Applications for Consent to the MB Docket No. 10-56 Transferor, To

FOR PUBLIC INSPECTION

5102097

Before the Federal Communications Commission

Washington, DC 20554

In the Matter of Applications for Consent to the Transfer of Control of Licenses General Electric Company, Transferor, To Comcast Corporation, Transferee

) ) ) ) ) ) ) ) ) ) ) )

MB Docket No. 10-56

PETITION TO DENY OR IN THE ALTERNATIVE IMPOSE CONDITIONS COMMUNICATIONS WORKERS OF AMERICA

Kevin J. Martin Mark C. Ellison Jennifer A. Cetta Patton Boggs, LLP 2550 M Street, NW Washington, D.C. 20037 (202) 457-5635 Counsel for Communications Workers of America

George Kohl Debbie Goldman Communications Workers of America 501 Third Street, NW Washington, D.C. 20001 (202) 434-1194 [email protected]


i 5102097

EXECUTIVE SUMMARY

CWA represents 700,000 workers in communications, media, airlines, manufacturing and

public service, including workers of General Electric, NBCU and Comcast. CWA members are

residents of NBC broadcast station and Comcast cable service areas and are viewers and

subscribers to the same, as well as online video services.

The proposed transaction, as currently structured, poses considerable harm to CWA

members as workers and consumers. It will result in the loss of jobs, erode employee rights and

undermine living standards in the communications and media industries.

After transaction is completed, Comcast will be able to provide its 23.5 million cable

subscribers, 16.3 million broadband customers and 7.8 million telephone subscribers with an

unprecedented supply of programming. Already, Comcast viewers have access to the company’s

18 cable channels that include USA Network, Versus, Golf, and G4 Media, Inc., along with 10

owned and operated Regional Sports Networks (“RSNs’). NBCU brings the NBC Television

Network, which broadcasts 5,000 hours of television programming to 234 affiliated stations

across the country, including 10 NBC owned-and-operated television stations reaching 27

percent of U.S. television households. NBC also comprises national broadcast network

Telemundo and 15 Telemundo owned-and-operated stations; 32 online video properties that

include Hulu.com, CNBC.com and NBCOlympics.com; at least 11 wholly owned cable

networks CNBC, NBC Sports, MSNBC, Syfy, Bravo, Oxygen and USA Network and additional

cable networks in which they have an additional interest, and a vast film library from Universal

Studios and Focus Features. NBCU not only boasts the nation’s oldest broadcast network, it has

the leading business news network, CNBC. NBC owns the rights to arguably the most desirable

lineup of national sporting events in the industry, including NBC Sunday Night Football, the


- ii - 5102097

premier primetime NFL game of the week, the U.S. Open Championship, The Ryder Cup, the

President’s Cup, the Kentucky Derby, the Preakness Stakes, Wimbledon, the French Open and

the Stanley Cup Final.

Comcast’s acquisition of NBCU would give the combined company even greater power

to raise cable rates, exercise block competition in the video marketplace, impair independent

networks, eliminate jobs and degrade employee rights.

Comcast-NBCU also will have the ability to withhold critical must-have programming

from its competitors, including national and regional sports programming and local broadcasting.

The Commission has recognized that the ability to provide a video service offering is an integral

component of being able to upgrade your network for broadband capability. Thus, limiting the

ability to offer a competitive video service may delay or prevent the deployment of broadband.

Comcast-NBCU will also have the ability to impair the emerging online video market.

By tying access of online video to traditional cable subscriptions, Comcast-NBCU can slow the

growth of Internet TV and protect Comcast’s market power in the supply of cable television

service.

The availability of premium content online increases the value of broadband subscription

to consumers. Thus, the availability and ease of accessing video online is also an important

means to encourage the deployment and adoption of broadband.

Because the proposed merger would result in considerable harm to CWA members, the

Commission should deny the Application or in the alternative impose the following conditions:

1. Workers should not lose their jobs as a result of the transaction. Comcast-NBCU should

commit to ensuring that employees will retain their current jobs and that their employment rights


- iii - 5102097

will be protected. Further, Comcast-NBCU should commit to maintain or grow employment

levels after the transaction.

2. For employees who have elected to have representation rights, the merged entity will

respect and recognize the collective bargaining status of its employees that existed prior to

transfer and will take no action to undermine that status.

3. Employees with collective bargaining agreements who will now work the new entity will

have their existing contract recognized by the new franchise owner.

4. The merged entity will take no action to undermine the rights of employees who seek

union representation.

5. Comcast-NBCU should be compelled to sell its affiliate networks to MVPDs on an a-la-

carte basis—i.e. Comcast should be barred from tying its marquee networks (an NBC affiliate,

an RSN, or Versus) to its lesser programming.

6. Comcast-NBCU should be explicitly prohibited from offering bulk discounts, which are

frequently used to impair new entrants. With respect to the NBCU O&O affiliates: (1) Comcast

should be compelled to enter binding baseball style commercial arbitration for disputes over

retransmission consent; and (2) rival MVPDs should be allowed to carry the NBC affiliate during

arbitration.

7. To address the potential abuse of market power in the online video marketplace,

Comcast-NBCU should be barred from tying access to online content to the purchase of a cable

video subscription.


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8. Comcast-NBCU should be barred from conditioning carriage on an independent

network’s agreement not to replicate video programming online.

9. Within one year of the acquisition, the combined company should be compelled to divest

NBCU’s partial ownership in Hulu.com. Given the pivotal role that Hulu.com plays as an

aggregator of network television programming on the Internet.

10. The Commission should apply the program access protections to OTT video providers,

and it should extend those protections in the event that Comcast-NBCU’s affiliated programming

is ported or replicated online.

11. Comcast-NBCU should be barred from tying the purchase of the new entity’s cable

television service to its set-top box.

12. To discourage Comcast-NBCU from discriminating in its carriage decisions on the basis

of affiliation, the Commission should refine its current program-carriage adjudication process: to

include an expedited complaint process; a baseball-style arbitration process, and a swift

timetable for resolution of complaints.


v 5102097

TABLE OF CONTENTS

I. INTRODUCTION...........................................................................................................................5

II. CWA HAS STANDING TO PETITION TO DENY THE APPLICATION ...............5

III. PUBLIC INTEREST REVIEW ...................................................................................................5

IV. THE PROPOSED TRANSACTION POSES CONSIDERABLE HARM TO EMPLOYEES ....................................................................................................................................5

V. THE PROPOSED TRANSACTION WILL RESULT IN ANTICOMPETITIVE HARM IN TODAY’S VIDEO MARKETPLACE.....................5 A. Forced Bundling Raises Competitors’ Costs and Cable Rates.........................................5 B. Denial of National Sports Programming ............................................................................5 C. Denial of Regional Sports Programming ............................................................................5

1. SportsNet Philadelphia ........................................................................................5 2. Comcast SportsNet Northwest ..........................................................................5 3. Denial of Regional Sports Programming Leads to Less

Competition and Higher Cable Prices.............................................................5 D. Denial of Local Broadcast Programming Would Lead to Less Competition

and Higher Cable Rates .........................................................................................................5 E. The Merger of Comcast’s Programming and NBC’s Programming Will

Lessen Competition For News, Entertainment and Advertising ....................................5 F. Denying Independent Programming Networks’ Access to Comcast’s

Subscribers...............................................................................................................................5

VI. THE PROPOSED TRANSACTION WILL RESULT IN ANTICOMPETITIVE HARMS IN THE EMERGING ONLINE VIDEO MARKET .............................................................................................................................................5 A. The Merger Increases Comcast’s Power to Impose Limits on Consumers’

Ability to Watch Programming Online Unless They Subscribe to Cable ......................5 B. Hulu Could Be Used to Force The TV Everywhere Model ............................................5 C. Other Exclusionary Strategies...............................................................................................5

VII. THE COMMISSION SHOULD DENY THE APPLICATION OR IN THE ALTERNATIVE, THE COMMISSION SHOULD IMPOSE REMEDIES TO PROTECT WORKERS’ RIGHTS AND COMMUNITY LABOR STANDARDS AND TO PROTECT COMPETITION IN THE VIDEO AND ONLINE MARKETPLACE ..............................................................................................5 A. Remedies Addressing Employment and Workers’ Rights................................................5 B. Remedies to Address Comcast’s Refusal to Supply Affiliated Programming to

Rival Distributors on Reasonable Terms ............................................................................5 C. Remedies to Address Comcast’s Tying of Access to Internet Content to the

Purchase of Cable Television Service – Banning TV Everywhere Model .....................5 D. Remedies Addressing Comcast’s Denial of Carriage to Independent

Programming Networks ........................................................................................................5


- vi - 5102097

VIII. CONCLUSION .................................................................................................................................5


1 5102097

Before the Federal Communications Commission

Washington, DC 20554

In the Matter of Applications for Consent to the Transfer of Control of Licenses General Electric Company, Transferor, To Comcast Corporation, Transferee

) ) ) ) ) ) ) ) ) ) ) )

MB Docket No. 10-56

PETITION TO DENY OR IN THE ALTERNATIVE IMPOSE CONDITIONS

COMMUNICATIONS WORKERS OF AMERICA I. INTRODUCTION

The Communications Workers of America (“CWA”), pursuant to Section 309(d)

of the Communications Act of 1934, as amended,1 and section 73.2584 of the Commission’s

Rules,2 hereby petitions to deny or in the alternative impose conditions in the above-captioned

application for the transfer of control of NBC Universal, Inc. (“NBCU”) from General Electric

Company (“General Electric”) to Comcast Corporation (“Comcast”)3 (collectively, the

“Applicants”).

1 47 U.S.C. § 309(d) (2006 & Supp. III). 2 47 C.F.R. § 73.3584 (2009). 3 Commission Seeks Comment on Applications of Comcast Corporation, General

Electronic Company, and NBC Universal, Inc., to Assign and Transfer Control of FCC Licenses, DA 10-47 (rel. Mar. 18, 2010) (hereinafter, the “Application” and the transaction referred to as the “Transaction,” the “Combination” or the “Merger”).


2 5102097

As discussed more fully below, the approval of the Applications would result in a number

of public interest harms and would create numerous anticompetitive effects. The Applicants

have failed to demonstrate by a preponderance of the evidence that the proposed transactions will

serve the public interest, convenience, and necessity.

The Application before the Commission to combine the nation’s largest cable and

Internet distribution company with the nation’s leading newsroom and production company

would create a media conglomerate of unprecedented scope and scale that would challenge the

Commission’s obligation to safeguard the public interest. Comcast’s acquisition of NBCU

would give the combined company even greater power to raise cable and advertising rates,

exercise gatekeeper control over traditional and new media programming and distribution,

eliminate jobs, and degrade employee rights. Because the proposal would diminish diversity and

competition among media voices and would thus harm the public interest, the Commission

should deny the Application.

After the complex series of transactions are completed, this will be a media company of

unprecedented size and scope. Comcast will be able to provide its 23.5 million cable

subscribers,4 16.3 million broadband customers and 7.8 million telephone subscribers5 with an

unprecedented supply of affiliated programming. Already, Comcast viewers have access to the

company’s 18 cable channels6 that include USA Network, Versus, Golf, Sprout, E!

Entertainment Television, Inc., and G4 Media, Inc., along with 10 owned and operated Regional

4 See DSL Reports, April 28, 2010, http://www.dslreports.com/shownews/Comcast-

Continues-To-Beat-Telcos-In-Broadband-Growth. 5 Comcast Reports First Quarter 2010 Results, Press Release, April 28, 2010, available at

http://www.cmcsa.com/earningdetails.cfm?QYear=2010&QQuarter=1. 6 Application at 17-21.


3 5102097

Sports Networks (“RSNs’) in seven of the 10 largest television markets.7 NBCU brings to the

table the NBC Television Network, which broadcasts 5,000 hours of television programming to

234 affiliated stations across the country, including 10 NBC owned-and-operated television

stations reaching 27 percent of U.S. television households.8 NBC also comprises national

broadcast network Telemundo and 15 Telemundo owned-and-operated stations that reach 93

percent of U.S. Hispanic viewers; 32 online video properties that include Hulu.com, CNBC.com

and NBCOlympics.com; at least 11 wholly owned cable networks CNBC, NBC Sports, MSNBC,

Syfy, Bravo, Oxygen and USA Network and additional cable networks in which they have an

additional interest, including (the top-rated cable channel), and a vast film library from Universal

Studios and Focus Features. NBCU also boasts the nation’s oldest broadcast network, NBC, and

the leading business news network, CNBC. NBC also owns the rights to arguably the most

desirable lineup of national sporting events in the industry, including NBC Sunday Night

Football, the premier primetime NFL game of the week, the U.S. Open Championship, The

Ryder Cup, the President’s Cup, the Kentucky Derby, the Preakness Stakes, Wimbledon, the

French Open and the Stanley Cup Final.9 The proposed merger of such scale and scope would

have a significant anticompetitive impact on the entire communications landscape and should be

denied. In the alternative, the Commission should impose significant remedial conditions

outlined below and described more fully herein.

7 Comcast Sports Group – Televising Over 2,400 Live Sporting Events Annually,

Available at http://www.comcast.com/medialibrary/1/1/about/pressroom/documents/PressKit.pdf.

8 NBC Universal Company Overview, available at http://www.nbcuni.com/About_NBC_Universal/Company_Overview/.

9 Id.


4 5102097

II. CWA HAS STANDING TO PETITION TO DENY THE APPLICATION

CWA is a labor organization whose members have standing as parties in interest to

petition the Commission to deny the Applications, or in the alternative, to impose conditions, in

the Comcast-NBCU merger.10 As set forth below, CWA satisfies the constitutional threshold

elements to establish standing, viz., CWA’s members will suffer an injury-in-fact that is

traceable to the proposed merger/license transfer applications, and a grant of this Petition to

Deny would likely redress CWA’s injury.11

CWA represents 700,000 workers in communications, media, airlines, manufacturing and

public service, including workers of General Electric, NBCU and Comcast. CWA members are

residents of NBC broadcast station and Comcast cable service areas and are viewers and

subscribers to the same, as well as online video services. Therefore, CWA “can assert a possible

injury to a legally protected interest… as ‘spokesman’ for a station’s entire audience.”12 Such

standing exists when faced with an injury caused by the grant of an application that seriously and

adversely impacts the public interest.

The proposed transaction, as currently structured, poses considerable harm to CWA

members as workers and consumers. As discussed herein, it will result in the loss of jobs, erode

employee rights and undermine living standards in the communications and media industries.

Although the Applicants claim that the proposed transaction will preserve and create jobs,

10 47 U.S.C. § 309(d), See Office of Commc’n of United Church of Christ v. FCC, 359

F.2d 994, 1002 (D.C. Cir. 1966) (“United Church of Christ”). 11 See New World Radio, Inc. v. FCC, 294 F.3d 164, 170 (D.C. Cir. 2002) (citing Jersey

Shore Broad. Corp. v. FCC, 37 F.3d 1531, 1535 (D.C. Cir. 1994)); Liberty Prods., a Ltd. P’ship WOXL-FM, Biltmore Forest, NC, Letter, 20 FCC Rcd 11987, 11992 (July 7, 2005); Sierra Club v. Morton, 405 U.S. 727, 739-40 (1972) (organizations have standing of their members).

12 Huddy v. FCC, 236 F.3d 720, 722 (D.C. Cir. 2001) (citing United Church of Christ, 359 F.2d at 1002).


5 5102097

Comcast-NBCU has not made any concrete, verifiable and enforceable commitments regarding

jobs. Further, the proposed merger will result in higher prices and fewer choices for consumers

of cable, broadcast, and online video services. Because the proposed merger would result in

considerable harm to CWA members, denial of the applications presently before the Commission

will likely redress CWA’s imminent injuries. Alternatively, imposing certain conditions on the

merger, discussed, further herein, would go far to alleviate CWA members’ injuries.

III. PUBLIC INTEREST REVIEW

Pursuant to Section 310(d) of the Communications Act, the Commission weighs the

potential public interest harms of the proposed merger against the potential public interest

benefits to insure that, on balance, the transfer serves the public interest, convenience, and

necessity.13 The Commission’s public interest analysis is not limited to a traditional anti-trust

review, but includes the “broad aims of the Communications Act,” which include, among other

things, preserving and enhancing competition in relevant markets, ensuring that a diversity of

13 See Applications for Consent to the Transfer of Control of Licenses and Section 214

Authorizations from MediaOne Group, Inc., Transferor, to AT&T Corp., Transferee, 15 FCC Rcd 9816, 9817 ¶ 1 (2000) (“AT&T-MediaOne Order”); Applications for Consent to the Transfer of Control of Licenses from Comcast Corporation and AT&T Corp., Transferors, to AT&T Comcast Corporation, Transferee, MB Docket No.02-70, Memorandum Opinion and Order, 17 FCC Rcd. 23,246, 23,255 ¶ 26 (2002) (“AT&T-Comcast Order”), Application of WorldCom, Inc. and MCI Communications Corporation for Transfer of Control of MCI Communications Corporation to WorldCom, Inc., CC Docket No. 97-211, Memorandum Opinion and Order, 13 FCC Rcd. at 18031 ¶ 10 (1998) (“WorldCom-MCI Order”); Applications of Ameritech Corp., Transferor, and SBC Communications Inc., Transferee, for Consent To Transfer Control of Corporations Holding Commission Licenses and Lines Pursuant to Sections 214 and 310(d) of the Communications Act and Parts 5, 22, 24, 25, 63, 90, 95, and 101 of the Commission’s Rules, CC Docket No. 98-141, Memorandum Opinion and Order (“SBC-Ameritech Order”).


6 5102097

voices is made available to the public, assessing whether the merger will affect the quality and

diversity of communications services and analyzing the impact on employment.14

The Commission also considers whether a proposed transaction is likely to lead to public

interest harms with respect to employment practices.15

The Supreme Court has emphasized the Commission’s duty and authority to promote

diversity and competition among media voices based on the principle that “the widest possible

dissemination of information from diverse and antagonistic sources is essential to the welfare of

the public.”16 The Supreme Court has found that decentralization of information production

serves values that are central to the First Amendment. Thus, the Court concluded that the

Commission’s interest in “promoting widespread dissemination of information from a

multiplicity of sources” is an “important government interest.”17 As the Commission noted in the

AOL-Time Warner Order, its evaluation must consider, among other things, whether the

proposed transaction will further the statutory goals of “assur[ing] that cable communications

provide and are encouraged to provide the widest possible diversity of information sources and

14 See AT&T-Comcast Order, ¶ 27; 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, CS Docket No. 00-30, Memorandum Opinion and Order, 16 FCC Rcd 6547, 6556 ¶ 22 (rel. Jan. 22, 2001) (“AOL-Time Warner Order”); WorldCom-MCI Order, 18031 at ¶ 9.

15 See Applications for Consent to the Assignment and/or Transfer of Control of Licenses from Adelphia Communications Corp. to Time Warner Cable Inc., MB Docket No. 05-192, Memorandum Opinion and Order, 21 FCC Rcd 8203 (2006); see also WorldCom-MCI Order at 213 (considering the impact of that merger on employment); see also SBC-Ameritech Order at 567 (citing SBC’s commitment to “improving service quality by hiring more employees”); Puerto Rico-GTE Order at ¶ 57 (noting that employee commitments are a merger-related public interest benefit).

16 Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622, 663 (1994) (citing United States v. Midwest Video Corp., 406 U.S. 649, 668 n.27 (1972)). See AT&T-Comcast Order, ¶ 27.

17 See Turner Broadcasting, 512 U.S. at 663.


7 5102097

services to the public, and ‘promot[ing] competition in the delivery of diverse sources of video

programming…”18

The Applicants bear the burden of proving, by a preponderance of the evidence, that the

transfer will advance the public interest.19 In its public interest review, the Commission employs

a balancing test to determine whether the potential public interest benefits outweigh the potential

public interest harms. “As the harms to the public interest become greater and more certain, the

degree and certainty of the public interest benefits must also increase commensurately in order

for us to find that the transaction on balance serves the public interest.”20 The analysis focuses on

demonstrable and verifiable public interest benefits that could not be achieved if there were no

merger.21

Finally, the Commission has recognized the need for regulatory intervention through

specific merger conditions if necessary “to compensate in markets where sufficient competition

is lacking.”22 The Commission has recognized that combining assets may allow the merged

entity to “consolidate that power,” and to use its market power to “create or enhance barriers to

entry by potential competitors, and create opportunities to disadvantage rivals in anticompetitive

ways.”23

18 47 U.S.C §§ 521(4) and 523(a). See AOL-Time Warner Order, 6556 ¶ 22. 19 See SBC-Ameritech Order, 14737, ¶ 48; AT&T-TCI Order, 3169-70, 15; WorldCom-

MCI Order, 18031, ¶ 10 n.33. 20 See AT&T-MediaOne Order, ¶ 154 (citing SBC-Ameritech Order, 14 FCC Rcd at

14824, ¶ 256). 21 Id. 22 See AOL-Time Warner Order, 15-16. 23 See AT&T-Comcast Order, 28.


8 5102097

IV. THE PROPOSED TRANSACTION POSES CONSIDERABLE HARM TO EMPLOYEES

Comcast’s proposed acquisition of NBCU will likely result in the loss of good jobs, the

erosion of employee rights, and undermine living standards in the communications and media

industries. Although the Applicants claim that the proposed transaction will preserve and create

jobs, Comcast-NBCU has not made any concrete, verifiable and enforceable commitments

regarding jobs and respect for workers’ rights.

The new venture will be financially weaker the day after Comcast’s acquisition is

approved. As part of the transaction, NBCU debt will increase by approximately $8 billion.24

This debt burden will deprive the merged entity of the resources to maintain, much less to grow,

its workforce to ensure adequate staffing levels to provide quality service and programming and

career opportunities for employees. The result will lead the new entity to cut costs and jobs.

This is a familiar pattern in the media industry, where companies over-leverage to pay for

a merger and then cut jobs to improve their balance sheets, only to discover that they lack the

staff to produce quality news and entertainment programming. This erosion in program quality

leads to declining audience share, less revenue and continued cost-cutting. Absent firm

commitments from Comcast and NBCU to maintain or grow their current employment levels,

there is no reason to believe that the joint venture will not follow this pattern. With national

unemployment hovering at 10 percent, this corporate transaction’s impact on jobs runs counter to

the Administration’s American Recovery and Reinvestment Act job stimulus programs that have

sought to increase employment in the communications industry in particular through broadband

investment.

24 Comcast Corporation, SEC Form 10-K (2009 Annual Report), p. 22, filed Feb. 23,

2010, for the period ending Dec. 31, 2009.


9 5102097

Historically, the communications and media sectors have served as a good source of

stable jobs, due in large measure to more than 70 years of collective bargaining. The proposed

joint venture would undermine advancements in labor standards for workers in these sectors.

Among the factors that the Commission considers as part of its public interest inquiry is

whether the applicant for a license has the requisite “citizenship, character, financial, technical

and other qualifications.”25 Comcast lacks the requisite citizenship and character qualifications

based upon its systematic campaign to undermine its employees’ rights under that National

Labor Relations Act to union representation and to bargain collectively over wages, benefits and

working conditions. Nowhere has this been more apparent than when Comcast has attempted to

eliminate worker organizations at companies that it has acquired.

In 2002, when Comcast merged with AT&T Broadband, it sought to eliminate the

existing unions. At the time, CWA represented about 5,000 cable employees at AT&T

Broadband. During the review process, Comcast told union members and local franchise

authorities that it would respect the collective bargaining agreements between AT&T Broadband

and union members. Comcast leaders pledged to continue the fair labor management practices

the parties had established.

Comcast failed to honor its commitment. Most of the organized units that Comcast

acquired from AT&T Broadband were in the process of negotiating a first contract. Comcast

delayed bargaining for years, denied workers wage and benefit improvements provided to non-

union employees, and supported decertification elections. Comcast refused to reach agreement

25 In the Matter of Annual Assessment of the Status of Competition in the Market for the

Delivery of Video Programming, Thirteenth Annual Report, (“Thirteenth Annual Report”) MB Docket No. 06-189, rel. Jan. 16, 2009.


10 5102097

on a first contract in 16 of the organized units that it acquired from AT&T.26 This disrespect for

employees’ right to collective representation does not comport with the Commission’s

citizenship and character qualifications.

There are other examples of Comcast’s abusive labor practices. In the San Francisco Bay

and Detroit metropolitan areas, where CWA also represents Comcast employees, Comcast has

shifted work to non-union contractors earning lower wages, thereby reducing secure jobs in areas

greatly affected by unemployment.27 In Detroit area, all the installation work is done by

subcontractors, and in the Port Huron, MI, bargaining unit, all the installation work and 90

percent of the service work is done by subcontractors. As a result, the permanent workforce in

Detroit has been cut in half since 2004 (from 80 employees in 2004 to 38 today), and is down to

12 employees in Port Huron.

The National Labor Relations Board (“NLRB”) has repeatedly cited Comcast for

violations of labor law. In 2005, an Administrative Law Judge for the NLRB ruled that Comcast

had illegally fired two workers for union activities during an organizing drive in 2002 and 2003.

The judge required Comcast to reinstate the workers with back pay and ruled against the

company on 11 unfair labor practices for violating the National Labor Relations Act by

“coercing … threatening … and interrogating” employees.

In 2002, Comcast illegally fired two Pittsburgh area technicians who were union

supporters. Arbitrators ordered that the workers be reinstated with back pay and compensation

the following year. And in 2001, Comcast fired a union supporter in Hialeah, Florida, who was

26 American Rights at Work, No Bargain: Comcast and the Future of Workers’ Rights in Telecommunications, 2004 (available at http://www.americanrightsatwork.org/publications/general/no-bargain-comcast-and-the-future-of-workers-rights-in-telecommunication.html).

27 Non-union cable workers’ compensation trails unionized telecom employees by an average of $13,000 a year.


11 5102097

called to active duty with the Navy in Guantanamo Bay. The company refused to allow the

employee to return to work after he completed his military service. The NLRB concluded that

Comcast erred and directed the company to reinstate the worker. When Comcast refused, the

NLRB issued a complaint. The employee ultimately accepted a cash settlement.

CWA represents Comcast workers in the Pittsburgh area. Initially, Comcast actively

resisted its employees’ efforts to gain union representation, and workers were forced to go

through four union elections in five years, three of which were decertification attempts by the

company, before they were able to establish a union voice. Since then, Comcast and CWA have

negotiated a collective bargaining agreement there, indicating that change and the development

of a more positive company-union relationship is possible.

Comcast competes against unionized telecommunications companies for voice,

broadband and video services and its anti-labor practices have the effect of eroding industry

wage and benefit standards.

By contrast, NBCU has a long-standing history of collective bargaining with CWA and

other unions. If the Commission approves Comcast’s acquisition of NBCU, Comcast would take

control of labor relations, thereby expanding its ability to put downward pressure on workers’

rights and community living standards.

Absent firm commitments from Comcast and NBCU to maintain or grow current

employment levels, there is no reason to believe that the Comcast-NBCU joint venture will not

eliminate jobs, thereby impacting the quality of news and entertainment programming. As a

result, the Commission must ensure that employees will retain their current jobs and that the new

entity will recognize the collective bargaining status of its employees that exists prior to the

transfer. The Commission should also condition the proposed transaction on assurances that


12 5102097

employees with collective bargaining agreements who will become employees of the new entity

will have their existing contract recognized by the new owner and that the new owner will take

no action to undermine that status – or the scope of the bargaining units.

V. THE PROPOSED TRANSACTION WILL RESULT IN ANTICOMPETITIVE HARM IN TODAY’S VIDEO MARKETPLACE

The combination of Comcast, the nation’s largest multichannel video programming

distributor, and NBCU, a leading video programmer would create a single vertically integrated

entity with unprecedented market power to increase cable rates, impair independent networks,

block competition in the video marketplace and reduce jobs.

There already is too little competition in the video marketplace already, as evidenced by

the rising cable rates that consumers pay year after year. The FCC estimates that from 1995 to

2008, the price of expanded basic service grew at three times the rate of inflation -- from $22.35

to $49.65, an increase of 122.1 percent, compared with an increase in the Consumer Price Index

of 38.4 percent over the same period.28 Indeed, cable’s share of MVPD subscribers exceeds 75

percent in 52 out of the 210 Designated Market Areas (“DMAs”).29 The FCC also has concluded

28 In the Matter of Implementation of Section 3 of the Cable Television Consumer

Protection and Competition Act of 1992, Report on Cable Industry Prices, MM Docket No. 92-266 ¶ 2, Chart 1 (2009), provided as Attachment A.

29 In the Matter of Implementation of the Cable Television Consumer Protection and Competition Act of 1992: Development of Competition and Diversity in Video Programming Distribution: Section 628(c)(5) of the Communications Act: Sunset of Exclusive Contract Prohibition, Review of the Commission’s Program Access Rules and Examination of Programming Tying Arrangements, Report and Order and Notice of Proposed Rulemaking, FCC MB Docket Nos. 07-29, 07-198, 22 FCC Rcd 17,791, 17,827-28, n. 277 (rel. Oct. 1, 2007) (“Tying Order”), appeal docketed, Cablevision Systems Corp. v. FCC, no. 07-1425 (D.C. Cir. Filed Oct. 19, 2007). These include two of the top 50 most-populated DMAs, Philadelphia and Hartford-New Haven, where Comcast has more than 70 percent of the market share; see also In the Matter of Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, MB Docket. No. 06-189, Thirteenth Annual Report, (rel. Jan. 16, 2009)(“Thirteenth Annual MVPD Report”), ¶ 27 (noting that while the number of subscribers to


13 5102097

that “[i]ncumbent cable operators are still by far the dominant force in the MVPD business, with

… the ability to impose steadily rising prices.”30 A combined Comcast-NBCU would have

greater incentive and ability to engage in anti-competitive practices such as forced bundling that

would raise consumers’ cable rates. As Dr. Singer explains in his declaration, the proposed

transaction significantly increases the potential for anticompetitive bundling, as the new tying

product would be significantly stronger for Comcast in the seven markets where a Comcast RSN

and NBC O&O affiliate overlap. And in markets served by a Comcast RSN but not served by an

NBC O&O affiliate, including Sacramento, Baltimore, and Detroit, Comcast can now tie NBC’s

other network programming (for example, Syfy or Oxygen) to a Comcast RSN—a tying strategy

that was not available to NBCU.31

In addition to these anticompetitive harms, Comcast also will have the ability to withhold

from, or delay the licensing of critical must-have programming to, its competitors, including

national and regional sports programming and local broadcasting. Finally, the Commission has

recognized that the ability to provide a video service offering is an integral component of being

able to upgrade one’s network for broadband capability.32 Thus, limiting the ability to offer a

competitive video service may delay or prevent the deployment of broadband.

basic and premium cable service declined in 2005, premium cable service subscriptions and subscriptions to digital video service increased.)

30 In the Matter of Exclusive Contracts for the Provision of Video Services in Multiple Dwelling Units and Other Real Estate developments, Report and Order and Further Notice of Proposed Rulemaking FCC MB Docket No. 07-51, 22 FCC Rcd 20,235, 20,251 ¶ 32 (rel. Nov. 13, 2007) (“MDU Order”), petition for reh’g denied Nat’l Cable & Telecomm. Ass'n v. F.C.C. 567 F.3d 659 (DC Cir. 2009).

31 See Declaration of Hal J. Singer at 14 ¶ 13, provided as Attachment B (“Singer Declaration”).

32 MDU Order at 20,2345 ¶¶19, 20 (citing Implementation of Section 621(a)(1) of the Cable Communications Policy Act of 1984 as Amended by the Cable Television and Consumer Protection Act of 1992, Report and Order and Further Notice of Proposed Rulemaking, 22 FCC


14 5102097

A. Forced Bundling Raises Competitors’ Costs and Cable Rates

Today, competing video distributors are often forced to purchase large bundles of

channels that they and their customers do not want.33 Following the merger, Comcast will have

more premium content and will have the ability to bundle its less desirable cable channels with

must-have NBC programming to secure higher rates for and more favorable placement of its

programming. This forced bundling will raise other video providers’ costs, and those added costs

translate into higher cable rates for consumers.

This anticompetitive practice is not new. In fact, the Commission has explicitly

recognized the problem of tying arrangements.34 Tying arrangements leave MVPDs with a

dilemma: they must either refuse the tied programming package and potentially go without must-

have programming, or they can agree to the tying arrangement and purchase programming that

neither they nor their customers want.35 The Commission noted that “the competitive harm and

adverse impact on consumers would be the same regardless of whether the programmer is

affiliated with a cable operator or a broadcaster or is affiliated with neither a cable operator nor a

broadcaster, such as networks affiliated with a non-cable MVPD or a non-affiliated independent

network.”36 Specifically, in past merger reviews, the Commission has recognized and addressed

Rcd 5101, 5126 ¶ 51(2006) pet. for rev. denied sub nom. Alliance for Cmty. Media v. FCC, 529 F.3d 763 (D.C. Cir. 2008) for the finding that broadband deployment and entry into the MVPD business are “inextricably linked.”)

33 See Tying Order at 17862 ¶ 119 (noting complaints about the “practice of programmers requir[ing] carriage of less popular programming in specified (usually basic) tiers in return for the right to carry popular programming.”)

34 Id. at ¶ 120. 35 Tying Order, supra. 36 Id.


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the harms that such “tying” practices cause.37 When the Commission considered the DirectTV-

News Corp. merger, it agreed that the “transaction [could] enhance News Corp.’s incentive and

ability to persuade competitors to carry its affiliated programming.”38 Only by imposing

conditions on the merger did the Commission find that it remedied this potential harm.39

Tying arrangements are particularly problematic for small rural operators and new video

competitors with a smaller subscriber base. Because Comcast and NBC give bulk discounts, they

charge themselves and other large MVPDs less than they charge small and rural carriers on a per

subscriber basis, raising the costs for cable subscription for customers of rural operators and new

video entrants.

Such impediments to competition drive up consumers’ cable bills. In every iteration of

the FCC Cable Price Reports, the FCC has found that the effect of overbuilder entry on cable

prices is significant. In 2005, the Commission wrote that incumbent cable prices “are 17 percent

lower where wireline cable competition is present.”40 This finding is consistent with FCC cable

price survey findings over the past few years, which are presented below in Table 3.

This table demonstrates the extent to which incumbents demand higher average cable prices in

non-competitive areas than they do in competitive areas.

37 Gen. Motors Corp. & Hughes Elec. Corp., Transferors & The News Corp. Ltd., Transferee, Memorandum Opinion and Order, 19 FCC Rcd 473, 593 ¶ 271 (2003) (“NewsCorp Order”).

38 Id. 39 Id.

40. Statistical Report on Average Rates for Basic Service, Cable Programming Services, and Equipment, MM Dkt. No. 92-266, released Dec. 27, 2006, ¶ 2.


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TABLE 3: FCC-ESTIMATED EFFECT OF OVERBUILD COMPETITION ON

INCUMBENT CABLE EXPANDED BASIC PRICES, 2002-2008 Difference Date Average Overbuilt Area

Cable Price Average Non-Competitive

Area Cable Price Nominal Percentage January 2002 $31.01 $36.21 $5.20 16.8% January 2003 $32.83 $39.11 $6.28 19.1% January 2004 $34.00 $41.18 $7.18 21.1% January 2005 $36.79 $43.77 $6.98 19.0% January 2006 $40.24 $45.53 $5.29 13.1% January 2007 $42.77 $47.49 $4.72 11.0% January 2008 $45.04 $49.97 $4.93 10.9% Average $37.53 $43.32 $5.80 15.4%

Sources: FCC Cable Price Report (2004) Attachments 8-9; FCC Cable Price Report (2005) Attachment 2, FCC Cable Price Report (2008) Attachments 2, 2-a, 2-b.

In January 2009, the FCC noted that “cable prices decrease substantially when a second

wireline cable operator enters the market.41

Many companies are trying to compete with incumbent cable operators, investing

significant resources to build out their networks and enter the video marketplace. This merger

would provide Comcast/NBC with the incentive and ability to block or limit that competition,

and block or limit the investment and jobs that accompany those efforts. As competitors’ costs

increase, those companies trying to compete will invest less in building out their networks and

hire fewer people. As a result of this proposed merger, Comcast-NBCU will have the market

power to stifle competitive entry by new video operators, yielding fewer companies competing to

provide traditional cable video services, fewer choices and higher prices for consumers, slower

deployment of broadband and lost jobs from these potential competitors.

41 Report on Cable Industry Prices, MM Docket No. 92-266, ¶ (rel. Jan. 16, 2009) (“Cable

prices decrease substantially when a second wireline cable operator enters the market.”)


17 5102097

B. Denial of National Sports Programming

The real cornerstone of the Transaction may be Comcast’s acquisition of NBC’s national

sporting events. In their Application, Comcast and GE (NBCU) acknowledged that the

consolidation of sports programming was a key merger-related synergy.42

In the Internet Age, sports programming is critical to an MVPD because viewers demand

to see it in real-time, often on their big-screen televisions. This “must-have” nature of sports

programming is recognized by advertisers, which explains why such programming commands

high advertising rates. By acquiring NBCU’s national sports content, Comcast seeks to exploit

this unique opportunity to protect its cable television profits. In particular, Comcast could

withhold affiliated national sports programming from downstream rivals to impair MVPD

competition.

NBCU owns the rights to many of today’s top national sporting events, including the

U.S. Open Championship, The Ryder Cup, Kentucky Derby, Preakness Stakes, Wimbledon,

French Open, NHL Stanley Cup Finals, Summer and Winter Olympic Games through 2012,

and—perhaps most importantly—NBC Sunday Night Football. By porting those national

sporting events from NBC’s networks to Comcast’s Versus cable network, Comcast would form

a national sports network to rival ESPN. But unlike ESPN, which is owned by Disney, Versus

will be owned by the largest MVPD, serving roughly one-quarter of the country’s MVPD

subscribers. Consideration of Comcast’s downstream profits would severely distort the joint

venture’s pricing incentives for Versus. As Dr. Singer describes in his declaration, MVPD

consumers would be harmed in either of two ways: first, if Comcast raises the price of Versus to

rival MVPDs, then these higher prices will be passed through to MVPD subscribers in the form

42 GE Comcast Press Release, Dec. 3, 2009, attached as exhibit to Comcast SEC Form

8K, filed Dec. 4, 2009, at 308.


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of higher cable bills; or second, if Comcast outright refuses to supply this programming to rival

MVPDs—for example, by moving the future marquee Versus programming online to escape the

program access rules—then non-Comcast customers will be forced to incur switching costs to

follow this programming (as they switch to Comcast) and higher cable bills due to the reduction

in MVPD competition. 43

C. Denial of Regional Sports Programming

The Commission has recognized that denial of access to regional sports programming can

have significant competitive implications in the provision of MVPD service in the downstream

market.44 The Commission explained that “an MVPD’s ability to gain access to RSNs and the

price and other terms [or] conditions of access can be important factors in its ability to compete

with [downstream MVPD] rivals.”45 The Commission also found that “lack of access to RSN

programming can decrease an MVPD’s market share significantly.”46 The Commission also has

found that “vertically integrated cable programmers have increased incentives and ability to

foreclose access to certain “must-have” programming to their MVPD rivals.47 The FCC found

this to be especially true of RSNs, “which are highly valued by MVPD subscribers and for which

there are no adequate substitutes.”48 The FCC concluded that continued access to this

programming is necessary for competition in the MVPD market to remain viable.49

43 Singer Declaration, p. 9 ¶ 7. 44 Singer Declaration at p. 29, ¶ 44 (citing Applications for Consent to the Assignment

and/or Transfer of Control of Licenses, Adelphia Communications Corporation, to Time Warner Cable, Inc., to Comcast Corporation, Memorandum Opinion and Order, MB Docket No. 05-192, DA 06-105, ¶ 68 (rel. July 21, 2006).

45 Adelphia Order at ¶ 124. 46 Id. at ¶ 145. 47 Exclusivity Sunset Report and Order, 22 FCC Rcd at 17,810. 48 Id. at 17,819 (“We remain convinced … that, with regard to RSNs and programming

with similar characteristics (such as popularity and monthly per subscriber affiliate fee and


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Comcast has a history of using its ownership of regional sports programming in an anti-

competitive way at the local level. In these instances, direct broadcast satellite (“DBS”)

penetration has been significantly reduced relative to what it should have been absent such anti-

competitive action, and cable prices have been inflated.50 For example, Comcast has prevented

DirecTV and Dish Network from accessing its SportsNet Philadelphia channel, which carries

games of Major League Baseball’s Phillies, the NBA’s 76ers and the NHL’s Philadelphia

Flyers.51 As a result, penetration of DBS providers in the Philadelphia area is well below the

national average.52 By withholding games of these Philadelphia sports teams from its rivals,

Comcast ensures a powerful marketing advantage over its satellite competitors. Comcast has

employed the same practice in Portland, Oregon, where Trail Blazers games are only available

on SportsNet Northwest to Comcast subscribers, leaving Charter TV, Dish Network and

DirecTV subscribers without access to their home team.53

network advertising revenue), withholding programming from rivals can be a profitable strategy for a vertically integrated cable programmer and that such withholding can have a significant aspect on a subscribership to the rival MVPDs. Such practices, in turn, predictably harm competition and diversity in the distribution of video programming, to the detriment of consumers.”)

49 Id. at 17,817-18. 50 Singer Declaration, p. 5, ¶ 3. 51 Comcast has a controlling interest in the 76ers and the Flyers. 52 In the Matter of the Annual Assessment of the Status of Competition in the Market for

the Delivery of Video Programming, Eleventh Annual Report, MB Docket No. 04-227, 155, n. 687 (rel. Feb. 4, 2005).

53 John Canzano, Trail Blazers Fan Held Hostage … Day Nine, The Oregonian, Nov. 7, 2007. It is unclear when Blazers fans who subscribe to a satellite or cable provider other than Comcast will have access to games, despite the Commission’s January 20, 2010, decision to close the so-called “terrestrial loophole” and allow competitors access to cable-affiliated programming. The Commission said it will consider complaints on a case-by-case basis. See FCC Issues Order Promoting Competition in the Video Distribution Market, News Release, MB Docket No. 07-198, DA 10-17 (rel. Jan. 20, 2010).


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1. SportsNet Philadelphia

In the past, Comcast denied access to CSN-Philadelphia to DBS providers through the so-

called “terrestrial delivery” loophole, which allowed programmers to deny terrestrially-delivered

programming to any MVPD.54 Comcast is the majority owner of CSN-Philadelphia, with

approximately an 80 percent equity share in the RSN.55 Ever since Comcast acquired the rights

from SportsChannel Philadelphia and PRISM in August 1997, Comcast has refused to negotiate

with DBS providers for carriage of CSN-Philadelphia.56 Comcast also controls future access to

the 76ers’ and Flyers’ carriage rights. Specifically, in 1996 Comcast acquired a controlling

interest in Spectacor (now “Comcast Spectacor”), a holding company that owns the 76ers, the

Flyers, and the Wachovia Center stadium.57

By August 1997, Comcast had acquired local telecasting rights of Philadelphia Flyers

hockey games, Philadelphia 76ers basketball games, and Philadelphia Phillies baseball games

previously held by Rainbow Sports, the owner of SportsChannel.58 SportsChannel announced

that it would cease to operate as of September 30, 1997.59 On October 1, 1997, CSN-

Philadelphia debuted as a new channel on Comcast’s basic service tier in the Philadelphia area,

54 See, e.g., In the Matter of Applications of Adelphia Communications Corporation, Comcast Corporation, and Time Warner Cable Inc., for Authority to Assign and/or Transfer Control of Various Licenses, MB Docket No. 05-192, Comments of DirecTV, Inc., July 21, 2005, at 16-17 [hereinafter DirecTV Comments].

55 See Eleventh Annual MVPD Report, supra, at 141. 56 In the Matter of DIRECTV, Inc. v. Comcast Corporation, Comcast-Spectacor, L.P.,

Comcast SportsNet, Memorandum Opinion and Order, 13 F.C.C. Rcd. 21,822, 21,826-27 (released Oct. 27, 1998) (“SportsNet MO&O”).

57 See Mark Robichaux, Comcast to Buy Stake in Pro Teams in Philadelphia, WALL

STREET JOURNAL, Mar. 20, 1996, at B7. 58 SportsNet MO&O, supra, at 21,834. 59 Id.


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and it was distributed only through terrestrial microwave and fiber technology.60 Before

introducing CSN-Philadelphia as a new channel, Comcast indicated that CSN-Philadelphia’s

programming would not be available to any national DBS provider.61 Comcast’s discriminatory

and continuing refusal to provide CSN-Philadelphia to its downstream competitors caused DBS

providers to experience significantly lower-than-expected penetration rates in the Philadelphia

DMA. Despite the growing market share of DBS providers in Philadelphia, Craig Moffett of

Sanford C. Bernstein & Co. estimated that Comcast’s refusal to license CSN-Philadelphia has

yielded an additional 450,000 subscribers for Comcast.62 Accordingly, DBS market share in

Philadelphia would have increased even faster but for Comcast’s exclusionary practice.

In January 2010, the Commission voted to close the “terrestrial loophole,” thereby

opening the door to a potential program access complaint with the Commission. Comcast

immediately announced that it would challenge the FCC action in an administrative process at

the federal agency.63

2. Comcast SportsNet Northwest

For years, Portland Trail Blazer games were available to cable and satellite subscribers

via the BlazerVision Pay Per View package.64 In 2001, Paul Allen, owner of the Trail Blazers,

abolished the pay-per-view system when he founded the Action Sports Cable Network

60 Id. 61 Id. 62 Bob Fernandez, FCC: Comcast must share Phila. sports coverage, PHILADELPHIA

INQUIRER, Jan. 20, 2010, available at http://www.philly.com/philly/business/82230427.html#axzz0orqf07iX.

63 Bob Fernandez, Comcast to fight FCC ruling on sports telecasts, PHILADELPHIA

INQUIRER, Jan. 22, 2010, available at http://www.philly.com/philly/business/82341347.html#axzz0orclBgQ9.

64 R. Thomas Umstead, DirecTV Fishes for Subs with Trail Blazers, MULTICHANNEL

NEWS (Nov. 4, 1996) [hereinafter DirecTV Fishes for Subs].


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(“ASCN”) to broadcast Trail Blazer games and other valuable local sports programming,

including Seattle Seahawks and Portland Fire games.65 ASCN planned to team with ESPN

Network and KGW-TV to maximize fan access to local teams. The Blazers increased broadcast

production by 30 percent to meet the demand for increased coverage.66 For sixteen months,

ASCN struggled to secure a distribution deal with Portland’s “primary cable television

provider,” AT&T Broadband, which was purchased by Comcast amid negotiations over ASCN

carriage in 2002.67 A “shift in management” at AT&T Broadband in late 2001 caused the cable

company to renege on its “verbal agreement” to carry ASCN in Oregon and southwest

Washington.68 ASCN folded after failing to secure a distribution deal with the cable company,

leaving the Blazers to scramble to find a home in time for the 2002-2003 NBA season.69

After conducting discussions with cable providers, satellite companies, Fox Sports

Northwest, and local stations, Allen sold the rights to broadcast Trail Blazer games to Fox Sports

Northwest in November 2002.70 The network signed a five-year deal and carried 30 Blazers

65 Kristina Brenneman, Paul Allen’s Sporting Plans, PORTLAND BUS. J. (Feb. 2, 2001)

[hereinafter Paul Allen’s Sporting Plans]. 66 Id. 67 Andy Giegerich, Fox Hunts for Local Space to Increase Sports Coverage, PORTLAND

BUS. J. (Mar. 26, 2004) [hereinafter Fox Hunts for Local Space]. For a discussion of the AT&T Broadband-Comcast acquisition, see Bob Liu, Comcast Offers to Acquire AT&T Broadband, INTERNETNEWS.COM (Jul. 8, 2001); David Lieberman, Comcast to Buy AT&T Broadband, USA TODAY (Dec. 20, 2001).

68 Action Sports Cable Network Blames AT&T for Failed Negotiations, PORTLAND BUS. J. (Oct. 31, 2001).

69 Fox Hunts for Local Space, supra. 70 Notebook: Agent Alleges Kings Reneged on Secret Deal, SEATTLE TIMES (Nov. 14,

2002) [hereinafter Notebook 2002], available at http://community.seattletimes.nwsource.com/archive/?date=20021114&slug=nbanotes14.


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games during the first year of its contract.71 Fox Sports Northwest reached more than 3.4 million

homes in the Northwest in 2006,72 giving the team broad distribution; however, the network was

known to have a Seattle focus.73 The contract with Fox Sports Northwest expired at the close of

the 2006-2007 season and the parties failed to come to a renewal agreement.74

Comcast began negotiations for broadcasting rights with the Trail Blazers in the spring of

2007, soon after renewal talks with Fox Sports Net collapsed.75 Comcast won the rights to the

games after agreeing to a 10-year, $120 million contract.76 In May 2007, Comcast and the Trail

Blazers announced the creation of a new regional sports network, Comcast SportsNet Northwest

(“CSNW”), the core of which would be live coverage of the Portland Trail Blazers.77 CSNW

launched shortly before the 2007-2008 NBA season and in its first year carried at least 55 of the

81 regular season games broadcast on television and made more of those games available in

HDTV than ever before. Those who did not subscribe to Comcast, however, were able to access

fewer than 30 regular season games during the 2007-2008 season, compared with 61 during the

2006-2007 season.78 As of September 2007, CSNW reached just 590,000 subscribers in Oregon

71 Notebook 2002, supra; Jason Vondersmith, Local teams, local TV, PORTLAND

TRIBUNE (Jul. 15, 2008) [hereinafter Local teams, local TV]. 72 Select FSN Trail Blazers Games To Be Televised in HD, NBA.COM, available at

http://www.nba.com/blazers/news/FSN_Trail_Blazers_Games_In_HD-201079-1218.html. 73 Local teams, local TV, supra. 74 Mike Rogoway, Comcast, Blazers to announce cable deal (updated), THE OREGONIAN

(May 21, 2007) [hereinafter Comcast, Blazers to announce cable deal], available at http://blog.oregonlive.com/business/2007/05/comcast_blazers_to_announce_ca.html.

75 Comcast, Blazers to announce cable deal, supra. 76 John Canzano, Trail Blazers start another season with many fans held hostage by

Comcast SportsNet, THE OREGONIAN (Oct. 10, 2009), available at http://www.oregonlive.com/sports/oregonian/john_canzano/index.ssf/2009/10/canzano_trail_blazers_start_an.html.

77 Comcast, Blazers to announce cable deal, supra. 78 Id.


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and southwest Washington.79 Although a number of small cable carriers and Verizon FiOS

carried the sports network, many local fans who subscribed to DirecTV and DISH Network were

still unable to receive Trail Blazer programming.80 CSNW began offering its Trail Blazers

coverage live over the Internet for a fee to local subscribers during the 2009-2010 season, but

refused to offer the package to Blazers fans (and fans of other NBA franchises carried on

Comcast-owned regional sports networks) who could not watch the games through their cable

providers.81 In January 2010, three years into the 10-year contract, and frustrated by Comcast’s

failed negotiations with the two major satellite TV carriers and some local cable operators, the

Blazers announced that they would “pursue all of [their] rights under [the] contract.”82 As of

April 2010, DISH Network and DirecTV were still without access to CSNW.

3. Denial of Regional Sports Programming Leads to Less Competition and Higher Cable Prices

Comcast has a long history of using RSNs to disadvantage its rivals and charge higher

cable rates. Numerous FCC decisions and economic studies have confirmed Comcast’s patterns

and its negative impact on competition and its resulting increase in cable prices.

79 Brent Hunsberger, Comcast-Trail Blazers Deal Still Leaving Some Viewers in the

Dark, THE OREGONIAN (Sept. 26, 2007), available at http://blog.oregonlive.com/playbooksandprofits/2007/09/comcasttrail_blazers_deal_stil.html.

80 John Canzano, Trail Blazers Start Another Season with Many Fans Held Hostage by

Comcast SportsNet, THE OREGONIAN (Oct. 10, 2009); Jon Hemingway, Portland FiOS TV Subscribers Get Comcast SportsNet Northwest, BROADCASTING & CABLE (Jan. 17, 2008).

81 Mike Rogoway, Disappointed Blazers “Pursuing All of Our Rights” in Comcast Deal, THE OREGONIAN (Jan. 7, 2010) (“Disappointed Blazers”}, available at http://www.oregonlive.com/business/index.ssf/2010/01/blazers_say_they_are_pursuing.html; Tom Lowry, Comcast Targets ESPN by Streaming Pro Sports Games, BUSINESS WEEK (Dec. 16, 2009), available at http://www.businessweek.com/technology/content/dec2009/tc20091216_396786.htm.

82

Id.


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The FCC has recognized Comcast’s incentive to use its dominance in the upstream RSN

market to impair competition in the downstream MVPD market. In assessing the potential

anticompetitive effects of the joint acquisition of Adelphia by Time Warner and Comcast, the

FCC found that the acquisition would increase the likelihood of harm to MVPDs in markets in

which Time Warner or Comcast hold, or have the potential to hold, an ownership interest in an

RSN.83 The FCC also found that Time Warner and Comcast would gain an incentive and

increased ability to deny carriage to unaffiliated RSNs.84 The FCC concluded that even small

increases in the market share of Comcast or Time Warner would increase the firm’s incentives to

increase prices for affiliated RSNs.85 In particular, the FCC found that a uniform price increase

was likely to occur in fifteen of the 39 “key” geographic markets known as DMAs.86 The

Commission also provided a recognized link between RSN ownership and MVPD competition.

Specifically, the FCC noted that DBS penetration levels are significantly lower in Philadelphia,

where DBS operators—such as DirecTV and Dish Network—cannot offer the local RSN to their

subscribers.87

83 FCC Adelphia Order, supra ¶116. 84 Id. 85 Id. ¶ 141. 86 Id. ¶144 (“Key DMAs are DMAs that are home to professional sports teams that play

in one of the four major U.S. sports (football, baseball, basketball, and hockey). These DMAs are most likely to be within the “inner zone” of where sports programming is most popular. Therefore, these DMAs are the most susceptible to subscriber losses if the RSN is withheld. We find a potential for an increase in the RSN’s affiliation fee of at least five percent in 15 of the 39 key DMAs. These DMAs are Atlanta, Boston, Buffalo, Charlotte, Cincinnati, Cleveland, Columbus, Dallas, Jacksonville, Los Angeles, Miami, Minneapolis, Pittsburgh, San Diego, and Washington. In these DMAs, a uniform price increase is likely to extract at least an additional $4.2 million per market in RSN fees from unaffiliated MVPDs under conservative assumptions in our model.”).

87 Id. ¶ 146. In the cities where the local RSN is not available to DBS subscribers (Philadelphia, San Diego, and Charlotte), the FCC’s regression analysis shows a statistically significant drop in market share in Philadelphia and San Diego. Id. ¶149. (“We find that the


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There appears to be a direct relationship between Comcast’s share of households and

instances where Comcast discriminates against competitive providers. Specifically, Comcast

engages in discrimination against some unaffiliated MVPDs in every market in which (1) it owns

the sort of marquee sports content to make such discrimination worthwhile and (2) it supplies

cable service to at least 35 percent of the households within the DMA.88

TABLE 1: TOP 30 LOCAL MARKETS IN WHICH COMCAST OWNS A RSN

Market (DMA) Affiliated RSN Comcast Subs as % of Total Households

in DMA (Before Adelphia Merger)

Comcast Subs as % of Total Households

in DMA (After Adelphia Merger)

Does Comcast Own Marquee Sports

Content?

Discriminate Against

Unaffiliated MVPD

Orlando Comcast/Charter Sports Southeast

5 8 No NA

Tampa Comcast/Charter Sports Southeast

10 10 No NA

Atlanta Comcast/Charter Sports Southeast; BravesVision

29 32 No NA

Washington SportsNet MidAtlantic

28 38 Yes No

Sacramento SportsNet West 35 35 Yes Yes

Miami Comcast/ Charter Sports Southeast

37 42 No NA

Philadelphia SportsNet Philadelphia

58 60 Yes Yes

Baltimore SportsNet MidAtlantic

53 56 No NA

Detroit Comcast Local 48 48 No NA

Chicago SportsNet Chicago 49 49 Yes Yes

Note: Reproduced from Singer and Sidak (2007). Although the exact share of total households required to make discrimination vis-à-vis rival

MVPDs profitable is difficult to ascertain, based on the pattern contained in Table 1, it is

reasonable to infer that the “critical share” is somewhere between 28 percent (pre-merger

percentage of television households that subscribe to DBS service in Philadelphia is 40% below what would otherwise be expected given the characteristics of the market and the cable operators in the DMA.”).

88 Hal J. Singer & J. Gregory Sidak, Vertical Foreclosure in Video Programming Markets: Implication for Cable Operators, 3 REV. NETWORK ECON. 348 (2007). The 35 percent threshold may represent the critical share necessary to profitably own an RSN and withhold regional sports programming from competing MVPDs.


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Washington DMA) and 35 percent (pre-merger Sacramento DMA). Comcast does not own

marquee sports content in six of these ten DMAs: Miami, Atlanta, Tampa, Orlando, Detroit, or

Baltimore.89 However, Comcast’s experience in the other three DMAs (not counting

Washington) in Table 1 demonstrates that Comcast would discriminate against competitive

providers once (1) Comcast secures the rights to marquee sports content and (2) establishes a

sufficiently large downstream footprint.

Multiple econometric studies have estimated the decrease in DBS penetration in the

Philadelphia DMA that can be attributed to Comcast’s exclusionary conduct. For example, on

behalf of DirecTV, Bamberger and Neumann predict that, given its market characteristics, DBS

penetration in Philadelphia should have been 20.9 percent in 2005 rather than the actual 10.4

percent.90 The competitive effect of Comcast’s refusal to provide CSN-Philadelphia was also

89 BravesVision carries some live Atlanta Braves baseball games in high-definition that

are also carried on other RSNs (TBS and Turner South), although those RSNs do not carry the games in high-definition. See R. Thomas Umstead, Comcast, Braves Create HD Net; Regional Could Serve as Template for Other Dedicated Team Channels, MULTICHANNEL NEWS, Sept. 27, 2004, at 60; BravesVision Suits Up for Season, MULTICHANNEL NEWS, Apr. 1, 2005, at *1. Because these games are available on other RSNs not affiliated with Comcast, Atlanta is labeled “N/A” in Table 1. Even though neither RSN is carried by a DBS provider, Comcast’s content on both BravesVision and CSS is not sufficient to be labeled “discrimination” because neither RSN carries exclusive marquis content.

90 Lexecon, Analysis of Effect of RSN Availability on DBS Penetration, at Appendix Table 1 (attached as Appendix A to Applications of Adelphia Communications Corp., Comcast Corp., and Time Warner Cable Inc. for Authority to Assign and/or Transfer Control of Various Licenses, MB Dkt. No. 05-192, DIRECTV Surreply, Oct. 12, 2005) (“Lexecon October 2005 Analysis); Gustavo Bamberger and Lynette Neumann, Updated Analysis of Effect of RSN Availability on DBS Penetration, Mar. 17, 2006 (attached as Exhibit 1 to Letter from William M. Wiltshire et al., counsel to DIRECTV, to Marlene H. Dortsch, Secretary, FCC, Re: Ex Parte Presentation in MB Dkt. No. 05-192, Mar. 17, 2006) (“Bamberger and Neumann March 2006 Analysis”). Bamberger and Neumann refined and updated these initial findings with a second study provided to the Commission in March 2006. In both March 2005 and December 2005, their model estimates that the actual DBS penetration rate in Philadelphia is approximately 10 percentage points smaller than it should be based on Philadelphia’s characteristics.


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documented by Robert Willig and Jonathan Orszag.91 Like Bamberger and Neumann, Willig and

Orszag estimate the extent to which Comcast’s denial of CSN-Philadelphia reduced DBS

penetration in Philadelphia. Willig and Orszag extended this foreclosure analysis by estimating

the size of the incremental profits that Comcast extracted as a result of its RSN foreclosure

strategy. Willig and Orszag calculated that Comcast’s conduct caused Dish to win 190,000 fewer

subscribers in the Philadelphia DMA than it would have otherwise.

On behalf of Dish Network, Willig and Orszag calculate this number by “comparing its

penetration in the Philadelphia DMA…to the average penetration in other DMAs where Echostar

has local-into-local service (as in Philadelphia) but also carries professional sports.”92 Willig and

Orszag noted that there were approximately 2.8 million MVPD subscribers in the Philadelphia

DMA at that time, implying that Dish’s penetration rate was reduced from 9.5 percent to 3

percent as a result of Comcast’s conduct.93 Willig and Orszag provided a supplementary analysis

that includes both the extent to which Comcast’s conduct reduced DBS penetration and the

extent to which Comcast charged higher expanded basic cable rates as a result. Willig and

Orszag explicitly link Comcast’s refusal to provide its DBS rivals with CSN-Philadelphia to

91 See Redacted Letter from David K. Moskowitz, Executive Vice President and General

Counsel, EchoStar Satellite L.L.C. to Marlene H. Dortch, Secretary, FCC, MB Docket No. 05-192 (filed Jan. 25, 2005) (citing the redacted Willig/Orszag study) (“Willig & Orszag”).

92 Id. at 3 (“In Philadelphia, Comcast has been able to deny Echostar (and DIRECTV) access to the regional sports that it controls by transmitting the programming terrestrially to its own headends and thereby avoiding the exclusivity prohibition of the Communications Act. The result? Almost 190,000 subscribers lost. Echostar has estimated this loss by comparing its penetration in the Philadelphia DMA, which was extremely low at about 3% as of November 2003, to the average penetration in other DMAs where Echostar has local-into-local service (as in Philadelphia) but also carries professional sports – about 9.5% at the same point in time. The loss of about 70% of the expected penetration rate, applied to the Philadelphia DMA population of 2.8 million television households points to a loss of 188,000 subscribers.

93 Id. Note that this reduction does not estimate the total effect of Comcast’s conduct on DBS penetration because it does not include the effect of Comcast’s conduct on DirecTV’s penetration rate.


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Comcast’s exercise of market power by charging supra-competitive rates for its expanded basic

cable service.

The FCC produced its own econometric study to examine whether DBS penetration was

unusually low in Philadelphia.94 Consistent with the DirecTV and Dish Network studies, the

FCC’s analysis indicated that, if DBS providers in Philadelphia had access to Comcast

SportsNet, then DBS penetration would be approximately six percentage points greater.95 The

FCC updated and revised its Adelphia regression analysis in the 2007 Program Access Order. It

again found that DBS penetration in Philadelphia was significantly below the predicted level and

pointed to “empirical evidence that [Comcast’s] withholding” of SportsNet programming from

DBS providers in Philadelphia “has had a material adverse impact on competition in the video

distribution market.”96

Similarly, Singer and Sidak estimate that DBS penetration in the Philadelphia DMA

should be 15.4 percent.97 The 95 percent confidence interval around our best prediction is 13.1 to

17.8 percent. Because the actual DBS penetration rate in the Philadelphia DMA is outside the 95

percent confidence interval, one must reject the hypothesis that Philadelphia’s predicted

penetration. Stated differently, Philadelphia’s low DBS penetration rate is less than what one

would expect (the rate is 9.4 percent), which demonstrates that Comcast’s foreclosure strategy

has reduced the DBS penetration rate in the Philadelphia DMA.

94 FCC Adelphia Order, supra. 95 Id. Appendix D ¶ 18. 96 FCC NPR ¶¶ 39; see id. ¶ 115 (noting findings in Adelphia Order that withholding of

SportsNet in Philadelphia “has had a materially adverse effect on competition in the video distribution market”).

97 J. Gregory Sidak & Hal J. Singer, Vertical Foreclosure in Video Programming Markets: Implication for Cable Operators, 3 REVIEW OF NETWORK ECONOMICS 348 (2007).


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D. Denial of Local Broadcast Programming Would Lead to Less Competition and Higher Cable Rates

Comcast’s history of using local sports to thwart competition and raise local rates is

particularly troubling in the context of this merger. Here Comcast is seeking to purchase not just

the NBC network, but the owned-and-operated local broadcast stations in the 10 markets that

will only strengthen and extend that local market power and pattern of abuse.

The 10 NBC broadcast stations that Comcast would acquire provide local “must-have”

programming that competitive operators need in order to compete effectively against cable

operators. In its 2002 annual video competition report, the Commission found that DBS

penetration had increased more rapidly in markets where local-into-local service was available.98

The 10 local NBC stations also will increase Comcast’s market power against its MVPD rivals in

those markets. According to economist Hal Singer’s declaration accompanying this petition. The

FCC has already implied that “local broadcast programming is another “must have” input.99

Thus, Comcast will realize a substantial increase in market power vis-à-vis its MVPD rivals in

the seven local markets in which NBCU owns both a broadcast affiliate and Comcast owns an

RSN.100 Those “overlapping markets” are Chicago, Philadelphia, Dallas-Ft. Worth, San

Francisco-Oakland-San Jose, Washington, DC (Hagerstown), Miami-Ft. Lauderdale, and

Hartford-New Haven. In these markets, Comcast will be able to target customers of MVPD

competitors who were unwilling to switch to Comcast for local sports programming, but who

would switch for access to local NBC programming.101 To date, Comcast serves approximately

70 percent of MVPD subscribers in the Philadelphia DMA, and it serves approximately 60

98 See 2002 Video Competition Report, 17 FCC Rcd 26901, 26931-32 ¶ 61 (2002). 99 Singer Declaration, p. 32 ¶ 46. 100 Singer Declaration, p. 10. ¶ 10. 101 Id.


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percent of MVPD subscribers in the Chicago, Miami, and San Francisco DMAs. With such

significant downstream market shares, Dr. Singer states, Comcast can recoup any upstream

losses associated with withholding of the NBC affiliate with downstream gains. Thus, a

combined Comcast-NBCU would have the incentive and ability to withhold or significantly

increase above the competitive level the price it charges its MVPD rivals for must-have local

NBC programming. This would result in less video competition and higher cable rates.

E. The Merger of Comcast’s Programming and NBC’s Programming Will Lessen Competition For News, Entertainment and Advertising

Today, Comcast’s regional and local programming networks compete with NBC’s 10

owned-and-operated (“O&O”) stations for local news and entertainment programming. Comcast-

NBCU would have the incentive to merge these operations, reducing quality, diversity,

competition, and employment in video programming. The public interest would not be served if

competition were eliminated between the O&Os and Comcast’s local programming networks.

Post-merger, Comcast-NBCU would have the incentive to unilaterally exercise its market power

by profitably raising the price of advertising, by cutting programming, and by scaling back

newsrooms, leaving fewer journalists and broadcast technicians to gather news about important

community events and thus harming consumers.

Already, NBC has pioneered local news sharing (LNS) agreements that in effect merge

NBC’s local news gathering with those of its competitors. Under these arrangements, NBC and

its former competitors jointly determine news assignments and crew assignments, replacing what

were once competing news operations with shared news gathering. The first local news services

began in January 2009 between the Fox and NBC owned-and-operated stations in Philadelphia.

Over the course of 2009, Fox and NBC launched LNS agreements in eight of the top nine


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DMAs. In New York City, for example, six stations owned by four different owners cooperate

in a local news sharing venture.102

This merger also threatens to eliminate a current competitor for local advertising.

Contrary to Comcast-NBCU claims today, Comcast is often the largest provider of local

advertising in these markets, which would increase Comcast’s ability to raise local advertising

rates with the acquisition of an NBC affiliate.103 In 2006, NBC made this very argument to the

Commission. As evidence, Dr. Singer points to the Commission’s Media Ownership proceeding

in which NBC noted that cable is the largest player for locally-targeted television advertising in

some major markets. For example, according to those estimates, Comcast’s share of local

advertising sales would increase from 25 to 39 percent in Philadelphia, and Philadelphia (greater

than the ABC station by $26 million) and from 24 to 36 percent in San Francisco (greater than

the Fox station by $70 million).104 Comcast’s local ad share has grown since then. In addition, an

independent broadcaster will not be able to offer the volume discounts and package deals for

advertising across dozens of channels that the merged entity will be able to do. Comcast’s local

ad share has grown since then.

This translates into less revenue for competing broadcasters to produce local news and

hire workers. As a result, broadcasters will no doubt be forced to scale back local news

production, with negative impact on diversity, competition, and adequate staffing that drive

102 See Comments of Communications Workers of America and Media Council Hawaii,

In the Matter of FCC Launches Examination of the Future of Media and Information Needs of Communities in a Digital Age, GN Docket No. 10-25, pages 11-17, May 7, 2010.

103 Singer Declaration, p. 11. ¶ 10. 104 Id., n. 19 (citing Comments of NBC Universal, Inc. and NBC Telemundo License

Co., MB Docket Nos. 06-121; 02-277; 01-235; 01-317; and 00-244 (Oct. 23, 2006).


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quality news. Lack of diversity in newsrooms and in ownership should be cause for alarm. Any

hope for these news organizations depends on their relevancy to the populations they serve.

In terms of local market share, Comcast’s ad penetration is analogous to NBC trying to

merge with the highest ranked station in the market, a practice prohibited by the FCC under its

dual network rule. That rule permits common ownership of multiple broadcast networks but

prohibits a merger of the “top four” networks, i.e., ABC, CBS, Fox, and NBC.

F. Denying Independent Programming Networks’ Access to Comcast’s Subscribers

As the largest MVPD distributor, Comcast has faced numerous FCC complaints from

programmers for discrimination and anti-competitive behavior. The NFL Network, the Tennis

Channel, MASN (a regional sports network), and Wealth TV (an independent SD and HD

programmer) have filed formal FCC complaints against Comcast. These complaints allege that

Comcast carried its own programming on favorable terms, including tiering decisions, while

refusing to carry independent programming on equal terms – or to carry such programming at all.

Should regulators approve the Comcast-NBCU merger, Comcast will have more affiliated

content and even more of an incentive to favor its own programming in its carriage decisions.

This may result in Comcast refusing to carry competitors’ programming, paying them less for

carriage, or placing them on a program tier with fewer viewers.

For example, Comcast gives preferential treatment to its affiliated, national sports

networks, Versus and the Golf Channel, relative to unaffiliated sports networks. As of the 1st

quarter of 2010, Comcast had approximately 23.47 million total subscribers,105 nearly all of

whom have access to Comcast’s affiliated sports networks on Comcast’s “Standard Service.”

Comcast carries its affiliated national sports networks, the Golf Channel and Versus, on a tier

105 Comcast Reports Third Quarter 2009 Results, Nov. 4, 2009, at 3.


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that reaches nearly 100 percent of its subscribers. By contrast, Comcast’s Sports Tier reaches

only 11.3 percent of its subscribers (equal to 2.7 million divided by 23.8 million). It is there that

Comcast places many unaffiliated sports networks106 or, more specifically, threatens to place

unaffiliated sports networks if they refuse to grant equity to Comcast.

The following table shows the tier on which sports programming appears in Comcast’s

channel lineup in the Washington, D.C. area in January 2010, which is generally representative

of its carriage decisions in other parts of the country. As the table shows, none of the sports

networks carried on Comcast’s “Sports Entertainment” tier is affiliated with (or owned by)

Comcast. By comparison, with the exception of ESPN channels—which have sufficient

countervailing market power vis-à-vis Comcast by virtue of their significant sports holdings to

obtain broad access for their networks—all of the sports networks that are carried on Comcast’s

“Standard Service” tier are affiliated with (and owned by) Comcast (Versus, the Golf Channel,

SportsNet Mid-Atlantic), or are carried by Comcast subsequent to the settlement of an FCC

program-carriage complaint (MASN).

TABLE 2: SPORTS PROGRAMMING ON COMCAST BY TIER AS OF JANUARY 2010 (WASHINGTON, D.C.)

“Standard Service” Affiliation “Digital Classic” Affiliation “Sports Entertainment” Affiliation ESPN No ESPN Classic No Fox Soccer Channel No ESPN2 No ESPN U No Fox College Sports No Golf Channel Yes MLB Network Yes* Tennis Channel No Versus Yes NBA TV Yes** CBS College Sports No SportsNet MA Yes NHL Channel Yes*** GolTV No MASN No^ Speed Channel No Big Ten Network No Horseracing Television No TV Games No NFL Red Zone No^^ Sources: Comcast Channel Lineup, available at http://www.comcast.com/Customers/Clu/ChannelLineup.ashx (accessed on Jan. 4, 2010); affiliation is from 13th Annual Report, Appendix C, Table C-1; Comcast 8-K, filed 12/04/09 for the Period Ending 12/03/09, at 6. Notes: * Comcast owns 8.3 percent of MLB Network. ** Comcast holds equity in NBA TV through its ownership in the National Basketball Association. *** Comcast owns 15.6 percent of the NHL Channel, and the League provides anchor programming for Versus. ^ MASN is carried subsequent to a settlement of a carriage complaint, as is the NFL Network, which is carried on

106 Tennis Channel, Inc. v. Comcast Cable Communications, LLC, File No. CSR-8258-P,

Feb. 11, 2010.


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Comcast’s “Digital Starter” tier, which is Comcast’s most broadly distributed level of digital service. ^^ Comcast also sells the HD version of the NFL Red Zone as part of its extra-charge HD package.

For completeness, the table also shows sports networks carried on Comcast’s “Digital

Classic” tier in Washington, D.C., which achieves greater distribution than its Sports

Entertainment tier but less distribution that its Standard Service tier. On its Digital Classic tier,

Comcast owns a minority equity stake in the MLB Network (8.3 percent), the NHL Network

(15.6 percent), and NBA TV (through its equity stake in the National Basketball Association).107

Moreover, the National Hockey League provides Versus its anchor programming (live

professional hockey games). With the exception of the two ESPN networks on the Digital

Classic tier, which again have countervailing market power, it appears that a sports network can

avoid being relegated to Comcast’s Sports Entertainment tier only so long as Comcast is at least

modestly involved in its success. Significant involvement leading to outright ownership yields

access to Comcast’s Standard Service tier and all the associated benefits, including exposure to a

larger audience and a more desirable channel number.

As a consequence of Comcast’s discriminatory tiering policy, an unaffiliated sports

network is restrained in its ability to compete effectively for viewers, advertisers, and

programmers. Comcast is the largest MVPD in the United States, with roughly 24 million

MVPD subscribers. Competition scholars have concluded that 20 percent of a market constitutes

a significant foreclosure share.108 The reason why 20 percent is considered critical is that, in the

presence of economies of scale, missing out on such a large portion of the market can inflate a

107 Comcast Spectacor owns the Philadelphia 76ers, which jointly owns the National

Basketball Association along with the other teams, and thereby owns part of the equity in NBA TV. See Comcast Corp. SEC Form 10-K for fiscal year ended Dec. 31, 2007, at 1.

108 See PHILLIP AREEDA, IX ANTITRUST LAW 375, 377, 387 (Aspen 1991) (indicating that 20 percent foreclosure is presumptively anticompetitive); See also HERBERT HOVENKAMP, XI ANTITRUST LAW 152, 160 (indicating that 20 percent foreclosure and an HHI of 1800 is presumptively anticompetitive).


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rival’s average costs. Because Comcast’s market share of roughly 25 percent of U.S. MVPD

subscribers exceeds that 20 percent standard, economists typically would consider Comcast’s

exclusionary conduct here to be presumptively anticompetitive. Moreover, the actual foreclosure

share may exceed Comcast’s market share to the extent Comcast is making carriage decisions in

coordination with other vertically integrated MSOs as part of a reciprocal compensation strategy,

or other MSOs are following Comcast’s tiering strategy, or both.109

Economists have derived market conditions under which exclusionary conduct can harm

competition. In particular, when markets exhibit economies of scale or when markets display

network effects, exclusionary conduct can impose barriers to entry and expansion that make

rivals smaller, causing them to be less efficient and therefore less capable of restraining the

incumbent’s prices.110 This market condition appears to be satisfied here. By refusing or

conditioning a programmer’s access to its highly penetrated tiers, Comcast deprives rival sports

networks of critical economies of scale.111 Because many costs of the cable network (including

program acquisition costs) are invariant to the number of subscribers, increasing a network’s

number of subscribers (and therefore increasing advertising and license revenues) reduces the

cost of providing service on a per-subscriber basis. The economic literature suggests that the

109 See Jun-Seok Kang, Reciprocal Carriage of Vertically Integrated Cable Networks: An

Empirical Study, Indiana University Working Paper, August 30, 2005, at 1 (“These [empirical] results make credible an underlying premise of a 30 percent national market share limit that the Federal Communication Commission established in 1993: namely, that MSOs may tacitly collude in their carriage decisions, having the effect of restricting market access to startup cable networks in which those MSOs have no ownership interest.”). Moreover, Comcast appeared to act in concert with other cable operators in its dealings with the NFL Network. See Transcript of Record, NFL Enterprises LLC v. Comcast Cable Communications LLC, File No. CSR-7876-P, Apr. 16, 2009, 1277: 10-1279:10.

110 See, e.g., Einer Elhauge, Defining Better Monopolization Standards, 56 STANFORD L. REV. 253 (2003).

111 See, e.g., Dennis W. Carlton, A General Analysis of Exclusionary Conduct and Refusal to Deal—Why Aspen and Kodak Are Misguided, 68 ANTITRUST L. J. 659 (2001)


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scale economies associated with national television advertising are significant. Advertisers can

receive better returns by advertising with larger audiences, and as a result, advertising rates

generally increase with audience size.112 Accordingly, the ads that smaller networks sell are sold

at a significant discount relative to the rates charged by their larger and more widely distributed

competitors. National sports networks are highly dependent on advertising revenue. According to

SNL Kagan, nearly half of total revenue for a national network is derived from advertising

revenue.113

A second potential motivation for Comcast’s discriminatory conduct vis-à-vis

independent networks is that Comcast seeks to expand its footprint from golf, hockey, and bull

riding—the principal sports content carried on its affiliated national sports networks—into

complementary and more compelling sports programming. That motivation is particularly salient

here because Comcast’s objective according to its 2008 Annual Report is to expand its reach into

sports programming: “We have invested and expect to continue to invest in new and live-event

programming that will cause our programming expenses to increase in the future.”114 Comcast’s

“Programming segment,” which “consists primarily of [its] consolidated national programming

networks, including E!, Golf Channel, VERSUS, G4 and Style,” earned revenues of $1.4 billion

112 See, e.g., Johan Arndt & Julian L. Simon, Advertising and Economics of Scale:

Critical Comments on the Evidence, 32 J. IND. ECON. 229, 231-2 (1983); Dong Chen & David Waterman, Vertical Foreclosure in the U.S. Cable Television Market: An Empirical Study of Program Network Carriage and Positioning, Oct. 2005, at 7. Advertisers may also consider factors such as the season and time of day. But these factors are not affected by Comcast’s tiering decision.

113 Derek Baine, Comcast sports networks: Opening the kimono on $2 billion in hidden

value, SNL Kagan, Oct. 8, 2009. 114 Comcast SEC Form 10-K, for the fiscal year ended Dec. 31, 2008, at 29 (emphasis

added).


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in 2008.115 The (upstream) programming division’s operating cash flow grew at 28.3 percent in

the second quarter of 2009, whereas its (downstream) cable division grew by only 4.1 percent.116

With those “live event” programming rights on an exclusive basis, Comcast could seek higher

carriage fees from its downstream rivals as a means of raising rivals’ costs. Alternatively, as the

Commission has concluded in other contexts,117 Comcast could deny that exclusive

programming to its downstream rivals as a means of degrading their quality of service.

As described above, after acquiring NBCU programming, Comcast will have even

greater incentives to favor its own array of programming, shutting out the independent voices of

other programmers, leaving consumers with less quality, choice and diversity in programming.

In fact, Comcast Cable’s President and COO Steve Burke made remarks during the NFL’s

115 Id. 116 Comcast 2nd Quarter 2009 Results, Aug. 6, 2009, at 4. 117 See In the Matter of Applications for Consent to the Assignment and/or Transfer of

Control of Licenses, MB Dkt. No. 05-192, Memorandum Opinion and Order, released July 21, 2006, FCC 06-105, ¶ 118 (“One way by which vertically integrated firms can raise their rivals’ costs is to charge higher programming prices to competing MVPDs than to their affiliated MVPDs.”). See also Id. ¶ 123 (“We find that the transactions [the Adelphia purchase and related cluster-driven swaps] would enable Comcast and Time Warner to raise the price of access to RSNs by imposing uniform price increases applicable to all MVPDs, including their own systems, by engaging in so-called ‘stealth discrimination,’ or by permanently or temporarily withholding programming. As commenters contend, such strategies are likely to result in increased retail rates and fewer choices for consumers seeking competitive alternatives to Comcast and Time Warner.”); Federal Communications Commission, Sunset of Exclusive Contract Provisions, Review of the Commission’s Program Access Rules and Examination of Programming Tying Arrangements, CS Dkt. Nos. 07-29, 07-198, Report and Order, rel. Oct. 1, 2007, ¶ 53 (“We also find that three additional developments since 2002 provide cable-affiliated programmers with an even greater economic incentive to withhold programming from competitive MVPDs: (i) the increase in horizontal consolidation in the cable industry; (ii) the increase in clustering of cable systems; and (iii) the recent emergence of new entrants in the video market place, such as telephone companies.”).


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program carriage complaint with the FCC that Comcast treats affiliate networks “like siblings as

opposed to strangers.”118

Meanwhile, bringing a carriage access complaint to the FCC is not a meaningful remedy.

The complaint process currently lacks any concrete deadlines for FCC action, with many

complaints languishing for years. For example, a June 2008 decision in favor of MASN against

Time Warner involving carriage in North Carolina, was appealed by Time Warner in October

2008, and has remained at the Commission since then. The complaint, which was originally filed

in June 2007, has thus taken three years, to date, with no resolution in sight.

VI. THE PROPOSED TRANSACTION WILL RESULT IN ANTICOMPETITIVE HARMS IN THE EMERGING ONLINE VIDEO MARKET

Another area of concern posed by the Comcast-NBC Universal merger is in the

developing online video marketplace. Video programming delivered via the Internet is a

significant threat to all MVPD distributors, as acknowledged by Comcast itself in the

Commission’s most recent video competition proceeding.119 The recent increase in the quantity

of video programming available online along with a burgeoning ecosystem of software and

hardware that enable customers to view video delivered over the Internet on their televisions has

transformed the Internet into a closer substitute to cable television. The transition of Internet

video from a complement to a substitute for cable television can be seen in recent viewing data.

118 Mike Reynolds, Tennis Volleys Program Carriage Complaint Against Comcast, Multichannel News, Jan. 6, 2010, http://www.multichannel.com/article/442600-Updated_Tennis_Volleys_Program_Carriage_Complaint_Against_Comcast.php.

119 In the FCC’s thirteenth annual report on video competition, Comcast noted that “Many networks have jumped head-first into Internet video, providing consumers with an interactive alternative to traditional TV-set viewing.” Comcast Comments at 29-30 (emphasis added). Comcast provided further evidence that Internet video is a substitute to cable television: “All of these modalities of communications are important to younger consumers, all are part of the paradigm shift to a ‘what-you-want-when-you-want-it’ world, and all of them compete with traditional and not-so-traditional video distribution technologies for time, attention, and dollars.” Id. at 59 (emphasis added).


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According to comScore, the average American web user spent about ten minutes a day in early

2009 (slightly under six hours per month) viewing online video, compared with roughly 300

minutes spent watching live television (slightly over 150 hours per month),120 suggesting that the

two platforms were mild substitutes not long ago. Because the audience for online video is young

and growing, and because the broadcast networks are replicating their content online, however,

the Internet has quickly emerged as a serious threat to cable television. Over the course of 2009,

the average amount of time that web users spent watching videos online more than doubled to

nearly thirteen hours per month (from slightly under six hours per month in the beginning of the

year).121 Independent analyses confirm this trend. Parks Associates reported that the number of

U.S. broadband households watching premium online content doubled in 2009; as of April 2010,

over 25 million U.S. broadband households regularly watched full-length television shows

online, and over 20 million watched movies online.122 The Convergence Consulting Group

estimated that, from 2008 to 2010, 800,000 U.S. households disconnected their cable television

service and watched their television online; that number was also expected to double by 2011.123

Some of the most compelling online video is now available from Hulu.com,

programmers’ websites (such as Comedy Central), and the growing libraries of services like

Apple’s iTunes, Amazon’s Unbox, Amazon’s Video on Demand service, Netflix’s “Watch

120. Time Warner and the internet: After the divorce, THE ECONOMIST, May 7, 2009. 121. comScore data shows 2009 was a blistering year for online video, VIDEO NUZE, available

at http://www.videonuze.com/blogs/?2010-02-09/comScore-Data-Shows-2009-Was-a-Blistering-Year-for-Online-Video-Slides-Available-/&id=2425 (citing comScore data).

122.Parks Associates finds over 25 million U.S. broadband households regularly watch full-length TV shows online, Apr. 20, 2010, available at http://www.fiercetelecom.com/press_releases/parks-associates-finds-over-25-million-u-s-broadband-households-regularly-watch-full.

123. Ryan Fleming, New Report Shows More People Dropping Cable TV for Web Broadcasts, Apr. 16, 2010, available at http://www.digitaltrends.com/computing/new-report-shows-that-more-and-more-people-are-dropping-cable-tv-in-favor-of-web-broadcasts.


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Instantly” streaming service, and sites offering free content such as Joost. New hardware from

firms such as Apple (Apple TV) and TiVo (the recently released TiVo Premier), and new

software running on gaming consoles, DVD players, and increasingly built into televisions

themselves are making it easier for subscribers to access the Internet from their televisions.

Indeed, a new class of “over-the-top” (OTT) video providers, such as Boxee and Roku, aims to

reach Internet users with subscription-based or advertising-supported streaming-video services.

The success of the OTT business models depends critically on access to online content. And

investment by broadband access providers in faster and wider networks depends on the

development of this ecosystem, as the demand for the pipe is derived from the demand of the

content that rides over the pipe.

Cable companies have recognized the threat of their video distribution business being

cannibalized by their Internet business. As Glenn Brit, CEO of Time Warner Cable, acknowledged

in May 2009: “The reality is, we’re starting to see the beginnings of cord cutting where people,

particularly young people, are saying all I need is broadband.”124 In April 2009, Comcast’s president

and chief operating officer, Steve Burke, likened television viewers’ movement to online video to

“wildfire.”125 According to Melinda Witmer, Time Warner Cable’s programming chief, OTT video

providers are actual (and not just potential) competitors: “We wake up every day and there is some

new competitor out there—a Roku or a Boxee. People like to think of cable operators as

monopolists, but we face a lot of competition just to keep the business we have.”126 Despite this

124 Christopher Lawton, More Households Cut the Cord on Cable, WALL STREET JOURNAL,

May 28, 2009, available at http://online.wsj.com/article/SB124347195274260829.html. 125 Tom Lowry, Cable TV: Pushing to Become More Web-like, BUSINESSWEEK, Apr. 16,

2009, available at http://www.businessweek.com/magazine/content/09_15/b4126050298367.htm [hereinafter Cable TV].

126 Ronald Grover, Tom Lowry & Cliff Edwards, Revenge of the Cable Guys, BUSINESSWEEK, Mar. 11, 2010, available at


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threat, incumbent cable operators still maintain an advantage over OTT video providers by virtue of

their control over video content, as explained by Time Warner executive Jeffrey Bewkes: “We’re

fortunately in a position where this [Internet video] doesn’t cost us much money. We have an

advantage and we’re going to use that advantage.”127

The increasing dominance of the Internet as a delivery platform is brought into focus by

this Transaction because Comcast is the nation’s leading broadband provider. New entrants are

beginning to offer a number of video streaming services on the Internet and “over the top” OTT

services that bring Internet video directly to the television as well as the desktop and mobile

devices. This premium content available online increases the value of broadband subscription to

consumers. Thus, the availability and ease of accessing video online is an important means to

encourage the deployment and adoption of broadband. And as broadband adoption increases,

some users are able to choose to “cut the cable cord,” canceling their cable subscription and

relying on the Internet for television. In fact, the FCC recently concluded that Internet video and

video devices are an important part of developing a National Broadband Plan.128

The Comcast-NBC merger has the potential to bring this to a halt by limiting the ability

of over-the-top service providers to access a wide array of video programming and restricting

consumer access to content. A combined Comcast/NBC could limit consumers’ online access to

NBC content altogether or charge consumers higher prices to access that content unless they

http://www.businessweek.com/magazine/content/10_12/b4171038593210_page_2.htm [hereinafter Revenge of the Cable Guys].

127 Knowledge at Wharton, Cable TV Follows Its Subscribers to the Internet, July 22, 2009, available at http://knowledge.wharton.upenn.edu/article.cfm?articleid=2295. In the same article, the former chief economist of the FCC, Gerald Faulhaber, described Internet video as “very disruptive,” a technology that “attacks the model of cable television.” Id.

128 Comment Sought on Video Device Innovation, NBP Public Notice #27, GN Docket Nos. 09-47, 09-51, 09-137; CS Docket No. 97-80 (Dec. 21, 2009).


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already subscribe to cable services. This is the TV Everywhere model that Comcast and NBC

have already begun to deploy, bundling content with cable subscription, thereby forcing internet

customers to buy cable television/cable modem packages in order to see content online from

NBC. .

A. The Merger Increases Comcast’s Power to Impose Limits on Consumers’ Ability to Watch Programming Online Unless They Subscribe to Cable

TV Everywhere is an initiative being pursued by a number of cable companies, but led by

Comcast. Under the TV Everywhere model, Comcast video subscribers have access to video

online content for free, just as they do today. Online consumers, however, are forced to pay

higher rates or are restricted from accessing content at all. The imposition of this cable business

model on the Internet threatens to constrain consumer choice and diversity of programming

content.

Comcast has made some of the video content it distributes available online, but only to

paying customers of its cable television service through its TV Everywhere model, which is

branded in Comcast markets as Fancast Xfinity TV (“Fancast”).129 Fancast provides access to

network television shows and movies integrated with television-related news and a viewing

guide for its video service.130 During 2009, Fancast had between two and five million unique

visitors per month, or approximately 10 percent of Hulu’s audience size.131 As of March 2010,

Fancast offered nearly 20,000 television shows and movies from two dozen channels, including

129 See http://www.fancast.com. 130 Id. 131 Site statistics for Fancast available at

http://siteanalytics.compete.com/fancast.com/?metric=uv.


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HBO, Discovery, AMC, and NBC.132 Subscribers can use the service on personal computers, but

not on their televisions.133

As Dr. Singer explains in his declaration, this conduct is as a tie-in, with Comcast’s cable

television service serving as the tying product and the online content serving as the tied

product.134 By tying access to its online content portfolio to the purchase of Comcast cable

television service, Comcast may impair the ability of in-region MVPD rivals, including OTT

providers, to compete effectively; by tying access to its online content portfolio to the purchase

of Comcast cable modem service, Comcast may impair the ability of in-region rival ISPs to

compete effectively. In particular, Comcast and other members of TV Everywhere can induce

substitution away from fiber/DSL connections offered by telephone companies.

BusinessWeek explained how Time Warner and Comcast coordinated in the development

of the TV Everywhere model.135 To exert the maximum pressure on content providers, Time

Warner needed an MVPD partner; Time Warner CEO Jeffrey Bewkes reportedly floated his

proposal to Comcast CEO Brian Roberts in 2009.136 Bewkes prevailed on Roberts to allow

customers to “tap into any cable channel’s Web site as long as it was part of the TV Everywhere

ecosystem.”137 Collectively, Comcast and Time Warner possess significant buying power vis-à-

vis independent cable networks. The cable operators were “using the $32 billion they pay content

132 TV Everywhere, BUSINESSWEEK, Mar. 10, 2010, available at

http://www.businessweek.com/magazine/content/10_12/b4171041598366.htm. 133 Id. 134 Singer Declaration at 18 ¶ 19. 135 Ronald Grover, Tom Lowry & Cliff Edwards, Revenge of the Cable Guys,

BUSINESSWEEK, Mar. 11, 2010 (“Revenge of the Cable Guys”), available at http://www.businessweek.com/magazine/content/10_12/b4171038593210.htm?chan=magazine+channel_top+stories.

136 Id. 137 Id.


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providers each year as leverage” to ensure that cable networks do not grant OTT providers such

as Boxee and Roku access to their content.138

In the biggest TV Everywhere trial, NBC restricted access to Olympic games online to

consumers who could prove they already subscribed to cable. NBCU held the rights to the 2010

Winter Olympics in Vancouver.139 According to the New York Times, NBC’s online Olympic

portal, NBCOlympics.com, streamed fewer sports in the Vancouver games in real-time than it

did in the Beijing games, “marking a step backward in online access to marquee events.”140

NBC’s online portal aired only hockey and curling in real-time. Other events on the Internet

were shown on delay, sometimes of more than a day.141 Moreover, online users could only view

streamed Olympic events provided they could “authenticate” a subscription to participating cable

or satellite providers.142

The TV Everywhere model, as described above, creates a mechanism for programmers

and content providers to have a “walled garden” of online video content, only available to those

who pay their monthly cable subscriptions. In doing so, TV Everywhere denies independent

video distributors access to must-have programming, and creates a barrier to entry to OTT

providers. This extension and protection of the cable business model effectively “cabilizes” the

Internet, thus diminishing innovation, depressing investment in broadband deployment and

ultimately eliminating jobs.

138 Id. 139 Cecilia Kang, Merger plans for Comcast, NBC ignite battle over television access,

WASHINGTON POST, Dec. 4, 2009, at A1. 140 Brian Stelter, A trickle of life streams on the web, NEW YORK TIMES, Feb. 18, 2010, at

15. 141 Id. 142 Id.


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Customers lose under the TV Everywhere model, because it imposes the cable

subscription pricing structure on the Internet. Where customers have traditionally accessed the

online content of their choice, often for free, they would now be forced to pay for a cable and/or

a broadband subscription to view online video. Where the Internet used to be a source of

expanding consumer choice and diversity of programming content, it would be used to protect

the current cable incumbents.

B. Hulu Could Be Used to Force The TV Everywhere Model

A merged Comcast-NBCU would have the ability to force this business model on other

distributors through their ownership of NBC’s content. Through its acquisition of NBCU,

Comcast will gain ownership of 32 online properties, including several marquee Web sites. Key

among them is Hulu.com, a Web site that offers free, advertising-supported streaming video.

Viewers can choose from more than 1,700 primetime cable and television shows and movies.

Hulu videos also are available on AOL, IMDb, Yahoo!, MSN, and MySpace. NBCU owns a 30

percent interest in Hulu. The Web site is joint venture of NBCU, Fox (News Corp), and ABC

Networks (the Walt Disney Company)143 and offers video content from those programmers as

well as hundreds of others. According to comScore, in March 2009, 380 million videos were

viewed on Hulu.com by more than 41 million unique viewers.144 By February of 2010, the

143 Hulu’s owners also include Providence Equity Partners. See

http://www.hulu.com/about. 144 Hulu Continues Ascent in U.S. Online Video Market, Breaking Into Top 3 Properties

by Videos Viewed for First Time in March, comScore press release April 28, 2009, available at http://www.comscore.com/Press_Events/Press_Releases/2009/4/Hulu_Breaks_Into_Top_3_Video_Properties.


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number of videos watched was up to 912 million,145 making it the second leading online video

portal.

Hulu plays a critical role as an aggregator of network television programming on the

Internet. That role is of such concern that Sen. Herb Kohl, Chairman of the Senate Subcommittee

on Antitrust, Competition Policy and Consumer Rights, urged the Commission and the Justice

Department to condition approval of the merger on Hulu’s divestiture within a year of the

acquisition.146

Today, video from Hulu is not tied to cable. As a result, NBC has the incentive to make

its programming available in as many points of sale as possible, including to non-cable

customers. Merger with Comcast could end that pro-competitive practice. After the transaction,

Comcast’s ownership in Hulu would give it the ability and incentive to force its cable business

model on other distributors. Comcast also could choose to provide its increased portfolio of

online programming exclusively to its cable subscribers, thereby restricting its access and

depriving competing cable, satellite and telecommunications companies and their customers of

access to must-have content.

C. Other Exclusionary Strategies

Comcast has addressed the increasing threat of Internet based television in several ways.

First, as described above, Comcast has made content available online but only to its cable

customers. Second, Comcast requires that unaffiliated cable networks not make their content

145 comScore Releases February 2010 U.S. Online Video Rankings, comScore press

release April 13, 2010, available at http://www.comscore.com/Press_Events/Press_Releases/2010/4/comScore_Releases_February_2010_U.S._Online_Video_Rankings.

146 Letter from Sen. Herb Kohl, D-WI, to FCC Chairman Julius Genachowski and Assistant Attorney General Christine Varney, (May 26, 2010).


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available online as a condition of being carried on Comcast’s cable television systems.147 This

conduct is an exclusive deal; Comcast insists that a cable network not license its content to OTT

video providers or post content to its own Web site as a condition of carriage on Comcast’s cable

system. Finally, Comcast also maintains complete control of the set-top box used to access its

cable television service by requiring its cable television customers to purchase the set-top box

from Comcast to enjoy the full suite of interactive services. This conduct is another tie-in; with

the tied product being the set-top box.

These exclusionary strategies will slow the growth of Internet-only television and protect

Comcast’s market power in the supply of cable television service. By preventing unaffiliated

cable networks from posting their content online as a condition of carriage, and by denying

access to its affiliated online content, Comcast can deny a critical input to OTT video providers,

impairing Internet-only television. When Comcast’s affiliated online properties are combined

with those of Time Warner, which also participates in TV Everywhere, the collection of withheld

content could significantly impair OTT providers.

Independent cable networks and movie studios naturally fear upsetting Comcast by

posting their video content online or making it available to OTT video providers; by including

other cable operators, including Time Warner, in TV Everywhere, the combined leverage vis-à-

vis independent networks is even stronger.148 Having NBCU’s content portfolio also would

147 Cable TV, supra, at *1 (“As the cable companies scramble to get these technologies

out of the lab, they are trying to prevent cable networks from putting their shows online. In recent months, Big Cable has reminded USA, Bravo, TNT (TNT), and hundreds of other channels that the cable companies provide about half their revenues, in the form of fees to carry their shows. The implicit warning: put your content online and forfeit nearly $30 billion. ‘If I don’t have a customer,’ says Time Warner Cable’s Britt, ‘the programmers aren’t going to have a customer.’”).

148 Revenge of the Cable Guys, supra (“Back at Time Warner Center in New York and One Comcast Center in Philadelphia, the cable operators began to realize they had the studios


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increase Comcast’s market power vis-à-vis independent programmers. In particular, Comcast’s

threat not to carry independent networks that seek to post some of their content online becomes

more credible as Comcast adds to its online video content portfolio. By denying its online

portfolio to in-region rival ISPs—that is, by tying Fancast to Comcast’s cable modem service—

Comcast and other members of TV Everywhere can induce substitution away from fiber/DSL

connections offered by telephone companies.

And by controlling the set-top box, Comcast can ensure that its video subscribers cannot

access the Internet from their televisions. An independent set-top-box maker would be more

inclined to add features, including the ability to connect to and download video from the Internet

via a Wi-Fi connection that could threaten a cable provider’s cable television revenues.

Comcast’s acquisition of NBCU’s online content portfolio would further these

exclusionary strategies, on a unilateral basis and on a coordinated basis with other cable

operators. Denying access to NBCU’s online content portfolio, especially Hulu.com, would

significantly impair the ability of OTT providers to compete effectively for online video

customers. To the extent that TV Everywhere does not provide access to rival ISPs on reasonable

terms, denying access to NBCU’s online content portfolio would also impair the ability of in-

region ISP rivals to compete effectively for broadband subscribers.

Finally, Comcast’s acquisition of NBCU’s online content portfolio would increase

Comcast’s incentives to thwart set-top-box technologies that would enable cable television

customers to access the Internet from their televisions. If a Comcast cable customer could access

locked down. As Frank Biondi, former president of the media giant Viacom (VIA), puts it: ‘Why would [the studios] make a deal with a competitor to their largest customer and risk angering them?’) (emphasis added).


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Hulu.com from his television without having to authenticate his Comcast cable television

subscription, then the value of Comcast’s cable television platform would be diminished.

All of the actions described above restrict the Internet from developing into a platform for

competitive video alternatives. These actions in essence protect the cable-channel business

platform at the expense of new video entrants, thereby devaluing the investment of competitive

broadband access companies. The end result is that companies will invest less in broadband

deployment, put less fiber in the ground and hire fewer people.

VII. THE COMMISSION SHOULD DENY THE APPLICATION OR IN THE ALTERNATIVE, THE COMMISSION SHOULD IMPOSE REMEDIES TO PROTECT WORKERS’ RIGHTS AND COMMUNITY LABOR STANDARDS AND TO PROTECT COMPETITION IN THE VIDEO AND ONLINE MARKETPLACE

For the reasons articulated above, the Commission should deny the Applicants’ request to

transfer NBCU licenses from GE to Comcast. In the alternative, should the Commission grant

the proposed transaction, it should impose remedial conditions to address concerns regarding the

likely harms that we have identified. At bottom, the public must be protected from the significant

harms by a combination of such unprecedented scale.

A. Remedies Addressing Employment and Workers’ Rights

Historically, debt-financed media mergers have resulted in significant job cuts to achieve

so-called “synergies.” The Commission has recognized that merger-related commitments to

preserve jobs and protect workers’ rights serve the public interest.149 Further, Comcast in the

149 In the WorldCom/MCI Order, the Commission considered the impact of that merger

on employment. See WorldCom/MCI at 213. In the SBC/AMT Order, the Commission cited SBC’s commitment to “improving service quality by hiring more employees.” SBC/AMT Order at 567. In the Puerto Rico Telephone Authority/GTE Merger, the Commission also cited employee commitments as a merger-related public interest benefit. Puerto Rico/GTE Order at ¶ 57; See alsoIn the Matter of Applications Filed by Frontier Communications Corporation and Verizon Communications Inc. for Assignment or Transfer of Control, WC Docket No. 09-95, Statement of FCC Chairman Julius Genachowski, ("I take seriously concerns that have been


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past worked to abrogate its employees’ right to union representation and collective bargaining

following its purchase of AT&T Broadband. Therefore, the Commission should impose the

following conditions to ensure that these anti-labor practices do not affect workers impacted by

the proposed transaction.

1. Workers should not lose their jobs as a result of the transaction. Comcast-

NBCU should commit to ensuring that employees will retain their current jobs and that their

employment rights will be protected. Further, Comcast-NBCU should commit to maintain or

grow employment levels after the transaction.

2. For employees who have elected to have representation rights, the merged

entity will respect and recognize the collective bargaining status of its employees that existed

prior to transfer and will take no action to undermine that status or the scope of its bargaining

units.

3. Employees with collective bargaining agreements who will now work the

new entity will have their existing contract recognized by the new franchise owner.

4. The merged entity will take no action to undermine the rights of

employees who seek union representation.

expressed about the risks this transaction poses for consumers, employees, and competitors"); Joint Statement of Commissioner Michael Copps and Mignon Clyburn ("Lastly, we understand—and fully expect—that approving this transaction will maintain and potentially expand much-needed quality jobs in these rural communities. We continue to be hopeful that Frontier will soon reach an equitable agreement with the Communications Workers of America, ensuring that the needs of Frontier’s employees are respected").


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B. Remedies to Address Comcast’s Refusal to Supply Affiliated Programming to Rival Distributors on Reasonable Terms

To ensure that Comcast provides its rivals with its affiliated programming, the

Commission should compel Comcast to make its programming available to all rivals at

reasonable and non-discriminatory rates regardless of method of delivery. First, Comcast-NBCU

should be compelled to sell its affiliate networks to MVPDs on an a-la-carte basis—Comcast

should be barred from tying its marquee networks (an NBC affiliate, an RSN, or Versus) to its

lesser programming. Comcast-NBCU should be explicitly prohibited from offering bulk

discounts, which are frequently used to impair new entrants. With respect to the NBCU O&O

affiliates: (1) Comcast should be compelled to enter binding commercial baseball style

arbitration for disputes over retransmission consent; and (2) rival MVPDs should be allowed to

carry the NBC affiliate during arbitration.

A key weakness of the program access rules is that they are satisfied by charging one’s

affiliated cable distributor the same, inflated wholesale price for the network. Depending on the

must-have nature of the affiliated network, a vertically integrated cable operator may choose a

price for its affiliated cable network in excess of the price that would be charged by an

independent cable network provider or what economists call the “independent monopoly price”

(“IMP”). As Dr. Singer explains in his declaration, the goal of regulation should be to steer the

wholesale price of the affiliated network back to the IMP, as wholesale prices exceeding the IMP

constitute a reduction in social welfare.150

The reason for the divergence between the wholesale price and the IMP for a vertically

integrated cable operator is that it realizes a gain from the elevated costs incurred by its

downstream MVPD rivals. It is always better to compete against a high-cost rival than a low-cost

150 Singer Declaration, p. 141 ¶ 217.


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rival. And by controlling the access price of a key input for a rival, the vertically integrated cable

operator can directly raise its rival’s costs. The problem confronting regulators is to distinguish

the elevated offer price from the IMP. Program access disputes often focus on prices charged for

similarly situated networks. But to the extent that those networks are also owned by vertically

integrated cable operators, the benchmark itself is tainted.

One approach is to estimate the IMP of the cable network based on the classic Lerner

index, which sets the price-cost margin equal to the inverse of the own-price elasticity of

demand.151 The regulator would then impose a restraint on the vertically integrated cable

operator not to exceed the estimated IMP. The problem with this approach, however, is that

econometric estimation of the demand curve imposes significant data requirements on the

analyst. Although there are non-econometric methods, these also require granular data on the

network’s margins. The dispute would likely turn into a “battle of the experts,” with the

arbitrator having to decide which economic model best explained the data.

An alternative approach is to allow Comcast’s customers to opt out of the retail bundle

that includes the affiliated network in question at a price equal to the bundled retail price less the

wholesale price of the network. To implement this approach, Comcast should be barred from

selling its affiliated networks on a bundled basis to MVPDs. Comcast could not tie its marquee

programming to lesser programming. This a-la-carte pricing rule would apply, at a minimum, to

any Comcast RSN, Versus, and the 10 NBCU O&O local affiliates. For example, assume that

Comcast charges $40 per subscriber per month for an expanded digital basic package that

includes Versus. Assume further that, after porting NBC sports programming to Versus, Comcast

seeks $6 per subscriber per month from its MVPD rivals for a license to Versus. At that pricing

151 Singer Declaration, p. 143-46 for economic proof of the benefits of the a-la-carte

restraints.


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pair, a Comcast subscriber, under this regime, could elect to subscribe to the expanded digital

basic package for $34 per month (equal to $40 less $6) by opting out of Versus. Comcast

subscribers who do not opt out of Versus would continue to pay $40 per month.

How would this regime affect Comcast’s incentives to price Versus to its downstream

rivals? Suppose that the IMP of Versus (with NBC’s sports programming) is $3 per month—that

is, an independent owner of Versus would chose $3 per month as the profit-maximizing price—

but that Comcast seeks an additional $3 per month to disadvantage its downstream MVPD rivals.

At a $6 wholesale price for Versus, Comcast would expose itself to a certain level of opt-outs for

all Comcast customers who value Versus at less than $6 per month. In particular, for each

Comcast subscriber that opted out of Versus, Comcast would lose $6 in revenues on net; the fact

that it no longer pays its upstream cable network $6 for the opt-out customers is an internal

transfer that can be ignored.

The elegance of this approach is that Comcast’s exposure to revenue loss at the retail

level is an increasing function of the wholesale price it seeks for Versus; the higher the wholesale

price it seeks for its affiliate networks, the higher the opt outs. While this remedy does not ensure

that Comcast selects the IMP for its affiliated networks, it tempers Comcast’s incentive to raise

its wholesale price (as it has with CSN Chicago (a near doubling of the wholesale price) and with

its RSNs in Portland and in Philadelphia (effectively an infinite wholesale price)). Comcast

might argue that even if it were to charge the IMP of $3 month, it would still expose itself to opt

outs and the associated lost revenue under this regulatory regime. But this exposure can be

thought of as a fresh cost of vertical integration—a cost that counteracts a strategic benefit of


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vertical integration that Comcast has until now exploited to impair MVPD competition.152 If

Comcast wants to avoid this exposure, it can sell off Versus and free itself of the a-la-carte

restriction.

C. Remedies to Address Comcast’s Tying of Access to Internet Content to the Purchase of Cable Television Service – Banning TV Everywhere Model

The evidence presented above suggests that a primary motivation of the proposed

transaction is to extend Comcast’s market power into online content and to impair the ability of

OTT providers to compete for Comcast’s cable video subscribers. The Commission should

consider the following remedies to address this potential abuse of market power:

First, Comcast-NBCU should be barred from tying access to online content to the

purchase of a cable video subscription. Online users who access the Internet via any broadband

access provider should be permitted to access content on a standalone basis.

Second, Comcast-NBCU should be barred from conditioning carriage on an independent

network’s agreement not to replicate video programming online. Similarly, Comcast-NBCU

should be barred from conditioning carriage on an independent network’s agreement not to

license its programming to an OTT video provider.153 The ability of Comcast-NBCU to do so

shrinks the online portfolio of content, thereby reducing the private returns to investing in

broadband access.

Third, within one year of the acquisition, the combined company should be compelled to

divest NBCU’s partial ownership in Hulu.com. Given the pivotal role that Hulu.com plays as an

152 As part of the a-la-carte restraint, Comcast should be barred from imposing restrictions that prevent rival MVPDs from allowing the rival’s MVPD customers from opting out of Comcast’s affiliated networks under a similar a-la-carte option.

153 Comcast-NBCU should also be barred from offering a differential pricing scheme that induces an independent network not to (a) post its content online or (b) contract with an OTT video provider.


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aggregator of network television programming on the Internet, and given the strong likelihood

that Comcast would restrict access to Hulu.com, vertical integration here is unwise. Rather than

placing (and then policing) access restrictions on Hulu.com for OTT providers, a better course is

divestiture. Absent any MVPD ownership, if Hulu.com decides to block access to OTT providers

on a going-forward basis, the reasons would be unrelated to impairing competition in the supply

of MVPD services.

Fourth, the Commission should apply the program access protections to OTT video

providers, and it should extend those protections in the event that Comcast-NBCU’s affiliated

programming is ported or replicated online. For example, the program access provisions

currently prevent Comcast from denying its MVPD rivals access to Versus so long as Versus is

delivered via satellite. To evade those restrictions, the new entity could port certain must-have

content from Versus to the Internet. To make matters concrete, if Comcast-NBCU were to

broadcast Sunday Night Football games (currently aired on NBC) on Versus, and if Comcast-

NBCU were to port those games to its Versus Web site, then rival MVPDs would not have

access to that must-have programming. Extension of the program access provisions to the

Internet would ensure that rival MVPDs (and their customers) would have access to (ported)

online content so long as the rival MVPD had secured a license to the cable television feed of an

affiliated network.

Fifth, Comcast-NBCU should be barred from tying the purchase of the new entity’s cable

television service to its set-top box. Comcast currently allows its cable television customers to

access Fancast online, but only from a computer. As described above, Comcast recognizes the

threat that Internet access via the television poses to its cable television system. Because the

merged entity cannot be counted on to integrate features such as Wi-Fi access into its set-top


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box,154 Comcast-NBCU should be compelled to permit its cable television customers to purchase

a set-top box from an independent provider.

D. Remedies Addressing Comcast’s Denial of Carriage to Independent Programming Networks

The proposed transaction would increase Comcast-NBCU’s portfolio, thereby giving the

new entity the incentive and ability to extend and increase its market power in the supply of

cable programming, particularly sports programming. To discourage Comcast-NBCU from

discriminating in its carriage decisions on the basis of affiliation, the Commission should refine

its current program-carriage adjudication process: As a condition of the merger, Comcast should

agree to an expedited complaint process; a baseball-style arbitration process, and a swift

timetable for resolution of complaints.

VIII. CONCLUSION

The Comcast/NBC merger’s potential to limit growth, investment and jobs is not in the

public interest. Given its anticompetitive and anti-consumer effects, the Commission should

deny the proposed transaction. In the alternative, should the Commission approve the joint

venture, it must carefully consider the significant impact the merging companies will have on

video competition, choice and jobs.

Moreover, the Commission cannot rely on the voluntary public interest commitments

offered by Comcast and NBCU alone. The voluntary commitments are: 1) insufficient to

adequately address the very real competitive harms; and 2) in many cases, rest on pending

actions before federal regulators. As a result, prior to addressing this merger, CWA believes that

154 By contrast, Verizon FiOS, an entrant in the MVPD industry, allows its television

customers to access the Internet via their television by downloading “TV Widgets.” See Download TV Widgets, available at http://www22.verizon.com/Residential/aboutFiOS/Overview.htm#widgets.


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the FCC should complete many of the actions that will address some of these issues from a

broader industry-wide perspective. The FCC would then have the ability to craft any additional,

specific merger conditions that are necessary to further address the potential harms caused by

this combination.

As proposed, the transaction would likely (a) result in lost jobs; (b) impair competition in

several MVPD markets; (c) weaken independent networks that compete with Comcast’s or

NBCU’s affiliated networks; (d) retard the development of online video, and (e) undermine the

incentive of rival broadband Internet access providers to invest in network infrastructure. The


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public interest demands that the Commission either deny the Application or in the alternative

adopt conditions that would remedy all of these imminent harms.


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Respectfully submitted, _____________________ Debbie Goldman Communications Workers of America June 21, 2010

Kevin J. Martin Mark C. Ellison Jennifer A. Cetta Counsel for Communications Workers of America


61 5102097

CERTIFICATE OF SERVICE

I, Jillian Gibson, a legal secretary at Patton Boggs LLP, hereby certify that on this 21st day of

June, 2010, I caused true and correct copies of the foregoing Petition to Deny to be served by

first-class mail on the following individuals:

Kathleen A. Zachem Vice President, Regulatory and State Legislative Affairs COMCAST CORPORATION 2001 Pennsylvania Avenue NW, Suite 500 Washington DC 20006

Brackett B. Denniston, III Senior Vice President & General Counsel GENERAL ELECTRIC COMPANY 3135 Easton Turnpike Fairfield CT 06828

Richard Cotton Executive Vice President & General Counsel NBC UNIVERSAL, INC. 30 Rockefeller Plaza New York NY 10112

Joseph W. Waz, Jr. Senior Vice President, External Affairs and Public Policy COMCAST CORPORATION One Comcast Center Philadelphia PA 19103-2838

Ronald A. Stern Vice President & Senior Competition Counsel GENERAL ELECTRIC COMPANY 1299 Pennsylvania Avenue NW 9th Floor Washington DC 20004

Margaret L. Tobey Vice President, Regulatory Affairs NBC UNIVERSAL, INC. 1299 Pennsylvania Avenue NW 9th Floor Washington DC 20004

Jordan Goldstein Senior Director, Regulatory Affairs COMCAST CORPORATION 2001 Pennsylvania Avenue NW Sutie 500 Washington DC 20006

A. Richard Metzger, Jr. Regina M .Keeney Lawler, Metzger, Keeney & Logan LLC 2001 K Street NW, Suite 802 Washington DC 20006


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Bryan N. Tramont Kenneth E. Satten David H. Solomon Natalie G. Roisman Wilkinson Barker Knauer LLP 2300 N Street NW, Suite 700 Washington DC 20037

Michael H. Hammer James L. Casserly Michael D. Hurwitz Brien C. Bell Willkie Farr & Gallagher LLP 1875 K Street NW Washington DC 20006

Arthur J. Burke Ronan P. Harty Rajesh James David Polk & Wardwell LLP 450 Lexington Avenue New York NY 10017

Respectfully submitted, Jillian Gibson

Applications for Consent to the MB Docket No. 10-56 Transferor, To

Documents

Transcript of Applications for Consent to the MB Docket No. 10-56 Transferor, To