Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Senate members seek info on AT&T-Directv, Comcast-TWC mergers, (Jul 18, 2014)

By Lynn Stanton,TR Daily

Some members of the Senate Commerce, Science, and Transportation Committee yesterday sought assurances from AT&T, Inc., that its broadband deployment commitments in connection with its planned merger with Directv, Inc., would extend to their states, while others questioned whether consolidation in the communications sector—where a proposed merger of Comcast Corp. and Time Warner Cable, Inc., is also pending—will limit consumer choices.

During the somewhat vaguely titled “At a Tipping Point: Consumer Choice, Consolidation, and the Future Video Marketplace,” some members raised issues that went beyond the mergers, such as state laws restricting municipalities’ ownership and operation of broadband networks.

Committee Chairman John D. (Jay) Rockefeller IV (D., W.Va.) said, “Make no mistake: the video marketplace is at a tipping point. The two proposed mergers could fundamentally reshape the marketplace.”

He also said that during his years in Congress, he has heard from many company representatives in many industries about the supposed consumer benefits of their proposed mergers and “ever larger companies” but that “in most cases, those benefits never came to pass.”

Chairman Rockefeller also said that “no online video platform has emerged that can compete on equal footing with traditional cable or satellite service,” thus limiting the options of consumers. He said that the Consumer Choice in Online Video Act (S 1680), which he introduced last fall, would give online video services “the breathing room to compete on a level playing field with traditional pay TV services.”

S 1680 would aim to limit the ability of broadband providers to degrade competitive online video service offerings, impose truth-in-billing requirements on broadband Internet services, and provide online video distributors with “reasonable access to video programming and facilitat[e] their ability to offer more consumer choice in programming and services”

Chairman Rockefeller said that he had invited the chief executive officer of Netflix, Inc., (Reed Hastings) to testify at today’s hearing, but that “the Netflix CEO declined to be here, which I can’t figure out, because I’m trying to help them, I think.”

Netflix, despite recently concluding interconnection agreements with Comcast and Verizon Communications, Inc., has publicly said that it doesn’t believe it should have to pay for interconnection. Recently, it conducted a trial of delivering on-screen notices to subscribers blaming congestion on their ISPs’ networks for degraded viewing experiences.

Committee Ranking Member John Thune (R., S.D.) said that he is “not convinced” that the Comcast-TWC and AT&T-Directv proposed mergers “will necessarily change the market in a permanent or negative way. That said, there is no doubt that these transactions are quite significant, and we are rightly here to discuss them and their potential impact on the marketplace and, most importantly, on our constituents.”

As for the role of online, or over-the-top, video providers, he said that they will need robust broadband connections to deliver their offerings. “I am eager to hear how these mergers may improve the broadband network infrastructure,” he added.

Ranking Member Thune was one of the members who asked how AT&T’s fixed wireless broadband commitments in its merger proposal would benefit his constituents. Sens. Dean Heller (R., Nev.) and Kelly Ayotte (R., N.H.) asked similar questions about residents of their states, and each time AT&T Executive Vice President and Chief Strategy Officer John Stankey was ready to state how many tens of thousands of residents in the given state would be reached by the planned deployments—in some cases, the first fixed terrestrial broadband service available to those consumers.

On a similar theme, Sen. Bill Nelson (D., Fla.) asked whether AT&T’s U-verse build-out in Florida will go forward if the merger with Directv is approved. Mr. Stankey said it would.

Sen. Thune also asked about the fears of smaller video providers and content creators that they will be “squeezed as the big companies get bigger—are these fears legitimate? And if so, can they be assuaged?”

On that point, Jeffrey Blum, senior VP and deputy general counsel at Dish Network LLC, which has expressed concern about access to programming such as regional sports networks controlled by Comcast, said in his testimony that the Comcast-TWC merger would produce “too much power in the hands of too few.”

Mr. Blum added, “I should note that Comcast reacted to Dish’s recent opposition to its merger by characterizing us as a company set out to win an edge against a competitor. To the contrary, Dish is all in favor of healthy competition. You do not hear us complaining about Comcast competing on service quality, value, or technology features. But we will take issue when a market participant sees to abuse its market power to the detriment of healthy competition. We want to win when the game is played on an even playing field.”

He continued, “I also want to express Dish’s competitive concerns about the AT&T/Directv merger. Among other things, AT&T and Directv will also be able to combine their market power to leverage programming content, to the potential detriment of consumers.”

Acknowledging that the FCC and antitrust officials at the Justice Department will be the ones deciding whether to approve or oppose the mergers, Mr. Blum said, “Congress has an opportunity to improve video competition right now. .. Specifically, it is time to do something to fix the broken retransmission consent.”

Chairman Rockefeller asked Mr. Blum whether his Consumer Online Choice in Video Act would help alleviate the challenges faced by online video services, such as the Internet streaming video service that Dish has launched.

“In terms of your bill, there are many things we like,” including its “recognition of the growing importance of over-the-top,” Mr. Blum said.

Shawn Ryan, a member of the Writers Guild of America, West, raised concerns about the incentives of network to make decisions about which content to air based on their ownership stakes in some programs. He called for “strong net neutrality rules” and “strong antitrust rules.”

Sen. Edward J. Markey (D., Mass.) asked whether AT&T or Comcast opposes municipalities running broadband networks.

Mr. Stankey said it is acceptable “if it’s an underserved community where there’s been no private solution. … We don’t think private companies should compete with government.”

Comcast Executive Vice President David Cohen said, “I was in city government for six and half years, and I … don’t think it’s a good idea.” He added that Comcast exercises its right to “advocate at the municipal government level against it.” While he said he opposes state preemption of municipal decision-making about local issues, he also opposes federal preemption of state laws.

Sen. Cory Booker (D., N.J.) also asked at length about state laws restricting muni broadband networks.

News: AcquisitionsMergers Antitrust