Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C

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1 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C ) In the Matter of ) ) Applications of Comcast Corporation and ) MB Docket No Time Warner Cable Inc. for Consent to Assign ) or Transfer Control of Licenses and Applications ) JOINT COMMENTS OF THE PARENTS TELEVISION COUNCIL, CITIZENS FOR COMMUNITY VALUES, AMERICAN DECENCY ASSOCATION, MORALITY IN MEDIA, ILLINOIS FAMILY ASSOCIATION, AMERICAN FAMILY ASSOCIATION OF PENNSYLVANIA AND JANICE CROUSE, PH.D. The Parents Television Council, Citizens for Community Values, American Decency Association, Morality in Media, Illinois Family Association, American Family Association collectively representing millions of concerned citizens, parents and families hereby submits the following comments in the above proceeding. 1. The Commission Must Act in the Public Interest, and Not the Corporate Interest Congress has directed the Commission to review merger transactions under the Communications Act and to determine whether the proposed transaction would serve "the public interest, convenience, and necessity." This is related to, but obviously different from, the Department of Justice s concurrent antitrust review under the Clayton Act.

2 Thus, the Commission s role in this proceeding is not to determine whether the proposed merger of Comcast and Time Warner Cable meets any would-be tests for antitrust, but rather simply if the public will benefit from the merger of these two industry giants. Failing to provide even some public benefit is clearly not in the public interest and that, by law, must by the Commission s focus in its review of this proposed merger. Too often the corporate interests, with their disproportionate access to resources designed to monitor and influence the Commission are the voices heard most in its halls. In this matter, one which will impact every consumer of entertainment, news, sports and educational programming as well as every subscriber to high speed internet regardless of whether the subscriber lives in the geographical areas served by Comcast or Time Warner Cable the Commission must exercise its full authority to examine each piece of the proposed merger and determine whether there is any real public benefit to it, or if the only benefit is to the media conglomerates themselves. However, economic benefit to consumers is not the only benchmark to judge the merits of this proposed transaction. The broad aims of the Communications Act must also be preserved: that is, a commitment to robust competition, ensuring wellconsidered diversity and encouraging the deployment of innovative and advanced services. The proposed merger of Comcast and Time Warner cable fails to deliver any of those aims sought by Congress in the Communications Act, and thus this proposed merger must be rejected by the Commission as not being in the public interest,

3 convenience or necessity or, at bare minimum, impose conditions on the proposed merger that satisfy the Congressional intent and broad aims of the Communications Act.

4 2. Either Zero or Limited Economic Benefit Promised to Consumers If approved, the proposed merger would combine what is already the largest cable and broadband company in the U.S. with the second largest cable company and third largest provider of broadband internet. Comcast currently has nearly 22 million cable subscribers. If it were to acquire Time Warner Cable, Comcast would gain roughly 12 million new customers. Moreover, these customers would come from key Designated Market Areas, including New York City, Los Angeles, and Dallas and service in 19 of America s largest 20 cities. This would give a single company a subscriber base would dwarf that of any other company. In fact, it would be nearly 7 times larger than the next largest cable company, and would exceed the subscriber base of the largest provider of DBS satellite service (DirecTV) by about 50%. According to media reports, the combined Comcast/Time Warner entity would control better than half of the cable television distribution in the country. Comcast and Time Warner heavily cite increased competition from other television and broadband providers, such as telephone companies. However, Verizon recently announced that it had no immediate plans to buildout its FiOS network beyond its existing Local Service Acquisitions. 1 Similarly, AT&T has slowed rollout of its U-verse service, and will largely only complete buildouts in markets that already have a U-verse presence Think

5 In some markets, Comcast has raised the price on its basic tier package by nearly 70%, while the average Comcast customer already pays an average of $154 per month for services. Even according to Comcast s own chief Washington lobbyist in Congressional testimony, consumers should not expect any price relief, saying we re certainly not promising that customer bills are going to go down or even increase less rapidly, 3 As such, the proposed merger fails to provide even the most basic of economic benefit to end consumers. How would consumers benefit from the creation of this colossally-sized company? The answer is clearly either not at all or very, very little. 3. The Proposed Merger Hampers Competition and Diversity, While Limiting Consumer Choice The Parents Television Council, along with many other groups and individuals, have long advocated for the introduction of more consumer choice-oriented models of cable television distribution. In other words, parents and families should be given the free market ability pick and pay for programming that best suits their needs and their values while not being forced to cross-subsidize the enormous bundled channel packages of channels which currently dominate the market. We feel this is in keeping with the spirit of the Communications Act subsequent Congressional intent that consumers be given maximum flexibility in the marketplace. Unfortunately, the proposed merger takes what is already an anti-consumer and anti-family business model and throws gasoline on the fire. Disputes between 3

6 programmers and distributors are already myriad with Cablevision and Viacom mired in a high profile lawsuit over Viacom s bundling practices while Mediacom has petitioned the Commission for an Expedited Rulemaking to look at the issue of wholesale bundling in cable television programming. Regardless of the legal intricacies of these cases and others, the reality for consumers and families is easy to quantify: cable prices have increased steadily at rate of about 6% per year while overall inflation is only 1.5% and overall rates have nearly doubled over the past 13 years. While the industry will argue that the per channel rate for most packages is a value to consumers, how can it be considered a value to families, or anyone else, if that family has no demand for the product (in this case a cable network) for which it must pay? The end result is that millions of consumers and families pay billions of dollars per year for programming they simply do not want, do not watch, and often find offensive or even harmful to their families. To be sure, the consumer harm done by bundling already exists but the Commission has the ability to not make a problem much worse via the unconditioned approval of this proposed merger. Comcast already enjoys tremendous power to control the programming market due to its large distribution footprint as well as its vertical integration with NBC Universal. The proposed combined entity would be able to control programming pricing on a grand and unprecedented scale, effectively making impossible for independent programmers to exist without carriage across their network. The newly merged entity would have every incentive to favor the content it owns at the expense of others.

7 Currently, consumers have no way of knowing what they pay for the programming they receive since all programming is bundled together and different levels. Because pricing is not transparent, it is impossible for consumers to make market-based decisions about what programming they wish to receive at what price. Moreover, since the distribution details between programmers and MVPDs are not disclosed to the public, consumers are left at a clear disadvantage. In order to ensure competition, fairness and diversity in the marketplace, the Commission should consider a condition on this merger that would include public disclosure of the perchannel, per-subscriber fees paid to the programmers by MVPDs. Only then would consumers be armed with the information they need to make the best marketplace decision possible. In addition to the concerns about the continued production and distribution of independent programming, we already know that Comcast makes no secret that there will be little, if any, price relief as a result of the merger. This is in large measure due to the bundled-or-nothing business model employed by Comcast as a programmer as well as the other five major programmers that control the vast majority of the multichannel video market. With little meaningful wireline competition across the country, this issue has been in place for some time and the proposed merger would create an entity with such enormous market power as to preclude new entrants and new business models into the market all at the expense of further innovation, competition and consumer choice. The situation with Time Warner Cable and distribution of Los Angeles Dodgers games is a case in point of this phenomenon. Time Warner Cable paid more than $8

8 billion for SportsNetLA, which carries exclusive rights to Los Angeles Dodgers telecasts, in Obviously, this is a staggering sum for the distribution of a single regional sports network, but Time Warner Cable fully expects to recoup its investment via a substantial per-subscriber fee associated with the network, reported to be several dollars per-subscriber, per month. 4 This situation has yet to be resolved and Chairman Wheeler has encouraged the parties to agree to binding arbitration. However, the fundamental issue remains: if a consumer has no interest in baseball, why should that consumer be forced to pay to receive it? The same is true of any other type of programming, and the proposed merger would only exacerbate the existing anti-consumer problems associated with a fundamental lack of consumer choice. There is a clear pro-consumer remedy that the Commission has available to is as a condition of this mega merger: to require the unbundling of cable networks owned and distributed by the newly-formed entity. This particular solution has been bandied about the Commission in one form or another since at least 2008, and Mediacom has recently petitioned the Commission for an expedited rulemaking that would examine the key anti-consumer, anti-family and anti-small MVPD practices employed by the major media conglomerates. Many of the remedies sought in the Mediacom petition could be applied here, including: a la carte option for at least some channels, and unbundled option at the MVPD level, and a prohibition on blocking online access to programming as a negotiation tactic. All of these options would put more power in the hands of 4

9 consumers to exercise a market-based decision about the programming they wish to receive and, ultimately, more control over the pricing of content overall. This is clearly an issue which must be addressed in any public interest review of the proposed merger. 4. Conclusions We urge the Commission to reject the proposed merger based on the uncertain, at best, benefit to the public interest represented by it. The combined entity would have enough market power to essentially foreclose meaningful competition, either by traditional or over-the-top distribution methods, particularly in its market areas. Further, the combined entity will have enough market power to adversely affect the market for independent programming, and, most critical to parents and families, will have enormous power to maintain the anti-consumer bundled channel model which pervades the cable industry. Any reasonable analysis must conclude that these factors are incompatible with the public interest standard that must be preserved by the Commission. At the bare minimum, the Commission should examine conditions on the merger that would ensure disclosure of per channel fees associated with bundled packages sold at the retail level. Such billing transparency is necessary in order for consumers to make educated decisions between different providers. Such a move would be in keeping with the Commission s mandate to ensure competition.

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