power parity in 2011 ($48,450 annual income).39 A basic package of broadband that ensures access to essential services for health, education, employment, and e-government are accessible on 4 Mbps or less, the FCC’s definition of broadband. High speeds are not required for these services, and presently the only services for which consumers need high speeds are essentially for real time entertainment.
 
Comcast offers its customers standalone broadband package at affordable prices. Prices scale with discretionary video entertainment options. In the markets that Comcast serves, consumers have viable alternatives for broadband. Consumers can and do switch.
 
International Comparisons
 
The discussion of dynamic and static competition need not be an academic exercise. We can look at the practice and evidence from a variety of countries to see the impact of regulatory and competition policy. Along with a
 
 

36http://techpolicyinstitute.org/events/register/116.html?utm_source=WhatCounts+Publicaster+Edition&utm_medium=emai l&utm_campaign=IFS+Event+Alert&utm_content=her
37 Dean et al., “Internet Economy in the G-20,” 13.
38 Shane Greenstein and Ryan McDevitt, “Measuring the Broadband Bonus in Thirty OECD Countries,” OECD Digital Economy Papers 197 (April 19, 2012): 19.
39 “Measuring the Information Society,” International Telecommunications Union, 2013, 82, http://www.itu.int/en/ITU-D/Statistics/Documents/publications/mis2013/MIS2013_without_Annex_4.pdf.
 
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number of other scholars, I have explored the differences between the US and EU approach and the outcomes with regard to investment, innovation and next generation access coverage.
 
The OECD does not compare the US to the EU, but meaningful measures of the two regions can be prepared using other datasets. In 2013, the EU government commissioned an in-depth study of broadband for its Digital Agenda Scoreboard. Table 1 displays those data. For the US, the National Broadband Map contains the most detailed public information about America’s broadband facilities and subscriptions as of 2013. Table 1 also includes those data, with three notations of the newest information. These authoritative data clearly show the United States leading on the availability of key broadband technologies and competition between broadband facilities.
 
Table 1. United States and EU Broadband Comparisons, 2013
 
 
United States (%)
EU (%)
Availability of broadband with a download speed of 100 Mbps or higher to population
57*     
30
Availability of cable broadband to population
88      
42
Availability of 4G/LTE to population
94**  
26
Availability of FTTH to population
25       
12
Percentage of population that subscribes to broadband by DSL
34       
74
Percentage of households that subscribe to broadband by cable
36***
17
* The National Cable Telecommunications Association suggests speeds of 100 Mbps are available to 85 percent of Americans. See “America’s Internet Leadership,” National Cable Telecommunications Association, 2013, http://www.ncta.com/positions/americas-Internet-leadership.
** Verizon’s most recent report notes that it reaches 97 percent of America’s population with 4G/LTE networks. See “Overview,” Verizon, News Center: LTE Information Center, accessed June 12, 2014, http://www.verizonwireless.com/news/LTE/Overview.html.
*** This table is based on 49,310,131 cable subscribers at the end of 2013, noted by Leichtman Research (http://www.leichtmanresearch.com/press/031714release.html) compared with a total of 138,505,691 households noted by the National Broadband Map.
Source: US data from National Broadband Map; see “Access to Broadband Technology by Speed,” Broadband Statistics Report, July 2013, http://www.broadbandmap.gov/download/Technology%20by%20Speed.pdf and http://www.broadbandmap.gov/summarize/nationwide. EU data from European Commission; see “Chapter 2: Broadband Markets,” Digital Agenda Scoreboard 2013, working document, December 6, 2013, http://ec.europa.eu/digital-agenda/sites/digital-agenda/files/DAE%20SCOREBOARD%202013%20-%202-BROADBAND%20MARKETS%20_0.pdf.
Notes: LTE = long-term evolution, FTTH = fiber to the home, DSL = digital subscriber line.
 
In general the regulators and governments of various EU countries have taken a static competition approach to broadband. They focus on regulating access to the copper network frequently owned by the government and controlling prices. The results are not surprising. Almost three quarters of all broadband connections in the EU are provided by DSL. If a government can make network access so cheap and available, there is no incentive for firms to invest in new networks and different technologies. Old fashioned DSL is a slower technology than cable and 4G/LTE mobile, so those who assert that the EU has lower broadband prices frequently forget to include fact
 
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that Europeans are buying a lesser broadband product than Americans. Indeed cable is available to only 40% of EU households, and just 17% of all EU households subscribe.
 
If we look at the US, not only do we see a greater diversity of broadband technologies, but we see higher deployment of next generation access technologies. Only about one third of Americans subscribe to broadband via DSL, another third by cable, and the remaining third is made up by other technologies. This is a more dynamic and arguably competitive situation than the EU.
 
The important thing to note in Europe, however, is that those countries where cable has been allowed to compete against DSL have a greater diversity of technology, higher coverage of next generation access networks, and higher investment in infrastructure.
 
An interesting case is Denmark where cable DOCSIS 3.0 deployment is available to 61% of Danes. Many Americans consider Denmark to be a broadband utopia of sorts, but they don’t mention that the incumbent telco also owns the leading cable company and together it provides two-thirds of the country’s broadband connections. It is unthinkable for Americans to consider that an AT&T could own a Comcast, but that is the case in Denmark.
 
It should also be noted that Denmark’s broadband market has been significantly deregulated. Even the telecom regulator itself was dismantled in 2011 by the new center left government under the reasoning that broadband should be an enabler to society, not the national regulatory project. This was one of the government’s first activities upon coming into office and was effected nearly overnight with essentially no debate.40 The Danish government supports a market-led, technology-neutral approach of dynamic competition where network providers compete with different technologies. There are almost no subsidies for broadband, save for the remote island of Bornholm. This policy and has succeeded to foster an environment where the telecom industry invests highly in infrastructure ($457/household), to a level approaching the US ($562/household). The EU overall broadband providers invest only $244/household. In Denmark private companies invest in telecom infrastructure equivalent to the what the Danish government spends on roads, railways, and hospitals.
 
Some Americans believe that broadband prices are too high. They claim that Europeans pay less for faster speeds. Frequently, these assertions fail to standardize the comparisons—for example, to compare similar networks and speeds. A higher-speed, next-generation network connection delivering more data generally costs more than a slower one. The challenge for measuring European and American prices is that networks are not uniform across the regions. The OECD comparisons are based on availability in at least one major city in each country, not in the country as a whole. This means that OECD data may overstate the availability of broadband and understate its price in many European countries. Therefore it is necessary to look at multiple datasets to get a more balanced picture. In general American networks are 75 percent faster than those in the EU. The overall price may be higher in the United States, but the unit cost is lower, and the quality is higher. This means Americans get more value for their money.41
 
Another item rarely mentioned in international broadband comparisons is mandatory media license fees. These fees can add as much as $44 to the monthly cost of broadband. When these fees are included in comparisons, American prices are frequently an even better value. In two-thirds of European countries and half of Asian countries, households pay a media license fee on top of the subscription fees to use devices such as connected computers and TVs. Media license fees are now applied to fixed-line broadband subscriptions and even mobile
 
 

40 Anders Henten and Morten Falch, “The Future of Telecom Regulation: The Case of Denmark,” June 2014, http://vbn.aau.dk/en/publications/the-future-of-telecom-regulation(87df5174-0a28-4865-b5a4-5f4bf2c758f5).html.
41 Roslyn Layton, “The European Union’s Broadband Challenge” (American Enterprise Institute, Washington, DC, February 2014), http://www.aei.org/files/2014/02/18/-the-european-unions-broadband-challenge_175900142730.pdf.
 
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broadband. In general in such countries, all households that subscribe to information services (e.g., broadband) must register with the national broadcasting corporation, and they receive an invoice once or twice a year. The media fees are compulsory, and in some countries it is a criminal offense not to pay. The US opted not for this model and looked to advertising to fund broadcasting instead.
 
The issue of media license fees brings up an important issue related to the American content market and the cable industry as one of its key distribution networks. American movies and television (and to some degree sports), on account of their subject matter, language , and scale, have both a national and global audience. Cable networks are an important input to content industry in that they ensure an audience and delivery for content. American cable companies purchase rights to distribute content. Those fees fund the activities of production, artists’ salaries and so on. The American audience is large and diverse, and content developers can produce a wide range of content. They can also invest in risky, high budget films that small countries could never finance. Thus the large American market for content and its associated distribution on cable networks helps to create the foundation of America’s third largest export, that of digital goods and services which totaled more than $350 billion in 2011.42
 
By contrast most the film and TV industries abroad have a large amount of state support. Outside of a few exceptions of Oscar-winning foreign films and Spanish language content which also has a global audience, the local language content of any particular country has a limited audience around the world. So cable packages in many European and Asian countries are smaller and lower-priced simply because they offer less content.
 
However Americans increasingly signal that they are willing to pay for quality content, this is shown in the growth of premium subscription models for cable, Netflix, Hulu, Amazon and so on. They key benefit for Americans versus people of other countries is they have the freedom to pay for content they want. They are not forced to pay for government-created content, nor are the criminalized if they choose not pay for it.
 
When calculating the real cost of international broadband prices, one needs to take into account media license fees, taxation, and subsidies. Neither the OECD Broadband Portal43 nor the ITU’s statistical database44 provides this information. However, these inputs can materially affect the cost of broadband, especially in countries where broadband is subject to value-added taxes as high as 27 percent, not to mention media license fees of hundreds of dollars per year.
 
In my paper “The EU Broadband Challenge”45, I provide a comparison of two premium cable packages, one from Comcast and another from Stofa, a non-incumbent Danish cable provider. The results are shown below. While by no means a comprehensive analysis, this illustration provides example of an honest comparison of cable prices between the US and a European country. Broadband and content account for a larger portion of the total cost of the cable subscription in the US (about 86 percent of the total price), and the US package also includes more premium channels. The US package has 200 channels, while the Danish package offers only 63 and does not include HBO, Cinemax, ESPN, and other channels that are part of the premium package in the US.
 
 

42 “U.S. International Trade in Goods and Services,” US Census Bureau, US Bureau of Economic Analysis, June 4, 2013, http://www.census.gov/foreign-trade/Press-Release/2012pr/final_revisions/final.pdf.
43 “Broadband and Telecom,” Organisation for Economic Co-Operation and Development, January 9, 2014, http://www.oecd.org/sti/broadband/oecdbroadbandportal.htm.
44 “Statistics,” International Telecommunications Union, 2014, http://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx?utm_source=twitterfeed&utm_medium=twitter.
45 Roslyn Layton, The European Union’s Broadband Challenge (American Enterprise Institute, February 2014), http://www.aei.org/files/2014/02/18/-the-european-unions-broadband-challenge_175900142730.pdf.
 
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In the Danish offering, which has a slightly higher broadband speed but two-thirds less content, broadband and content make up just 60 percent of the cost. The remaining 40 percent is taxes and compulsory fees. On balance, Danish subscribers pay 35 percent more than Americans for a similar premium package. The figure clearly shows that taxes and fees dramatically change broadband prices. Not incorporating the relevant costs makes for a superficial and incomplete analysis.
 

 
Conclusion
 
The FCC needs to apply the relevant public interest standards to evaluate the Comcast/TimeWarner Cable transaction. The required test should be whether this merger will substantially lessen competition. It must not succumb to political pressure or public opinion. For the reasons set out above, I see no reason to oppose this transaction.
 
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Before the
 
Federal Communications Commission
 
Washington, DC 20554
 
 
)
 
Applications of Comcast Corporation,
)
 
Time Warner Cable Inc., Charter
)
 
Communications, Inc., and Spinco
)
 
 
) MB Docket No. 14-57
to Assign and Transfer Control of FCC
)
 
Licenses Transfer Control of Licensees and
)
 
Other Authorizations
)
 
 
)
 
 
COMMENTS OF CHRISTOPHER S. YOO
 
John H. Chestnut Professor of Law, Communication, and
Computer & Information Science
 
Founding Director of the Center for Technology, Innovation and Competition
 
University of Pennsylvania
 
I am pleased to submit my comments regarding the proposed transaction between Comcast Corp.; Time Warner Cable Inc.; Charter Communications, Inc.; and Spinco. The views presented are my own and should not be attributed to my employer or to the Center for Technology, Innovation, and Competition.1
 
Those raising concerns about the merger have generally focused on two distinct markets: (1) the market for the distribution of traditional cable television and (2) the market for broadband Internet access. In short, established principles of antitrust and communications law dictate that
 
 

1                 I have not received any compensation for these comments, nor have I been retained by any party with a financial interest in these proceedings. In the past, Comcast has provided financial support the Center for Technology, Innovation, and Competition (CTIC). Those gifts did not provide Comcast with any input into the programs run by CTIC or the positions taken by CTIC faculty.
 
 
20

 
 
the merger is unlikely to harm consumers in either market. In fact, technological and economic changes are transforming the markets in ways that should make the prospect of anticompetitive harms even more remote.
 
I.           TRADITIONAL MULTICHANNEL VIDEO
 
The first relevant market involves the distribution of traditional cable networks. In this market, cable operators enter into three types of transactions. First, they pay television networks such as ESPN, Nickelodeon, and the Disney Channel for the rights to retransmit video programming. Second, they collect subscription fees from consumers who wish to view that programming. Third, they receive revenue from local advertisers who wish to reach local subscribers. Although each market should be analyzed separate, the end conclusion is the same in each case, that is, none of these markets is structured so that the merger is likely to harm consumers.
 
A. 
End-User Subscriptions
 
With respect to subscribers, cable operators in different cities serve different geographic markets and as a result do not compete with one another. In short, consumers would have the same number of choices of multichannel video providers the day after merger that they did the day before. Thus, a merger between cable operators serving different cities should not affect the prices that subscribers pay for cable television subscriptions.2
 
 

2           See Christopher S. Yoo, Vertical Integration and Media Regulation in the New Economy, 19 YALE J. ON REG. 171, 222 (2002).
 
 
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B. 
Video Programmers
 
The geographic scope of the market in which cable operators contract with video programmers is very different from the one in which cable operators contract with subscribers. As both the Federal Communications Commission (FCC) and the U.S. Court of Appeals for the D.C. Circuit have recognized, video programmers do not really care if they reach viewers in any particular metropolitan area. Instead, their primary concern is whether they can reach a sufficient number of customers to achieve minimum viable scale.3 The proper geographic scope of this market is thus national. For them, it is national reach, not local reach that matters.4
 
Any arguments that that the merger would create anticompetitive harms to video programmers must overcome one potentially insuperable obstacle. On two occasions, the FCC attempted to institute rules prohibiting cable operators from controlling more than 30% of the nation’s multichannel video subscribers in order to protect the interests of video programmers. On both occasions, the courts invalidated the rules because the FCC’s rationale for imposing the 30% limit was arbitrary and capricious. In both cases, the court indicated that the available evidence suggested that cable operators could control much larger shares of the national market without harming video programmers, driven largely by the advent of competition from direct broadcast satellite (DBS) providers, such as DirecTV and the Dish Network.5
 
Given that the merging parties have committed to reduce their holdings so that the resulting company will control no more than 30% of the national market, these court decisions
 
 

3           See Comcast Corp. v. FCC, 579 F.3d 1, 4, 7 (D.C. Cir. 2009) (citing Commission’s Cable Horizontal and Vertical Ownership Limits, Fourth Report and Order and Further Notice of Proposed Rulemaking, 23 FCC Rcd. 2134, 2162 (2008)); Time Warner Entm’t Co. v. FCC, 240 F.3d 1126, 1131 (D.C. Cir. 2001) (citing Implementation of Section 11(c) of the Cable Television Consumer Protection and Competition Act of 1992, Third Report and Order, 14 FCC Rcd. 19098, 19114–16 ¶¶ 40–41 (1999)).
4           Yoo, supra note 2, at 227.
5           See Comcast, 579 F.3d at 6–8; Time Warner Entm’t, 240 F.3d at 1132.
 
 
22

 
 
essentially foreclose arguments that anticompetitive harms to video programmers would justify blocking the merger. Indeed, the courts’ analyses were based on the competitive environments that existed in 2001 and 2009. Since that time, these markets have become even more competitive. The number of multichannel video subscribers has increased from 96 million to 101 million by 2012.6 Thus, even under the specious justification for the 30% threshold rejected by the courts, the percentage of the national market that one cable operator can control should rise above 30% without causing any harm to video programmers. Since that time, Verizon’s FiOS and AT&T’s U-verse networks have expanded their customer bases. Internet-based video platforms such as Netflix, Amazon, Hulu, Google, Roku, and Apple have emerged as significant market players. In addition, the costs of program acquisition have risen sharply, as program providers have increased their bargaining power.
 
The one type of programming for which the market is not national is sports. Interest in regional sports programming tends to be highly localized. People who live in the Philadelphia area tend to follow Philadelphia sports teams. A merger between the cable company that serves the Philadelphia area with the cable company serving the Los Angeles area would not alter the relative bargaining power of the Philadelphia-area sports teams or the Philadelphia-area cable provider.
 
Moreover, it is not clear how such a combination would hurt any advertising market. National advertising revenue naturally seeks national distribution channels. In terms of local advertising, FCC data discussed below indicate that cable represents only 7% of the local advertising market.
 
 

6               See Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, Fifteenth Report, 28 FCC Rcd. 10496, 10499 ¶ 3 (2013) [hereinafter Fifteenth Video Competition Report].
 
 
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It is possible that a market for regional advertising may exist. Any concerns would require an examination of actual behavior and the extent to which advertisers regard local and national advertising as a substitute for regional advertising. In addition, advertising markets can be very hard to define. Different advertising avenues vary in their ability to reach different types of demographics. As a result, it is impossible to make predictions in the abstract that the merger will harm the market for regional sports programming. Such a conclusion would depend on a very careful and fine-tuned analysis of actual market conditions.
 
These considerations suggest that the merger would not create an industry structure that would raise concerns about anticompetitive harms to video programmers under established principles of antitrust and communications law. Even if such concerns had merit, however, they are properly addressed by the program carriage and access rules that the FCC has developed to address just these problems. Commissioners of the Federal Communications Commission (FCC) and commentators have long criticized the use of merger conditions as a mechanism for making policy.7 Traditional notice-and-comment rulemaking promotes public participation. By their
 
 

7           See, e.g., Applications of AT&T Inc. and Centennial Communications Corp., Memorandum Opinion and Order, 24 FCC Rcd. 13915, 13972 ¶ 141 (2009); Verizon Communications Inc. and MCI, Inc., Memorandum Opinion and Order, 20 F.C.C.R. 18433, 18573 (2005) (separate statement of Abernathy, Comm’r); Applications for Consent to the Transfer of Control of Licenses and Section 214 Authorizations by Time Warner Inc. and America Online, Inc., Transferors, to AOL Time Warner Inc., Transferee, Memorandum Report and Order, 16 F.C.C.R. 6547, 6713 (2001) (Powell, Comm’r, concurring in part and dissenting in part); Applications of Ameritech Corp., Transferor, and SBC Communications Inc., Transferee, Memorandum Opinion and Order, 14 F.C.C.R. 14712, 15197-200 (1999) (Powell, Comm’r, concurring in part and dissenting in part); id. at 15174-96 (Furchtgott-Roth, Comm’r, concurring in part and dissenting in part); Application of Worldcom, Inc. and MCI Communications Corp. for Transfer of Control of MCI Communications Corp. to Worldcom, Inc., Memorandum Report and Order, 13 F.C.C.R. 18025, 18166 (1998) (separate statement of Powell, Comm’r); id. at 18159 (separate statement of Furchtgott-Roth, Comm’r). For commentators’ criticisms of the merger conditions, see Rachel Barkow & Peter Huber, A Tale of Two Agencies: A Comparative Analysis of FCC and DOJ Review of Telecommunications Mergers, 2000 U. CHI. LEGAL F. 29, 54, 62-66, 69-81; Harold Furchtgott-Roth, The FCC Racket, WALL ST. J., Nov. 5, 1999, at A18; Bryan Tramont, Too Much Power, Too Little Restraint: How the FCC Expands Its Reach Through Unenforceable and Unwieldy “Voluntary Agreements,” 53 FED. COMM. L.J. 49, 51-59 (2000); Daniel E. Troy, Advice to the New President on the FCC and Communications Policy, 24 HARV. J.L. & PUB. POLY 503, 505-09 (2001); Philip J. Weiser, Institutional Design FCC Reform and the Hidden Side of the Administrative State, 61 ADMIN. L. REV. 675, 708-11 (2009); Christopher S. Yoo, New Models of Regulation and Interagency Governance, 2003 MICH. ST. DCL L. REV. 701, 704.
 
 
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nature, merger conditions restrict conduct permitted by the existing rules (otherwise the restriction would be imposed by general regulation rather than by the order clearing the merger). The problem is that they are imposed outside of the normal regulatory processes, and even when orders clearing the merger are subject to notice and comment, the resolution of the issues is more likely to be driven by the issues raised by a particular transaction and less likely to yield a clear statement of agency policy.
 
In many cases, merger conditions address conduct that is not the result of the merger, and in most, if not all, cases, these issues addressed by the merger conditions are the subject of ongoing proceedings before the FCC. The use of company-specific adjudications to address issues that confront the entire industry threatens to skew the competitive landscape and raises serious issues of fairness. Moreover, merger conditions often cannot be appealed, because the voluntariness of the commitment may well immunize it from meaningful judicial review.
 
At best, the use of the merger review process to impose conditions represents a source of delay and uncertainty that reduces the industry’s ability to adjust to a rapidly changing and increasingly challenging technological and economic landscape. At worst, it represents a form of backdoor regulation that hurts consumers, singles out individual companies for restrictions that could not necessarily withstand the rigors of normal regulatory processes, and undermines democratic values as well as the integrity of agency processes.
 
The one matter on which the FCC and academic commentators agree is that merger clearances represent a bad way to impose access requirements. Not only does the resulting restriction apply only to the merging parties. Merger conditions are typically not subject to the full range of administrative procedures, such as public participation, the need for reasoned justification, and the discipline of judicial review. Most importantly, it would only address the
 
 
25

 
 
conduct of a handful of industry actors. It would do nothing to solve the same problems when they arise with respect to parties who have not recently merged. The proper venue for such issues is in a general regulatory or legislative proceeding, not the merger review process
 
Congress has the authority to take additional steps to mandate greater access for content, service, and application providers. It is not yet clear that such action is necessary at this time. With respect to traditional video, the FCC has a mature regime of program and network access rules designed to ensure that no actor can use its control over key content or key infrastructure to harm other actors in a way that harms consumers. With respect to the Internet, the Open Internet proceeding is considering whether and how best to address these types of concerns. At this point, the best course of action would be to permit these initiatives to continue while keeping a watchful eye on how things develop.
 
C. 
Local Advertising
 
Finally, the merger is unlikely to harm the market for local advertising. The reason is simple: although cable television networks receive significant amounts of national advertising, the limited reach of local cable operators limits them to local advertising. The fact that local advertising occurs in different geographic markets means that, as was the case with cable television and broadband Internet subscribership, the merger will not cause any reduction in competition. FCC data indicates that cable television represents a minor share of local advertising revenues.
 
 
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Figure 1: Local Advertising Revenues by Sector ($million)
 
Sector
2011 act.
Share
2012 proj.
Share
Broadcast television
10,308
15%
11,802
17%
Cable television
4,164
6%
4,867
7%
Radio
11,264
16%
11,405
16%
Internet
11,602
17%
12,274
17%
Daily newspaper
16,915
25%
15,720
22%
Regional sports networks
842
1%
925
1%
Mobile
974
1%
2,064
3%
Telco
161
0%
230
0%
Other
12,313
18%
11,061
16%
Total
63,543
100%
70,348
100%
 
Source: Fifteenth Video Competition Report, supra note 6, at 10597 tbl.20.
 
Given the minor role that cable television plays in local advertising markets, it is hard to see how the merger could lead to anticompetitive harms. Moreover, the large amount of innovation that is occurring is likely to make the market for local advertising increasingly competitive in the near future.
 
II.           BROADBAND INTERNET ACCESS
 
With respect to broadband Internet access, the merged company would engage in two types of transactions. First, it would collect subscription fees from consumers who wish to access the Internet. Second, it would contract to interconnect with other Internet service providers to receive traffic that other end users and edge providers would like to send to current Comcast and Time Warner Cable subscribers and to terminate the off-network traffic that Comcast and Time Warner Cable subscribers generate. For reasons, I discuss below, the proposed merger is even less likely to create anticompetitive harms in the market for broadband Internet access than in the market for traditional multichannel video.
 
 
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A. 
End-User Subscriptions
 
As was the case with traditional multichannel video, 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 charged to subscribers.
 
Some observers have mistakenly asserted that the merged company would have market shares as high as 40% by disregarding DSL and other technologies. The fact that AT&T’s DSL network is taking market share away from cable in areas where AT&T has upgraded its DSL network suggests that this approach is mistaken. Other analysts make the mistake of ignoring smaller players, who typically represent roughly 7% of the market, as well as the fact that the merging companies have pledged to divest 3 million subscribers. The resulting market share of the merged company would only be 30% of the multichannel video market and 32% of the broadband market, which is well below the levels traditionally associated with monopoly or monopsony power.
 
In addition, for reasons I detail in my recent article in the Harvard Law Review, the number of options that end users enjoy is increasing rapidly. Take digital subscriber lines (DSL), for example. Although many commentators have written DSL off for dead, a number of new technologies, including IP DSLAMs, pair bonding, and vectoring, are increasing the bandwidth that DSL can deliver. In November 2012, AT&T’s Velocity IP committed to spend $6 billion to expand the reach of its DSL network to provide at least 45 Mbps service to nearly 80% of its service area, with half of those households receiving 75 Mbps service. AT&T plans to increase the number of locations where AT&T’s U-verse VDSL network to 33 million
 
 
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locations (an increase of 8.5 million), 90% of these locations receiving 75 Mbps service and 75% of these locations receiving 100 Mbps.8 CenturyLink is following a similar strategy.
 
But the real bellwether is Europe, where leading telecommunications providers as Deutsche Telecom, BT, Telecom Italia, and Orange are making VDSL the centerpiece of their broadband strategies. These speeds are clearly sufficient to compete with cable. Indeed, where AT&T has already upgraded its network, it is taking subscribers away from cable. And standard setting organizations are developing a new DSL technology known as G.fast capable providing 200-500 Mbps under normal circumstances and capable of providing 1 Gbps under ideal circumstances.
 
With respect to fiber-to-the-home (FTTH), Verizon’s FiOS network has been joined by two new companies. Google Fiber has expanded beyond Kansas City to expand to Provo and Austin and has indicated that it plans to lay FTTH to thirty-four additional cities. In addition, AT&T has also begun deploying FTTH in Austin and in April announced plans to deploy FTTH in the Research Triangle and Piedmont Triangle areas of North Carolina. AT&T has announced plans to expand FTTH to 100 cities, including 21 major metropolitan areas.
 
In addition, wireless broadband providers are in a race to buildout LTE. Although some commentators have questioned whether LTE can deliver the speeds needed to become viable substitute to fixed-line broadband, PC Magazine and Root Metrics report that Verizon, AT&T, and T-Mobile each offer average download speeds of 12–19 Mbps and peak download speeds of 49–66 Mbps, well in excess of the 8 Mbps needed for HDTV. In addition, the LTE market allows for competition among multiple providers. Verizon completed its LTE buildout in mid-2013 and now serves 96% of the U.S. population. AT&T’s LTE network reached 85% of the
 
 

8                Christopher S. Yoo, Technological Determinism and Its Discontents, 127 HARV. L. REV. 915, 919 (2014).
 
 
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U.S. population by the end of 2013 and plans to reach 96% by the end of 2014. Sprint and T-Mobile each reached roughly two-thirds of the U.S. population by the end of 2013. By mid-2014, Sprint projected to reach 79%, and by the end of 2014, and T-Mobile’s should reach 79%.
 
Moreover, LTE providers initially focused on making geographic coverage as broad as possible, even if that meant provisioning too little bandwidth in major metropolitan areas. These providers are now focusing on densification of urban areas which should help bring capacity in line with demand. In addition, if one gives up mobility and uses LTE to provide fixed wireless (in direct competition with cable), it is possible to use 8 antennas instead of 4, in which case the throughput rates increase dramatically.
 
And waiting in the wings is the next-generation technology known as LTE Advanced, which is already delivering of 150 to 300 Mbps in South Korea and Australia. It thus comes as no surprise that 10% of U.S. households have abandoned fixed-line service and rely entirely on mobile devices for their Internet access. This number is only likely to increase in the future.9
 
A comparison of the U.S. approach and those taken in other parts of the world demonstrate the value of the hands-off approach that the U.S. has taken with respect to the Internet. Despite some occasional rhetoric to the contrary, the actual data shows that European countries are by and large lagging far behind the U.S. in terms of high-speed broadband deployment and that European broadband companies are investing two to two-and-one-half times less than their American counterparts. Moreover, in terms of service providers, U.S. companies are the envy of the world. Even in Asia, where governments have mandated broadband buildouts, high-speed service is languishing with low take-up rates and enormous
 
 

9           Id. at 923–26.
 
 
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financial losses. Together these comparisons provide a strong endorsement in favor of maintaining the U.S. approach of minimal government involvement with respect to the Internet.
 
When evaluating a merger, antitrust law counsels in favor of focusing on what the world will look like in the future rather than what the world looks like today, since it is the future world that matters. In this respect, the future looks quite bright. Indeed, we are seeing waves of investment driven by the competitive incentive to outdo one another. Those who have attempted to right off DSL, FTTH, and LTE as meaningful competitors to cable have done so without any empirical foundation. Indeed, observers have been writing off DSL for years only to be proven wrong time after time. Moreover, it was just a few short years ago where the Berkman Center report and other studies were writing off cable, arguing that it was no match for FTTH. The real lesson is that the future is hard to predict and that innovation has thrived most when no one has attempted to impose remedies based on any particular prediction of which technologies will succeed or fail.
 
B. 
Peering and Transit
 
Cable operators also enter into contracts with other Internet service providers (ISPs) to exchange traffic originating or terminating on other networks. Typically, the originating ISP is the only one to receive direct payment from end users. Because the terminating ISPs also incur costs, the traditional rule was that the originating ISP would make what is known as a transit payment to compensate the terminating ISP for the costs it incurs serving the originating ISPs customers. If traffic is roughly symmetrical, ISPs can reduce costs by foregoing monitoring and billing for the exchange of traffic and instead calling it a wash, a practice commonly known as settlement-free peering. Such arrangements make economic sense only if the traffic exchanged is symmetrical. If traffic becomes out of ratio, peering contracts typically call for transit-style
 
 
31

 
 
payments. Thus, although peering is often misrepresented as zero-price interconnection, it is more properly regarded as a form of barter and is conditional on an even exchange.
 
Consider what would happen if one of the parties to a peering contract suddenly increased the amount of traffic that it was handing off to the other party for termination. The terminating ISP would have to incur significant costs to terminate the traffic. Certainly, the originating ISP would like the terminating ISP to bear all of the costs of doing so. Conversely, the terminating ISP would like the originating ISP to pay for the costs, as required by the typical peering contract. Both parties benefit from delivering greater value to the end users. The usual solution would be for both parties to bear part of the costs.
 
Indeed, this is exactly what appears to be occurring in the recent interconnection agreement between Comcast and Netflix. Netflix has been a spectacular success, growing to roughly one-third of all primetime Internet traffic in the U.S. Like any for-profit company, it would prefer it if the ISPs bore as much of the burden of the additional costs of carrying this traffic as possible. Indeed, that is the gist of its Open Connect program, which requires ISPs to terminate Netflix traffic for free. Some ISPs have embraced Open Connect. Others have resisted. All of this is a natural part of healthy bargaining process. As in the typical case, both sides reached an interconnection agreement that divides the costs. The terms represent nothing more than a garden-variety bargain over price that characterizes every arms-length economic transaction.
 
Although some have suggested that such interconnection agreements represent network neutrality violations, network neutrality only applies to how traffic is handled within an ISP’s network. It does not apply to how the traffic arrives at an ISP, which inevitably travels by paths of different lengths and incurs different costs as it traverses a system composed of 30,000
 
 
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separate networks tied together through arms-length interconnection agreements. Indeed, this is why the Open Internet Order specified that it does not apply to interconnection agreements10 and why FCC Chairman Julius Genachowski made clear that the Open Internet Order does not apply to interconnection disputes, such as the prior dispute between Comcast and Level 3.11
 
The Comcast-Netflix interconnection agreement appears to be nothing more than a typical case of such bargaining. The agreement reduces Comcast’s costs. The impact on Netflix is ambiguous: while it now must pay Comcast to terminate its traffic, it no longer needs to pay the third-party ISP on which it previously relied to reach Comcast in a classic case of efficiencies through cutting out the middleman. Although some have suggested that this might lead to a net reduction in Netflix’s costs, that information is confidential and cannot be verified. In any event, interconnection represent a trivial revenue stream for Comcast and a tiny portion of Netflix’s cost structure, which is dominated by program acquisition costs, which means that the transaction is unlikely to have any material effect.12
 
In addition, interconnection in the Internet space is fundamentally different from carriage agreements in cable television. In cable television, the failure to come to an agreement means that subscribers cannot receive particular content. With respect to the Internet, multiple ways to reach consumers always exist. In fact, Comcast maintains 40 settlement-free peering relationships and over 8,000 paid transit relationships. That means that edge providers will always have some way to reach Comcast customers even if they are unable to reach an direct interconnection agreement. The only bargaining advantage that Comcast would enjoy is the
 
 

10          Preserving the Open Internet, Report and Order, 25 F.C.C.R. 17905, 17944 n.209 (2010).
11          Network Neutrality and Internet Regulation: Warranted or More Economic Harm than Good?, Hearing before the Subcomm. on Communications and Technology, H. Comm. on Energy and Commerce, 102d Cong., 1st Sess. 102 (2011), available at http://www.gpo.gov/fdsys/pkg/CHRG-112hhrg65940/pdf/CHRG-112hhrg65940.pdf.
12          Dan Rayburn, Here’s How the Comcast & Netflix Deal Is Structured, with Data & Numbers, STREAMING MEDIA BLOG, Feb. 27, 2014, http://blog.streamingmedia.com/2014/02/heres-comcast-netflix-deal-structured-numbers.html.
 
 
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different between the interconnection terms and the cost of Netflix’s next-best interconnection option. Although some have speculated that Comcast might still be able to discriminate against Netflix traffic flowing over other paths, that traffic is mixed with the traffic of other end users, which would require Comcast to inspect all of the traffic coming through that connection, which would be unrealistic and prohibited by Comcast’s commitment to abide by the terms of the Open Internet Order.
 
The video industry is undergoing fundamental changes. Cable subscribership is slowly declining, and consumers are shifting more and more to online video. At the same time, content acquisition costs are increasing faster than the overall cost of cable television. These price trends suggest that content providers are in a stronger bargaining position than are able operators to the point where Cablevision has floated the possibility of abandoning the video business and simply allowing over-the-top providers like Netflix to fill the void.
 
In this world, agreements such as the one between Netflix and Comcast hold many benefits for consumers. As an initial matter, as a direct customer instead of an indirect customer, Netflix now has a service level agreement with Comcast that guarantees certain levels of service. At the same time, direct connections hold the promise of allowing the two companies to better coordinate their behavior to deliver content more effectively. In addition to obtaining better service, there are indications that such arrangements may reduce the prices that consumers pay. Although Netflix has to pay Comcast to terminate traffic, it no longer has to pay its former transit provider, Level 3. Industry observers have concluded that cutting out the middleman can yield substantial savings. Even if the net price does not go down, the enhanced service should provide considerable benefits to consumers.
 
 
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As an added benefit, absent the interconnection agreement, all of Comcast’s customers would have had to bear the costs of Netflix’s increase in traffic regardless if they used the service or not. The interconnection agreement promotes fairness by ensuring that those who derive the benefits are the ones who bear the costs. The elimination of zero-cost pricing also avoids the problems that arise when edge providers have no incentive to economize on the volume of traffic they send, as well as address the legal concerns raised by Judge David Tatel in his decision in Verizon v. FCC.13
 
In terms of peering and the market for last-mile interconnection services, companies are experimenting with a wide range of different solutions, including proprietary data centers, collocated content delivery networks, and multitenant hosting in third-party data centers just to name a few. At the same time, each of these types of companies are experimenting with a wide range of commercial arrangements including for example traditional peering, paid peering, secondary peering, traditional transit, and paid transit. The parties should be permitted to experiment with different ways to satisfy all of these actors’ shared interest in delivering content to end users in the most effective way
Any remaining concerns should be eliminated by the fact that Comcast has committed to abide by the terms of the FCC’s Open Internet Order even though it was struck down by the courts. In fact, the merger would extend this benefit to all of Time Warner Cable’s customers as well.
 
 

13         740 F.3d 623, 658 (D.C. Cir. 2014).
 
 
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CONCLUSION
 
In closing, it bears keeping in mind how dynamic and unpredictable this sector has been. Consider the 2000 merger between Time Warner and America Online. What many predicted would be the end of history ended up simply being the end of $200 billion in Time Warner shareholder value. In addition, just a few short years ago, many argued that fiber-to-the-home would soon consign the cable industry to the dustbin of history, whereas many of these same people now warn that cable represents a looming natural monopoly.
 
These episodes underscore how easy it is to hypothesize problems that never materialize and how easy it is to forget that innovation and willingness to undertake commercial risk have created greater consumer benefits than anyone could have anticipated. In this respect, the experience under merger conditions the Commission imposed when it cleared Comcast’s acquisition of NBC Universal is instructive. Since that time, Netflix has thrived, as its subscribership numbers, revenue, and stock price have soared.14 Netflix’s success does not seem to be the result of the merger conditions created largely for its benefit. Indeed, to date, there does not seem to be any evidence that any OVD has invoked these provisions. While it is feasible that the lack of any conflict is simply bargaining in the shadow of the merger conditions, Comcast’s conduct seems to be nothing more than ordinary licensing practices that are no different from any other industry actor. Instead, Netflix’s rise appears to derive largely from its willingness to undertake the risk associated with billions of dollars in forward contracts for content.
 
Humility about even experts’ ability to predict the future has led regulators to deemphasize hypothetical considerations and to insist on concrete harms backed by a clear
 

14          Yoo, supra note 8, at 934–36.
 
 
36

 
 
theory and backed by real-world data. Moreover, even if problems with access to content or networks were to materialize, the better practice would be to address them through general regulations that benefit the entire industry, such as the leased access and program access regimes.
 
 
 
37

 
 
 
Justin (Gus) Hurwitz
Assistant Professor of Law
(402) 472-1255
ghurwitz@unl.edu
 
Before the
Federal Communications Commission
Washington, D.C. 20554
 
In the Matter of
)
 
     
Applications of Comcast Corporation, Time
)
 
Warner Cable Inc., Charter Communications
)
MB Docket No 14-57
Inc., and SpinCo to Assign and Transfer Control
)
 
of FCC Licenses and Other Authorizations
)
 
 
)
 
 
Comments of Justin (Gus) Hurwitz, Assistant Professor of Law,
University of Nebraska College of Law1
 
These comments are respectfully submitted in response to the Commission’s July 10, 2014, request for comments in the above-captioned proceeding, MB Docket Number 14-57, relating to the proposed merger of Comcast Corporation and Time Warner Cable, Inc., and related matters.
 
That is may help the Commission’s consideration of this important transaction, I have included as attachments of recent writings and Congressional testimony that I have authored relevant to this transaction.
 
The general theme of these materials is that to the extent that the transaction is thought of as between MVPDs, it is between firms that largely do not compete in overlapping
territories today, such that it has little effect on competition; to the extent that the transaction is thought of as between ISPs, the same analysis applies and is between firms operating in an environment even more competitive than that in which MVPDs operate; and that in any event the combined firm is better thought of as participating in the much larger and robustly
 
 

1
The author teaches and researches in areas relating to telecommunications law and policy, Internet-and cyber-law, and the regulation of technology; has previously worked in the Federal government in a capacity relevant to the present matter; has degrees in both law and economics and has researched and published in technical fields relating to modern telecommunications technology. Further information about the author is at http://law.unl.edu/justin-gus-hurwitz/.
 
P.O. 830902 / Lincoln, NE 68583-0902
 
(402) 472-2161 / FAX (402) 472-5185

 
38

 
 
competitive video content and Internet-related technology industries. Any meaningful analysis of this transaction, that is, must consider the full range of actual and competitive infrastructure, content delivery, and related firms against which the merged entity competes today or with which it may compete in the future.
 
I hope these materials may be of interest in your evaluation of the proposed transaction.
 
Sincerely,
/s/ Justin (Gus) Hurwitz
 
Justin (Gus) Hurwitz
Assistant Professor of Law
University of Nebraska College of Law
 
 
 
39

 
 
   
     
 
August 25, 2014
 
Federal Communications Commission
445 12th Street, SW
Washington DC 20554
 
RE: Docket 14-57, Applications of Comcast Corporation and Time Warner Cable Inc. for Consent to Assign or Transfer Control of Licenses and Applications
 
Dear Commissioners:
 
I appreciate the opportunity to share the thoughts of the Institute for Policy Innovation (IPI) on your review of the merger of Comcast Corporation and Time Warner Cable, Inc.
 
IPI is a 27 year-old market-oriented public policy think tank that closely follows the communications marketplace. We submit these comments in hope that they are useful to you in your review of the merger.
 
Introduction
 
In our view, in a free society, people are free to make economic arrangements and engage in commerce as they see fit so long as they operate within the law and don’t do harm to others. Government should not preclude entire areas of economic activity in anticipation that there might be harm or that there might be a bad actor; rather, we allow people the freedom to experiment and try new things, and we take action if and where there is evidence of harm.
 
There is no sound policy reason why the same logic should not apply to businesses, since businesses are simply forms in which free people organize themselves for common purposes.
 
Further, when there is free exchange of goods and services in a free market, both parties benefit. One side of the transaction is not predating on the other; in fact, in a competitive marketplace, a business must constantly be seeking to please its customers. Only through pleasing customers can a business advance its own interests.
 
Of course, even in an ideal market there are occasional bad actors. A just system identifies behaviors and practices that harm others and remediates the harm without limiting the freedom of those who are acting properly in the marketplace.
 
 
 
40

 
 
But regulation designed in an assumption of anticipating possible bad behavior and precluding it risks running afoul of the Law of Unintended Consequences, in which regulations restrict or preclude entire areas of beneficial economic activity that could not have even been anticipated when the regulatory policy was put in place.
 
This is because of the Knowledge Problem; i.e., in an economy as large and as complex as human behavior, regulators have neither the information nor the processing power to even fully understand the current economy, much less to anticipate all possible strands of the future economy. To assert such knowledge in promulgating regulatory policy is simply arrogance.
 
With Regard to Merger Reviews
 
How does this philosophy apply to merger review? When those reviewing a merger claim to know how an industry or marketplace will develop in both the scenarios of the merger going forward and the merger being rejected, they assert an impossible degree of knowledge, including knowledge of counterfactuals. In fact, regulators have little to no idea what the future holds for the companies that are merging or for the industry in which they operate.
 
The good news is that this lack of foreknowledge shouldn’t matter. In a free society, the default condition should be approval of mergers, or even an end to the merger review process altogether. It’s a relic of the Progressive Era, during which there was an overreaction of distrust against the behavior of businesses. The history of that era provides us with abundant examples of the federal government attempting to direct industries from the top-down in the arrogant assertion that the government knew best. This assertion turned out to be predictably wrong.
 
Since the 1970s, policy has generally shifted in a more deregulatory direction, and the benefits to consumers have been clear. Innovation and economic growth have increased as a result. The less government asserts an ability to understand, predict and direct industries and markets, the better the economy performs. Almost 300 million American adults making multiple economic decisions every day in a free marketplace is a much better way to determine economic outcomes than assertions by federal regulators that they know in advance what all those decisions are going to be.
 
The danger in the merger review process is that U.S. policy making begins to resemble European-style competition policy, where regulators indeed assert that they know how a particular market should function and review mergers through that lens. But what has been the result of European style competition policy?

 
41

 
 
Interestingly, in an analysis published recently on August 22nd, it was revealed that, if European countries were American states, the richest and most productive European country, Norway, would be only the 7th richest American state, just below Massachusetts. Switzerland would be 20th, Germany 39th, and Sweden, 40th. Yes, the massive German economy would only be the 39th richest American state. The average of the Eurozone would be 41st, just below West Virginia, and the U.K. would be next-to-last, just above Mississippi.1
 
This at least suggests that European-style competition policy has not resulted in levels of innovation and wealth creation in excess of that experienced in the United States, and thus suggests that, instead of the U.S. moving toward European-style competition policy, the U.S. should retain our hands-off approach to experimentation in the economy and our light-touch regulatory environment.
 
Of course, should a company behave in a manner that is monopolistic, abusive of consumers or harmful to a competitive marketplace, there remains an abundant body of law and significant law enforcement resources within the Justice Department to prosecute such harmful activity.
 
But absent such clear evidence of harm, companies should be free to experiment in the marketplace and outcomes should be determined by the interactions between consumers and businesses rather than by the dictates of regulators who don’t possess sufficient knowledge to undertake such a task, and thus who will almost certainly be wrong.
 
Additionally, the merger review process has become a source of uncertainty in and of itself, chilling investment. In a speech delivered in 2011 by then-FCC Commissioner Meredith Attwell Baker at IPI’s third Annual Communications Policy Summit, Commissioner Baker identified features of the FCC’s merger review process that require addressing:
 
Let’s assume you are the CEO of a company and you have $10 billion to invest. You are considering acquiring a company with broadcast and wireless assets. Looking at that deal, you need to know if it serves your shareholders’ best interests, and whether it is the right long-term vision for the company. If the deal can be structured correctly, you are willing to infuse the new company with billions in capital and to create new jobs. Your decision to invest is complicated today by the uncertainty surrounding the necessary regulatory approvals.
 
 

1 http://blogs.spectator.co.uk/coffeehouse/2014/08/why-britain-is-poorer-than-any-us-state-other-than-mississippi/
 
 
42

 
 
What does that mean in practice? You have to factor in approximately a year of regulatory scrutiny. Some deals take longer, 18 months or more. More than likely, merger conditions will also be imposed, but you will have little sense of the cost, complexity, length, or even topic of those conditions when you make the deal. In recent years, the FCC has imposed conditions mandating jobs to be created in a particular region, a billion dollars to be invested in a geographic market, and broadband services to be offered on specific terms and conditions.
 
So, ask yourself, would you subject yourself to the FCC merger review process? Or in our global market would you look elsewhere to invest in telecom companies overseas or more certain investments in other industries altogether? My concern is that you might walk away, and how many other consumer enhancing and job-creating deals are not getting done today.2
 
Commissioner Baker suggested that the FCC’s job in a merger review is simply to “transfer a license, not bless the entire transaction.” Why should mergers of communications companies be subjected to a duplicative and more stringent review process than mergers in other industries?
 
Commissioner Baker also criticized the length of FCC merger reviews as most often grossly exceeded its supposed 180 day shot clock, and especially the FCC’s practice of imposing conditions on companies. As former Commissioner Abernathy has stated, such conditions “are the quid pro quo that merger applicants must accept in order to get timely approval.”
 
By imposing such conditions, regulators have developed a habit of accomplishing their policy goals through the merger review process, which is offensive to the rule of law. Demanding that companies agree to abide by policies that have not become law either through either the legislative or rule-making processes, but are simply the preferences of the current FCC chairman, is an illegitimate means of policy making. Policies set precedents for entire industries, and thus policy should be made through normal policy-making processes rather than at the convenience of whatever chairman happens to be in office when two companies decide to merge.
 
With Regard to the Comcast\Time Warner Cable Merger
 
Because of the cable industry’s historical business model, Comcast and Time Warner Cable do not compete with each other—their business territories do not overlap.
 
 

2 http://www.ipi.org/ipi_issues/detail/towards-a-more-targeted-and-predictable-merger-review-process

 
43

 
 
Thus, consumer choice will not be reduced by the merger, and that should be the most significant factor in the Commission’s review process.
 
Further, it has been generally observed that Comcast has been a leader in delivering innovative products and services to its customers. This suggests that the merger will actually bring an improved level of products and services to Time Warner Cable’s customers. In other words, in the short to intermediate term, consumer benefit will likely result from the merger, rather than consumer harm.
 
Those benefits to Time Warner Cable customers would seem to be:
 
 
·
Faster broadband speeds. Comcast offers speeds of between 105 to 505 Mbps, and has been a leader in deploying ever faster broadband speeds, often for no increase in price. Time Warner Cable, by contrast, generally offers 50 Mbps in most of its market, offering 100 Mbps in a few select markets.
 
 
·
Greater video options. Comcast offers significantly more video options to its consumers than does Time Warner Cable.
 
 
·
All-digital networks. Comcast has completed the transition to all-digital networks, while Time Warner Cable has completed less than 20% of the transition.
 
In addition, Comcast has a record of investment in its network that outpaces Time Warner Cable’s, along with the resultant job creation.
 
That level of investment commitment has been demanded of Comcast, at least in part, because of the tremendous level of competition that exists between cable, satellite, telecom and wireless options. Hopefully by now the Commission realizes that, in highly capital-intensive industries like broadband, one does not gauge competition simply by the number of competitors. There are, for instance, more donut shops than broadband providers, but that doesn’t mean that the donut business is significantly more competitive than the broadband business. In fact, other measurements, such as the investment in competitive advertising, would suggest that the broadband market is much more competitive than the donut business.
 
In fact, the United States is one of only two nations in the world with three (3) fully deployed broadband technologies competing for consumers—cable, telco, and wireless 4G LTE. And, in fact, it is growth in wireless broadband that is currently outpacing the other technologies. There is no danger of the newly merged Comcast possessing dominant market share such that consumers would be harmed. Comcast would still have less than the FCC’s arbitrary and vacated 30 percent of the pay TV market concerns.
 
In the long term, as we have already argued, who knows what will happen? Perhaps the Comcast\Time Warner Cable merger will be seen as the last gasp of a dying

 
44

 
 
cable industry. Perhaps it will be the ingenious move that saved the cable industry, or that transformed it into something entirely new, offering increased innovation and enhanced competition with other industries. We just don’t know, and can’t know.
 
Hopefully by now it’s clear that we do not think it wise or even possible for the FCC to know, much less to direct, how the video and broadband marketplaces develop in the future. To state the obvious, no one knows what the video and broadband marketplaces will look like five or ten years hence. The only thing we can be assured of is that, based on observations of the current rate of change and dynamism in the marketplace, it will be different. And it is up to the market itself to determine how that future is shaped, not the FCC, and certainly not the critics of this merger.
 
Many critics, however, assert that they do know what will happen. We should dismiss the majority of social media concerns against the merger as rhetorically empty, since there is no economic evidence that the combined companies will be “too big,” and it’s impossible to know what “too big” would actually be. Although we should point out that, in an economy this large, for Comcast to gain seven million of Time Warner Cable’s subscribers is not actually that big of a change.
 
Another concern raised against the merger is that the post-merger Comcast would have too much power in carriage negotiations with programming. We would suggest several responses to this claim:
 
 
·
It is possible that, at the moment, programmers have too much power in such negotiations. We do not assert that is the case, but it is just as easy to assert this as it is to assert the opposite sentiment.
 
 
·
Antitrust law is not designed to protect competitors, but consumers. When regulators begin considering the complaints of competitors as primary in a merger review, they are slipping into European-style competition policy rather than traditional U.S. antitrust policy.
 
 
·
Cable-provided video is actually under competitive assault from over-the-top video sources such as Netflix, Hulu and Amazon. It may be that cable consolidation is necessary for cable to continue to provide competition for these rapidly growing video services.
 
 
·
Comcast also faces enhanced competition from new entrants, such as Google Fiber, as well as enhanced competitors such as the new combination of AT&T and Direct TV.
 
In summary, today’s video marketplace is radically more competitive than ever before. Consumers have never had as many choices and options, and there is no indication that this trend will do anything other than continue. Fears that a post-merger Comcast will wield overwhelming market power such that it will be able to quash such competition seems more based in Progressive Era general distrust of

 
45

 
 
corporations rather than any informed understanding of the current video marketplace and obvious current trends.
 
In today’s diverse video marketplace, where consumers have a dizzying array of options for how, when and where they access the content of their choice, only purposefully ignoring this diversity of competition could lead one to believe that the Comcast\Time Warner Cable merger would have any effect other than continued positive enhancement of consumer choice and welfare.
 
Conclusion
 
It should be clear from our comments that we believe the merger between Comcast and Time Warner Cable should be allowed to not only proceed, but to proceed promptly and without the addition of conditions and concessions. Further, we believe there is need for serious reform of the merger review process that would strictly limit the FCC’s role.
 
We thank you for the opportunity to submit our thoughts on this proceeding, and would be happy to answer any questions or discuss this matter further with FCC personnel at your request.
 

Sincerely,

/s/ Tom Giovanetti

Tom Giovanetti
President
 
 
46

 
 
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
 
In the Matter of
)
 
 
)
 
Applications of Comcast Corp. and
)
 
Time Warner Cable Inc. for Consent
)
MB Docket No. 14-57
to Assign and Transfer Control of
)
 
Licenses and Other Authorizations
)
 
 
COMMENTS OF
THE COMPETITIVE ENTERPRISE INSTITUTE
 
August25, 2014
Ryan Radia
Competitive Enterprise Institute
1899 L Street N.W., Floor 12
Washington, D.C. 20036
(202) 331-2281
Ryan.Radia@cei.org

 
47

 
 
COMMENTS OF THE COMPETITIVE ENTERPRISE INSTITUTE
 
SUMMARY
 
On behalf of the Competitive Enterprise Institute (“CEI”), we respectfully urge the Commission to unconditionally approve the joint applications of Comcast Corpora­tion (“Comcast”) and Time Warner Cable Inc. (“TWC”) seeking consent to transfer various FCC licenses and other authorizations.1 The Commission’s prompt approval of the Comcast-TWC applications is likely to serve the public interest by advancing consumer welfare and facilitating robust competition in the dynamic and multi-sided markets for broadband Internet service, multichannel video distribution, and original television programming. And although we cannot say with certainty whether this merger, if consummated, will deliver all the benefits that both empirical evidence and economic theory suggest it can attain, the upside of the deal for consumers is far more promising than its downside is worrisome.
 
CEI is a nonprofit, nonpartisan public interest organization that focuses on regulato­ry policy and competitive markets. We make the uncompromising case for economic freedom because we believe it is essential for entrepreneurship, innovation, and pros­perity to flourish. CEI has previously filed comments with the Commission in nu­merous proceedings involving license transfers, media ownership, wireless and wireline telecommunications, and other issues.
 
I. COMCAST AND TWC WILL BE BETTER EQUIPPED TO SERVE CONSUMERS IF ALLOWED TO COMBINE
 
A.
A Merged Comcast-TWC Is Positioned to Offer Americans Superior Broadband Access than Either Standalone Company
 
As the Commission has repeatedly emphasized, expanding the availability of afford­able, high-speed broadband Internet access is a top public policy priority.2 Indeed, as the Commission has observed, broadband is “the great infrastructure challenge of the early 21st century.”3 Although various government agencies have played a limited role in facilitating broadband deployment, the brunt of this work has been done by the private sector.4 As two of the nation’s leading broadband providers, both Comcast
 
 

1.
Comm’n Seeks Comment on Applications of Comcast Corp., Time Warner Cable Inc., Char­ter Commc’ns, Inc., and Spinco to Assign and Transfer Control of FCC Licenses and Other Authorizations, Public Notice, FCC MB Docket No. 14-57 (July 10, 2014), available at http://www.fcc.gov/document/pleading-cycle-set-comcast-time-warner-cable-charter-transactions.
 
2.
See, e.g., FCC, Connecting America: The National Broadband Plan, at 3 (2010), available at http://download.broadband.gov/plan/national-broadband-plan.pdf.
 
3.
Id. (emphasis in original).
 
 
48

 
 
COMMENTS OF THE COMPETITIVE ENTERPRISE INSTITUTE
 
and Time Warner Cable have played a crucial role in this process.5
 
If Comcast acquires TWC, the merged company will account for roughly 35 percent of wireline broadband connections in the United States—or 27.9 million residential broadband subscribers.6 The deal will thus create a company that enjoys greater scale in the residential broadband market than any existing wireline provider. This scale will likely translate into an advantageous cost structure for the merged company and, in turn, more competitive service offerings in terms of price and throughout.7 Although many of the costs entailed in offering broadband access are a function of each particular neighborhood or region a provider covers, the cost of delivering broadband also turns on a provider’s overall footprint.8
 
For instance, each ISP must secure peering arrangements with other network owners to ensure its subscribers have unfettered access to the Internet. Making such deals can be expensive, especially for smaller broadband providers that lack a significant back­bone infrastructure. Comcast, however, has reached settlement-free peering arrange­ments with every so-called “Tier 1” network—that is, networks considered to be at the top level of the Internet in terms of global connectivity.9 These routes facilitate Comcast’s ability to offer its subscribers higher throughput at lower costs than other providers—including TWC, which incurs marginal costs associated with paid peering as its subscribers transfer more content.10
 
These factors help explain why Comcast—which generates nearly thrice the revenue
 
 

4.
Id. (“Due in large part to private investment and market-driven innovation, broadband in America has improved considerably in the last decade. More Americans are online at faster speeds than ever before.”).
 
5.
See FCC, 2014 Measuring Broadband America Fixed Broadband Report: A Report on Consumer Fixed Broadband Performance in the U.S., at 5 (2014), available at http://data.fcc.gov/download/ measuring-broadband-america/2014/2014-Fixed-Measuring-Broadband-America-Report.pdf (both Comcast and TWC are among the nation’s top 14 leading broadband providers by sub­scribers).
 
6.
See Emily Steel, Dish Asks F.C.C. to Block Comcast-Time Warner Cable Merger, N.Y. TIMES, July 9, 2014, available at http://www.nytimes.com/2014/07/10/business/media/dish-asks-fcc-to-block-2-big-mergers.html?_r=0.
 
7.
See SCOTT WALLSTEN, TECH POLY INST., AN ECONOMIC ANALYSIS OF THE PROPOSED COM-CAST/TIME WARNER CABLE MERGER, at 2 (May 2014), available at https://techpolicy institute.org/files/wallsten_evaluating%20the%20comcast%20twc%20merger.pdf.
 
8.
Id.
 
9.
See Jon Brodkin, Comcast Is the One Who Should Pay For Network Connections, Cogent Claims, ARS TECHNICA (May 8, 2014, 2:20 PM), http://arstechnica.com/tech-policy/2014/05/comcast-is-the-one-who-should-pay-for-network-connections-cogent-claims/.
 
10.
Cf. Sam Gustin, Netflix Pays Verizon in Streaming Deal, Following Comcast Pact, TIME, April 28, 2014, available at http://time.com/80192/netflix-verizon-paid-peering-agreement/.
 
 
49

 
 
COMMENTS OF THE COMPETITIVE ENTERPRISE INSTITUTE
 
of TWC11—currently offers at least 25mbps downstream broadband throughput to a higher share of its subscribers than does TWC.12 If Comcast absorbs TWC’s network, the merged company plans to make major upgrades so that it can offer its subscribers the service tiers available to Comcast customers today—which, for many TWC sub­scribers, will entail significantly faster broadband connectivity without any attendant price increases.13 In the longer term, the merged company will be better-positioned to make consistent and incremental service enhancements at a faster rate than either standalone company has offered historically.
 
Although the merged company will be bigger than any existing wireline ISP, the Comcast-TWC acquisition will not reduce the number of broadband choices availa­ble to subscribers, for no households are serviced by both Comcast and TWC today.14 The two companies compete largely in distinct geographic markets, while in the few cities wherein both services are available to a portion of households, only one of the two providers is available to any given property.15 To be sure, many transactions de­liver considerable net benefits despite growing the combined firm’s share of a rele­vant market. Unlike many other recent mergers, however, the Comcast-TWC deal will have no direct effect on consumer choice.
 
Indirectly, the Comcast-TWC merger may well intensify broadband competition among existing fiber and DSL broadband providers. These providers, which in many markets represent the chief competitor to cable companies such as Comcast and TWC, currently offer fiber-to-the-home in a sizable minority of U.S. communities. Verizon FiOS, for example, now passes almost 19 million U.S. households with its fiber-optic broadband service.16 In other areas, many DSL providers offer broadband speeds comparable to all but the fastest cable tiers; for instance, AT&T’s U-verse
 
 

11.
See Applications and Public Interest Statement of Comcast Corp. and Time Warner Cable Inc. at 22, Applications of Comcast Corp. and Time Warner Cable Inc. for Consent to Assign and Transfer Control of Licenses and Other Authorizations, FCC MB Docket No.14-57 (rel. July 10, 2014) [hereinafter Comcast-TWC Public Interest Statement], available at http://corporate.comcast.com/images/Comcast-Public-Interest-Statement-April-8.pdf.
 
12.
Comcast-TWC Public Interest Statement, supra note 11, at 33.
 
13.
Id. at 34.
 
14.
New York City Mayor Bill de Blasio, a skeptic of the deal, has conceded that “Comcast and TWC operate cable networks in distinct non-overlapping geographic markets.” Ted Johnson, New York Mayor Calls for Conditions on Comcast-Time Warner Cable Merger, VARIETY (Aug. 25, 2014, 2:17 PM), http://variety.com/2014/biz/news/new-york-mayor-calls-for-conditions-on-comcast-time-warner-cable-merger-1201289939/.
 
15.
Comcast-TWC Public Interest Statement, supra note 11, at 138–39.
 
16.
Jeff Baumgartner, Verizon Keeps FiOS Fire Stoked in Q4, MULTICHANNEL NEWS (Jan. 21, 2014, 9:10 AM), http://multichannel.com/news/content/verizon-keeps-fios-fire-stoked-q4/356444.
 
 
50

 
 
COMMENTS OF THE COMPETITIVE ENTERPRISE INSTITUTE
 
VDSL now passes over 30 million U.S. households.17 A more robust cable sector will likely spur these competing providers to continue to improve and expand their offer­ings.
 
B.
Comcast-TWC Will Also Deliver Better Multichannel Video Programming Service If Allowed to Merge
 
Comcast and TWC also compete in the market for multichannel video programming distribution (“MVPD”).18 Unlike the residential wireline broadband market, wherein most U.S. consumers have two choices, nearly all Americans have at least three choices among MVPDs—while well over one in three Americans has four MVPD choices.19 As in the broadband market, the Comcast-TWC merger will not reduce the number of consumer choices among MVPDs, for the two providers offer service to differing sets of households.20
 
Unlike in the broadband market, however, MVPDs do not simply connect their sub­scribers to a global interconnected network by any means necessary. Instead, MVPDs must bargain for the rights to perform, distribute, and retransmit a discrete set of tel­evision channels and programs. As the Commission has noted, “the broadcast and cable networks of seven companies—Disney, News Corp., NBC Universal, Time Warner Inc., CBS, Viacom, and Discovery—account for roughly 95 percent of all television viewing hours in the United States.”21 Although one of these seven companies, NBC Universal, is a subsidiary of Comcast, a merging party, the other six are not. Currently, both Time Warner Cable—not to be confused with Time Warner— and Comcast pay a considerable sum each of these channel-owning companies to distribute their programming to MVPD subscribers.
 
The costs to acquire this programming are substantial. Indeed, as the Commission has observed, “compared to the smaller and mid-sized MSOs, Comcast, Time Warner Cable, and Charter can better leverage their scale in programming cost
 
 

17.
The AT&T/DIRECTV Merger: The Impact on Competition and Consumers in the Video Market and Beyond: Hearing Before the Subcomm. on Antitrust, Competition Policy and Consumer Rights of the S. Comm. on the Judiciary, 113th Cong. 1 (2014) (Questions for the Record Submitted by Chair­man Amy Klobuchar for AT&T CEO Randall Stephenson), available at http://www.judiciary.senate.gov/imo/media/doc/Stephenson%20Responses%206-24-14.pdf.
 
18.
See Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, Fifteenth Report, FCC 13-99, 28 FCC Rcd. 10496, para. 33 (2013) [hereinafter Fifteenth Video Competition Report], http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-13-99A1.pdf.
 
19.
Id. at para. 36.
 
20.
See supra note 15.
 
21.
Fifteenth Video Competition Report, supra note 18, at para. 329.
 
 
51

 
 
COMMENTS OF THE COMPETITIVE ENTERPRISE INSTITUTE
 
negotiations.”22 By joining forces, Comcast and TWC will account for a moderately greater share of MVPD consumers—and, in turn, will likely enjoy a moderately improved bargaining position relative to large programming vendors, whose popular and differ­entiated content offerings have traditionally made it difficult for MVPDs to aggres­sively negotiate on prices.
 
II. CONCLUSION
 
Ultimately, the Comcast-TWC merger represents just one transaction in a series of mergers and divestitures that ebbs and flows as the media and telecommunications markets evolve. If the deal is consummated, the combined company will continue to face fierce competition from broadband providers, MVPDs, programming vendors, and Internet-focused companies such as Netflix, Amazon, Apple, and Google. How these rivalries will pan out is impossible to predict, but the virtuous cycle of invest­ment and innovation is all but certain to continue—especially if left undisturbed by presumptuous agency interventions. The Commission should let this merger go forward by unconditionally approving the companies’ applications for consent to trans­fer various FCC licenses and other authorizations.
 
 

22.
Id. at para. 69, n.208 (citing Michelle Ow, Historical Benchmarks: Cable Margins by Segment, 2007 – Q1’12, SNL Kagan, Cable TV Investor: Deals & Finance, July 31, 2012, at 12-13).
 
 
52

 
 
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
 
 
  )  
In the Matter of
)
 
 
)
 
Applications of Comcast Corp. and
)
 
Time Warner Cable, Inc
)
MB Docket No. 14-57
For Consent to Assign or Transfer
)
 
Control of Licenses and Authorizations
)
 
 
)
 
 
Comments of
Douglas Holtz-Eakin and Will Rinehart1
 
Introduction
 
The Comcast-Time Warner Cable (TWC) deal will strike the tenor for technology mergers in the coming years, so it is important the regulators understand its impact on consumers and the competitive environment. Technology policy’s fundamental question again takes center: should we regulate beforehand, deterring all potential positive benefits, or regulate when there is actual consumer harm? Answering that question requires knowledge of both the current market realities and an exploration of the future competitive environment. The current market realities are certain: there are few horizontal and vertical concerns in both paid TV and broadband Internet, the broadband market is extremely competitive, and the deal is likely to benefit consumers. While the future is far more uncertain, efforts by rivals in the converged television and broadband market continue to bode well for competition. More importantly, the Federal Communications Commission (FCC) should be hesitant to stop this deal from closing. However, if concerns and merger conditions are pursued, those constraints should be narrowly tailored to this deal. All combined, the deal is clearly in the public interest and should be allowed.
 
How Market Realities Affect Horizontal and Vertical Concerns
 
Merger review, as part of antitrust law, is meant “to protect and enhance competition and consumer welfare.”2 By all accounts, competition is robust in both the paid TV and broadband spaces, and the merger itself has few vertical and horizontal integration concerns.
 
 

1 Douglas Holtz-Eakin is President of the American Action Forum and Will Rinehart is Director of Technology and Innovation Policy at the American Action Forum
2 Deborah Platt Majoras, Statement of FTC Chairman Deborah Platt Majoras Before the Antitrust Modernization Commission Concerning Modernization of Antitrust Law, http://www.ftc.gov/public-statements/2006/03/statement-ftc-chairman-deborah-platt-majoras-antitrust-modernization.

 
53

 
 
Horizontal mergers can reduce the number of competitors in the market. However, Comcast and TWC do not compete in any relevant market for multichannel video programming distributors (MVPDs), so should a merger go through, consumers will not see a reduction in the number of choices.3 Even though the 1992 Cable Act prohibits exclusive cable franchises, local regulations called “cable franchising rules” usually result in just one cable provider for a market.4 Consequently, this deal will not change an important feature of TV: 98 percent of Americans can choose from three or MVPDs. In addition to two satellite providers, the entry of fiber into countless market allows 32.8 percent of Americans the choice of four or more MVPD options, up from a mere 4.7 percent in 2006.5
 
Paid TV is a relatively mature market, but the last two decades have been a transformative time. High quality serial dramas have proliferated, which has driven up the cost of production and changed the ways that consumers watch content. TV sets have steadily increased in resolution and size, creating upward pressure for high definition signals in programming. Meanwhile, cheap alternatives on the Internet increasingly compete for attention. The TV viewing habits of Americans have been stable and consumers are turning to cord cutting and cord trimming to get their content without the cost of cable.6 While cable is indeed the largest U.S. broadband provider, its share of TV distribution is only a little more than 50 percent with total subscribers on a decline from 2008.7 Forty four million American homes now get video from non-cable providers such as fiber and satellite, who have cut into the core business.8
 
The combined company would sit below the arbitrary 30 percent market share threshold that had long been a cap by the Federal Communication Commission (FCC). The FCC established this cap as a limit for pay TV ownership, but it was struck down by the courts in 2009, because the agency “failed to demonstrate that allowing a cable operator to serve more than 30 percent of all cable subscribers would threaten to reduce either competition or diversity in programming.”9
 
Programming is really the primary concern in the pay TV market. About half of a cable bill goes to programming companies such as Viacom and Disney, and costs are on an incline.10 From 2006 to 2011, total spending by cable companies on programming increased 29 percent in real, inflation adjusted
 
 

3 In the Matter of Applications of Comcast Corp. and Time Warner Cable Inc. For Consent To Transfer Control of Licenses and Authorizations, http://corporate.comcast.com/images/Comcast-Public-Interest-Statement-April-8.pdf.
4 Thomas W. Hazlett, Cable TV Franchises as Barriers to Video Competition, http://www.vjolt.net/vol12/issue1/v12i1_a2-Hazlett.pdf.
5 Geoffrey Manne, The Future of Video Marketplace Regulation,
http://democrats.energycommerce.house.gov/sites/default/files/documents/Testimony-Manne-CT-Satellite-TV-Law-2013-6-12.pdf.
6 Neilsen Company, An Era of Growth: The Cross-Platform Report,
http://www.nielsen.com/content/dam/corporate/us/en/reports-downloads/2014%20Reports/nielsen-cross-platform-report-march-2014.pdf.
7 In the Matter of Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, https://apps.fcc.gov/edocs_public/attachmatch/FCC-13-99A1.pdf.
8 Id.
9 John Eggerton, Court Throws Out FCC’s Cable Subscriber Cap,
http://www.broadcastingcable.com/news/washington/court-throws-out-fccs-cable-subscriber-cap/56420.
10 Matthew C. Klein , Stop Whining About the Comcast-Time Warner Merger,
http://www.bloombergview.com/articles/2014-02-13/stop-whining-about-the-comcast-time-warner-merger.

 
54

 
 
dollars.11 Programming expenditures have increased substantially more than the average cable price.12 Time Warner spun off its cable operations partly due to this squeeze.
 
Will this deal stifle the production of content? The entire cable industry only owns about 14 percent of all programming channels, according to the FCC.13 It is hard to see how this would substantially change the production of programming given that it is a little more than a 1/8 of the market. Moreover, Comcast will still be subject to its conditions from its acquisition of NBC Universal. In allowing the deal to move forward, the cable company agreed to a length set of restrictions, which included a provision requiring the company to provide online distributors with TV content, and an agreement to not “exercise corporate control over or unreasonably withhold programming from Hulu.”
 
What will change is the calculus between Comcast and huge content players like ESPN, CBS, and NBC. Merging the two operators would give them bargaining power. Consumers have the potential to win in this deal because the combined company would be able to slow down these programming costs. However, nothing is given. TWC just saw itself on the losing side of a programming debate with CBS when they negotiated their programming fees, losing more than 275,000 subscribers in the fight.
 
The future of cable is the Internet, and that is where any concerns, be they minimal at best, of this acquisition lie.
 
Competition is Robust in Broadband
 
The broadband market is both competitive and dynamic, marked by falling relative prices, expanding output, rapid innovation, and convergent competition. Even though broadband did not exist as a practical option for residential consumers until the early 2000s, it has rapidly developed. Average download speeds for wired connections in America have increased 32 percent in the past year alone, far faster than projected growth.14 The U.S. is now the 9th fastest country overall. Last year alone, the number of Internet subscribers with a connection over 10 Mbps jumped 60 percent, putting the U.S. close behind small countries like South Korea and Japan where the population density makes it cheap to build networks.15 The 6-year historical trend is depicted in the chart below and shows a strong upward trajectory with a projected growth path of nearly 35 percent in the coming year.
 
 

11 Meg James, Cable TV networks feel pressure of programming costs,
http://articles.latimes.com/2011/dec/08/business/la-fi-ct-cable-economics-20111208.
12 Rani Molla, How Much Cable Subscribers Pay Per Channel, http://blogs.wsj.com/numbers/how-much-cable-subscribers-pay-per-channel-1626.
13 See footnote 4.
14 Akamai, Akamai’s State of the Internet Q1 2014, http://www.akamai.com/dl/akamai/akamai-soti-q114.pdf?WT.mc_id=soti_Q114; Using Akamai’s available data beginning in 2007 Q3 along with a polynomial function projected an average speed of 10.392 Mbps.
15 Id.
 
 
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Building out broadband infrastructure is expensive, but the US, driven by private investment, continues to lead the world. Of the world’s total investment in broadband, the U.S. has nearly a fourth of it, even though we have just 4 percent of the world’s population.16 All totaled, nearly 1.2 trillion has been invested since 1996.17
 
It is important to remember that the absolute numbers of broadband providers in any given city won’t change in this deal because local regulations set up in the 1960s and 1970s allowed only one cable company to exist in a jurisdiction. Fully understanding of these impediments to competition, U.S. communication competition policy has generally been one of intermodal competition, that is, competition exists among technologies. So, there has been an effort by regulators to ensure that cable competes against fiber, DSL, satellite, and increasingly wireless for broadband market share. Because of the sheer cost in laying wire and the rules set up by the Telecom Act, it is unlikely that two companies will utilize the same last mile technology in serving wired customers, as is the case right now. Even the newest entrant, Google, is going straight for fiber development because of a combination of long term cost and regulatory headaches.
 
Demand by consumers for faster speeds is placing pressure on both wired and wireless companies to upgrade. Last year, AT&T announced a $14 billion upgrade to its wired and wireless broadband networks.18 They are currently in the middle of this project which will bring a significant portion of its wired footprint on to superfast broadband and help to lay the basis of future upgrades. With the upgrades, AT&T will be able to offers speeds up to 45 Mbps in the near future, ramping up to 75 Mbps and 100 Mbps soon after, putting them ahead of most cable offerings. As the FCC’s most comprehensive plan for
 
 

16 Roslyn Layton, The European Union’s Broadband Challenge, http://www.aei.org/files/2014/02/18/-the-european-unions-broadband-challenge_175900142730.pdf.
17 National Cable & Telecommunications Association, America’s Internet Leadership,
http://www.ncta.com/positions/americas-Internet-leadership.
18 AT&T to Invest $14 Billion to Significantly Expand Wireless and Wireline Broadband Networks, Support Future
IP Data Growth and New Services, http://www.att.com/gen/press-room?pid=23506&cdvn=news&newsarticleid=35661&mapcode=.

 
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faster Internet had suggested, DSL is uniquely situated to serve consumers, and with the increased demand for faster Internet, traditional telephone companies like AT&T are upgrading their DSL offerings.
 
The investments have paid off. AT&T has put seven consecutive quarters of U-verse broadband net adds on the books, most recently with 634,000 in Q1 201419 and 488,000 in Q2 2014.20 As a point of comparison, Comcast’s broadband net adds in Q2 2014 were 203,000,21 and in Q1 2014,22 they were 383,000. In other words, when AT&T invested, their U-verse broadband net adds in these quarters were twice as Comcast’s.
 
At the same time, these same companies are also getting into fiber networks, leapfrogging cable
companies to capture consumers. The third largest telecommunications company, CenturyLink, is pushing out fiber to Seattle and is looking to expand into the 15 other communities. For their own part, AT&T is investing in fiber under the name of Gigapower. In addition to their well-known project in Austin, the legacy phone company is working to install a network in Dallas, Raleigh-Durham, and Winston-Salem. However, they are also now considering 21 other metro areas including Chicago, Cleveland, Houston, Los Angeles, Miami, and San Francisco.23 Cox Communications also announced intentions to launch a 1 Gbps fiber to the home (FTTH) service, a move that will challenge both AT&T and Google Fiber.24 The genesis of this fiber build out can be partially attributed to Google, which has shaken up the stolid regulatory process and other industry players with their offering in Kansas City. With Provo and Austin, finished, the search company is working closely with 34 cities across the U.S. to deploy the service in more households. As consumers find uses for these speeds and change companies, a merged Comcast-TWC will find its market position being assailed, as is the case now with satellites entry into traditional TV.
 
Google should not be a special case in broadband. Yet, in Kansas City, the government sped up the permitting process, gave Google rights-of-way access for little to no cost, and allowed Google to build-out in select neighborhoods where consumers actually expressed demand. Local costs tilt the scales. As Milo Medin, Google’s vice president for access services and a lead on the Google Fiber project, testified before the Senate, “regulations – at the federal, state, and local levels – can be central factors in company decisions on investment and innovation.” Franchising rules are often the worst offenders and “result in
 
 
19 AT

&T Reports Strong Results in First Quarter while Investing in Growth Transformation, http://about.att.com/story/att_first_quarter_earnings_2014.html#sthash.PMoP0GsW.dpuf.
20 Best-Ever Postpaid Churn Drives Strongest Postpaid Net Adds in Nearly Five Years and Continued U-verse Gains Highlight AT&T’s Second Quarter as Business Transformation Continues, http://about.att.com/story/att_second_quarter_earnings_2014.html#sthash.fFmmAcvl.dpuf.
21 Comcast Reports 2nd Quarter 2014 Results, http://www.cmcsk.com/releasedetail.cfm?ReleaseID=861091.
22 Comcast Reports 1st Quarter 2014 Results, http://www.cmcsk.com/releasedetail.cfm?ReleaseID=841516.
23 Marguerite Reardon, AT&T to take gigabit broadband to 21 new metro areas, http://www.cnet.com/news/at-t-to-take-gigabit-broadband-to-21-new-metro-areas.
24 Sean Buckley, Cox takes on AT&T and Google Fiber in 1 Gbps fiber race, http://www.fiercetelecom.com/story/cox-takes-att-and-google-fiber-1-gbps-fiber-race/2014-04-30.

 
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unreasonable fees, anti-investment terms and conditions, and long and unpredictable build-out timeframes.”25
 
AT&T’s decision to build a fiber network in Austin just days after Google serves as a further example. As Raymond James analyst Frank Louthan pointed out in Reuters, “AT&T is making the point that they could make a lot more investments in many of their communities, absent the regulatory burdens which every community puts on providers.”26 Franchising rules, pole attachments, and other local fees are where competition is actually hampered. Removing those barriers to entry would help bring a fresh wave of competitors into this space.
 
The FCC even recognized the problems, and is moving towards solving some of the key deterrents to investment.27 But still, as many as 30,000 jurisdictions issue video franchises, with just as much variance as you’d expect. These are the real problems to broadband deployment that need to be dealt with, not a merger that is clearly a natural outgrowth of market processes and in the interest of consumers.
 
A Merged Comcast Will Bring Real Benefits to Consumers
 
The merger between Comcast and Time Warner Cable carries real and substantial gains in consumer welfare.
 
First, the merged company could expect two kinds of internal efficiency gains. For one, it will be easier to buy inputs in bulk, including all of the wires, routers, and switches that make Internet connections possible. This will be especially important when cable begins to upgrade to the newest technology, DOCSIS 3.1. Similarly, because companies bundle TV with their broadband offerings, there are likely to be long term cost savings for consumers with television inputs, namely programming.
 
Moreover, there is the real possibility that Comcast could force networks and video providers onto one online package. As one commentator noted,
 
“A cable company with true nationwide reach could cut the kind of deal that would change that, providing enough subscribers to make a next-generation TV product viable and create enough market pressure to bring its competitors to the table and sign on to similar arrangements. It’s the kind of deal that could turn a new Apple TV into a set-top box that would let you watch live television — and one that Cupertino has reportedly been working on with Time Warner Cable already.”28
 
 

25 Milo Medin, Testimony of Milo Medin, Vice President of Access Services, Google Inc. Committee on Oversight and Government Reform Field Hearing On Innovation and Regulation, http://oversight.house.gov/wp-content/uploads/2012/01/TestimonyofMiloMedin_1.pdf.
26 Alexei Oreskovic and Sinead Carew, Google, AT&T target Austin for high-speed Internet, http://www.reuters.com/article/2013/04/09/us-google-austin-idUSBRE9380W620130409.
27 In the Matter of Implementation of Section 224 of the Act A National Broadband Plan for Our Future Report and Order and Order on Reconsideration, https://apps.fcc.gov/edocs_public/attachmatch/FCC-11-50A1.pdf.
28 Bryan Bishop, Why you should be scared of Comcast and Time Warner Cable merging,
http://www.theverge.com/2014/2/13/5407932/comcast-and-time-warner-a-very-dark-cloud-with-a-tiny-silver-lining.

 
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Second, technological transfers will benefit consumers. In the case of Comcast, they have touted their X1 platform, which could help initiate innovation in the set top space (if paired with regulatory reforms). This new technology would likely be shared with all current Comcast and Time Warner Cable customers, implementing a new integrated software stack that brings together search, apps, and other entertainment options through the TV. In a similar vein, when Google bought the ad network DoubleClick, the search engine was able to quickly integrate the services for the benefit of consumers. Congressional hearings were replete with voices proclaiming that this deal would substantially reduce competition in the search market, but in reality it marked the beginning of a new era in search engine competition, as well as advantageous for the development of robust ad networks, which Facebook and others are trying to emulate.
 
Lastly and importantly, a merged Comcast is likely to bring on new investment and spur competition within the industry. As the FCC Chief Economist Tim Brennan noted in a recent talk, mergers change the bargaining positions of both competitors and partners, and can induce new deals.29 The explosion of announced projects in fiber, next generation TV, and online content, can in part be seen as a result of the Comcast-TWC announcement and exemplifies this positive shift in the market.
 
Of course, many of these deals have been in the works for some time, suggesting that the entire industry is moving online and to faster infrastructure. To make a bright line separation between the two primary markets of interest especially difficult, as these markets are cannibalizing each other and integrating in unique ways that requires serious consideration for the merger.
 
What Kind of Competition Should Consumers Expect in Future Broadband Markets?
 
While the future is difficult to predict, it does look bright. As a result of competition and increasing speeds, a “broadband ecosystem” has emerged. Cheap computers, ubiquitous cell phones, and smart televisions have spurred broadband providers to advance their speeds. While video was once consumed primarily through TV, technology has made it possible to watch video content online and through wireless networks, thus expanding everyone’s choices and leading to a shift in preferences and an ever bigger shift in expectations. Forecasted changes are leading to a new wave of investment and competitive pressure. Developing the capacity to meet these demands is part of the strategy of a merged Comcast, but will also act as a competitive constraint.
 
To understand, it is helpful to compare the usage patterns of the United States and Europe. U.S. households receive nearly double the broadband investment dollars as those in Europe, but they also consume nearly double the amount of data.30 The culprit is Netflix, as Americans spend a significantly higher amount of time streaming video over the net. To put that more succinctly, as a result of Netflix, Hulu, and others, broadband providers have been forced to upgrade their networks to keep up. The
 
 

29 Tim Brenan, Keynote Address Given to A Regulator’s Dilemma: Policy in an Age of Disruption Event, http://cbpp.georgetown.edu/2014/08/06/regulators-dilemma-video/.
30 Sandvine, Global Internet Phenomena Report 1H 2014, https://www.sandvine.com/downloads/general/global-internet-phenomena/2014/1h-2014-global-internet-phenomena-report.pdf.

 
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investments by AT&T, Google Fiber, Century Link, and others are a result of this upward trending demand.
 
Wireless networks have been undergoing similar and radical transformations. When the iPhone was first introduced, no one could predict how the data-intensive device would affect network buildouts. Yet, in just three years, data volumes increased nearly 8,000 percent.31 To help mitigate these congestions issues, wireless carriers pressed forward with the newest 4G technology, which in turn provided enhanced service and speeds. Emboldened by these download speeds, a growing contingent of consumers are now choosing to access broadband solely through mobile devices, thus adding a new competitor to wire broadband. The story of the iPhone is indicative of the larger market. Spurred on by these complementary goods, providers are being forced to provide better service, the ultimate goal of competition.
 
Faster broadband speeds are upending the cable industry’s traditional product. A recent survey found that 23 percent of Netflix subscribers have canceled their TV service.32 Netflix and other Internet content providers increasingly compete for attention. As a result, consumers are cutting the cable all together, or choosing basic packages with Netflix and Hulu as additional “channels.” Cord-cutting has climbed to 6.5 percent of U.S. households up from 4.5 percent in 2010.33 With Netflix just passing 50 million subscribers and a number of new shows in the works, the converged TV and broadband market will continue to develop and be competitive.
 
As Jessica Rosenworcel, a commissioner on the Federal Communications Commission, noted, the media mergers currently underway – Comcast and TWC included – are the direct result of competition from online and other video sources and this should be central to any agency decision.34 “I think all of the activity you’re seeing right now is a response to that change,” she said. Like countless others in the space, it is clear that “television will change more in the next five years than it has in the last five decades.”
 
While the future bodes well for competition, regulators are still tasked with a difficult choice: should they regulate beforehand, deterring all potential positive benefits, or regulate when there is actual consumer harm? This question has been asked time and again by the Federal Communications Commission and answered in the same way for nearly three decades. Beginning with the National Information Infrastructure of 1991 through the Next Generation Internet initiative of 1996 and into the National Broadband Plan of 2010, the governing policy of the Internet has followed a common thread that offers guidance for this merger:
 
 

31 Marguerite Reardon, Is AT&T considering throttling heavy data users?, http://www.cnet.com/news/is-at-t-considering-throttling-heavy-data-users.
32 Michelle Clancy, A fifth of US Netflix users have cut the cord, http://www.rapidtvnews.com/2013071928886/a-
fifth-of-us-netflix-users-have-cut-the-cord.html.
33 Jim Barthold, Report links OTT on television with increase in cord cutting, http://www.fiercecable.com/story/report-links-ott-television-increase-cord-cutting/2014-04-17.
34 Kate Tummarello, FCC Dem: Telecom mergers the result of online competition, http://thehill.com/policy/technology/213131-fcc-dem-telecom-mergers-the-result-of-online-competition.

 
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“Many uncertainties will shape the evolution of broadband, including the behavior of private companies and consumers, the economic environment and technological advances. As a result, the role of government is and should remain limited.”35
 
Regulatory humility has long been the de facto policy in broadband and been a contributing factor to its success. Along with consumer harm, regulatory humility should be the guiding principle for antitrust and merger analysis. The reasoning is simple, as Federal Trade Commissioner Maureen Ohlhausen notes, because “even agencies with the best-designed statutory and regulatory structure will be less effective and possibly make consumers worse off” without bearing in mind these two principles.36
 
The AOL-Time Warner Cable deal serves as prime example. When Time Warner Cable merged with AOL, there was constant fear that the larger company would stifle innovation on the Internet, but these worries were clearly overblown. Technological winds shifted away from AOL’s core business in Internet service, and the synergies that were expected on the technological and management side never materialized. While AOL once seemed unassailable, they are now largely a content production company with a greatly reduced market share. The AOL-Time Warner deal is a reminder that we need a much higher threshold on just what evidence is needed to deter a deal.
 
The DoJ generally agrees with this sentiment, noting,
 
“We do not find it especially helpful to define some abstract notion of whether or not broadband markets are “competitive.” Such a dichotomy makes little sense in the presence of large economies of scale, which preclude having many small suppliers and thus often lead to oligopolistic market structures. The operative question in competition policy is whether there are policy levers that can be used to produce superior outcomes, not whether the market resembles the textbook model of perfect competition. In highly concentrated markets, the policy levers often include: (a) merger control policies; (b) limits on business practices that thwart innovation (e.g., by blocking interconnection ); and (c) public policies that affirmatively lower entry barriers facing new entrants and new technologies.”37
 
As the DoJ predicted, interconnection negotiations between content providers and cable companies have become a concern with this merger. Some worry that a merged Comcast would have unassailable bargaining power, but the content blackout and consumer flight from TWC during their negotiations with CBS suggest otherwise. Content is still king and content companies will continue to have bargaining power as a result. More importantly, free negotiations between network providers benefit consumers, who
 
 

35 William Kennard, Connecting the Globe: A Regulator’s Guide to Building a Global
Information Community, http://www.fcc.gov/connectglobe/regguide.pdf.
36 Maureen K. Ohlhausen, The Procrustean Problem with Prescriptive Regulation,
http://www.ftc.gov/system/files/documents/public_statements/291361/140318fsf.pdf.
37 Ex Parte Submission of the United States Department of Justice,
http://www.justice.gov/atr/public/comments/253393.htm.

 
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have seen steadily falling prices in this market for over two decades. For these reasons and others, economists have been positive about the current bargaining arrangements.38
 
The comparison between this environment and one in which the FCC manages the arrangement is stark. Because the FCC prescribes the rates at which telephone companies connect with each other, an entire bureau has been erected to manage this regulatory regime. The problems with this managed regime are clear, and the FCC is now in a protracted regulatory process to allow telephone companies to upgrade their networks as a result. Applying this costly and slow moving process to the Internet would be detrimental to consumers and for competition.
 
The FCC would do well to lower the entry barriers that face entrants, as pointed out earlier, but with this deal, many have wondered what merger control policies the FCC and DoJ might pursue. As Federal Trade Commissioner Joshua Wright has clearly explained, merger conditions can and do play an important role in competition enforcement.39 Yet, these agreements should address competitive concerns arising from a deal and not broader policy goals by the agency. While many applauded the network neutrality rules Comcast agreed to under the NBC-Universal deal, for the sake of rule of law, industry wide policies like network neutrality should be done at the rulemaking level and not the dealmaking level. These consent decrees have real effects upon consumers and need to be understood as doing such. Yet, as was shown earlier, there are few concerns that actually necessitate merger conditions for the deal between Comcast and Time Warner Cable.
 
Conclusion
As past mergers and present competition shows, the merged company will face more scrutiny from competitors, the market and consumers than from either the DoJ or FCC. It is hard to deny the immediate reality in which a merged Comcast would find itself. The broadband market is extremely competitive, there are few horizontal and vertical concerns, and the deal is likely to benefit consumers. Yet, it is just as important to include the future of competition in a merger analysis, and efforts by rivals in the converged television and broadband space continue to bode well for both competition and consumers. More importantly, however, the Federal Communications Commission (FCC) should take a page from their successful playbook and pursue regulatory humility. Stopping this natural deal could have a huge
negative effect on consumers, so it is clearly in everyone’s best if the agency allows the arrangement to continue.
 
 

38 Joshua Gans, Coase, Net Neutrality and Netflix, http://www.digitopoly.org/2014/02/24/coase-net-neutrality-and-netflix.
39 Joshua Wright, Statement of Commissioner Joshua D. Wright In the Matter of Graco, Inc, http://www.ftc.gov/sites/default/files/documents/cases/2013/04/130418gracowrightstatement.pdf.
 
 
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In the Matter of
Applications of Comcast Corp. and Time Warner Cable, Inc.
For Consent to Assign or Transfer
Control of Licenses and Authorizations
 
MB Docket No. 14-57
 
Comments of
International Center for Law & Economics
 
Geoffrey A. Manne
Executive Director, International Center for Law & Economics
 
Ben Sperry
Associate Director, International Center for Law & Economics
 
August 25, 2014
 
 
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These comments are filed in response to the Commission’s request for comments concerning Comcast Corporation’s proposed acquisition of Time Warner Cable, Inc. In its review of the license transfers, the FCC should assess the transaction’s likely competitive effects using the modern economic models employed by antitrust regulators.
 
The consumer welfare standard of antitrust law has established a number of things:
 
 
1.
Increased concentration is not, in itself, evidence of anticompetitive effect.
 
2.
Product markets should include all the reasonable substitutes.
 
3.
Generally, mergers, like this one, that combine to meet only a 30% threshold (or less, if the market is properly defined) cannot be presumed to enable enough foreclosure to result in consumer harm.
 
 
4.
Mergers, like this one, offer many efficiencies, from increasing shared know how among vertical steps in the production chain and increasing bargaining power against inputs that hold market power, to improving governance, reducing transaction costs, and increasing economies of scale that can lead to benefits for consumers.
 
Below, we very briefly support these points and apply them to the merger. We expand on these points in greater detail in our previous work on this merger, attached to this comment:
 
 
l
Geoffrey A. Manne, Beneficence Is Beside the Point: The Antitrust Realities of the Comcast/Time Warner Cable Merger, CPI ANTITRUST CHRONICLE, Apr. 2014(1).1
 
l
Geoffrey Manne, Why the Antitrust Realities Support the Comcast-Time Warner Cable Merger, TRUTH ON THE MARKET (Apr. 14, 2014).2
 
l
Geoffrey Manne, Actually, the Comcast-Time Warner Merger Doesn’t Hurt Netflix, WIRED (May 9, 2014).3
 
Increased Concentration ≠ Anticompetitive Effect
The bulk of many critics’ analysis of the proposed merger is that it will result in an increase in market share for the new combined Comcast-Time Warner entity. While it hardly merits repeating that increasing concentration isn’t the same thing as anticompetitive effect, we must note it anyway as a corrective to the persistent assumption that “big is bad.” As the Horizontal Merger Guidelines state:
 
“The measurement of market shares and market concentration is not an end in itself, but is useful to the extent it illuminates the merger’s likely competitive effects.... Even a highly concentrated market can be very competitive if market shares fluctuate
 
 

1 Available at http://papers.ssrn.com/sol3/papers.cfm?abstractid=2424917.
2 Available at
http://truthonthemarket.com/2014/04/14/why-the-antitrust-realities-support-the-comcast-time-warner-cable-merger/.
3 Available at http://www.wired.com/2014/05/actually-the-comcast-time-warner-merger-doesnt-hurt-netflix/.
 
 
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substantially over short periods of time in response to changes in competitive offerings.”4
 
As noted below, Comcast-Time Warner will still be subject to considerable competition in both the MVPD and broadband markets, and Comcast’s market share has indeed fluctuated with the advent of new technology. In fact, a proper definition of those marketplaces will show the combined firm would lack even the level of concentration assumed by critics.

Fiber, Wireless, Satellite, and DSL are All Reasonable Substitutes for Cable Broadband
 
Under the current FCC benchmark of 4 mbps down and 1 mbps up, wireless, satellite, DSL, cable, and fiber all contribute competitive offerings to the vast majority of American consumers. According to FCC data, 92% of American households have access to at least 3 offerings in the 6 mbps down and 1.5 mbps up speed range and 98% have at least 2.5 In other words, FCC data suggests there is strong competition in the marketplace for broadband.
 
In fact, even under the proposed standard of 10 mbps down and 1 mbps down,6 consumers still face a competitive marketplace. Again, the FCC Wireline Competition Bureau’s Internet Access Services Report notes that 92% of American households have access to 2 or more fixed broadband ISPs with speeds of 10 mbps down and 1.5 mbps up.7 If wireless is included, 91% of American households have access to 3 or more service providers that can provide 10 mbps down and 1.5 mbps up and 98% have access to at least 2.8
 
Part of the reason there is increasing competition is that innovations have made wireless and DSL into more effective competitors. DSL, in particular, has seen dramatic improvements in recent years. The deployment of VDSL2 (the newest DSL technology) by AT&T’s U-verse and other providers like CenturyLink has enabled DSL-based broadband connections to grow at significantly higher rates than cable-based broadband connections. For instance, between December 2008 and December 2012, DSL-based broadband
 
 

4 HORIZONTAL MERGER GUIDELINES 7, 18 (2010), available at
http://www.justice.gov/atr/public/guidelines/hmg-2010.pdf.
5 FCC Wirelines Competition Bureau, Internet Access Services: Status as of June 30, 2013, at 11 available at https://apps.fcc.gov/edocs public/attachmatch/DOC-327829A1.pdf.
6 See Tenth Broadband Progress Notice of Inquiry, FCC 14-113, Aug. 5, 2014, at ¶¶ 14-16 available at http://transition.fcc.gov/Daily Releases/Daily Business/2014/db0805/FCC-14-113A1.pdf.
7 Internet Access Services 2013, supra note 5, at 10.
8 Id. at 11.
 
 
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connections grew at an average annual rate of 25% compared to only 18% for cable broadband.9
 
The deployment of VDSL has also played a significant role in increasing the options that consumers have at higher speeds. The growth in availability indicated in the table below is largely attributable to VDSL:10
 
Time Period
Households With Access to Two or More Broadband Providers
3 Mbps/768 kbps
6 Mbps/1.5 Mbps
10 Mbps/1.5 Mbps
As of December 31, 2012
97%
71%
70%
As of June 30, 2013
99%
92%
92%
 
Finally, it is important to note that Netflix, one of the most bandwidth-intensive services on the Internet, recommends only 3 mbps for SD quality and 5 mbps for HD quality.11 Even over fiber, the fastest service technology available, Netflix usually streams at about 5 mbps or less.12 Competition to provide the necessary speeds to do most of what consumers want on the Internet reasonably includes all the services noted above, dramatically decreasing the risk of harm from increased concentration from this merger.
 
The Combined Entity will not have Market Power or Incentive to foreclose Competition
 
On a horizontal basis, national measures of post-merger market shares are irrelevant: Consumers have never had the ability to choose between Comcast and TWC (largely
 
 

9 FCC Wireline Competition Bureau, Internet Access Services: Status as of December 31, 2012, at 23, available at http://transition.fcc.gov/Daily Releases/Daily Business/2013/db1224/DOC-324884A1.pdf.
10 Cf. Internet Access Services 2012, supra note 9, at 9, and Internet Access Services 2013, supra note 5, at 9.
11 See Internet Speed Recommendations, NETFLIX (last accessed Aug. 24, 2014),
https://help.netflix.com/en/node/306.
12 See David Talbot, Not Sofast: A Google Fiber One-Gigabit Mystery, MIT TECH. REV. (Sept. 20, 2013), http://www.technologyreview.com/view/519466/not-so-fast-a-google-fiber-1-gigabit-mystery/ (noting “3.8 megabits per second... that’s the measure of the performance of Netflix streams on the network, not of what your home link is capable of doing” and that this “serves as a reminder that you only need five-megabit speeds to get high-definition Netflix”).
 
 
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because of local and state franchise regulations12) and the merger doesn’t change that, whatever the resulting market shares.
 
Vertically, the merger changes little overall. Comcast currently has no ownership interest in the vast majority of programming it distributes — and yet it eagerly distributes it. And it makes its own content widely available for distribution by competitors. Nothing about the proposed merger will change any of that. What the merger does do is to combine TWC’s distribution networks with Comcast’s NBCUniversal content. While the merger doesn’t appreciably increase Comcast’s content holdings and thus doesn’t appreciably increase vertical concentration, it should be noted that it does bring the benefits of a more vertical structure to more subscribers.
 
After divesting customers to SpinCo as part of the merger, the new Comcast-Time Warner entity will have less than 30% of the national MVPD market and less than 40% (considerably less if, as is appropriate, wireless and other technologies are included) of the national broadband market. Certainly, the FCC should not presume the new entity will be harmful just because of its size. If anything, the presumption should be that this merger will not have anticompetitive effects.
 
The MVPD marketplace is more competitive than ever. There should be no concern that Comcast will be a “bottleneck” for video programming because programmers will have ample ways to access subscribers in the top markets. In fact, as the FCC found in 2011, 98.6% of homes have access to at least three MVPDs, and 35.3% had access to at least four. First, DirecTV and Dish are available in all DMAs, so programmers have at least two other robust and well-established alternatives to access in all of the top DMAs. Second, the major telco providers (AT&T U-Verse and Verizon FiOS) have a particularly significant presence in top markets, as do other overbuilders (e.g., RCN), providing programmers with additional ways to access subscribers. Third, programmers also have access to other cable providers in many of these DMAs. And OVDs like Netflix, Amazon and iTunes — to say nothing of traditional forms of distribution like DVDs and over-the-air broadcasting — present a significant (and, in the case of OVDs, growing) platform for national programmers in all of the top DMAs (and everywhere else).
 
 

13 Kate Cox, Why Starting A Competitor To Comcast Is Basically Impossible, CONSUMERIST (May 10, 2014), http://consumerist.com/2014/05/10/why-starting-a-competitor-to-comcast-is-basically-impossible/ (“Companies’ reach stopped at the town line because that’s where their franchise agreement stopped” and “There’s also a large secondary cost to building out any kind of infrastructure project anywhere, and it’s not measured in dollars... It’s political clout”). See also Thomas W. Hazlett, Cable TV Franchises as Barriers to Video Competition, 12 VA. J.L. & TECH. 1 (2007), available at
http://www.vjolt.net/vol12/issue1/v12i1 a2-Hazlett.pdf.
 
 
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Finally, not only will Comcast’s share of the broadband market post-merger be relatively small, as noted, it has no incentive, as many critics allege, to foreclose programmers’ access to consumers via broadband in order to benefit its cable offerings. The company is not a monolith, and, at minimum, these different divisions within Comcast have clearly divergent incentives. Moreover, broadband and OVD services offered via broadband are rapidly growing, while cable video distribution is somewhat in decline. There is no reason to expect the merged company to have any greater incentive or ability to foreclose broadband competition for the sake of cable than it has today — and every reason to expect its incentive to facilitate the provision of broadband content to increase.
 
The Efficiencies from the Merger Could be Substantial and Will Promote Consumer Welfare
 
There are many potential benefits to competition that could result from this merger, and the FCC should consider them in its analysis:
 
 
l
Reductions in transaction costs and increased “know-how” from increased vertical integration between distribution and content once TWC is merged with Comcast/NBCU. These benefits are likely to be passed on in the form of higher quality and more content;
 
l
Elimination of double marginalization of Comcast/NBCU content to Time Warner customers, which could lead to lower prices;
 
l
Better offerings for businesses on broadband;
 
l
Increased efficiency due to economies of scale; and
 
l
Increased bargaining power in disputes with content providers. It is indisputable that video programmers have significant bargaining power of their own, as evidenced by recent carriage disputes. Programming costs have outstripped both inflation and cable rate increases over the last decade. Increased bargaining power could reduce these, with lower prices passed on to consumers.
 
We urge the FCC to consider these and the other issues raised in our attached documents. Opposition to the merger has rested largely on the unsubstantiated belief that “big is bad,” and the highly politicized and emotional belief that the government should “do something about Comcast.” Neither of these has any grounding in fact or in rigorous competition analysis, and we urge the Commission to reject them as grounds for stopping or conditioning this merger.
 
 
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In the Matter of
Applications of Comcast Corp. and Time Warner Cable, Inc.
For Consent to Assign or Transfer
Control of Licenses and Authorizations
 
MB Docket No. 14-57
 
Comments of TechFreedom
 
Berin Szoka
President
 
Tom Struble
Legal Fellow
 
August 25, 2014
 
 
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Introduction

In February of this year, Comcast Corporation (Comcast) announced its intention to consummate a merger with Time Warner Cable (TWC).1 Both companies provide multichannel video programming delivery (MVPD) and broadband Internet access services — but in separate geographic markets, and so do not compete with each other for subscribers.2 The total transaction is estimated to cost Comcast $45 billion, and, if approved, the merger would make the merged entity the largest provider of MVPD and broadband services in the country.3
 
Some have claimed that the merger would give the combined Comcast-TWC undue power in both markets. In theory, a sufficient degree of “horizontal” concentration in the distribution market could allow a company to exercise market power in “vertical” relationships with content providers in ways that would harm consumers. Indeed, Congress recognized this possibility in the 1992 Cable Act, when it authorized the FCC to cap both horizontal concentration and vertical integration.4 The FCC twice proposed to cap horizontal concentration at 30% of the U.S. MVPD market.5 But both times, the D.C. Circuit failed to justify such a cap.6
 
While the underlying concern remains theoretically plausible (at some degree of horizontal concentration), it has grown increasingly difficult to see how even a 30% cap could be justified — let alone a de facto lower ban.
 
Video Competition has Exploded
 
The merged Comcast-TWC would stay below the 30% limit that the FCC twice failed to justify.7 Moreover, there seems to be little reason to fear that the combined company will continue to
 
 

1 Comcast Corp., Time Warner Cable to Merge with Comcast Corporation to Create a World-Class Technology & Media Company (Feb. 13, 2014), available at http://bit.ly/1tLbip5.
2 Comcast Corp. & Time Warner Cable, Inc., Applications & Public Interest Statement: Description of Transaction, Public Interest Showing, & Related Demonstrations, 138 (Apr. 8, 2014) [Public Interest Statement], available at http://bit.ly/1lOr7ei.
3 Comcast Corp. & Time Warner Cable, Inc., Public Interest Benefits Summary, 1 (last visited Aug. 25, 2014) [Public Interest Benefits Summary], available at http://bit.ly/1ebrgPM.
4 See Cable Television Consumer Protection & Competition Act of 1992, Pub. L. No. 102-385, § 2(a) (1992), available at http://uscode.house.gov/statutes/pl/102/385.pdf.
5 See Implementation of Section 11(c) of the Cable Television Consumer Protection and Competition Act of 1992, Report and Order, 14 F.C.C.R. 19098 (1999); 47 C.F.R. § 76.503(a) (“No cable operator shall serve more than 30 percent of all multichannel-video programming subscribers nationwide through multichannel video programming distributors owned by such operator or in which such cable operator holds an attributable interest.”).
6 See Time Warner Entm’t Co. v. F.C.C., 240 F.3d 1126, 1136 (D.C. Cir. 2001) (“On the record before us, we conclude that the 30% horizontal limit is in excess of statutory authority.”); Comcast Corp. v. F.C.C., 579 F.3d 1, 9 (D.C. Cir. 2009) (“In light of the changed marketplace, the Government’s justification for the 30% cap is even weaker now than in 2001 when we held the 30% cap unconstitutional.”).
7 Public Interest Benefits Summary, at 1.
 
 
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grow without additional acquisitions — any of which would provide the FCC another opportunity to check Comcast’s growth.
 
In general, cable companies are losing, not gaining, market share.8 The merger would merely restore Comcast to the market share it possessed in the early 2000s — before growing competition from satellite and telco providers whittled down its leadership of the MVPD market.9 In 1992, cable was the only alternative to broadcast for multichannel video programming. But today, roughly a third of Americans get their video service from satellite providers,10 8.5% from telephone companies11 (companies that were barred, by law, from providing video service until 1996 and who continued to be stymied franchising requirements until 2006),12 and companies like Google Fiber and Sonic.Net are starting to lay a “third pipe” to Americans’ homes.13 Cable’s market share seems, for the moment, to have reached its high water mark. Indeed, this merger will be the third time that Comcast has reached the 30% figure by acquisition: In 2002, Comcast bought AT&T broadband and in 2006, it bought Adelphia cable, each time reaching 30% nationwide, only to see its market share within a larger footprint whittled away again by competition.14
 
And as cable’s share of the MVPD market falls, so too does the relevance of measuring the “MVPD market” at all. The Internet has become an alternative video distribution channel preferred by millions. Netflix already has more subscribers than will a combined Comcast-TWC — and, unlike Comcast, will continue gaining market share nationwide.15 An estimated 7.6 million American households have simply “cut the cord,” cancelling their MVPD subscription and obtaining video content from other sources, such as Netflix or Hulu subscriptions, a la carte
 
 

8 Public Interest Statement, at 5 (“Notably, since 2009 when the court last rejected the 30 percent cap, the two nationwide DBS providers have added another 1.7 million subscribers and the telco video providers have added 6.2 million subscribers, while traditional cable operators have lost 7.3 million video subscribers.”) (emphasis in original).
9 See id.
10 Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, Fifteenth Report, 28 FCC Rcd. 10496, 10558, Table 7 (2013) [Fifteenth Video Competition Report], available at https://apps.fcc.gov/edocs public/attachmatch/FCC-13-99A1.pdf (showing DBS providers to make up 34% of MVPD Video Subscribers at the End of June 2012).
11 Id.
12 See Implementation of Section 621(a)(1) of the Cable Communications Policy Act of 1984 as amended by the Cable Television Consumer Protection and Competition Act of 1992, Report & Order & Notice of Proposed Rulemaking, MB Docket No. 05-311 (Dec. 20, 2006), available at
http://www.mhcrc.org/docs/ops FCCCFAR.pdf.
13 See generally Google fiber, A Different Kind of Internet & TV (last visited Aug. 25, 2014), available at https://fiber.google.com/about2/; Sonic.net, About Us (last visited Aug. 25, 2014), available at http://sonic.net/company/.
14 The Impact of the Comcast-Time Warner Cable Merger on American Consumers: Hearing Before the S. Comm. on the Judiciary, 113th Cong., at 3, (joint statement of David Cohen, Executive Vice President of Comcast Corp., and Arthur T. Minson, Executive Vice President of Time Warner Cable), available at http://www.judiciary.senate.gov/imo/media/doc/04-09-14CohenMinsonJointTestimony.pdf.
15 Brian Stelter, Netflix Stock Soars 16% on Huge Subscriber Growth, CNN (Jan. 23, 2014), available at http://money.cnn.com/2014/01/22/technology/netflix-earnings/ (showing Netflix to have ended 2013 with 44 million subscribers and a quarterly add of 2.3 million American households).
 
 
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content purchases from Amazon or iTunes, streaming shows on the websites of the channels that distribute them, finding more user-generated content on YouTube or Vimeo, or (and this is the best part) finding a combination of these outlets that suits their tastes.16 Several companies, including DISH and Verizon, are launching Over-the-Top (OTT) services that will deliver MVPD-style linear video programming over broadband connections to subscribers of any broadband service, including Comcast — a prospect that makes cord-cutting that much more feasible.17
 
Over-the-Air (OTA) broadcasting, once written off as irrelevant, has once again become a part of that mix, too, because, once the Digital Television Transition was completed in 2009, over-the-air broadcasting became another digital distribution channel for video. Broadcasting is now a robust digital wireless streaming service, with high-definition signals carried over the air to viewers’ Digital Video Recorders, thus allowing them to subscribe to broadcast content and watch it at their convenience in ways that are directly substitutable with MVPD services.18 Yes, a dwindling percentage of users actually rely solely on over-the-air broadcasting, but broadcast networks still retain a large share of the market that matters most: the market for eyeballs on content.19 The same devices that allow users to stream Internet video content can also capture and record OTA content and present it to the user in a seamless interface that provides an alternative to MVPD services.20 Theatres and DVDs/Blu-Rays also remain important alternative distribution channels for video content, especially in rural areas, which might lack adequate bandwidth for OTT services to be effective substitutes.
 
These are just a few of the major reasons why it would be difficult for the FCC to justify any new horizontal cable ownership cap in an increasingly competitive and dynamic video market. But these trends also illustrate how fundamentally the video market has changed since 1992 — and even since the D.C. Circuit struck down the 30% cap in 2009.21 Cable had already become a
 

 

16 Adrienne Zulueta, More Households Ditching Cable, Satellite TV, ABC NEWS (Apr. 21, 2014), available at http://abcnews.go.com/Business/household-cable-cord-cutting-rise/story?id=23411056.
17 Jeff Baumgartner, Ergen: DISH Has Enough Deals For OTT Service, MULTICHANNEL NEWS (May 8, 2014), available at http://www.multichannel.com/news/tv-apps/ergen-dish-has-enough-deals-ott-service/374442; Steve Donohue, Verizon: Intel OnCue Acquisition Will Power New OTT Video Service, Next-Gen FiOS TV Product, FIERCECABLE (Jan. 21, 2014), available at http://bit.ly/1l4kzZ6.
18 See generally FCC, Digital Television (last visited Aug. 25, 2014), available at http://www.fcc.gov/digital-television (describing DTV technology, the analog-to-digital TV transition, and offering links for consumers to more information about DTV).
19 See Fifteenth Video Competition Report, at 10597, Table 20 (showing Broadcast TV to have a 15% share of local advertising revenues in 2011, compared to only 6% for cable TV).
20 See Roku, What is Roku? (last visited Aug. 25, 2014), available at https://www.roku.com/meet-roku  (describing the Roku IPTV streaming product); see also Simple.TV, The Whole Planet DVR (last visited Aug. 25, 2014), available at https://us.simple.tv/ (describing how the Simple.TV service can be used to record OTA content and stream it over the Internet to a Roku, Chromecast, iOS, Android, or Windows Phone 8 device).
21 Comcast Corp. v. F.C.C., 579 F.3d 1, 8 (D.C. Cir. 2009) (“We conclude the Commission has failed to ‘examine[] the relevant data and articulate[] a satisfactory explanation for its action,’ and hold the 30% subscriber cap is arbitrary and capricious.”) (alterations in original) (internal citation omitted).
 
 
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relatively shrinking subset of the MVPD market, which is also diminishing in importance as a subset of the larger video market.
 
In short, there is little reason to believe that there is anything about the structure of this market that requires a sui generis competition law. And there is every reason to believe that the standard antitrust laws of general application are competent to assess whether this merger is more likely to cause harm to consumers than to benefit them, keeping in mind the dynamic nature of the market, and, just as importantly, whether blocking or conditioning the merger would do more harm than good.
 
President Obama’s Department of Justice articulated well the reasons for caution in intervening in broadband markets, even via antitrust law, in its 2009 comments on the National Broadband Plan, “We do not find it especially helpful to define some abstract notion of whether or not broadband markets are ‘competitive.’ Such a dichotomy makes little sense in the presence of large economies of scale, which preclude having many small suppliers and thus often lead to oligopolistic market structures.”23
 
 
Consumer Benefits of the Merger
 
Critics of mergers, especially in the telecom sector, typically begin from the presumption that mergers will harm consumers because “Big is Bad.”24 Whether a merger offers sufficient “synergies” to overcome such a presumption is inevitably the subject of intense debate, with both sides accusing the other of baseless speculation.
 
Consumers would be better served if regulators began from the opposite presumption: that, in the absence of demonstrated harm, mergers are likely to benefit consumers because mergers are, far from being a suppression of market forces, a critical way for markets to work. Indeed, “in the presence of large economies of scale, which preclude having many small suppliers and thus often lead to oligopolistic market structures” (as the Obama DOJ put it25), mergers may be the only way for “the market” — specifically the market for corporate control26 — to ensure that

 
22 See generally U.S. Dept. of Justice & Fed. Trade Comm., Horizontal Merger Guidelines (Aug. 19, 2010), available at http://www.justice.gov/atr/public/guidelines/hmg-2010.pdf (setting forth the applicable analytical framework to be used in reviewing proposed horizontal mergers).
23 Economic Issues in Broadband Competition: A National Broadband Plan for Our Future, Ex Parte Submission of the U.S. Dept. of Justice, GN Docket No. 09-51, at 11 (2009), available at http://www.justice.gov/atr/public/comments/253393.pdf.
24 See Seth L. Cooper, The Comcast/Time Warner Cable Deal: Keep the Focus on the Consumer Welfare Benefits, 9 Perspectives from FSF Scholars 20, at 2 (June 2, 2014), available at  http://bit.ly/1tM6C2d  (asking the FCC to disregard pleas “based on appeals to emotional incredulity or ‘big is bad’ sloganeering).
25 See supra note 23, at 11.
26 See generally Richard S. Ruback & Michael C. Jensen, The Market for Corporate Control: The Scientific Evidence, 11 J. FIN. ECON. 5 (1983), available at http://bit.ly/1t6E7PV (reviewing scientific literature on the market for corporate control, and finding that the evidence indicates that corporate takeovers generate positive gains, and that those gains do not appear to come from the creation of market power).
 
 
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consumers are getting the best product. Since Time Warner Cable and Comcast do not compete head-to-head (as the result of both the high fixed costs inherent in the industry and the government-created barriers to deployment we discuss below), a dissatisfied TWC subscriber cannot today take his business to Comcast. Only through a merger can he get the benefit of Comcast’s superior management. Market forces have recognized Comcast’s management as superior, based on the stock performance of the two companies.27 But more importantly, Comcast has done a better job of investing in its network and upgrading speeds. Two key details illustrate the point: Comcast’s average speeds are consistently higher than TWC’s,28 and Comcast is well ahead of TWC in its deployment of next-generation DOCSIS 3.1 broadband networking technology.29
 
Specifically, the FCC should keep in mind four clear consumer benefits of the merger
 
 
1.
Greater investment and faster speeds: Faster deployment of DOCSIS 3.1, higher speeds, more deployment of Fiber-to-the-Home.30 Allowing Comcast and TWC to eliminate redundancies via the merger process (e.g., by consolidating legal and advertising teams into a single group) frees the combined entity to allocate more of its resources towards investments in network infrastructure, maintenance, and operation.
 
 
2.
Promote expansion of Internet Essentials Program to serve low-income families. Comcast has led the industry’s effort to offer affordable broadband service to low-income families.31 The merger will expand this program throughout Comcast’s footprint, demonstrably advancing the FCC’s goal of bringing all Americans into the digital communications age.32
 
 
3.
Greater Wireless Competition. For years, critics of the wireless “oligopoly” have dreamt of building mesh networks using Wi-Fi to offer consumers another option. Grassroots efforts to build such networks have met with little success, but Comcast has built the nation’s largest wireless mesh network, using its routers as hotspots.33 The
 

 
27 See David Gelles, Comcast Shares Are Down, But Time Warner Cable Deal Is Still Safe, N.Y. TIMES (Apr. 7, 2014), available at http://nyti.ms/1zsXr8q (discussing the recent stock performances of Comcast, Time Warner Cable, and other cable operators).
28 Public Interest Benefits Summary, at 1 (“According to the FCC and industry sources, Comcast’s broadband speeds are consistently higher than Time Warner Cable’s.”).
29 Public Interest Statement, at 2 (“While TWC has upgraded its entire network to DOCSIS 3.0 and has plans to improve speeds and further digitize its network, Comcast has already transitioned to a fully digital network, stands ready to implement DOCSIS 3.1 (the next-generation broadband standard), and has rolled out some of the fastest Internet speeds and the largest Wi-Fi network in the nation. This transaction will accelerate network upgrades in the TWC markets and produce a more advanced broadband network.”).
30 See, e.g., Shalini Ramachandran, Comcast Steps Up Its Game on Internet Speeds: Cable Operator Is Going All-Fiber for Some of Its Customers, WALL ST. J. (July 24, 2014), available at http://online.wsj.com/articles/comcast-steps-up-its-game-on-internet-speeds-1406238911.
31 See, Comcast Corp., Introducing Internet Essentials from Comcast (last visited Aug. 25, 2014), available at http://www.internetessentials.com/about.
32 Public Interest Statement, at 59.
33 Jon Brodkin, Comcast Turns Your Xfinity Modem into Public Wi-Fi Hotspot, ArsTechnica (June 10, 2013), available at http://bit.ly/1ntEA7v.
 
 
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  merger would allow Comcast to expand this network to many more consumers and in key parts of the country.34
 
 
4.
Greater Video Platform Competition. The video market is fundamentally changing as the MVPD model faces increasing pressure from OTT platforms, which may replicate the linear programming model of MVPD distributors, in addition to offering content a la carte. Operators like Netflix, Hulu, Amazon, Apple, Google, and DISH all have the potential to reach all Americans. Cable operators are struggling to reinvent the MVPD model to keep up with this potential paradigm shift. Denying any cable operator the minimum scale needed to compete may deny consumers the benefits of seeing the MVPD model evolve. It is one thing to ensure (as the antitrust laws should) that cable operators do not engage in conduct that denies consumers the benefits of new competitive options. It is quite another to bar cable operators the ability to keep up, hamstringing incumbents simply because they are incumbents.
 
 
Conclusion: Our Recommendations
 
Ideally, as we have previously urged, FCC merger review should “continue to maintain that the FCC’s review should focus narrowly on telecom-specific issues (e.g., compliance with FCC rules and fitness to hold a license). The FCC should act to advise and inform the antitrust agency’s determination; its own competition review should not have dispositive effect.” 35
 
Short of that, if the FCC does identify merger-specific harms related to the structure of the MVPD market, the FCC’s inquiry should begin by asking whether those concerns are really to do, not with horizontal concentration, but with vertical affiliation — the potential for Comcast to leverage control over programming. Since Time Warner Cable became independent from Time Warner Inc., and thus relinquished ownership over most of the channels it once owned, it is difficult to see how significant this concern could be.36 But more importantly, the FCC should ask whether the conditions volunteered by Comcast when it bought NBCUniversal, Inc. are adequate to address these concerns.37
 
If the FCC’s concerns are about the market for OTT video — that the combined company would have greater incentive and ability to block or degrade competitors’ video streaming services — that is precisely the kind of problem that antitrust law is well-suited to address. If the FCC can
 
 
34 Public Interest Statement, at 38-42.
35 Geoffrey Manne, Will Rinehart, Ben Sperry, Matt Starr, & Berin Szoka, The Law and Economics of the FCC’s Transaction Review Process 52 (TPRC 41 Working Paper, Aug. 23, 2013), available at http://papers.ssrn.com/sol3/papers.cfm?abstract id=2242681.
36 Time Wrner Inc. Chooses to Separate Time Warner Cable Inc. Through Spinoff (Mar. 12, 2009),
http://ir.timewarnercable.com/files/doc downloads/Separation%20Documents/TWC News 2009 2 19 Fina ncial.pdf.
37 See Applications of Comcast Corporation, General Electric Company and NBC Universal, Inc. For Consent to Assign Licenses and Transfer Control of Licensees, Memorandum Opinion & Order, MB Docket No. 10-56, Appendix A (Jan. 18, 2011), available at http://corporate.comcast.com/images/FCC-Order-on-NBCU.pdf.
 
 
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identify a clear reason why antitrust law is inadequate to prevent harm to consumers, that might well be a sound basis for the FCC to bar the blocking of lawful content and to prevent discrimination that harms consumers — through binding “net neutrality” regulations resting on clear legal authority.38 But it would not be a merger-specific harm, and therefore it would not be appropriate to address by regulating ad hoc through conditions applied only to this merger.
 
Ultimately, concerns about this merger seem to boil down to frustration that there is not more broadband competition. As the DOJ has noted, there are good reasons for this — the high fixed costs inherent in the business — and we should not expect the broadband market ever to look like textbook models of perfect competition. Having said that, we believe there is much that could be done to lower the barriers to entry that have largely shaped the current state of the market. We urge the FCC to focus its limited staff resources on those barriers.
 
Unfortunately, thus far, the FCC has been too focused on the idea of promoting government-owned broadband networks — despite lacking clear preemption authority to strike down state laws restricting such networks and despite what would be obvious to any economist: it is far from clear that allowing government to compete with the private sector for the provision of a product will, on net, result in more investment in the product.39
 
There are, however, many things that could be done to promote the deployment of private networks, in the form of both upgrades to existing networks and installation of new ones. Making it easier for telcos to upgrade their networks and for new entrants like Google Fiber and Sonic.Net to build a “third pipe” would be a far better use of the Commission’s limited resources than wringing its hands over a marginal increase in Comcast’s ownership of cable systems. In short, the Commission should spend more time stimulating broadband supply than quibbling over the structure of the market, growing the broadband pie instead of trying to micromanage how it is divided.
 
Specifically, we urge the Commission to open a Notice of Inquiry to re-examine the Commission’s 2010 National Broadband Plan; update its recommendations in light of the experience of the last few years, especially of the deployment of fiber-to-the-home networks; and issue recommendations as to what the FCC should do with its existing authority, new federal legislation, and best practices at the state and local level to encourage broadband deployment. That should include clearing the red tape that has made deployment painful — for example, even in San Francisco, one of the techiest cities in the world, scrappy Sonic.Net has struggled to deploy a fiber-to-the-home as a “third pipe” because NIMBY activists have protested the cabinets
 
 

38 See Modified Final Judgment § V.G., United States v. Comcast Corp., No. 11-cv-00106 (D.D.C. Aug. 21, 2013), available at http://www.justice.gov/atr/cases/f300100/300146.pdf#page=22. Since Comcast has volunteered to extend the net neutrality conditions it accepted when it bought NBCUniversal, this is not an issue here.
39 See Pleading Cycle Established for Comments on Electric Power Board and City of Wilson Petitions, Pursuant to Section 706 of the Telecommunications Act of 1996, Seeking Preemption of State Laws Restricting the Deployment of Certain Broadband Networks, Public Notice, WCB Docket Nos. 14-115 & 14-116 (July 28, 2014), available at http://bit.ly/1l88gGo.
 
 
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the company has to install on sidewalks to make their system work, and because the city issues permits for fiber deployment block-by-block, a regulatory nightmare.40 Similarly, putting up small cell antennas to make wireless broadband work well in cities remains a nightmare despite some efforts to address the enormous backlog of tower siting and modification applications. It is an unfortunate accident of telecom law that new entrants cannot get fair pricing for using rights-of-way or pole attachments if they are not Title II or Title VI services (which often involve prohibitive regulatory burdens).41 Finally, the FCC should explore and recommend “smart infrastructure” policies, such as the installation of “Dig Once” conduits under streets that any broadband company can rent.42 These ideas have stalled in Congress, state legislatures, and town halls — and will probably advance only slowly without clear support from the Commission. In short, the FCC should follow the Federal Trade Commission’s well-established model of competition advocacy: using the bully pulpit to advocate for a neutral competitive playing field.
 
Attachments
 
For the Commission’s benefit, we attach (1) the transcript of Berin Szoka’s discussion of the merger along with Susan Crawford and Gautham Nagesh on the Diane Rehm show, and (2) the testimony of Professor Christopher S. Yoo before the U.S. Senate Committee on the Judiciary on “Examining the Comcast-Time Warner Cable Merger and the Impact on Consumers” from earlier this year.
 
 
 

40 Stephen Lawson, Sonic.net Plans 1 Gbps Fiber Service to San Francisco Homes, ComputerWorld (Dec. 14, 2011), available at http://bit.ly/VOhO2L (describing Sonic.net’s network deployment plans for San Francisco and the numerous hurdles it faces due to, inter alia, the efforts of the group San Francisco Beautiful to prevent the installation of necessary network elements).
41 See Google fiber, Google Fiber City Checklist, at 5 (Feb. 2014), available at http://bit.ly/1bVcl1o (“We would like to see clear, predictable rules and reasonable terms for all providers to attach fiber to any utility poles that are within the public right of way. Providers of broadband Internet services, including IPTV, should have access to existing utility poles, city-owned ducts and conduit, on nondiscriminatory terms, in
exchange for reasonable payment. Ideally, these terms would be at least equivalent to the rights made available to traditional cable operators and telephone companies per the FCC’s current rules.”).
42 See, e.g., Fed. Highway Admin., Office of Transp. Policy Studies, Policy Brief: Minimizing Excavation Through Coordination (Oct. 2013), available at http://1.usa.gov/VKONoO (discussing “Dig Once” initiatives).
 
 
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I am writing in response to the Commission’s call for comment on the transfer of licenses involved in the proposed combination of Comcast Corporation and Time Warner Cable, MB Docket No. 1457.
 
My name is Everett M. Ehrlich. I am currently President of ESC Company, an economics consulting firm, and have previously served as Undersecretary of Commerce for Economic Affairs under President Clinton and Commerce Secretaries Ron Brown, Mickey Kantor, and Bill Daley; VicePresident for Strategic Planning and Chief Economist of Unisys Corporation; Senior VicePresident and Director of Research of the Committee for Economic Development, a businessled public policy entity; and Assistant Director for Natural Resources and Commerce of the Congressional Budget Office. These positions have given me many different and valuable perspectives on the Internet, its industrial structure, and its future.
 
In summary, this note urges the FCC to approve the merger of Comcast and Time Warner Cable. It argues that the central competitive challenge in the market for integrated netbased services – comprised of connectivity, devices, applications, content, and services – is not at the connectivity level but, rather, at the content level, and that the proposed combination of Comcast and Time Warner Cable is a legitimate response to that market power.
 
Just as the growing power of software – operating systems, programs, and solutions – turned computer hardware into a perishable commodity, the growing power of device manufacturers, content firms, and “edge providers” more broadly – from Google to Apple to Netflix – is now commoditizing the connectivity offered by ISPs. This is the context within which the proposed combination occurs.
 
Today’s consumer has little, if any, allegiance to his or her ISP, whether cable, telco, fiber, mobile, satellite, or whatever comes next. But the consumer’s allegiance to Facebook, or Amazon, or Ebay, or the iPhone or Galaxy, is strong if not absolute. As a result, the massive edge and device companies are now taking the bulk of the value proposition in this integrated netbased market. They can differentiate themselves from one another, build brand value and trust, and ultimately create and wield market and pricing power, while the ISPs cannot.
 
The proposed merger is a response to that imbalance. While disadvantaging no consumers given the absence of any overlap between the markets served by the two parties, it allows the combined company to level the playing field when confronting the market power of edge providers and content generally, including the market for cable programming (where content creators’ rapidly escalating fees are the driving factor behind rising cable bills).
 
In the notes that follow, I will expand on this argument and the evidence that supports it.
 
The bill of particulars against the Internet service providers asserts they are “oligopolists” who profiteer from the provision of Internet service and who, if left unchecked, will limit the consumer’s access to the full range of content offered by Internet “edge providers.” In

 
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the eyes of advocates, the proposed merger will exacerbate this problem. It would be a troubling scenario, were it not for two factors – the reality of the market for Internet services and the available evidence about the state of those markets.
 
The idea that ISPs are a funnellike tollgate between users and a constellation of edge providers is mistaken. A better depiction would be that they are a bridge between content providers, who seek to attract users, and users, who want to find content, much as newspapers link advertisers and readers, or stock exchanges link companies and investors.
 
The idea that ISPs have the means and incentive to manage this relationship is without merit. Imagine that an ISP decided to block users’ access to a website or content producer. It would be met with a wave of departures by its users, not just because of the specific site that was prohibited, but because of the risk that this might happen again in the future. An ISP that attempted to shape or limit its users’ habits on the web would be abandoned by users who want no filter on where they go online. That is why it is almost impossible to find any recent – and certainly any ongoing – example of such a practice – it would directly countermand the value proposition ISPs offer to their customers. It is a “problem” that does not exist.
 
In fact, as the Internet has evolved, content and devices have become the dominant aspect of the integrated value proposition comprised by connectivity, devices, content, and services. The consumer does not care which ISP brings her or him to the Internet so long as they can reach Facebook and Netflix and have whatever additional ecommerce, entertainment, gaming, or other experiences they seek and use on the devices they prefer. As a result, power in the market lies with these content and device producers.
 
The evidence of this shift is all around us. Netflix conveys between a third and a half of all Internet traffic, depending on the time of day. Google has a market share of 88 percent around the world and 67 percent in the U.S. (and rising!). Facebook and YouTube combine to control 75 percent of all social media. iOS and Android control 90 percent of mobile operating systems by both units and minutes. Amazon alone controls almost twothirds of ebooks.
 
These overwhelming market shares speak to the strength of consumer allegiance to edge brands, services, and products. But the other side of that allegiance is that consumers view their choice of ISP ever more inconsequential, even as the ISP’s service becomes all the more indispensable. The dynamics of the market speak to that shift. Consider the iPhone. Since its introduction, it has steadily gained in functionality and garnered a reputation for innovation and has made Apple a leading player in the Internet ecosystem. But the basis for that innovation is in large part the existence of stronger and more reliable signal offered by mobile Internet providers. For example, SIRI, Apple’s voice recognition program, relies on a technology that has existed for some while, as anyone who has talked to a robotic phone answering system knows. But it is now integrated into the iPhone because mobile carriers have invested and innovated to the point where the cloud can support realtime voice recognition – SIRI’s capabilities reside there, not in the phone. And that illustrates the central paradox of the Internet’s market structure – the investment and innovation of

 
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the service providers have resulted in Apple’s greater market power and profitability, but not their own.
 
The same dynamic can be found in almost every major application offered by “edge providers.” Netflix exists because ISPs make streaming possible and, now that it exists, consumer demand for it and allegiance to it is so strong that ISPs must compete to offer better capability to transmit Netflix’s signal. And we will soon see this pattern again as 4K television – the successor to “high-def” – enters the market, with its remarkable picture. Again, it was the improved connectivity offered by ISPs (such as Comcast, Time Warner Cable, Verizon, AT&T, Google, and others) that made this product possible, but it will be the set makers and the content providers who will profit from that improvement, not the ISPs who made the investments that enabled 4K in the first place.
 
Thus, the market power of content and devices has put ISPs on a treadmill. The ISPs (and the backbone providers) invest and improve networks, whereupon the downstream components of the on-line experience use that improved capability to offer valuable features to the consumer, which allows those downstream companies to gain market power and consumer allegiance, and that drives up usage and network demands, compelling the ISPs to invest and improve further. This “dynamic competition” has benefitted the consumer as surely – or likely more – than would have the atomistic, static competition advocates claim does not exist.
 
The available evidence makes clear that this dynamic is at work. The U.S. is tenth among the world’s nations in average broadband speed, and second in the G-7 (behind Japan) and third among our major trading partners (behind Japan and South Korea), despite formidable disadvantages. These include the low-density pattern of U.S. land use, which raises sizably the cost of installing “the last mile” of the network, and a recent regulatory history of “unbundling” that actively discouraged investment until that regime was overturned by the courts. Our per capita investment in telecom infrastructure is 50 percent higher that of the European Union, and as a share of GDP our broadband investment rate exceeds those of Japan, Canada, Italy, Germany, and France.1
 
But perhaps the most compelling evidence regarding the validity of this view of the market is the observed profits of the participants. In the paper referenced above, I compared the profits of Fortune 500 companies involved in the provision of the Internet (from ATT and Verizon to frontier and Level 3, including Comcast and Time Warner Cable) versus those who produce the content and devices that reside atop the broadband network (Apple, Facebook, Google, and the like). Whether measured based on sales or assets, the profits of the second group are between six and eight times greater than the first.
 
 

1 These and other data in this note can be found in my paper, The State Of U.S. Broadband: Is It Competitive? Are We Falling Behind?” Progressive Policy Institute, Washington, D.C. 2014. See http://www.progressivepolicy.org/slider/the-state-of-u-s-broadband-is-it-competitive-are-we-falling-behind/
 
 
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How is it possible to postulate that ISP monopoly power threatens edge providers, obstructs investment in broadband, or otherwise jeopardizes the Internet’s development in the face of those data? In fact, these allegations are tantamount to an economic calumny, a pretext to demand regulation – or forbid the sector from developing based on market-based rationality – that has its roots in an agenda unrelated to what is actually taking place.
 
Uninformed (but more than adequately funded) advocates have portrayed the cable providers as “Sauron-like” monopolists whose market power drives up the price of Internet access and constricts investment in the network. The reality is so different as to make this depiction preposterous. The U.S. is one of just two nations on the planet that has three different and fully deployed broadband technologies – telephone (both newer fiber and DSL), cable modems and mobile LTE – that compete to deliver broadband connections to nearly every American (plus satellite for some). Fully 85 percent of U.S. households have access to wired broadband networks capable of speeds of 100 megabits per second (Mbps) (in contrast to Europe, where only half of users get service that meets or exceeds 30 Mbps). Nearly 90 percent of Americans can choose from two wired providers and from 4 wireless broadband providers. Mobile 4G LTE, which can deliver downloads of 20 Mbps or more reaches 94 percent of Americans.
 
These results speak to the active competition now underway in the U.S. this is the reality: broadband providers hold four of the top ten positions among U.S. investors in plant and equipment; these are large, fixed-cost, systems that compete to attract a customer base large enough to amortize the sizable, ongoing investments they require; mobile systems are improving rapidly and can now support the kind of services that were once the landline providers’ mainstays, including live sports and entertainment; wireline broadband is threatened by “cord-cutting” and Over-The-Top television, which cut continually into their market. The wireline ISPs –such as Comcast and time Warner Cable -- confront content and device producers who have profited from the cable and other ISP’s investments and, in turn, usurped their profitability.
 
In the Comcast and Time Warner Cable merger, the participants do not ask for relief from the market power of the device producers and edge providers, nor do they seek to increase their share in any local market. They seek to combine to rationalize their costs, improve the business case for new large scale investments, and to gain some leverage against the content providers who drive cable rate increases and make it more difficult for the cable companies to respond to cord-cutters, Over-The-top television, the rise of mobile broadband, and the other challenges they face.
 
The advocates’ opposition to this merger relies on a shoddy intellectual bait-and-switch. They have analogized the ISPs – cable or otherwise – to the rotary, black telephones of the Ma Bell era. But they fail to address the myriad and compelling differences between that regime and the current one, starting with the reality that the Ma Bell regulatory regime expressly forbade the provision of innovative devices or services or the rise of any competing services that have characterized the Internet! Can telecommunications regulators really fail to recognize the sophistry of this argument? It would be to their

 
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shame, and the sector’s discredit, if they do and, in turn, would deny the participants in this proposed merger the ability respond to the competitive threats their businesses face.
 
 
 
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 Before the
Federal Communications Commission
Washington, D.C. 20554

In the Matter of
 
 
 
 
Applications of Comcast Corporation, Time
Warner Cable Inc., Charter Communications, Inc.,
and Spinco to Assign and Transfer Control of FCC
Licenses and other Authorizations
 )
 )
 )
 )
 )
 )
MB Docket No. 14-57

 
Comments of ITIF
 
August 25, 2014
 
 
 
 
 
 
 
 
 
Information Technology and Innovation Foundation
1101 K Street NW, Suite 610
Washington, DC 20005
 
 
 
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Contents
 
I.
Introduction and Summary
2
     
II.
The Proposed Transaction Presents Few Competitive Concerns
3
     
A.
The proposed transaction does not reduce horizontal competition
3
     
B.
The effects on vertical competition will be minimal
4
     
III.
A Larger Combined Company Can Better Serve Consumers
7
     
IV.
Conclusion
8
     
 
I. 
Introduction and Summary
 
The Information Technology and Innovation Foundation (“ITIF”)1 appreciates this opportunity to comment on the pending acquisition of Time Warner Cable Inc. by Comcast Corporation. ITIF supports this transaction with the belief that the deal presents few concerns in terms of competition while offering significant benefits through increased scale that will ultimately flow to consumers. Considering the pace of innovation and change in this sector, regulators should be cautious of chasing narrow, static efficiencies over allowing a dynamic market to innovate at an appropriate scale.
 
This acquisition poses very few concerns over competition. There is virtually zero reduction in horizontal competition as these companies do not compete in any single market. A
 
 

1 The Information Technology and Innovation Foundation (ITIF) is a non-partisan research and educational institute – a think tank – whose mission is to formulate and promote public policies to advance technological innovation and productivity internationally, in Washington, and in the states. Recognizing the vital role of technology in ensuring prosperity, ITIF focuses on innovation, productivity, and digital economy issues.
 
 
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combination also does not present significant vertical issues. With only 30 percent of the video market, a combined company presents no fear of real monopsony power, and, furthermore, stronger negotiating power in purchasing content should not be feared, as customers will ultimately benefit.
 
Vertical competition issues in the broadband space are somewhat more complicated, but are still not cause for alarm. Persistent confusion stems from the comparison of modern IP networks to the “terminating monopolies” regulations created in the phone networks. While it is true that the only way to reach broadband customers of a particular access network is through that network, there are dozens of various ways to get traffic into an access network like Comcast’s, alleviating any real concerns about vertical competition in broadband.
 
The Commission should not overlook the significant technological and economic benefits that would come from a combined, larger company. The improved ability to quickly scale new innovations throughout the country as well as the ability to better recoup the large capital investment needed to innovate, improve, and maintain a large cable plant mean that this transaction is likely in the public interest.
 
II. 
The Proposed Transaction Presents Few Competitive Concerns
 
A. 
The proposed transaction does not reduce horizontal competition
 
It is well established that Comcast and Time Warner Cable do not overlap in any geographic markets. Without any reduction in horizontal competition, this transaction becomes much simpler to analyze. There are obvious dynamic and productive efficiencies to be gained by a larger network. For example, it will be easier to recoup the large capital investments needed to maintain, operate, and upgrade a large access network. It will also be easier to support more research and development into better network operation and the development of new
 
 
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functionalities. Other scale economies related to advertising, overall management, and network operations are likely to be accrued. The opportunity to gain these and other efficiencies without any reduction in competition should be celebrated as in the public interest. This transaction will not meaningfully change the number of options consumers have for either video programming or broadband access. Rather than addressing these facts, most opposition to the merger simply reflects an ideological bias against large corporations.

B. 
The effects on vertical competition will be minimal

Although the vertical effects of a potential transaction are less straightforward than the horizontal, the increased concentration from a combined company is unlikely to compromise upstream markets. Here the Commission should consider the effect of the acquisition on both the video content and broadband or interconnection markets.
 
First, considering video, it is important to recognize how dynamic this market is. DBS providers, with nation-wide footprints, are strong competitors and maneuvering to supplement their already popular offerings with broadband. Likewise ILEC offerings like Verizon’s FiOS and AT&T’s U-verse provide substantial and growing competition in the video (as well as broadband) market. AT&T is investing aggressively in its U-verse offering, expanding its video footprint, and is seeing exceptional subscriber growth with its improved broadband speeds.2 Furthermore, major wireless carriers are developing LTE broadcast technologies that will continue to improve the ability of wireless to compete in the video as well as broadband services.3  This is a dynamic market the regulator should be cautious in shaping.
 

 

2 AT&T has recorded several consecutive quarters of U-verse broadband net adds that were above 600,000 – in Q1 2014, for example, U-verse broadband net adds were 634,000. See AT&T Newsroom, 2014 Q1 Earnings, http://about.att.com/story/att_first_quarter_earnings_2014.html.
3 See, e.g. Jeff Baumgartner, “Verizon CFO: LTE Multicast ‘Pivotal’ to Mobile Video,” Multichannel News (Aug. 12, 2014) http://www.multichannel.com/news/technology/verizon-cfo-lte-multicast-pivotal-mobile-video/383137;
 
 
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Even simply taking a snapshot of the current market, the combined company would only have about 30 percent of the video market – far from a monopsony for video programming. And recent negotiations have made it clear much of the power still lies on the content side. The recent dispute between CBS and Time Warner Cable is a prime example. Time Warner Cable and independent analysts attributed the steepest quarterly loss of subscribers in television history largely to the CBS blackout.4 Distributors know that consumers demand a variety of content, and evidence strongly shows that denying it to them, for however long, is dangerous.
 
Moreover, any increased power to negotiate lower content fees should ultimately benefit consumers. Content costs are a major factor in the increase in cable prices over the years, and many have attributed the pressures for consolidation in the cable industry to rising programming costs. Here we are not so worried about small independent programs making onto the carrier (distributors have incentives for variety and increasingly content providers have over-the-top options), but the appropriate pressure to control costs of large, popular programs. Customers will benefit from a combined company’s ability to negotiate lower programming fees.
 
Consumers are also increasingly turning to over-the-top services for video. The proposed transaction raises a number of questions about a combined company’s ability to affect upstream broadband services and providers. The most salient issue here is that of interconnection, an area complicated by the rightly confidential nature of interconnection agreements. The Commission is right to seek information on these agreements, but ITIF is confident, given the economics of
 
 

for an introduction to the technology and its business case, see Qualcomm, “LTE Broadcast – A revenue enabler in the mobile media era” (Feb. 2013), https://www.qualcomm.com/media/documents/files/lte-broadcast-a-revenue-enabler-in-the-mobile-media-era.pdf.
4 See, e.g., Brian Stelter, “Time Warner Left Bruised in Fee Battle with CBS,” New York Times (Oct. 31, 2013) http://www.nytimes.com/2013/11/01/business/media/time-warner-reports-record-quarterly-loss-of-tv-subscribers.html?_r=0.
 
 
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interconnection, that a combined company would not pose an anti-competitive threat to broadband services or other Internet providers.
 
Take, for instance, the recent dispute Netflix had with a few ISPs. Netflix chooses a handful among of dozens of possible paths to deliver its traffic into last-mile networks. Soon after Netflix turned on its “Super HD” video streaming,5 many of the interconnection ports they had relied on under a settlement-free peering arrangement became congested, affecting some consumers’ streaming. Reports indicate that Netflix is in the process of negotiating multiple interconnection deals with ISPs to ensure this unprecedented amount of data can reliably be delivered onto access networks. It is likely that, given the tremendous volume of data Netflix users draw onto access networks, these sorts of paid interconnection arrangements are economically efficient.
 
There is little concern that access networks will be able to leverage their last-mile status to extract anti-competitive rents from interconnection arrangements because of simply how many paths there are into the network. Access networks are already well interconnected with the rest of the Internet – these simply are not like the terminating monopolies of old where you had to get equipment into a central office in order to interconnect. Instead, numerous possible arrangements will allow for a great deal of flexibility for edge providers to find the most economically efficient route onto the combined company’s network. There are already several CDNs that have negotiated deals to deliver large amounts of data within these networks, and numerous transit providers compete fiercely to provide access to the Internet.
Indeed, it has been well established that the highly-competitive transit market functionally provides a price ceiling to deliver data to a last-mile access network.6 This is a key
 
 

5 Netflix, “Highest Quality HD Now Available to all Netflix Members,” (Sept. 26, 2013),
http://blog.netflix.com/2013/09/highest-quality-hd-now-available-to-all.html.
6 See David Clark et al., “Interconnection in the Internet: the policy challenge,” 39th Research Conference on Communication, Information and Internet Policy, (Aug. 2011).
 
 
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point – the highly competitive transit and CDN markets will continue to provide an alternative to paid interconnection, ensuring that the sort of arrangements Netflix is seeking are very unlikely to be anti-competitive.

III.
A Larger Combined Company Can Better Serve Consumers
 
The Commission should not overlook the significant technological and economic benefits that would come from a combined, larger company. A larger footprint and increased economies of scale will allow the company to spread high fixed costs over more customers. Not only do these costs include the important capital expenditures required to expand, maintain, and upgrade parts of its network, but also the expenses of developing innovative new offerings, developing marketing materials, ensuring network security, overall management and other services. Having a larger footprint allows the company to spread these fixed costs over a larger revenue base, thus increasing economy-wide productivity.
 
Many innovations in this sector are moving to the fast-paced, iterative design process of software. For example, Comcast’s X1 platform allows the company to quickly refine the user interface without having to wait for a re-designed cable box. There is also pressure to transition network equipment to “Software Defined Networking” with generalized components and a control plane abstracted into software. These types software-based innovations can be very quickly scaled out throughout entire networks, meaning a combined company would be in a better position to not only innovate more quickly, but, more importantly, scale those innovations out to more consumers with lower fixed costs than if two companies were developing them.
 
Many critics of the proposed transaction point to poor customer service ratings of these companies as a reason to reject the deal. Ignoring the fact that these issues are not merger specific, it is important to remember that these are complex industries where much can go wrong. As ITIF has pointed out, consumer ratings of UK broadband offerings are similarly low,
 
 
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despite much more competition due to separation of wholesale and retail networks (e.g., Open Reach).7 Consumers rightfully have high expectations but often under-appreciate the difficulty in managing an large, advanced network, some of which is out “in the wild,” strung on poles or buried underground, where much can go wrong. There are also often problems in the computers or routers of the consumer, over which access networks have no control. Indeed, other complex, network industries, such as airlines, also rank low in customer satisfaction and telecom companies consistently rank low across the world. Notwithstanding that this merger would not change the competitive pressures on the combined company, consumer satisfaction is simply not a good ground to question this transaction.

IV.
Conclusion
 
The broadband and video markets that Comcast and Time Warner Cable operate in are complex network industries that depend on scale and innovation. Regulators should be cautious about interfering on the basis of static efficiency presumptions without considering the longer term dynamic competition pressures that may motivate a transaction. The proposed transaction offers little concern over reduction in competition – by offering increased scale without reducing competition, the deal is in the public interest.

Doug Brake
Telecom Policy Analyst

Information Technology and Innovation Foundation
1101 K Street NW, Suite 610
Washington, DC 20005

 
7 Adams Nager, “How to Misuse American Customer Satisfaction Index Data to Try to Block a Merger,” The Innovation Files (Mar. 24, 2014), http://www.innovationfiles.org/how-to-misuse-american-customer-satisfaction-index-data-to-try-to-block-a-merger/.
 
 
 
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August 25, 2014
 
 
Chairman Tom Wheeler
Commissioner Mignon Clyburn
Commissioner Jessica Rosenworcel
Commissioner Ajit Pai
Commissioner Michael O’Rielly
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554
 
RE: MB Docket No. 14-57
 
Dear Chairman Wheeler and Commissioners:
 
We are a group of professors and academics writing to provide the Federal Communications Commission (“Commission”) with useful information and context to better inform the analysis of the proposed Comcast Corporation (“Comcast”) and Time Warner Cable, Inc. (“TWC”) merger.
 
I. 
Constraint is the key to merger analysis
 
The guiding principle under competition law and sound policy is that a merger should only be challenged if there is a substantial lessening of competition. The key to making this determination is whether the merging firms constrain each other. Companies constrain each other when they substantially influence each other’s competitive decision making. If a cable company would refuse to raise prices or reduce services due to competition with another company, then these companies constrain each other. Likewise, if a cable company lowers prices, adds additional content, or increases internet speeds due to the threat of competition from another company, then this also is evidence of constraint. Constraint causes companies to both take and abstain from actions that will prevent customers from leaving for a rival company or entice new customers to switch from a rival company.
 
Constraint is usually the most probative measure of whether a transaction will lessen competition. Thus the competition enforcement agencies have permitted a wide variety of mergers even in potentially concentrated markets where there was insufficient evidence of constraint. A prime example of this is the Federal Trade Commission’s (“FTC”) closing of its investigation of the ESI / Medco merger where it stated:
 
While this transaction appears to result in a significant increase in industry concentration, nearly every other consideration weighs against an enforcement action to block the transaction. Our investigation revealed a competitive market for PBM services characterized by numerous, vigorous competitors who are expanding and winning business from traditional market leaders. The acquisition of Medco by Express Scripts will likely not change these dynamics: the merging parties are not particularly close competitors, the market today is not conducive to

 
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coordinated interaction, and there is little risk of the merged company exercising monopsony power. Under these circumstances, we lack a reason to believe that a violation of Section 7 of the Clayton Act has occurred or is likely to occur by means of Express Scripts’ acquisition of Medco.1
 
The FTC also closed its investigation of the merger between Universal Music Group (“Universal”) and EMI Recorded Music (“EMI”), the first and fourth largest recorded music companies in the world, due to a lack of evidence of “head-to-head competition.”2 The FTC found that their products were highly differentiated and that the amount of direct competition between Universal and EMI was insignificant.3
 
Comcast and TWC are not significant direct competitors in any relevant market including cable services or broadband. The Horizontal Merger Guidelines requires a market definition consisting of a product and geographic market when analyzing a potential competitive concern.4 The “market definition helps specify the line of commerce and section of the country in which the competitive concern arises.”5 “The arena of competition affected by the merger may be geographically bounded if geography limits some customers’ willingness or ability to substitute some products, or some suppliers’ willingness or ability to serve some customers.”6 Consistent with the Horizontal Merger Guidelines, the Commission has previously concluded that the market for cable services is local.7 Comcast and TWC compete in distinct and separate local markets.8 Comcast’s internal estimates shows that out of the two companies’ combined 33 million customers, only about 2,800 residential, small, or medium business customers are located in the same zip+4 areas.9 Across all business services, Comcast only found about 215 customers were in common zip codes.10 This geographical distinction shows that Comcast and TWC do not directly compete with each other at the local level.
 
While Comcast and TWC do not constrain each other at the local consumer level, there remains the question of whether these companies constrain each other at the buyer level. A method of determining this constraint is to look at the changes in the abilities and incentives of Comcast to potentially wield monopsony power after the merger. In video, Comcast currently serves approximately 21.7 million customers and TWC currently serves approximately 11.4 million customers.11 Comcast will voluntarily divest approximately 3 million video customers, leaving an approximate total video subscriber base of 30 million post-merger — an 8 million
 
 

1 Statement of the Federal Trade Commission Concerning the Proposed Acquisition of Medco Health Solutions by Express Scripts, Inc., FTC File No. 111-0210, at *9 (April 2, 2012).
2 In the Matter of Vivendi, S.A. and EMI Recorded Music, Statement of Bureau of Competition Director Richard A. Feinstein (September 21, 2012).
3 Id.
4 U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger Guidelines § 4 [hereinafter “Horizontal Merger Guidelines”].
5 Id.
6 Id. at § 4.2.
7 See, e.g., Adelphia Order ¶ 81; SBC-AT&T Order ¶ 97.
8 Comcast Public Interest Statement at 127.
9 Id. at n.307.
10 Id.
11 Id. at 8, 14.
 
 
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customer difference.12 Comcast’s new market share – approximately 30 million out of over 100 million – will be essentially equivalent to Comcast’s subscriber share after the 2002 AT&T Broadband transaction and 2006 Adelphia transaction.13 Comcast’s new market share will also be under the FCC’s former 30% ownership cap on monopsony power, which was thrice rejected by the D.C. Circuit as too restrictive.14 The addition of TWC’s 8 million customers will result in a Comcast market share that is not unprecedented. There is no evidence that Comcast wielded unlawful monopsony control or that there was substantially lessening of competition after the AT&T Broadband and Adelphia transactions.
 
This same analysis can be used to address concerns over Comcast’s ability or incentive to harm new internet-based rivals through foreclosing them from the market. In regards to ability, there are two major factors preventing Comcast from foreclosing internet rivals. The first is the simple fact that Comcast committed to following the FCC’s 2010 Open Internet Order regardless of the DC Circuit decision, and that these Open Internet protections will be extended to TWC customers.15 All post-merger broadband customers will enjoy the protections of the no blocking and non-discrimination rules that were included in that order.16 The second factor is virtually all US households have a choice of broadband providers – the FCC reports that 97% of US households have a choice of at least two broadband providers and three including wireless.17 Foreclosing a customer from accessing a desirable online product or service is the type of action that is likely to result in costumer defection to these competitors.
 
In regards to incentive, while Comcast may compete with internet-based companies on the provision of some video content, the consumption of internet-based content drives demand for internet service provision. Comcast’s video service division may have an incentive to attempt to foreclose internet-based rivals, but its internet service division has the incentive to encourage customers to consume more internet-based content. A simple cost-benefit analysis shows which incentive is likely to prevail. The foreclosure of internet-based rivals from the market is an action with a high enforcement risk and the loss of consumer goodwill, while the anticipated benefits are hard to measure. Conversely, encouraging customers to consume more internet content is substantially less risky and has the benefit of driving the sale of higher tier internet services. This scale is further tipped by the fact that cable video service is a product that appears to be in decline, while the internet is experiencing rapid growth.18 It is not rational to risk a product in its growth stage for one in decline.
 
 

12 Id. at 25.
13 Business Week, A Comcast-Time Warner Cable Merger May Be Just Fine With Regulators, Feb. 13, 2014, http://www.businessweek.com/articles/2014-02-13/a-comcast-time-warner-cable-merger-may-be-just-fine-with-regulators.
14 Associated Press, Appeals Court Rejects Cap on Cable Ownership, THE NEW YORK TIMES (Aug. 28, 2009), http://www.nytimes.com/2009/08/29/technology/companies/29cable.html? r=0.
15 David Cohen, Comcast and Time Warner Cable Announce Merger, Detail Public Interest Benefits and Undertakings, COMCAST VOICES (Feb. 13, 2014), http://corporate.comcast.com/comcast-voices/comcast-and-time-warner-announce-merger-detail-public-interest-benefits-and-undertakings.
16 Id.
17 FCC Internet Access data December 2013,
http://transition.fcc.gov/Daily Releases/Daily Business/2013/db1224/DOC-324884A1.pdf.
18 Edmund Lee, TV Subscriptions Fall for First Time as Viewers Cut the Cord, Bloomberg (Mar. 19, 2014, 2:38 PM), http://www.bloomberg.com/news/2014-03-19/u-s-pay-tv-subscriptions-fall-for-first-time-as-streaming-gains.html.
 
 
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Finally, because Comcast is partially vertically integrated, it is important to address whether there is a significant change in post-merger programming power. At the outset it is important to note that Comcast will be extending the programming conditions of the NBCUniversal deal to the new territory and programming acquired from TWC. This means that the companies that purchase programming from TWC will actually be receiving more
 
protections than they currently enjoy. Comcast’s acquisition of TWC will also not significantly change its programming holdings. Comcast would only be acquiring control over several local news channels, one professional sports English-language RSN, and interests in two national cable networks in which Comcast already has part ownership.19 Critics of the deal concede this point, noting that “TWC brings relatively little content to the merger.”20 Given the insignificant changes in merger-specific programming power, there is little reason to believe that TWC constrains Comcast’s competitive programming decisions.
 
II. 
Increased buyer power is not a reason for challenging this deal
 
Buyer power can be a benefit by helping consumers receive products at the lowest cost. Buyer power is only at issue when there are several companies involved in creating a product and delivering it to a consumer. When a buyer of an input is able to negotiate a lower price at some layer in the product channel, that lower price is usually transferred to some extent as a benefit to the consumer in the form of lower price or increased quality. The extent to which the benefit transfers is dependent on the level of competition in the remaining layers between the product and the consumer. Wal-Mart is a prime example of a company that has buyer power. Wal-Mart is known to have enough negotiating leverage to drive down the prices it pays suppliers. However, Wal-Mart also passes on much of these savings to customers in order to better compete with other retailers. Amazon.com is another similarly situated retailer that is known to drive down the prices it pays to suppliers and then offer low prices to its customers. No one could argue that either of these retailers raises prices or decrease output, which is the main concern of competition analysis.
 
There are only a few scenarios where buyer power produces negative effects, which is when the power decreases output and ultimately elevates price. In extreme instances of buyer power, called monopsony power, low prices demanded in per-unit pricing transactions21 can force suppliers out of business or cause them to reinvest less than they would in a market where a buyer does not have monopsony power. This causes the reduction of output, which in turn harms consumers. Monopsony power can only occur when sellers have no other attractive outlet for their products. Otherwise a seller will just move its products to the seller it can get the most profit from.
 
 

19 Comcast Joint Senate Testimony at 46.
20 Diana Moss, Rolling Up Video Distribution in the US: Why the Comcast-Time Warner Merger Should be Blocked, American Antitrust Institute White Paper at 11 (June 11, 2014), available at http://www.antitrustinstitute.org/sites/default/files/AAI_CC-TWC%20White%20Paper_6-11.pdf.
21 In more complex pricing arrangements, which are certainly available in content transactions, there is generally no implication of a decrease in output.
 
 
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In the matter at issue, Comcast is the buyer of content which it then distributes to consumers. Buyer power is then the negotiating leverage Comcast has to get the lowest possible price from content creators. Negative effects are unlikely to be “a significant concern” as recognized by the Horizontal Merger Guidelines, because content creators “have numerous attractive outlets for their goods or services.”22 Content creators can sell their products nationwide through satellite television providers, and in many markets it can also sell through competing wireless or wireline providers. Content creators can also sell their products to various new internet distributors such as Amazon, Hulu, Netflix, Google, and Apple.
 
Evidence suggests that in the current market, seller power is greater than buyer power. Indeed, programming costs have gone up twice as fast in recent years as cable bills.23 Comcast representative David Cohen has testified that programmers have “inordinate market power and attractiveness of their content” which puts them in the driver’s seat in fee negotiations.24 The recent dispute between TWC and content creator CBS highlights the extent of seller power. In the third quarter of 2013, TWC customers in the New York, L.A., Dallas and other markets lost access to Showtime and CBS-owned stations during a fight over fees.25 During that same quarter TWC reported a loss of 306,000 cable subscribers due in significant part to the content blackout.26 Because it is a bundle provider, these losses also hurt TWC’s data and voice service businesses, where it lost 24,000 and 128,000 subscribers respectively.27 Some TWC subscribers even filed a lawsuit in Los Angeles, “claiming their contract for service was being breached, among other charges.”28 On the other hand, during the blackout CBS show ratings remained quite strong, for the most part, and the “network insisted it was easily weathering the storm.”29 If content creators currently have greater bargaining power then, to the extent there is a change in bargaining power post-merger, prices should decrease with little chance of ill effect. These lowered prices should reach consumers as a benefit due to Comcast’s competition with rival satellite, wireless, wireline, and internet-based distributors.
 
Critics of the deal falsely state that any decrease in prices Comcast is able to receive post-merger will come at the cost of an increase in prices for other distributors, which in turn will raise costs for consumers. This claim lacks a foundation in economics. Content creators will always try to obtain their profit maximizing price from each distributor. This motivation is not influenced by deals with other distributors, but is instead dictated by market forces. The reason why is clear. If a content creator raises its price above its profit maximizing price, then the increased income from a higher price will be more than offset by the loss of sales due to the higher price. The content creator will ultimately lose money. If, on the other hand, the content
 
 

22 Horizontal Merger Guidelines § 12.
23 Bloomberg View, Comcast’s deal to buy Time Warner Cable might prove beneficial to consumers, Feb. 13, 2014, http://www.bloombergview.com/articles/2014-02-13/stop-whining-about-the-comcast-time-warner-merger.
24 Transcript: Q&A W/ Sen. Check Grassley on the Proposed Comcast Time Warner Cable Merger — April 9, 2014, Jsquared News (April 30, 2014), http://www.;jsquarednews.com/2014/04/transcript-qa-w-sen-chuck-grassley-on-the-proposed-comcast-time-warner-cable-merger-april-9-2014/.
25 Hilary Lewis, Alex Ben Block, Time Warner Cable Loses 306,000 TV Subscribers Amid CBS Dispute, The Hollywood Reporter (Oct. 31, 2013, 6:17 AM), http://www.hollywoodreporter.com/news/time-warner-cable-loses-306000-652131.
26 Id.
27 Id.
28 Id.
29 Id.
 
 
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creator is pricing below its profit maximizing price, then an increase in price will earn them additional income regardless of prices charged to other distributors. Worse, if a content creator charges a distributor higher prices than its rival, and those costs are passed on to the distributors customers, then the content creator is simply encouraging customers to switch to the distributor that pays the content creator the lowest prices. This will also decrease the profits earned by the content creator.
 
III.
The market for video content and internet service delivery is robustly competitive
 
Proper merger analysis should account for the unique characteristics of the market the proposed merger is occurring in. The FTC and DOJ’s merger analysis focuses on whether the transaction will substantially lessen competition or tend to create a monopoly.30 The FCC has the further duty to determine whether the merger is in the public interest.31 These duties are rooted in the same basic principle – competition. But the FCC is allowed to consider a broader range of competitive effects, such as competition for diverse ideas and voices in the media. Therefore, if competition is the touchstone of all merger analysis, then we must take stock of market characteristics that tend to promote competition or suppress it.
 
Market characteristics can be divided into two basic categories: those that affect current competition and those that affect future competition. The characteristics that affect current competition are those that involve incentives to compete. If a service provider enacts a price increase without cause, would other service providers have the incentive to hold prices or lower prices in order to siphon off customers? If a broadcaster silences a point of view, would other broadcasters have the incentive to promote that point of view in order to woo customers who find that point of view, or a diverse set of views, to be important? The characteristics that affect future competition concern the barriers to entering a market. How easily can a company enter that can undercut current market participants on price, deliver better quality, and/or provide a new service customers are demanding? The answers to these market questions inform whether a particular merger will ultimately be competition neutral, competition enhancing, or competition reducing.
 
The current U.S. market for cable services is generally more robust than reported. About 98% of US households currently have a choice from three or more MVPDs 32 This competition is fierce. Experts predict satellite TV companies will gain at least 1.8 million customers to 36.2 million by the end of 2018. Verizon FiOS and AT&T U-Verse are expected to collectively add 5.4 million subscribers by the end of 2018, bringing the telephone total to 16.8 million homes. At the same time, cable is rapidly losing video subscribers.33
 
In addition, competition for the provision of video content is no longer confined to traditional wireline or wireless delivery models. The internet has opened this business to new online video distributors like Netflix, Hulu, Amazon, Google, and Apple who allow consumers
 
 

30 Section 7 of the Clayton Act, 15 U.S.C. § 18.
31 47 U.S.C. § 310(d) (2006).
32 FCC’s Fifteenth Annual Video Competition Report, Para. 36.
33 Los Angeles Times, Cable TV predicted to lose customers to phone and satellite firms, June 3, 2014, http://touch.latimes.com/#section/-1/article/p2p-80398243/.
 
 
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to choose a variety of a la carte or subscription plans for video content. Over the top video revenues are expected to top $10 billion this year.34 The online platform is also allowing companies to experiment in providing new niche video services. For example, Twitch.tv allows people to produce and distribute video game content and Crunchyroll provides customers with subtitled foreign shows, sometimes immediately after airing in their home country. These experiments can be wildly successful, as seen in Twitch.tv’s recent acquisition by Google for $1 billion.35
 
The U.S. market for the provision of internet access is also robust. As Comcast stated in its testimony before the Senate:
Approximately 97 percent of households are located in census tracts where three or more fixed or mobile broadband providers reported offering at least 3 Mbps downstream and 768 kbps upstream, and over 80 percent are located in census tracts where two or more providers reported offering at least 10 Mbps downstream and at least 1.5 Mbps upstream.36
 
Internet service is in the midst of beneficial intermodal competition spurred on by new technology and the repurposing of old technology. AT&T, Verizon, and Google are all competing to deliver fiber optic services, with its significantly faster internet speeds, to American consumers. AT&T’s fiber service, called U-verse, is currently its fastest growing business, and AT&T and Verizon will compete with Comcast for the provision of internet services in 42% of the homes in Comcast’s post-merger footprint.37 DSL technology, despite predictions to the contrary, has succeeded in keeping up with the speed demands of modern internet usage. Among the current DSL providers: Verizon offers speeds up to 15 Mbps, Frontier offers speeds up to 25 Mbps, and CenturyLink offers speeds up 40 Mbps.38 AT&T is currently expanding its DSL network and increasing speeds to 45 Mbps, with 90% of its customers receiving 75 Mbps and 70% receiving 100 Mbps.39 There is no sign that DSL is a dead-end technology either. Alcatel-Lucent is running field tests on a DSL technology that exceeds 1 Gbps.40 American consumers are also increasingly giving up wired internet access for the freedom of wireless. “10% of U.S. households have abandoned fixed-line service and rely entirely on mobile devices for their Internet access.”41 Studies have shown that current LTE
 
 

34 Fierce Cable, Netflix, Amazon help drive North American OTT revenues above $10B, August 5, 2014,
http://www.fierceonlinevideo.com/story/netflix-amazon-help-drive-north-american-ott-revenues-above-10b/2014-08-05.
35 Dean Takahashi, Google’s $1B purchase of Twitch confirmed —joins YouTube for new video empire, VENTUREBEAT (July 24, 2014 1:39 PM), http://venturebeat.com/2014/07/24/googles-1b-purchase-of-twitch-confirmed-joins-youtube-for-new-video-empire/.
36 Comcast Joint Senate Testimony at 38. Data comes from FCC, Internet Access Services: Status as of December 31, 2012, at fig. 5(b) (WCB Dec. 2013), http://transition.fcc.gov/Daily Releases/Daily Business/2013/db 1224/DOC-324884A l.pdf.
37 Comcast Joint Senate Testimony at 39.
38 See Letter from Lynn R. Charytan, Senior Vice President, Legal Regulatory Affairs and Senior Deputy General Counsel, Comcast Corp., to Marlene H. Dortch, Secretary, FCC, MB Docket No. 10-56, Ex. A, Pt. 3 (filed Feb. 21, 2014) (detailing competitive standalone HSD options in Comcast’s top 30 markets).
39 Christopher S. Yoo, Technological Determinism and Its Discontents, 127 HARV. L. REV. 915, 919 (2014).
40 See Mikael Ricknas, Alcatel-Lucent Gives DSL Networks a Gigabit Boost, PC World, July 2, 2013, available at http://www.pcworld.com/article/2043483/alcatellucent-gives-dsl-networks-a-gigabit-boost.html.
41 Christopher Yoo Senate Testimony at 5.
 
 
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technology provides an average of 12 Mbps speeds with a peak of 50 Mbps.42 Sprint has also indicated that they plan on building a wireless network capable of 200 Mbps to compete with cable broadband.43 To put these speeds into perspective, Netflix can stream video to its customers on as little as 0.5 Mbps and only needs 3 Mbps to stream standard definition quality content.44 Ultra high definition content requires 25 Mbps.45
 
Intermodal competition is lowering the barriers for new competitors to enter the market. There are currently four potential ways for companies to bring internet services into the home: cable, phone lines, fiber, and wireless. Most homes are already wired for cable and phone, which can be used to provide broadband speeds when paired with modern technology, and fiber service is growing. Wireless technology is unique in that it provides a way of connecting rural homes that would otherwise be cost prohibitive to connect through wired means. This can be seen in Africa, where many have leapfrogged wired internet technology and are using wireless devices to connect to the internet.46 Once a home is served with a data connection, companies can compete on top of that data connection for voice and video services. Technology is creating a vibrant and dynamic market where consumers are experiencing more, not less, competition for their dollars.
 
IV. 
Each transaction must be analyzed on its own merits
 
The existence of other deals or potential deals is irrelevant under the law and sound competition policy. Some commenters will try to inject irrelevant matters into this proceeding, e.g., the announced AT&T / DirecTV merger, the attempted Sprint /T-Mobile merger, the failed take over of Time Warner by 21st Century Fox, and future media consolidation in response to the merger.
 
The Commission has been clear that a license transfer proceeding must focus on transaction-specific harms and benefits. The Commission has previously ruled that issues that predate a reviewed transaction are not transaction-related, and should therefore not be considered.47 The Commission has also ruled that activities that are anticompetitive in general but are not merger-specific should be addressed through other proceedings.48 Under this reasoning the potential reactions of third parties to the merger would also be irrelevant. The Commission appropriately acknowledged and dismissed this tendency to use merger proceedings to air unrelated grievances in AOL / Time Warner:
 
The Commission recognizes and discourages the temptation and tendency for parties to use the license transfer review proceeding as a forum to address or
 

42 Id.
43 PC World, SoftBank CEO: U.S. mobile broadband needs to be back on top, Mar. 11, 2014,
http://www.pcworld.com/article/2107020/softbank-ceo-son-us-mobile-broadband-industry-needs-more-competition.html.
44 Internet Connection Speed Recommendations, Netflix Help Center, https://help.netflix.com/en/node/306.
45 Id.
46 Matthew Wall, Africa’s mobile boom powers innovation economy, BBC NEWS (June 30, 2014),
http://www.bbc.com/news/business-28061813.
47 Applications of Cellco P’ship d/b/a/ Verizon Wireless & SpectrumCo LLC and Cox TMI, LLC for Consent to Assign AWS-1 Licenses, Memorandum Opinion and Order and Declaratory Ruling, 27 FCC Rcd. 10698 ¶ 89 (2012).
48 AT&T-BellSouth Order ¶ 56 n.154.
 
 
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influence various disputes with one or the other of the applicants that have little if any relationship to the transaction or to the policies and objectives of the Communications Act.49
 
The Commission should continue to reject non merger-specific information in its analysis of the proposed merger.
 
V. 
Benefits of the transaction
 
There are many potential benefits to this transaction. In this comment we would like to highlight two that are both of great importance and also highly likely to be realized post-merger.
 
Post-merger, Comcast’s Internet Essentials program will be able to provide broadband and digital literacy programs to low-income subscribers in TWC’s coverage areas. This will include large metro areas like New York, Los Angeles, Dallas, Kansas City, and Charlotte.50 Comcast’s Internet Essential’s program provides $9.95 a month internet service and $149.99 subsidized computers to families with at least one child eligible to participate in the National School Lunch Program.51 Since the program began in 2011, Comcast has connected more than 1.4 million low-income Americans to the internet. In order to make sure these families can take advantage of the internet, Comcast has “[i]nvested more than $200 million in cash and in-kind support to help close the digital divide, reaching more than 1.75 million people through the program’s non-profit digital literacy partners” and sold almost 30,000 subsidized computers.52 In addition, on Aug. 4 Comcast announced that it will offer six months of free internet as well as provide amnesty to families that have not been able to subscribe to Internet Essentials due to unpaid bills over 1 year old. Comcast’s Internet Essentials program is not just for families, Comcast also “[o]ffered Internet Essentials to more than 30,000 schools and 4,000 school districts, in 39 states and the District of Columbia.”
 
Digital literacy and access to the internet is essential in countering the current socio­economic trend that is leaving an estimated 60 million people behind.53 Called the digital divide, this trend is beginning to cut off Americans from jobs, government services, health care, and education.54 The digital divide is also “deepening racial and economic disparities in the United States.”55 The convenience of the internet has moved many tasks online, but this has negatively impacted offline options.56 A lot of employers don’t accept offline job applications and many
 
 

49 Applications for Consent to the Transfer of Control of Licenses and Section 214 Authorizations by Time Warner Inc. and America Online, Inc., Transferors, to AOL Time Warner Inc., Transferee, Memorandum Opinion and Order, 16 FCC Rcd. 6547 ¶ 6 (2001).
50 David L. Cohen, Comcast to Offer Six Months of Free Internet Essentials Service and Announces Amnesty Plan for Back Due Balances, Comcast Voices (Aug. 4, 2014), http://corporate.comcast.com/comcast-voices/comcast-to-offer-six-months-of-free-internet-essentials-service-and-announces-debt-forgiveness-plan.
51 How It Works, http://www.internetessentials.com/how-it-works.
52 David L. Cohen, supra note 50.
53 Edward Wyatt, Most of U.S. Is Wired, but Millions Aren’t Plugged In, The New York Times (Aug. 18, 2013), http://www.nytimes.com/2013/08/19/technology/a-push-to-connect-millions-who-live-offline-to-the-internet.html?pagewanted=all&_r=0.
54 Id.
55 Id.
56 Id.
 
 
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employers require computer and internet literacy.57 Comcast’s Internet Essentials program is the most successful private endeavor to fix the digital divide.
 
The second major benefit that is likely to occur post-merger is Comcast’s increased ability to invest in its network due to the additional scale provided by TWC’s customers and fixed capital. To understand the benefits of scale it is important to outline why high fixed cost industries are different than traditional industries. In a traditional industry, economics tells us that the cost of a product will tend to equal marginal cost, or the cost to produce one more unit of the product. However, in an industry like the cable industry, where there are extremely high fixed costs but low variable costs, the marginal cost to serve one additional home may be near zero. This is because once the infrastructure is in place to provide the service, the remaining cost of actually providing the service is minute. Unfortunately, no rational actor would ever provide cable service for nothing. High fixed cost industries differ from the classic economic model because the motivation for investment in the fixed costs comes from an expected return on the investment, not on the marginal cost of the product. In a high fixed cost industry, scale is extremely important because it enhances the ability of companies to invest in improving or expanding its services. A $100 million investment to serve a community with the newest generation of broadband internet is easier for a larger company to make than a smaller one.
 
This does not mean that high fixed cost industries do not face competition. Many high fixed cost industries, including the cable industry, face intermodal competition. If a consumer wants to make a phone call then they usually have the option to place it through a national cellphone provider, their local telephone carrier, their local cable company, or an internet service like Vonage. Many consumers can likewise usually choose to access the internet through cable, DSL, or their connected smartphone. For video, many consumers have a choice among cable, satellite, over-the-top, or services sometimes offered by fiber or DSL providers. Intermodal competition is important in ensuring that the benefits of scale outweigh problems that can occur when additional scale leads to monopoly power. If insufficient competition leads to ultimately higher costs and lower output, then additional scale from a merger may not be worth the price and a merger should be blocked. This does not appear to be the case in the proposed Comcast / TWC merger.
 
An example of a benefit Comcast’s increased scale will likely bring is the hundreds of millions of dollars Comcast has pledged to invest annually to bring TWC’s broadband up to Comcast’s standards for internet speeds and quality.58 Currently, Comcast offers speeds of up to 505 Mbps in select areas and up to 105 Mbps nationally, while TWC offers speeds of up to 100 Mbps in select areas and 50 Mbps in most locations.59 Comcast is also an industry leader in the deployment of DOCSIS 3.0, an international telecommunications standard for high speed data transfer, which should also flow to TWC subscribers after the merger.60 While it is true that current TWC subscribers may eventually receive these benefits without the merger, the additional scale and expertise from the proposed merger with Comcast will ensure faster deployment.
 
 

57 Id.
58 Comcast Public Interest Benefits Summary.
59 Id.
60 Id.
 
 
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Signed,
 
Thomas Arthur, L. Q. C. Lamar Professor of Law, Emory University School of Law
 
David Balto, antitrust attorney and former Director of Policy and Evaluation of the Federal Trade Commission
 
Henry N. Butler, George Mason University Foundation Professor of Law and Executive Director, Law & Economics Center, George Mason University School of Law
 
Richard Epstein, Laurence A. Tisch Professor of Law and Director of the Classical Liberal Institute, New York University School of Law
 
Kenneth G. Elzinga, Robert C. Taylor Professor of Economics, University of Virginia
 
Keith Hylton, William Fairfield Warren Distinguished Professor and Professor of Law, Boston University School of Law
 
Thomas Lambert, Wall Chair in Corporate Law and Governance, University of Missouri School of Law
 
Geoffrey Manne, Executive Director of the International Center for Law & Economics
 
Scott Masten, Professor of Business Economics and Public Policy, University of Michigan Ross School of Business
 
Paul Rubin, Samuel Candler Dobbs Professor of Economics, Emory University
 
Michael Sykuta, Associate Professor in the Division of Applied Social Sciences and Director of the Contracting and Organizations Research Institute, University of Missouri
 
 
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August 20, 2014
 
Marlene H. Dortch
Secretary
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554
 
RE: MB Docket No. 14-57
 
Dear Ms. Dortch:
 
I am reaching out to the Federal Communications Commission on behalf of Boston Ballet’s Institutional Team to express my support for the proposed transaction between Comcast and Time Warner Cable.
 
As the Director of Corporate and Institutional Relations at Boston Ballet, I have experienced the benefits of using Comcast Business Ethernet services for faster Internet speeds, greater reliability and inter-office collaboration for all four of our locations in the Boston area. The success my organization has had using Comcast Business makes me confident that small businesses and non-profit organizations in Comcast’s new markets will benefit from a successful transaction.
 
Of course, we benefit from more than the services we purchase from Comcast. The company truly finds creative ways to support the community. In our case, the company has made available to us space on its video-on-demand library, allowing us to provide video of recent performances and increasing our exposure within the community. As a non-profit organization, we all our looking at ways to build demand for the arts that keep us innovative and relevant in the community, and Comcast’s solution was unique, imaginative and effective.
 
Thank you for taking the time to consider my thoughts on working with Comcast
 
/s/ Richard Armstrong
 
Richard Armstrong
Director of Corporate and Institutional Relations
 
 
 
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August 18, 2014
 
 
Tom Wheeler
Chairman
Federation Communications Commission
445 12th Street, SW
Washington, DC 20554
 
RE:           MB Docket No. 14-57
 
Dear Chairman Wheeler:
 
As President and CEO of the San Diego Regional Chamber of Commerce, I write today to urge the Federal Communications Commission to approve the proposed transaction between Comcast and Time Warner Cable.
 
The Chamber is dedicated to promoting a business-friendly environment and to growing the local economy. If its presence in Northern California markets is any guide, Comcast will be an outstanding partner in helping us advance this mission. If the proposed transaction is approved, Comcast plans to invest heavily in advanced multi-Gigabit high-speed data infrastructure that will provide San Diego businesses a sturdy foundation for growth, while also offering much-needed competition for business-class telecommunications services for firms of all sizes.
 
Though these benefits of the transaction will come in the near-term, we see long-term advantages as well. Our Chamber spends a great deal of our efforts to secure a strong economy for the future, and we want to ensure that all San Diego young people have the opportunity to become tomorrow’s captains of industry in the city where they grew up. Comcast’s Internet Essentials program, which offers low-income families the opportunity to obtain low-cost Internet access, is precisely the type of program we need to help maximize the opportunity for all our kids to become tomorrow’s business leaders. Over 350,000 households nationwide have been connected through Internet Essentials. By bringing Comcast to San Diego, the proposed transaction will expand this successful program and provide economic opportunity and advancement to those most in need.
 
Thank you for taking the time to consider our views. I encourage you to approve the proposed Comcast-Time Warner Cable transaction.
 
Sincerely,

/s/ Jerry Sanders

Jerry Sanders
President & CEO
 
 
 
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August 25, 2014
 
Tom Wheeler
Chairman
Federal Communications Commission
445 12th Street, SW
Washington ,DC 20554
 
Dear Chairman Wheeler:
 
The Illinois Hispanic Chamber of Commerce supports Comcast’s acquisition of Time Warner Cable. Comcast already serves much of Illinois and will continue to do so once the transaction closes. Our members, and Hispanic businesses nationwide, stand to benefit from the combination.
 
Illinois’— and particularly Chicago’s — importance as a Midwestern hub for national businesses only increases as a result of this merger. Comcast potentially serving New York and Los Angeles in addition to Chicago not only gives a competitive option to national businesses with locations across the country but makes the Chicagoland area more attractive to such businesses. Chicago already boasts a Gigabit infrastructure thanks to Comcast; this merger would also create for Chicago a service provider that reaches from coast to coast.
 
IHCC members appreciate Comcast’s record of supporting businesses owned and operated by Hispanics and other minorities. The company spent over a billion dollars last year with minority-owned suppliers and continues to seek out new partners, in part by working with diversity chambers of commerce like mine.
 
People of color and Hispanics are critical players driving these relationships. 9% of all management employees are Hispanics. The company continues to expand this commitment to minority leadership. The number of people of color in vice-presidential positions and above has grown by more than 30% since the closure of the NBCUniversal merger.
 
These inclusion initiatives have led to the ongoing construction of national cable and
 
 
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broadband networks that serve our communities and their businesses. The company provides our citizens with more than 60 Hispanic cable networks, making it the country’s largest outfit of Spanish-language networks. Our organization advocates for the development of independent, minority voices from our community. Comcast offers over 160 independent networks, and has already announced its intention to sponsor 10 addition independent- and minority-owned networks upon approval of this transaction. We are inspired by this ongoing commitment to minority enterprise.
 
Comcast furthermore supports the neediest members of our community. Over 30,000 families have signed up in the Chicago area for Internet Essentials, the nation’s largest broadband adoption program. These families now have access to low-cost internet and computer equipment that will enable their children to become the business and cultural leaders of tomorrow. I understand that the program empowers kids across the country; Comcast has already brought over 2 million individuals on board.
 
We believe that this combination will create opportunities for our members, and through all Americans through the company’s track record of diverse business practices. We urge the Commission to approve the transaction.
 
If you have any questions please do not hesitate to contact me directly via email at oduque@ihccbusiness.net or via phone at 312-425-9500.
 
Sincerely,
 
/s/ Omar Duque
 
Omar Duque
President & CEO
Illinois Hispanic Chamber of Commerce
 
 
105

 
 
 
 
August 25, 2014
 
Tom Wheeler
Chairman
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554
 
RE: MB Docket No. 14-57
 
Dear Chairman Wheeler:
 
Thank you for this opportunity to comment on a proposal before the Commission. The Arlington Chamber of Commerce is focused on the shift underway across the country that is moving technology from the research stage to the worldwide marketplace. Our members are keenly interested in digital development and in incorporating digital innovations into their everyday businesses.
 
A major architect of digital technology, Comcast is a leader in the telecommunications industry with its multi-gigabit ethernet that allows our business, government and education members to move and manipulate information quickly and efficiently.
 
We offer our support of the Comcast and Time Warner Cable transaction because of its potential for extending this expertise into new communities. Currently, many of our members operate multiple offices, sometimes dealing with two or more telecommunications providers. Their efficiencies would increase with the ability to streamline communication and data storage through the same provider.
 
Notably, Comcast has exhibited a unique approach to combining business with community engagement. We believe that is the reason that so many school and nonprofit projects it is involved in produce results. For instance, the company’s executives and other employees take part in many mentoring and leadership training initiatives for such business groups as Leadership Arlington and Women  in Cable Television, among others.
 
In January, Comcast sponsored and delivered a leadership session during the 2014 National Mentoring Partnership’s yearly summit in Arlington. The session addressed collaboration among and
 
 
 
 
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between agencies that help youth, a topic with which Comcast is more than familiar. It has a rich history of partnering with Big Brothers Big Sisters and other clubs for children, here and across the country.
 
Indeed, Comcast’s advocacy for youth is evident in a program begun a few years ago for children from low-income families. Internet Essentials offers inexpensive Internet service for qualifying families so that children who previously had no broadband access now are able to log in to homework sites, research and apply for colleges, and take advantage of all the other information and dollar savings that the ability to be online affords. Dr. Patrick Murphy, Arlington Public Schools Superintendent, recently discussed the impact of this specific program on the community.
 
Comcast is a significant contributor to Virginia’s economy with more than 2,000 employees and 150 offices and facilities. I was able to ascertain that the company invested more than $382 million in our state last year alone. Imagine the potential economic impact the proposed transaction could have in additional cities and states. Economic strength coupled with community investment would certainly be a benefit to any area.
 
Because of Comcast’s record in supporting businesses and communities, I encourage you to approve the proposed transaction.
 
Regards,
 
/s/ Kare Roche
 
Kate Roche
President & CEO
 
 

 
107

 
 

 
August 25, 2014
 
Chairman Tom Wheeler
Federal Communications Commission
445 12th Street, SW
Washington. DC 20554
 
FEE: MB Docket No, 14-57
 
Dear Chairman Wheeler:
 
As President and CEO of the DC Chamber of Commerce (“the Chamber”), I am writing to encourage the Federal Communications Commission (“the Commission”) to consider the manner in which approval of the Comcast and Time Warner Cable transaction (“the Transaction”) will spur the development and deployment of broadband Internet technology that will benefit business large and small throughout the District of Columbia, many of whom are members of the Chamber.
 
I understand that approval of the Transaction will support expansion of Comcast’s network to accommodate the data and video communications that are so important to growing our local technology economy. Since the bringing more jobs to the city is a priority for the Chamber, I am in favor of providing Comcast the flexibility it needs -- consistent with the public interest-to adjust with changing circumstances by proceeding with the Transaction.
 
Comcast has been a longtime and supportive Chamber member, and Donna Rattley Washington, Comcast’s Vice President of Government and Regulatory Affairs, is a member of our Board of Directors. Ms. Washington has supported the DC Chamber’s workforce development and education goals, many of which complement Comcast’s own initiatives.
 
The Chamber is concerned with issues that impact all of its members. Accordingly, I welcome the promise of an expanded commitment to net neutrality in new markets that will be served as a result of the proposed transaction. Also of interest is Comcast’s potential to
 
 
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further increase broadband speeds: It recently showed that it was capable of a 1 Terabit-per-second link (equivalent to more than 1,000 Gigabits) over more than 600 miles. The innovation that can be spurred by such enhanced Internet technology would benefit businesses across our city and the Nation.
 
Comcast products are in step with our members’ needs. Next month the Chamber will host a workshop that makes the case for embracing mobile communication. At the same time, Comcast is rolling out new options for accessing its TV and video content on mobile devices.
 
Three fourths of the businesses in our city are small businesses, and their owners represent our diverse culture. Comcast’s inclusive practices, when it comes to awarding supplier contracts to women and minority-owned businesses, is a model for other employers. As a military veteran, I encourage our members to tap the work ethic and wealth of experience that military veterans bring to private business. Comcast, too, has actively sought to add veterans to its workforce. and its efforts are bearing fruit, This year’s GI. Jobs and Military Spouse magazines named Comcast to their list of “100 Military Friendly Employees of 2014.”
 
I should also point out that Comcast has invested heavily in the District of to ensure our current infrastructure is ready for the future. I am told that the company has spent close to $340 million here on capital expenditures, taxes and fees, and employee and community investment. These investments will help to create more jobs in the Nation’s Capital.
 
The city as a whole benefits from Comcast’s business practices and numerous philanthropic programs such as Comcast Cares Day, professional mentoring, and scholarship grants, to name just a few. As we anticipate further innovation in broadband and video services, Comcast’s proposed transaction with Time Warner Cable promises to extend the company’s corporate/community partnership to new markets. I hope the Commission will consider these supporting factors as it decides whether to approve the Transaction.
 
Sincerely,
 
/s/ Harry Wingo
 
Harry Wingo
President & CEO
DC Chamber of Commerce
 
 
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August 25, 2014
 
Tom Wheeler
Chairman
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554

RE: MB Docket No. 14-57

Dear Chairman Wheeler,
 
The Association of California Cities represents the interests of local governments providing public services to more than 3.25 million residents and businesses. On behalf of our Board of Directors and membership. I am writing to express our support of the proposed combination of Comcast Corporation and Time Warner Cable, which will strengthen the economy of the Orange County communities my organization represents, and improve the options available to our businesses for commercial Internet.
 
As part of this transaction, Comcast has pledged to invest hundreds of millions of dollars to improve service and reliability in former Time Warner Cable communities like Orange County. That has direct benefits - the jobs and economic development that flow from all such capital projects and substantial indirect benefits as well - improved broadband service spurs broader economic development. While I assume Time Warner Cable would also invest in our communities if it remained a freestanding company, a larger scale organization can more readily undertake such efforts.
 
The proposed transaction promises particular benefits for our businesses. Today, most businesses have few options for Internet service - generally you need to lease a pricey T 1 connection or live with residential quality service that gets bogged down as business ebbs and flows. Comcast has indicated that this transaction will allow it to offer significantly more affordable business packages - bringing new competition to this sector of the market.
 
Comcast and Time Warner Cable are both strong companies and good partners to the business Community and local cities in Orange County. I support their plans to combine to better serve our market.
 
 
 
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Sincerely,
 
/s/ Lacy Kelly
 
Lacy Kelly
Chief Executive Officer
Association of California Cities
 
 
 
111

 
 
 
Mr. Tom Wheeler
Chairman
Federal Communications Commission
445 12th Street SW
Washington, D.C. 20554

RE: MB Docket No. 14-57

Dear Chairman Wheeler:

The Inland Empire Economic Partnership (IEEP) of California is excited by the prospect of Comcast serving the San Bernardino region and hopes that the Commission approves the proposed transaction between Comcast and Time Warner Cable.
 
Our mission is to help create the two-county region's voice for business and quality of life. Our membership, a collection of important organizations in the private and public sector, give the organization the knowledge and perspective needed to advocate and provide a vibrant business and living environment in our region. The addition of Comcast to our region would substantially increase the business and living environment of our citizens through access to both their "Comcast Business" services, including faster broadband and cutting edge technology, and broadband adoption programs, including Internet Essentials. Comcast's services would enable local businesses to thrive by increasing productivity and, therefore, their ability to be competitive within their industry while Comcast's broadband adoption programs would give citizens the opportunity to become digitally literate and more qualified when applying for jobs.
 
We also see the proposed merger as a way to grow the economy of our area by generating new jobs. The area this organization advocates for, San Bernardino and Riverside counties in Southern California’s Inland Empire, has endured the worst of the recession and has been slow to recover the loss of some 200,000 jobs over the last six years. This merger would create an unknown but significant number of jobs involved in the installation and upgrade of communications infrastructure.
 
We see the proposed transaction between Comcast and Time Warner Cable as a great opportunity for our region to increase economic development for both businesses struggling after the economic recession and citizens looking for employment. Thank you in advance for your time and consideration.
 
Sincerely,
 
/s/ Paul Granillo
 
Paul Granillo
President & CEO
Inland Empire Economic Partnership
1601 E. Third Street San Bernardino, Calif. 92408
 
 
112

 
 
 
August 25, 2014
 
Tom Wheeler
Chairman
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554
 
RE: MB Docket No. 14-57
 
Dear Chairman Wheeler:
 
On behalf of the Hispanic Federation, I appreciate the opportunity to weigh in on the proposed Comcast-Time Warner Cable transaction. The Hispanic Federation (HF) is a network of Latino serving nonprofit agencies that serve the most vulnerable members of our community. We advocate nationally on vital issues including education, health, immigration, economic empowerment, civic engagement and the environment.
 
As a national advocacy organization, we have partnered with Comcast and the Comcast Foundation for many years to advance civic engagement and voter education in New York, mainly focusing on empowering low-income individuals in the Latino community. I deeply appreciate this partnership, in large part because Comcast and HF have developed a common understanding of some of the major challenges faced by the Latino community and ways we can work systemically to overcome them together.
 
Underlying these challenges are the fundamental issues of civic participation and also of education, which are intertwined, since low educational attainment can be a factor in decreased civic participation. Key to surmounting these challenges is educating the Latino community, and central to that is closing the digital divide and dramatically lowering barriers to entry so that millions of low-income children, youth and families who are shut out can gain access toast and affordable broadband connections.
 
The digital divide is a perennial issue for the city of New York. Given this, I welcome Comcast to use its resources and talents to uplift our community. If approved, I believe Comcast Internet Essentials, and other low-cost broadband products, can provide opportunities to close the digital divide and help New York families acquire 21st century skills - especially if these services expand access toast, reliable and affordable internet connectivity for the low-income individuals that we serve.
 
We at the Hispanic Federation are also excited about the possibilities for new investments in infrastructure for our communities. Comcast has pledged to invest hundreds of millions of dollars to continue to improve their networks and those acquired in the merger. As Comcast’s network reaches all communities, these investments could be the groundwork for economic development in heavily Hispanic sections of New York, if detailed milestones and oversight systems are made to ensure that these communities will truly benefit.
 
 
 
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During the past 20 years, the Hispanic Federation has developed strategic partnerships with corporate and community foundations to deliver programs and services to New York City’s most vulnerable citizens. Hispanic Federation has a proven record with Comcast on important civic projects, and they have consistently and intently listened when we raised a concern about issues important to the Hispanic community. We urge the Commission to work with Comcast to ensure that this proposed transaction will serve the public interest by investing in our community and expanding access toast and affordable broadband connectivity for the vulnerable communities we care for and serve.
 
Sincerely,
 
/s/ Jose Calderon

Jose Calderon
President
 
 
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August 25, 2014
 
Tom Wheeler
Chairman
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554
 
RE MB Docket No. 14-57
 
Dear Chairman Wheeler:
 
As president of the Louisiana Association of Business and Industry, I represent over 2,500 business members around the state that are investing in their communities each and every day. Our members are proud to call Louisiana home and employ many of our citizens around the state.
 
As you may know, Louisiana is responding well to the impact of previous hurricanes and the impact of the national recession. We have seen the recent announcements of billions of dollars of new economic development projects in the state that will create over 250,000 new jobs over the next several years. We are a national leader in per capita income, as well as export and manufacturing growth.
 
Due to this growing demand and opportunity for our people, I write today to urge you to favorably review Comcast’s proposed transaction with Time Warner Cable. As we expand and diversify our economy, it helps to have a corporate partner like Comcast providing world-class broadband service, adding options to consumers and businesses and entertainment for children and adults from all ethnic backgrounds.
 
As a business leader I appreciate all the contributions that Comcast has made to the Louisiana economy and look forward to working with them in the future to build upon that partnership. I urge you to approve the transaction with Time Warner so that even more communities across the U.S. can benefit from Comcast’s presence in their market.
 
Sincerely,
 
/s/ Stephen Waguespack
 
Stephen Waguespack
President
 
 
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August 25, 2014
 
Mr. Tom Wheeler
Chairman, Federal Communications Commission
445 12th Street, SW
Washington, DC 20554
 
R: MB Docket No. 14-57
 
 
Dear Chairman Wheeler:
 
I write this letter on behalf of the Fort Worth Chamber of Commerce to express my support for the proposed transaction between Comcast and Time Warner Cable. The Fort Worth Chamber of Commerce represents 2,000 member  businesses, and works to promote the interests of its members by assuming a leadership role in making Fort Worth an excellent place in which to live, work and do business.
 
Currently, Fort Worth is located in a Charter service market, but were the transaction to be approved, Comcast would expand its network to Fort Worth, which could greatly benefit our member businesses and consumers.
 
Comcast has shown itself be a strong corporate partner in the areas of Texas where it currently offers service, and has shown commitment to supporting local employment. We are very pleased to have learned that Comcast employs 3,000 full-time workers in Texas, and in 2013 spent, over $23 million in total employee investment. This figure covers full health-care benefits. on-the-job training, payroll and payroll taxes, and tuition reimbursement for by employees. Comcast and NBCUniversal own and operate 121 total properties in Texas (including our very own hometown NBC station - KXAS) and generate an annual state and local tax income of nearly $151 million dollars. I believe that Fort Worth could certainly benefit from having such a strong economic partner in our community and local economy, and feel that the move would have a very positive impact.
 
Further, Comcast invests heavily in developing innovative and cutting-edge technology and services, which will add to the investment and improvements made by Charter to their Fort Worth Network. In today’s age, communication and information have become the vital resources that drive our increasingly information-based economy, and Comcast high-speed, expansive network and infrastructure allow for businesses to communicate and share information at high
 

 
116

 
 
Chairman Tom Wheeler
RE: MB Docket No. 14-57
August 25, 2014
Page 2
 
levels of efficiency. Comcast has invested billions in its network and next-generation technologies, and the results speak for themselves; I understand that the company has boosted its broadband speeds 13 times in the last 12 years, doubled the capacity of its network every 18 months, and has deployed the industry’s fastest in-home Wi-Fi gateways to millions of consumers across the nation.
 
The businesses and consumers of Fort Worth would benefit from access to these top-of-the-line services, and by approving the proposed transaction, the FCC could allow Fort Worth to catch up to current Comcast markets.
 
Further, the approval of this transaction will increase competition and innovation throughout the telecommunications industry. By combining resources, Comcast and Time Warner Cable would be a stronger competitor for business and consumers of all sizes in Fort Worth. This stronger model will drive other companies to increase their investments in technology and innovation in order to remain competitive with Comcast, with the result being that our consumers and businesses will have the best services to choose from.
 
I hope that the FCC will realize the exciting potential that the Comcast-Time Warner Cable transaction offers, and approve this transaction so that our businesses can flourish.
 
 
Sincerely,
 
/s/ Bill Thornton
 
Bill Thornton
President & CEO
Fort Worth Chamber of Commerce
 
 
 
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August 25, 2014
 

Federal Communications Commission
445 12th Street SW
Washington, DC 20554
 
Dear Sir/Madam,

The San Antonio Hispanic Chamber of Commerce is San Antonio’s leading resource and advocate for Hispanic businesses. As the organization’s President and CEO, I am responsible for ensuring that our business community works together to improve the economic outlook of our entire community. I encourage the Federal Communications Commission (FCC) to accept the proposed Time Warner Cable/Comcast transaction as I believe it will strengthen our region’s business and economic outlook.
 
One of our chief community education goals is to expose young Hispanic students to STEM (science, technology, engineering and mathematics) careers, an area where they have been traditionally underrepresented. STEM education is widely recognized as a key component for 21st century learning. As the world becomes increasingly all-digital and technologically competitive, our students need to be equipped with the skills and resources that will be considered valuable in the workplaces of the future.
 
Comcast has an impressive record of supporting student’s technology needs and has worked admirably to help close the digital divide that stifles opportunities. Its Internet Essentials program, which offers low-cost Internet access service and discounted computers to low-income families that have a child in the National School Lunch Program, provides opportunities for kids to get online at home and for adults to access information and search for jobs that they might otherwise not know about. Comcast has committed to extend Internet Essentials to areas now served by Time Warner Cable. This program, along with its Digital Connectors program, would assist in our efforts to promote STEM curriculum in local schools.
 
From a business perspective, Comcast’s services are an ideal asset for local companies of all sizes. Comcast provides businesses access to speeds of up to 10 Gbps, the fastest downstream broadband speeds, and multi-point connectivity. The flexibility and scalability of service offered is an added benefit for growing businesses. It should be noted that access to technology like this can spur job creation for businesses that know how to utilize it. That is a great opportunity for San Antonio’s growing Hispanic business base.
 
I encourage the FCC to vote in favor of this transaction so San Antonio can adopt a new partner in its pursuit of economic prosperity for all.
 
Ramiro A. Cavazos
 
/s/ Ramiro A. Cavazos
 
President & CEO
San Antonio Hispanic Chamber of Commerce
 
 
 
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August 25, 2014
 
Tom Wheeler
Chairman
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554
 
RE: MB Docket No. 14-57
 
Dear Chairman Wheeler:
 
The mission of the Valley Industry & Commerce Association (VICA) is to enhance the economic vitality of the greater San Fernando Valley region by advocating for a better business climate and quality of life. Because we believe that the proposed merger of Comcast and Time Warner Cable will support our efforts, we write to urge you to take our perspective into account in your assessment of the transaction.
 
VICA believes that Comcast would help us accomplish our mission by bringing economic development to the greater San Fernando Valley region. Comcast has indicated that they will be investing hundreds of millions of dollars annually to upgrade Time Warner Cable areas to provide better service, faster broadband, cutting edge technology, and options for businesses. These investments will increase productivity and, therefore, competition within the region. When our businesses have the tools necessary to become more successful, there is potential for an increase in growth and jobs within the region.
 
We support the proposed transaction between Comcast and Time Warner Cable and look forward to the potential economic development, growth and jobs, and community investment that Comcast would bring to our region.
 
Sincerely,
 
/s/ Stuart Waldman
 
Stuart Waldman
President
Valley Industry & Commerce Association (VICA)
 
 
119

 
 
 
Tom Wheeler
Chairman
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554
 
RE: MB Docket No. 14-57
 
Dear Chairman Wheeler:
 
I know what it takes to create lasting economic and social impacts and I understand the power of businesses that are dedicated to their communities. I serve as President and Chief Executive Officer of the Knoxvilie Area Urban League (“KAUL”), which promotes diversity and works to secure economic self-reliance, parity, power, and civil rights in the Knoxville area. Based on our organization’s longstanding relationship with Comcast, I believe that Comcast (also knows what it takes, and I am writing to encourage you to approve the proposed Comcast and Time Warner Cable transaction for that reason.
 
KAUL has been a consistently respected partner of Comcast. in each of the last 5 years. Comcast has supported KAUL’s chapter of the National Achievers Society, an honor society and leadership program that recognizes and motivates academically achieving high school juniors and seniors of color. In 2011, Comcast built KAUL’s computer lab and donated computers, enabling us to provide effective after-school, adult-literacy, and workforce-development programs.
 
Comcast has twice partnered with KAUL for its annual Comcast Cares Day, providing volunteers to improve our facility through extensive cleaning, painting, and planting, thereby improving our ability to provide services to the community. And Urban League Young Professionals have worked side-by-side with Comcast employees for several years as volunteers at other Comcast Cares Day events throughout the Knoxville area. As an annual participant in KAUL’s Shoes for School, an annual back-to-school event Comcast has helped to provide the basic necessities of new shoes and school supplies to hundreds of children in our area. Comcast has generously run numerous public service announcements on its system to assist KAUL’s outreach efforts in the community.
 
Comcast also has delivered on its belief in an inclusive and dynamic workforce by hiring minorities at all levels of its corporate structure, coupled with an emphasis on independent programming and multilingual resources. KAUL has been so impressed with Comcast’s commitment that, in 2009, it awarded Comcast its Equal Opportunity - Corporate Leadership Award, given annually to a company demonstrating high levels of diversity in its organization and support of KAUL’s mission.
 
It is my belief that the transaction with Time Warner Cable will only strengthen these policies and further economic opportunities for the citizens of Tennessee and throughout the country. I urge you to approve the Comcast and Time Warner Cable transaction, and allow Comcast’s profound level of engagement to continue.
 
Sincerely,

/s/ Phyllis Nichols

Phyllis Nichols
President and Chief Executive Officer
Knoxville Area Urban League
 
 
120

 
 
 
August 25, 2014
 
Tom Wheeler
Chairman
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554

Re: MB Docket No. 14-57
 
Dear Chairman Wheeler:
 
The Overland Park Chamber of Commerce submits this letter to the FCC in support of the proposed Comcast and Time Warner Cable transaction.
 
Overland Park, Kansas is the second largest city in the state. Our city has increasingly built a reputation as one of the country’s most dynamic corporate centers. We currently support more than 3,800 companies, including the headquarters of some of the world’s leading corporations. For a city with a strong and growing business economy, we require the top technology tools to support our businesses and expanding residential communities. In an area currently served by Time Warner Cable, we are looking forward to the positive impact of Comcast’s service offerings.
 
As representatives of Overland Park’s business community, we work hard to find solutions that best serve our residents, member businesses and the future economic outlook of our community. We believe that the proposed TWC and Comcast transaction will have a positive economic effect on those residents and businesses and urge the FCC to swiftly approve this matter.
 
Sincerely,
 
/s/ Tracey L. Osborne
 
 
Tracey L. Osborne, CCE
President
 
 
 
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August 23, 2014
 
 
Chairman Tom Wheeler
Commissioner Mignon Clyburn
Commissioner Jessica Rosenworcel
Commissioner Ajit Pal
Commissioner Michael O’Rielly
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554
 
RE: MB Docket No, 14-57
 
Dear Chairman and Commissioners:
 
As an introduction, I am Evelyn Smalls, President and Chief Executive Officer of United Bank of Philadelphia, the City’s only African-American owned and controlled commercial bank. It is with great pleasure that I write in support of Comcast’s application to acquire Time Warner Cable.
 
It is my understanding that the fundamental question before you is whether the proposal will benefit the public interest. Now, that is a subject I know well. The United Bank of Philadelphia is a community bank with a primary focus on underserved populations, and the only bank in our city certified by the U. S. Department of Treasury as a Community Development Financial Institution based on its track record of providing affordable products and services to the underserved. I know Comcast as an ethical, responsible corporate citizen of Philadelphia, and great partner to our local businesses, especially our poor and underserved communities.
 
Comcast has led the way ensuring that economic opportunity flows to all. United Bank, for example, has just closed its 10th consecutive one-year revolving credit arrangement with the company, a vital flow of business that we have been able to further syndicate out to 11 additional minority-owned banks around the country - enhancing their bottom lines and ensuring that community-based financial institutions thrive and anchor their communities. Comcast obviously has many choices for its commercial credit, and its decision to seek out local partners in this way speaks volumes about its commitment to sustainable relationships within local communities.
 
The company has also always gone above and beyond to ensure diversity in its hiring, contracting and business practices, as well as its programming and channel lineups. People of color account for 40% of the Comcast/NBCU workforce, including two African-American members of its Board. Comcast has spent over $4 billion with diverse contractors and suppliers in the last four years. Comcast has recently launched two African-American owned networks, Sean Combs’ Revolt TV to Magic Johnson’s ASPiRE, and carries best-in-the-business lineup of networks serving African-American audiences and communities, including The Africa Channel, UP TV, Centric, BET, and TV One. It’s no surprise the company was awarded the inaugural Greater Philadelphia Chamber of Commerce Diversity and Inclusion Award earlier this year.
 
 
 
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Chairman and Commissioners
August 23, 2014
Page 2
 
 
Comcast’s actions reflect a “money where your mouth is” commitment to Comcast’s home community that reveals the company’s true colors - honest, responsible, and committed to doing the right thing. In my opinion that profound civic spirit will ensure the proposed transaction with Time Warner Cable is carried out in an ethical, responsible manner that will benefit the public and the new communities in which Comcast will operate.
 
In closing, I support Comcast’s application to acquire Time Warner Cable and I thank you for considering my views.
 
Sincerely,

/s/ Evelyn F. Smalls

Evelyn F. Smalls
 
 
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August 25, 2014
 
Tom Wheeler
Chairman
Federal Communications Commission
445 12th Street, SW
 
Washington, DC 20554
 
RE: MB Docket No. 14-57
 
Dear Chairman Wheeler:
 
Big Brothers Big Sisters Southeastern PA writes to share our experiences working with Comcast in its hometown. We write this in hopes that our experiences working with Comcast will help the Federal Communications Commission choose to approve the merger between Comcast and Time Warner Cable.
 
Our organization helps children realize their potential and build their futures. We believe that if we nurture the children we will make stronger communities. For more than 100 years, Big Brothers Big Sisters Southeastern PA has operated under the belief that inherent in every child, is the ability to succeed and thrive in life. Our mission is to provide children facing adversity with strong and enduring, professionally supported one-to-one mentoring relationships that change their lives for the better, forever. Comcast has played a large role in the success of our mission, whether it is developing programs or volunteering their time.
 
Comcast’s Beyond School Walls program brings our children into Comcast’s offices and vice versa, providing opportunities for mentorship, guidance and career preparation. Our chapter – along with hundreds of others nationwide – has teamed up with Comcast to help promote the Internet Essentials program, encouraging both broadband adoption at home and di