Before the FEDERAL COMMUNICATIONS COMMISSION Washington, DC 20554

) In the Matter of ) ) Applications of Comcast Corp., ) MB Docket No. 14-57 Time Warner Cable Inc., Charter ) Communications, Inc. and SpinCo ) ) For Consent to Transfer Control ) of Licenses and Authorizations ) )

COMMENTS OF CINCINNATI BELL EXTENDED TERRITORIES LLC

Cincinnati Bell Extended Territories LLC (“Cincinnati Bell”), as a local head-to-head terrestrial competitor to Time Warner Cable, Inc. (“TWC”), submits these comments in connection with the Federal Communication Commission’s request for input on the transaction involving consolidation of Comcast Corporation (“Comcast”) and TWC (“Comcast/TWC Transaction”) – the two largest cable multichannel video programming distributors (“MVPDs”) -- and the subsequent transaction involving Comcast, Charter Communications, Inc. (“Charter”) – the fourth largest cable provider1 -- and SpinCo (“Comcast/Charter/SpinCo Transaction”) that will result in the further consolidation among cable providers.

Because both Comcast and Charter will profoundly change as a result of these transactions, we refer to the current Comcast as “Today’s Comcast,” and after the Comcast/TWC Transaction and the Comcast/Charter/Spinco Transaction as “New Comcast.” Similarly, we refer to the Charter post

1 See In the Matter of Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, Fifteenth Report, FCC 13-99, 28 FCC Rcd 10496 (2013) at Table 7. the Comcast/Charter/SpinCo Transaction as “New Charter.” We refer to those terrestrial-based

MVPDs that compete directly with Comcast or TWC as “TWC/Comcast Competitors.”

DISCUSSION

I. THE MULTICHANNEL VIDEO DISTRIBUTION MARKETPLACE IS BECOMING DOMINATED BY A HANDFUL OF UBER-LARGE PROVIDERS.

A. ͆The Times They Are a-Changin.͇

The famous lyrics of Bob Dylan sum it up best – “[t]he times they are a-changing.” The

change we face today, however, is the inverse of the anti-establishment revolution Dylan sang about

in 1963. Today, the Commission is faced with the creation of a new establishment - one that will

consolidate among a select number of MVPDs incredible power and significantly handicap

competitors – to the detriment of consumers, consumer choice and the public interest.

Comcast goes to great lengths to defend these transactions as necessary “to compete against

its national and global competitors, to improve the customer experience today, and to forge ahead to

meet future challenges and needs.”2 This is complete misdirection by Comcast. The question before

the Commission is not how Comcast competes nationally or globally, but whether the proposed

transactions will serve the public interest by creating the ability of both New Comcast and New

Charter to have a chokehold over essential inputs needed by local competitors in local markets that

give local consumers meaningful choice.

Comcast suggests that anything below 30 percent of total MPVD subscribers in the United

States, which Comcast will have post-closing of the TWC/Comcast and Comcast/Charter/SpinCo

2 In the Matter of Applications of Comcast Corp. and Time Warner Cable Inc. For Consent to Transfer Control of Licenses and Authorizations, Applications and Public Interest Statement, MB Docket No. 14-57 (Public notice released July 10, 2014) (“TWC/Comcast Public Interest Statement”) at 2.

2 transactions, is “plainly insufficient to give Comcast anticompetitive ‘monopsony’ or ‘buyer power’ vis-á-vis [sic] sellers of video programming.”3 Accordingly, “[i]n the context of sales to MVPDs

(which, unlike programming networks, do not generally license content exclusively), programming is what is called a ‘non-rivalrous’ good, meaning that one firm’s purchase of it has no effect on the amount of programming available for sale to other firms.”4 As explained below, such arguments disregard the explicit and implicit discrimination smaller competitors face in acquisition of programming, equipment and the like.

Although the Comcast/TWC Transaction and the Comcast/Charter/SpinCo Transaction are squarely before the Commission, the Commission’s evaluation of the impacts of these transactions must be considered in the context of the changes that are sweeping the MVPD industry.5 These changes may include the fact that New Charter is geographically positioned for further roll-up acquisitions. Thus, not only will New Comcast have tremendous market power, but New Charter will be positioned to grow into the second largest MVPD, possibly through a series of smaller transactions that would not require Commission review, resulting in market power close to that of the New

Comcast. 6 Simply put, consolidated large MVPDS restrict the affordability and availability of essential inputs to competitive independent MVPDs.

3 Id at 144. 4 Id at 146-147. We note, however, that programming is one of several “essential inputs” (content, technology, functionality, etc. that subscribers expect to receive) and that the rates, terms and conditions at which New Comcast can purchase it absolutely, as described in these comments, impacts the availability and cost of such programming to other MVPDs, including the Comcast Competitors. 5 A primary justification for the transactions, according to Comcast, is that it is not big enough to effectively compete. Shortly after the announcement of the Comcast/TWC Transaction, the Comcast/Charter/SpinCo Transaction was announced, which would reshape and rationalize the geographic footprints of Comcast and Charter and give Charter the option to acquire SpinCo in a matter of years. This second transaction is followed by a reactionary acquisition of DirecTV by AT&T, again based on the need to grow in size and scale to be able to compete with New Comcast. 6 Charter’s largest shareholder (by attribution), Dr. John Malone, has stated his belief that only two or three MVPDs can survive in the market. In fact, his investment in Charter is for the express purpose of converting Charter into a roll-up entity to consolidate MVPDs and its failed attempt at acquiring Comcast triggered the transactions that are now before the

3 B. Cincinnati Bell Fioptics – TWC Competitor

There are a number of cable operators who have built successful businesses providing consumers a meaningful and high-quality alternative to the service offerings of Today’s Comcast and

TWC notwithstanding their inability to extract comparable pricing to their direct competitors.

Cincinnati Bell is one of those competitors.

Cincinnati Bell is a relatively new entrant to video programming distribution. Since the founding of its parent company in 1873 as City and Suburban Telegraph Company, its parent has been and remained a local independent telephone company.7 In 2008, Cincinnati Bell began building a fiber-to-the-home (“FTTH”) system and expanded into high-speed data and video programming

(“Fioptics”), going into head-on competition with TWC. Cincinnati Bell’s current network capability directly competes with TWC in communities that include 307,100 households (approximately 38% of

Greater Cincinnati).8 Cincinnati Bell has set an ambitious target to pass 60-70 percent of the city's homes with its FTTH-based Fioptics product by 2017.9 Cincinnati Bell’s efforts to provide consumers choice has met with success as its Fioptics service continues to grow, currently serving approximately 82,500 video subscribers at the end of the second quarter in 2014, in Ohio, Kentucky

Commission. Andy Vuong, Why John Malone is pushing a mega merger between Charter and Time Warner Cable, The Denver Post, January 14, 2014, at http://blogs.denverpost.com/techknowbytes/2014/01/14/why-john-malone-is-pushing- mega-cable-merger-between-charter-and-time-warner/12745/ (last visited August 22, 2014). There is no evidence to suggest that Charter has yet fulfilled its aspirations to become one of those two or three surviving MVPDs. 7 Although part of the Bell telephone system, Cincinnati Bell was always an independent company as AT&T held no more than a minority interest. 8 Cincinnati Bell Press Release, Cincinnati Bell Reports Second Quarter 2014 Results at http://investor.cincinnatibell.com/phoenix.zhtml?c=111332&p=irol-newsArticle&ID=1956443&highlight= (last visited August 23, 2014). 9 Sean Buckley, Cincinnati Bell’s Fox: We’ll pass 60-70% of homes with Fioptics by 2017, Fierce Telecom, http://www.fiercetelecom.com/story/cincinnati-bells-fox-well-pass-60-70-homes-fioptics-2017/2014-03-04 (last visited August 25, 2014).

4 and Indiana. Assuming both the TWC/Comcast and Comcast/Charter/SpinCo transactions are consummated, Cincinnati Bell will directly compete with New Charter.

C. Competitors to Today’s Comcast Already Struggle with Unequal and Discriminatory Access to Essential Inputs.

Content, technology and support services are the lifeblood of every MVPD. Access to these essential inputs on competitively neutral prices, terms and conditions is critical to an MVPD’s ability to meaningfully compete with Comcast or TWC (or New Charter), yet such usually is not the case.

Comcast today serves 21.7 million video subscribers,10 making it the largest terrestrial MVPD by more than 10 million (“Today’s Comcast”). 11 As a result, Today’s Comcast is the “must-have” platform for all types of vendors. By virtue of its sheer size, Today’s Comcast has, as described in more detail in these comments, unprecedented access to a wide variety of content, programming rights, pricing advantages, technology, services and infrastructure. Today’s Comcast receives pricing, availabilities and non-economic terms and conditions (1) not offered by vendors to others, including direct competitors, or (2) for which Today’s Comcast has received so-called “most favored nations”

(“MFN”) provisions that prevent vendors from offering comparable rates, terms and conditions to others, including direct competitors.12

10 See TWC/Comcast Public Interest Statement at 8. 11 TWC is the second largest terrestrial cable system reporting 11.4 million video subscribers. See TWC/Comcast Public Interest Statement at 14. 12 See Testimony of David Cohen, Executive Vice President, Comcast Corporation, Response to Questions of Honorable Lindsey O. Graham, U.S. Senate Committee on the Judiciary (April 9, 2014) (“David Cohen April 9 Senate Testimony”) at 24 (“As a general matter, MFN provisions operate to provide material parity between a contracting party and any more favorable or expansive rights negotiated by another party, usually a competitor, although these provisions vary widely from agreement to agreement.”). According to Mr. Cohen, “[u]nder the Comcast-NBCUniversal Order, Comcast is permitted to have MFN provisions that ensure that Comcast is treated in material parity with other similarly situated MVPDs with respect to price and non-price terms, except to the extent that any other MVPDs’ non-price terms “would frustrate the purpose of” the Comcast-NBCUniversal Order, App. A, § IV.B.3.c. Since 2011, Comcast has complied with this provision to the extent that it has obtained MFNs from content producers.” Id at 24-25.

5 As the second largest provider of terrestrially-delivered MVPD services, TWC is similarly situated as a delivery platform sought after by all types of vendors. 13 Thus, TWC’s competitors often face unavailability of essential inputs on rates, terms and conditions that foster the ability to compete with TWC.

The impact of large MVPDs such as Today’s Comcast and TWC already adversely impact the affordability and availability of essential inputs to competitive independent MVPDs including

Cincinnati Bell. The New Comcast will have not only much larger scale immediately after the proposed transaction, but it will be the largest MVPD in 16 of the 20 largest markets.14 As pointed out by Consumer’s Union, “programmers seeking cable subscribers in urban areas will need distribution through Comcast/TWC, and will have no choice but to agree to its terms.”15 These markets will include important population centers such as New York State (including New York

City) and Southern California (including Los Angeles).

Beyond creating the New Comcast, the Comcast/Charter/SpinCo Transaction sets up Charter to become the second largest terrestrial MVPD. The proposed transaction geographically rationalizes the holdings of Comcast and Charter in three steps: (1) Comcast’s swapping approximately 1.5 million former TWC subscribers for approximately 1.6 million Charter subscribers, (2) Comcast’s

13 The absence of vertically-integrated content does not lessen the need for vendors to access TWC’s platform. 14 In fact, the new Comcast will be the largest MVPD in 104 television markets that make up 65% of the United States population. Free Press, Comcast-Time Warner Cable Merger Have You Seeing Red?, http://www.freepress.net/comcast- time-warner-cable-merger-have-you-seeing-red (last visited August 20, 2014). This information reflects totals before the announcement of the Comcast/Charter/SpinCo Transaction in which the total number of DMAs served by Comcast would remain unchanged (28 DMAs exited and 28 DMAs entered) See, Letter from Kathryn A. Zachem, Senior Vice President, Regulatory and State Legislative Affairs, Comcast Corporation, to Marlene H. Dortch, Secretary, Federal Communications Commission (June 5, 2014) at Attachment 1. 15 See In the Matter of Applications of Comcast Corp., Time Warner Cable Inc., Charter Communications, Inc., and SpinCo for Consent to Assign and Transfer Control of FCC Licenses and Other Authorizations, Joint Petition to Deny of Consumers Union and Common Cause, MB Docket No. 14-57 (filed August 21, 2014) at 43. Importantly, programmers will need access to 16 of the top 20 markets to be viable.

6 sale to Charter systems serving approximately 1.5 million former TWC subscribers, and (3) creation

of publicly-traded SpinCo to temporarily hold about 2.5 million legacy Comcast subscribers for four

years until Charter can officially take control.16

II. UNRESTRAINED, THESE SUPERSIZED-MVPDS WILL HAVE THE EFFECT OF FURTHER RESTRICTING THE AFFORDABILITY AND AVAILABILITY OF ESSENTIAL INPUTS.

A. Price/Cost Reductions Extracted by Comcast and Charter will Shift Costs, Resulting in Higher Prices to all Other MVPDs, Uniquely Impacting the Cincinnati Bell and other TWC/Comcast Competitors.

The amalgamation of TWC’s subscriber platform will exponentially exacerbate the situation

described above. The New Comcast will have such extreme influence (implicit and explicit) over

providers of essential inputs that the ability to effectively directly compete may be crippled without

appropriate Commission-mandated protections.

Through its increased scale, the New Comcast projects savings of $1.5 billion over the first

three years post-merger, in no small part from migration of TWC subscribers to Comcast

programming contracts that have “more favorable rates and terms.”17 Thereafter, Comcast projects

that its annual average cost savings of $500 million will increase to $1.5 billion,18 no doubt, in part

from extracting lower and lower prices from providers of essential inputs, especially programming.19

16 See In the Matter of Applications of Comcast Corp. and Time Warner Cable Inc. for Consent to Transfer Control of Licenses and Authorizations, MB Docket 14-57, Letter of Comcast Corp. and Time Warner Cable Inc. (June 5, 2014) at 2. 17 See TWC/Comcast Public Interest Statement, Exhibit 4, Declaration of Michael J. Angelakis, Vice Chairman and Chief Financial Officer, Comcast Corp., at 4. (discussing operating expense efficiencies that “are expected to come from savings on programming costs over a three-year period, to the extent and at such time as more favorable rates and terms in some of Comcast' s programming agreements supersede some of TWC' s existing contracts.”) 18 Id at 3. 19 Id (projecting annualized “operating expense efficiencies recurring at or above the $1.5 billion level each year thereafter capital expenditure efficiencies are not expected to continue beyond year three.)” Included in this cost savings are programming costs “to the extent and at such time as more favorable rates and terms in some of Comcast’s programming agreements supersede some of TWC’s existing contracts.”

7 As Charter grows in size and can further exercise its leverage over the providers of essential inputs, it too will undoubtedly benefit from substantial price and cost reductions as well.

The fact remains that these price reductions and cost savings must be recouped by the essential input providers somewhere, ultimately from their other customers. Because, by definition, these are essential inputs, they are necessary to effectively compete with New Comcast and New

Charter. The recent announcement by AT&T of its decision to acquire DirecTV underscores the price squeeze put on MVPDs other than Comcast and Charter as a result of consolidation. AT&T’s

CEO testified to Congress that its acquisition of DirecTV would “lower content costs for AT&T video subscribers by 20 percent or more” and he projected “total cost synergies to exceed $1.6 billion annually within three years after closing.”20 Again, these represent costs that will be recovered on the backs of other MVPDs.

The instant transactions, as well as the prospect of follow-on transactions by Charter to roll-up other MVPDs and other combinations such as the AT&T/DirecTV transaction that arise over concern of the emerging landscape, will profoundly and forever change the cost structure of essential inputs.

While the exact cost disparity between what Cincinnati Bell pays and what TWC/Comcast pays for essential inputs is unknown, through a variety of sources and interactions, Cincinnati Bell believes that it is paying substantially higher costs than TWC/Comcast. While this concern will undoubtedly be expressed on a global basis by other commenters, everyone living in the service areas of any

TWC/Comcast Competitor will be uniquely affected because New Comcast and New Charter will

20 Jon Brodkin, AT&T/DirecTV and Comcast/TWC mergers could put small ISPs “Out of Business,” ars technical (June 24, 2014). http://arstechnica.com/business/2014/06/attdirectv-and-comcasttwc-mergers-could-put-small-isps-out-of- business/ (last visited August 21, 2014).

8 have an almost insurmountable cost advantage that can be used to suppress TWC/Comcast

Competitors including Cincinnati Bell.

B. Service Parity is Largely Unavailable to Cincinnati Bell and other TWC/Comcast Competitors.

Equally important to the cost of essential inputs is their availability. In order to effectively compete with Comcast or any large MVPD, competitors must have access to the same programming content, availabilities and features. Cincinnati Bell has routinely encountered situations where vendors – the suppliers of essential inputs – are not able to offer the identical offerings as provided to

Comcast or other very large MVPDs.

Sometimes, providers of essential inputs will claim to offer similar opportunities if Cincinnati

Bell will meet the same terms and conditions as found in TWC’s or Comcast’s agreement. Such offers are illusory more often than not. Such terms and conditions are often structured in a way to frustrate the ability of competitive providers from accessing such offers. For example, the terms and conditions may require that a service or feature is made available to a minimum number of subscribers – sometimes in the millions -- or they involve cross consideration (e.g., a minimum purchase of advertising availabilities) that is measured in terms of aggregate dollars – in amounts that are not commercially feasible for Cincinnati Bell or most, if not all other TWC/Comcast Competitors.

When the Cincinnati Bell asks for parity representations – a simple representation that no one is getting more favorable rates, terms and conditions than are being offered to it at the time it enters into the contract -- such requests are routinely denied. This simply reinforces the fact that

TWC/Comcast Competitors can never hope for anything close to rate parity. But even when pared back to non-economic terms and conditions, service parity representations are typically denied -- often without reason. When reasons are given, oblique references to concessions granted to

9 “unnamed large MVPDs” simply cannot be replicated in a commercially viable basis across the vendor’s entire customer base. Regardless of the reason, disparity in non-economic terms and conditions are equally as harmful to competition as is economic discrimination.

C. MFN Provisions Cripple the Ability to Provide Adaptive Agreements to TWC/Comcast Competitors.

During negotiations, it is not uncommon for a smaller MVPDs, such as the Cincinnati Bell, to attempt to negotiate a unique provision related to the specific facts or circumstances of their systems and/or their stature as a smaller provider. Often, the providers of essential inputs are sympathetic and recognize that it is in their mutual economic interest to custom tailor agreements to meet the unique needs of smaller MVPDs. But the response most frequently encountered is that they can’t – if they do make a one-off arrangement, then they have to make the same arrangement available on a mass- scale to unnamed “larger MVPDs” due to the existence of an MFN.

Give the scale of Today’s Comcast and certainly with the scale of the New Comcast and New

Charter, MFN provisions serve a singular purpose – to suppress competition. When viewed in conceptual terms, the need for the New Comcast or New Charter to have any most favored nation’s provisions relative to smaller MVPDs collapses of its own weight. A provider with the scale and purchasing power of the New Comcast and New Charter simply does not need contractual protection that a smaller MVPD would be able to extract a better deal and that better deal would pose any material threat to the totality of the economics of either’s operation.

10 III. TO AMELIORATE THE IMPACT OF FURTHER CONSOLIDATION, THE FCC SHOULD PLACE THE FOLLOWING CONDITIONS ON COMCAST, CHARTER AND SPINCO.

A. MFN Provisions must be Rendered Unenforceable – at Least with Respect to Smaller Competitive MVPDs.

The Commission should bar enforceability of all types of MFN provisions in all vendor

agreements to which the New Comcast, New Charter or Spinco are a party relative to any other

terrestrial MVPD that competes head-to-head with the New Comcast, New Charter or Spinco.21 This

enforceability ban would apply to express and de facto MFN provisions as they relate to all economic

and non-economic terms and conditions. Given that the Commission may only have jurisdiction over

New Comcast, New Charter and SpinCo, the Commission should require all of the following actions.

1. New Comcast, New Charter and SpinCo must notify existing programming, equipment, technology and service provider vendors that MFNs will not be enforced and such vendors are not to voluntarily continue restricting arrangements with competing terrestrial MVPDs or require parity on any basis with respect to any rates, terms and conditions afforded them.

2. New Comcast, New Charter and SpinCo cannot enforce, or enter into future, agreements, arrangements or understandings, written or otherwise, that provide exclusivity in any way relative to a competing terrestrial MVPD.

B. Shedding Light on Comcast/Charter/Spinco’s Rates, Terms and Conditions for Essential Inputs is Critical to Help Protect the Viability of Terrestrial MVPD Competition.

The absence of Commission jurisdiction over the providers of essential inputs makes it

difficult to craft merger conditions that meaningfully protect the harm to competition that directly

results from increased market power of each New Comcast and New Charter. Even with the above

renunciation of MFN provisions, a wink and a nod between the New Comcast or the New Charter and

21 Given the geographic rationalization of both New Comcast and New Charter, it is plainly obvious that they have no intention of competing with each other on a facilities-based basis. Thus, any terrestrial competitor by definition would be smaller than either New Comcast or New Charter.

11 a vendor seeking to curry favor with them would render the ban meaningless. Thus, additional information disclosure is necessary to help measure the extent to which direct terrestrial competitors remain subject to disparate rates, terms and conditions.

Cincinnati Bell urges the creation of an agreement database that would identify for each essential input (without limitation, content in all formats, equipment, technology and service agreements) all material economic and non-economic terms and conditions provided to New Comcast and New Charter. Importantly, this database should be maintained by an independent third party at the sole expense of New Comcast and New Charter (“Data Custodian”). The Data Custodian would publish an online list of all agreements (without any confidential information) contained in the database (“Registry”). Upon request,22 a competing terrestrial MVPD, who is negotiating an agreement with a vendor for a service provided by the vendor as listed on the Registry, must be given access by the Data Custodian to the relevant data for that agreement. This data would be subject to confidentiality provisions and use and retention limitations by the competing terrestrial MVPD.

Knowledge of this data will not only provide the competitor with a more level playing field in negotiations with the vendor, it will identify with certainty the extent of the competitive disadvantage that still exists. The Commission should establish a confidential reporting procedure if the competing terrestrial MVPD believes that the ultimate differential in rates, terms and conditions is so significant as to hinder competition. The Commission should track this data and use it in the aggregate to determine whether the harm to competitors that results from the proposed transactions is so great as to require intervention by the Commission and/or reporting to Congress of the need for corrective legislation.

22 Including a certification that the MVPD is a direct competitor and is seeking services from the listed vendor.

12 C. To Avoid Discriminatory Pricing Aimed at Stifling Current or Future Terrestrial MVPD Competition, Comcast, Charter and SpinCo Must Price Uniformly Throughout that DMA.

Under the rate regulation provisions of the 1992 Cable Act, cable operators are subject to rate regulations that impose certain limitations on pricing and promotions.23 Cable operators, however, may free themselves from certain of those limitations by seeking a finding of effective competition from the FCC. More specifically, a finding of effective competition relieves a cable operator from

(1) basic service tier rate regulation if a local franchising authority had certified to regulate rates, (2) tier buy-through requirements, and (3) its obligation to offer uniform rates for basic service, cable programming service, and associated equipment and installation throughout the franchise area.

In recent years, TWC, Comcast and Charter have amassed numerous findings of effective competition. For example, as of April 2014, Comcast had filed 400 effective competition petitions, each covering numerous franchise areas, of which 350 had been granted by the Commission.24 To reverse a finding of effective competition, the FCC ordinarily would need to recertify a local franchising authority to regulate rates.25

The concern regarding Comcast, Charter and/or SpinCo with respect to findings (current or pending) of effective competition primarily has to do with geographic rate uniformity and the impact it has on direct competitors like Cincinnati Bell and other TWC/Comcast Competitors. To the extent a cable operator is subject to effective competition, it can offer different pricing even within the same franchise area. When faced with direct competition, Comcast, Charter or SpinCo would be able to offer existing and potential subscribers rates lower than it would necessarily offer in other parts of the

23 See, e.g., 47 C.F.R. §§76.905-76.906, 76.921, 76.984. 24 See David Cohen April 9 Senate Testimony,” supra at fn 13. 25 See 47 C.F.R. § 76.906.

13 franchise area, without sacrificing profit margins due to the lower pricing they receive on content,

equipment and the like. In contrast, direct competitors such as Cincinnati Bell and other

TWC/Comcast Competitors cannot necessarily match such pricing since, as discussed above, they

have to pay premium pricing for the same content, equipment and the like.

To overcome the competitive harm that effective competition has on Comcast, Charter and

SpinCo’s direct terrestrial competitors, the FCC should condition the transaction, notwithstanding

any current or future finding of effective competition in a franchise area, by requiring each Comcast,

Charter and SpinCo to make all retail (residential and commercial) pricing (including without

limitation promotions or term offers) uniform throughout each DMA.

IV. WHERE COMCAST COMPETES WITH A TERRESTRIAL PROVIDER, NBC/UNIVERSAL MUST GIVE THOSE COMPETITORS THE LOWEST RATES AND BEST NON-ECONOMIC TERMS THAT IT GIVES COMCAST OR ANY OTHER DISTRIBUTOR (TERRESTRIAL OR SATELLITE).

As described above, Cincinnati Bell and most, if not all other TWC/Comcast Competitors, by

virtue of their significantly smaller size, are impeded in obtaining programming, technology,

equipment and the like at competitive pricing to that offered TWC, Comcast and/or Charter. The

same can be said for the ability to obtain Comcast and NBC/Universal programming at competitive

rates and terms.

While the FCC arguably attempted to level the playing field in the NBC/Universal decision (1) by

modifying the arbitration provisions applicable to smaller MVPDs in bringing program access

complaints, and (2) allowing MVPDs in negotiating with NBC/Universal to “demand a standalone

offer for (a) broadcast programming, (b) RSN programming, (c) the bundle of all cable programming,

14 and/or (d) any bundle that a Comcast-NBCU programmer has made available to a similar MVPD,” 26

- these conditions suffer from flaws that made them ineffective for small and medium-sized cable operators, and their buying group.27 The FCC also declined to disallow volume-pricing discounts.

The Commission concluded:

that such a prohibition is unnecessary here. The Commission’s program access rules already contemplate that a complaint may be filed challenging volume-based pricing in certain circumstances. On the filing of such a complaint, a cable-affiliated programmer may be required “to demonstrate that such volume discounts are reasonably related to direct and legitimate economic benefits reasonably attributable to the number of subscribers . . . but may also identify non-cost economic benefits related to increased viewership.” Because the specific matter of volume-based discounts is adequately addressed by the Commission’s program access rules, we find no basis to adopt conditions regarding this issue. 28

The Commission’s conclusion here fails to take into consideration the potential harm to competition and ultimately consumers. Volume-pricing discounts are given based on the total number of subscribers served by a particular MVPD across all areas served. An inherent bias then exists with respect to large, national MVPDs. But bigger is not necessarily always better.

Today there are more than 900 cable operators, not to mention non-cable MVPDs. Many of these MVPDs serve areas that would not otherwise receive terrestrial cable service because the low household density does not justify the capital expenditures. For other providers, the business plan is to provide consumers a meaningful alternative to an incumbent provider. These providers serve to ensure that all Americans have access to quality service and choice. Despite the availability of satellite offerings in most of these areas, cable operators typically offer robust broadband services

26 See In the Matter of Applications of Comcast Corporation, General Electric Company and NBC Universal, Inc. for Consent to Assign Licenses and Transfer Control of Licenses, Memorandum Opinion and Order, FCC 11-4 (2011), 26 FCC Rcd 4238 (2011) at ¶7 (“NBC/Universal Order”).  27 These flaws have been well documented in the past. See In the Matter of Applications of Comcast Corp., General Electric Co. and NBC Universal, Inc. for Consent to Assign Licenses and Transfer Control of Licensees, MB Docket No. 10-56, ACA Notice of Ex Parte (filed December 22, 2010). 28 See NBC/Universal Order at ¶56.

15 (faster than DSL) and the entire network is supported by the revenue generated from consumer

purchases of one or more services (video, Internet and telephone). The demise of video services for

these operators resulting from high programming costs threatens the viability of these networks,

resulting in either the closing of systems or higher prices (if sustainable) for broadband services –

neither result is in the public interest. Therefore, consistent with communications policy, the FCC

must act to ensure the continued viability of such players. While the FCC cannot dictate commodity

pricing for all programming, it certainly has authority to place conditions on one of the largest

MVPD-programmers to ensure that it offers competitive pricing to those MVPDs that directly

compete with its retail service. To accomplish this, the FCC should places conditions on Comcast

NBC/Universal to require it to offer direct competitors, based on FCC filings, the same or better

pricing and non-economic terms that are provided to the New Comcast upon the closing of the

Comcast/TWC transaction or any time thereafter. 29

V. ABSENT SOME ABILITY TO ENSURE A MORE LEVEL PLAYING FIELD BETWEEN TWC/COMCAST COMPETITORS AND THE NEW COMCAST AND/OR NEW CHARTER, THE FCC SHOULD DENY THE TRANSACTION.

The proposed mechanisms discussed above provide no more than the ability for direct

competitors to compete effectively by gaining access to New Comcast’s (or New Charter’s) rates,

terms and conditions for essential inputs in an attempt to provide a benchmark for negotiations with

the same vendors. Opposition to these measures is evidence of the huge market-power advantage that

Comcast/TWC have today and will only be exacerbated by the proposed series of transactions as well

29 Such pricing must be no greater than the price paid by Comcast to the Comcast-affiliated programmer unless such pricing is not commercially reasonable when compared to actual third-party prices, such as those offered to other large third-party MVPDs.

16 as those that will follow as a natural consequence. If opposed, the only way to ensure the viability of competitive providers is to deny the proposed transactions.

Respectfully submitted,

Ted Heckmann Eric E. Breisach Managing Director of Regulatory Affairs Lisa Chandler Cordell And Assistant Corporate Secretary Breisach Cordell PLLC Cincinnati Bell Extended Territories LLC 5335 Wisconsin Avenue, NW 221 East Fourth Street Suite 440 Cincinnati, Ohio 45202 Washington, DC 20015 (202) 751-2701

Attorneys for Cincinnati Bell Extended Territories LLC

August 25, 2014

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