~

~ at&t

Henry Hultquist

AT&T S<..'f vices Inc.

Vice Presidcn1

1120 201h S1ree1. NW
Sui1e 1000
Washington. DC. 20036

Federal Regulntory

T: 202.457.3821
F: 202.457.3072

October 13, 2015

BY HAND
Marlene H. Dortch, Esq.
Secretary
Federal Communications Commission
445 Twelfth Street, SW
Washington, DC 20554

Re:

Applications of Charter Commullications, Inc., Time Warner Cable Inc.,
and Advance/Newhouse Partnership for Consent To Transfer Control of
Licenses and Authorizations._ MB Docket No. 15-149

Dear Ms. Dortch:
AT&T does not oppose the Charterffime Warner Cable/Bright House merger. The
Commission should, however, review the transaction carefully and consider the impact of cable
consolidation and coordination on emerging competition.
The cable industry, as the merging parties concede, is marked by a lack of head-to-head
competition.1 Cable companies have chosen not to compete and instead coordinate to gain
shared advantages over rivals, which further industry consolidation will only facilitate. The
reason is simple: as Charter CEO Tom Rutledge put it, following the proposed merger "(t]here
will be less people to coordinate [with]." 2 Other cable executives have likewise signaled
increased cable cooperation. Liberty Media Chairman John Malone noted "huge opportunities
for inter-company cooperation to create ubiquity of offerings, ubiquity of branding, scale,"
which he expects to be ..a very important future of the industry."3 Statements like these have
1

Public Interest Statement at 42 (filed June 25 , 2015) ("Because Charter, Time Warner Cable,
and Bright House Networks serve distinct geographic areas, a combination of the companies
does not reduce competition."); Applications of Comcast Corp., Time Warner Cable Inc.,
Charter Communications, In c., and SpinCo for Consent To Assign or Transfer Cofllrol of
Licenses and Authorizations, MB Dkt No. 14-57, Public Interest Statement at 127 (filed Apr. 8,
2014) ("[T]he transaction presents no 'horizontal ' competitive concerns because ... Comcast's
and TWC's service areas are distinct and the companies do not compete in any relevant
market.").
2

Cynthia Littleton, Charter CEO: TW Cable Acquisition Will Lead to 'Better Industry' Overall,
Variety (May 26, 2015), http://variety.com/2015/tv/news/charter-time-warner-cable-acquisition2-120l504796/.
3

Liberty Media Corporation, Q3 2014 Earnings Call (Nov. 4, 20 14).

 spurred AT&T to submit this letter to underscore the need for critical scrutiny of cable
coordination, both in this merger proceeding and more broadly.
Careful scrutiny is especially warranted because this increased consolidation and
coordination comes just as new competitive threats are emerging. Over-the-top video providers
are disrupting the traditional cable pay TV model by revolutionizing the way consumers access
and view video. AT&T/DIRECTV - which the Commission described as "a bet on
competition"4 - is investing billions to go toe-to-toe with cable incumbents and foster online
video distribution (..OVD").
This emerging competition is vulnerable to coordinated exclusionary actions by cable.
The Commission's Staff and the Department of Justice concluded that allowing Comcast and
Time Warner Cable to merge would create a dominant national platform that could "block the
adoption of innovative products, including 'over-the-top' video services that threaten the
traditional cable business model."5 The instant merger may be different, but the Commission
must ensure that the cable industry cannot use coordination to replicate the same mega-cable
threat to competition.
Cable companies share common, national rivals in broadband, video, and
telecommunications services. These geographically segregated cable companies therefore have
incentives to coordinate their activities to fend off these common rivals and have demonstrated
the ability to do so. The cable industry has formed a variety of exclusive associations,
organizations, and other ventures to advance the competitive interests of cable companies. These
joint initiatives, although opaque to outsiders, are transparent to cable-company members who
may use them to coordinate strategies against rivals. The proposed merger could make that
easier. The transaction would reduce by two the number of major cable operators, and create a
second cable giant - alongside Comcast - that together would be able to dictate strategy for the
entire cable industry.
Against this backdrop, the Commission should focus its scrutiny on several key areas.
First, the Commission should look into cable's affiliated programming, which it has long
recognized as an area with potential for anticompetitive conduct.6 The largest cable

4

Applications of AT&T Inc. and DIRECTV for Consent To Assign or Transfer Control of
Licenses and Authorizations, MB Dkt No. 14-90, Memorandum Opinion and Order, FCC 15-94,

'II 4 (rel. July 28, 2015).
5

Remarks of Jon Sallet, Federal Communications Commission General Counsel, Before the
Telecommunications Policy Research Conference, The Federal Communications Commission
and Lessons of Recent Mergers & Acquisitions Reviews at 14 (Sept. 25, 2015),
https://www.fcc.gov/document/speech-general-counsel-jon-sallet-lessons-recent-merger-reviews
(..Sallet Speech") (quotations omitted).
6

See Applications of Comcast Corporation, General Electric Company and NBCV Universal,
Inc. for Consent to Assign Licenses and Transfer Control of Licensees, Memorandum Opinion

and Order, 26 FCC Red 4238, 4252 ciI 34 (2011).
2

 companies still control or significantly influence numerous networks and OVD platforms. 7
For example, John Malone, whose Liberty Broadband will be the single largest shareholder
in New Charter, has significant interests in Discovery Communications ' family of channels,
Starz, QVC, and HSN.8 Time Warner Cable and Comcast both have interests in SportsNet
New York9 ; iN DEMAND is a partnership among Comcast, Cox, Time Warner Cable, and
Bright House that provides pay-per-view and other types of video on-demand 10 ; and Comcast
controls NBCUniversal and its broad suite of broadcast networks and cable channels. 11
Because cable companies have chosen not to compete against one another but face common
competitors, they have an incentive to share programming with each other at reasonable
rates, while using that same programming to raise their rivals' costs. AT&T has firsthand
experience of this kind of exclusion. 12 A national online distribution platform created
through cable coordination could likewise pose a threat to OVD development. 13
Second, the Commission should ensure that the cable industry cannot impede the
development of a consumer-friendly mobile video experience. Because video consumes
enormous bandwidth. a robust mobile video experience increasingly requires offloading video
from scarce licensed spectrum to unlicensed frequencies. Five major cable operators (Bright
House Networks, Cox, Cablevision, Time Warner Cable, and Comcast) recently formed the
Cable WiFi® consortium to give their high-speed Internet customers exclusive access to each
other's WiFi hotspots. 14 The consortium's over 400,000 hotspots 15 give it unrivaled reach.
Cable is not only excluding rivals from the consortium's network, but also is trying to restrict

7

See Annual Assessment of the Status of Competition in the Market for the Delivery of Video
Programming, Sixteenth Report, 30 FCC Red. 3253, App. B (2015) ("Sixteenth Report").
8

See Discovery Communications, SEC Form 10-K for 2014 at 23; Starz,, SEC Form 14A at 4
(Apr. 23, 2015); Liberty Interactive Corporation. SEC Form 10-K for 2014at1- 15.

9

See Sixteenth Re1x>rt at App. B.

10

See iN Demand, Who We Are, http://www.indemand.com/who-we-are/ (last visited Oct. l,
2015).
11

See Sixteenth Report at App. B.

12

See, e.g., AT&T Services, Inc. and Southern New England Telephone Company d/b/aAT&T
Connecticut, Complainants, v. Madison Square Garden, l.P. and Cablevision Systems Corp.,
Defendants, Order, 26 FCC Red 13206 (MB 2011) (subsequent history omitted); AT&T Services,
Inc. and Pacific Bell Telephone Company dlb/a SBC California d/b/a AT&T California v.
CoxCom, Inc., Memorandum Opinion and Order, 24 FCC Red 2859 (MB 2009).
13

See Sallet Speech at 13.

14

See Cable WiFi, http://www.cablewifi.com/ (last visited Oct. 12, 2015); Kevin Fitchard, Why
the Charter-TWC Merger Could Be a Big Deal for Wireless and Mobile, Too, Fortune (May 26,
2015), http://fortune.com/2015/05/26/charter-twc-merger-wireless-mobile/.
15

See Cable WiFi, http://www.cablewifi.com/ (last visited Oct. 12, 2015).

3

 competitors from serving mobile video customers using LTE-Unlicensed technologies in
frequencies reserved for unlicensed use. 16
Third, the Commission should consider the role of CableLabs. For many years, cable
companies have coordinated technology standards and R&D through CableLabs, a consortium
fonned explicitly to benefit the cable industry. 17 Membership is restricted to cable system
operators, as defined by the 1984 Cable Act, 18 its board is comprised of member cable operators,
and participation from non-cable MVPDs is limited. 19 With closed membership and a process
opaque to outsiders, the major cable companies could use their control over CableLabs to
promote technical features and intellectual property that favor cable and its technologies over
other MVPDs or OVDs.
Finally, the Commission should resist calls by the cable industry and others for
asymmetrical regulation of Ethernet and other enterprise services. Even without the merger,
Time Warner Cable and Comcast are the fifth and sixth largest providers of Ethernet services in
the United States.20 These companies compete vigorously with AT&T and other providers of
Ethernet services, not one of which has a port share exceeding one fifth of the market, and eight
of which (mostly non-ILECs) have shares over five percent. 21 Cable providers are making

16

See, e.g., Office of Engineering and Technology and Wireless Telecommunications Bureau
Seek Information on Currelll Trends in LTE-U and LAA Technology, ET Dkt No. 15-105,
Comments of the National Cable & Telecommunications Association (filed June 11, 2015).
17

CableLabs, About CableLabs, http://www.cablelabs.com/about-cablelabs (last visited Oct. 12,
2015) (describing CableLabs as "dedicated to creating innovative ideas that significantly impact
our cable operator members' business.").
18

See, e.g., CableLabs, Become a Member, http://www.cablelabs.com/become-a-member (last
visited Oct. 12, 2015); CableLabs, Member Companies, http://www.cablelabs.com/aboutcablelabs/member-companies/ (last visited Oct. 12, 2015).
19

In contrast, the Alliance for Telecommunications Industry Solutions and the 3rd Generation
Project Partnership are far more open. See Alliance for Telecommunications Industry Solutions,
Become an ATIS Member, http://www.atis.org/membership/become.asp (last visited Oct. 12,
2015) ("Full Membership is open to service providers, manufacturers, distributors, and
developers of communications, entertainment and information technology products and
services."); 3rd Generation Project Partnership, 3GPP Working Procedures § B,
http://www.3gpp.org/ftp/lnformation/Working_Procedures/3GPP_ WP.htm#SECTION_B (last
visited Oct. 12, 2015) (describing the low barriers to 3GPP membership and participation); 3rd
Generation Projecc Partnership, 3GPP Membership, http://webapp.etsi.org/3gppmembership/
QueryForm.asp (last visited Oct. 12, 2015) (searchable membership list indicating that
CableLabs, for ex.ample, is a member).
20

Vertical Systems Group, Mid-Year 2015 U.S. Carrier Ethernet LEADERBOARD (Aug. 24,
2015), http://www .verticalsystems.com/vsglb/mid-year-2015-u-s-carrier-ethemet-leaderboard/.
21

Vertical Systems Group, ENS Research Program (2015).
4

 particularly fast inroads in this space,22 and, just last month , Comcast announced a major
interconnection deal with other cable companies across the country that will allow it to provide
nationwide business-class services.2.1 Under these circumstances, regardless of whether this
merger is approved, there is no cause for the Commission to saddle incumbent LECs with new
regulatory obligations that do not apply to other providers of Ethernet services. But if the merger
is approved, the combined company will be an even larger and stronger Ethernet provider, and
there would accordingly be even less cause to heed cable's call for unwarranted regu latory
advantages.
The question underlying all these issues is whether the combined entity will, along with
the other major cable companies that have chosen not to compete with each other, effectively act
as a single national cable company capable of "put[ting] sand in the gears of competition through
the totality of its efforts," 24 impairing broadband service, video distribution, and program access.
The comprehensive information requests to the Applicants indicate the Commission understands
that it must investigate these issues closely. AT&T looks forward to participating in the review
of this significant transaction.
Respectfully submitted,

cc (via email): Jim Bird, Esq.
Ty Bream, Esq.
Adam Copeland, Esq.
Ms. Vanessa Lemme
Elizabeth Mcintyre, Esq.
John L. Flynn, Esq. (Counsel for Charter Communications)
Steven J. Horvitz, Esq. (Counsel for Advance/Newhouse Partnership)
Matthew A. Brill, Esq. (Counsel for Time Warner C'ahle-)
22

Sean Buckley, Cable Operators Taking Greater Share of Large Businesses, Says Analyst
Firm, Fierce Telecom (Sept. 21, 2015), http:l/www.fiercetelecom.com/story/cable-operatorstaking-greater-share-large-busi nesses-says-analyst-firm/201 5-09-21 (among "businesses with
over I 00 employees during the past two years, ... business spending on voice and data services
from cable operators rose 38 percent, climbing from 12.2 percent to 16.9 percent").
:n Shalini Ramachandran, Comcast To Sell Data Services to Big Firms Nationwide, Wall St. J.

(Sept. 16, 2015), http://www. wsj .com/articles/comcast-to-sell-data-services-to-big-firmsnationwide-1442376240; Press Release, Comcast, Comcast Business Announces New Unit
Targeting Fortune 1000 Enterprises (Sept. I 6, 20 I 5), http://corporate.comcast.com/newsi nformation/news-feed/co mcast-busi ness-announces-new-u ni t-targeting-fortu ne-1000en terpri ses.
24

Sallet Speech at 14.

5