Before The FEDERAL COMMUNICATIONS COMMISSION Washington, DC 20554

In the Matter of ) ) Petition for Rulemaking to Amend ) RM-11728 The Commission's Rules Governing ) Practices of Video Programming Vendors )

REPLY COMMENTS OF VERIZON 1

The record compiled on the Petition confirms that certain practices of video programming vendors highlighted by Mediacom make it more difficult for competitive

Multichannel Video Programming Distributors (MVPDs) to provide consumers with increased programming choices and lower prices for pay television services.2 As many commenters pointed out, the cost of video programming keeps rising,3 and video programmers add to those costs by pushing bigger bundles of channels on MVPDs and limiting opportunities to negotiate flexible programming packages that have the potential to better meet an MVPD's customers' needs.4 Programming vendors also frequently decline to consider alternative arrangements to

1 The Verizon companies participating in this filing (Verizon) are the regulated, wholly-owned subsidiaries of Verizon Communications Inc. 2 See Mediacom Communications Corp., "Petition for Rulemaking to Amend the Commission's Rules Governing Practices of Video Programming Vendors," RM-11728 (filed July 21, 2014) (Petition). 3 See, e.g., Comments of Hargray Communications Group, at 2 ("the ever-escalating cost of obtaining programming" makes it difficult to offer "a quality video service that meets its subscribers' needs at affordable prices"); Comments of American Cable Association (ACA), at 3; Comments of Charter Communications, at 8; Supporting Comments of WTA - Advocates for Rural Broadband, at 2-5. 4 See, e.g., ACA Comments, at 4; Charter Comments, at 5-9; Hargray Comments, at 4-5; Comments of ITTA, at 3-5; Comments of NTCA-The Rural Broadband Association, at 3; WTA Comments, at 5-6.

l pricing or channel selection - such as viewer-based, rather than subscriber-based pricing - that may allow more flexible offerings for consumers and lower subscription prices, particularly in the context of distribution rights for sports programming and regional sports networks (RSNs), which are expensive, highly valued by some consumers, but not viewed by all subscribers.5

While market forces are producing new choices for consumers in how, where and from whom they can access video programming, the central concern for competitive MVPDs remains obtaining access to must-have programming on reasonable terms. In that regard, several commenters echoed Verizon' s recommendations that the Commission should take steps to minimize the imbalance in negotiating positions favoring broadcasters that are inherent in the current retransmission consent regime and to vigilantly enforce the program access rules to ensure competitive MVPDs have reasonable access to highly popular programming held by cable-affiliated vendors.6

Several content providers and broadcasters opposed Mediacom's proposed regulatory solutions, claiming that they are outside the scope of the Commission's authority as unlawful price and/or content regulation, and harmful for consumers and the video programming industry.7 However, Sections 325 and 628 of the Communications Act provide authority for the

Commission to facilitate a balance between MVPDs and program owners in negotiating for

5 See, e.g., Comments of Cox Communications, at 4-5 ("the proliferation of costly regional sports networks ("RSNs") and programmers' demands that these RSNs be distributed to all or almost all customers create a considerable and unjustified expense"); Hargray Comments, at 6; NTCA Comments, at 4; Comments of TDS Telecommunications, et al., at 4-5. 6 See, e.g., ITTA Comments, at 2 (current video marketplace operates in "a regulatory and policy framework that provides unfair advantages to owners of programming"); Comments of Verizon, at 6-11. 7 See Joint Opposition of CBS Corp., et al.; Opposition of the National Association of Broadcasters to Petition for Rulemaking. 2 distribution of programming. 8 For example, several commenters raised concerns regarding a programmer's blocking of Internet access for an MVPD's subscribers to the programmer's content during negotiations for distribution rights over television.9 As Verizon recommended, the Commission could consider strengthening the list of practices deemed not negotiating in good faith under Section 325(b) to include a broadcaster blocking Internet access to its programming during retransmission consent negotiations. 10 Similarly, pursuant to Section 628, the Commission should consider whether blocking of Internet content for an MVPD's subscribers during negotiations should be deemed an "unfair practice" in its evaluation of program access complaints. 11

Verizon supports policies that make must-have video programming reasonably accessible to MVPDs through true, market-based negotiations. However, when video programming vendors have substantially more leverage in such negotiations than competitive MVPDs, resulting in bundle inflation and increased programming costs, or blocking of Internet content, as described in the record here, the ultimate effects are to reduce choice and increase prices for consumers and to harm competition in the video distribution marketplace. To alleviate such harms to consumers and the market for video programming, the Commission should consider steps to maintain competitive dynamics in negotiations between video programming providers

8 See 47 U.S.C. § 325(b)(3)(A) (authorizing FCC to establish regulations "to govern the exercise of television broadcast stations of the right to grant retransmission consent"); 47 U.S.C. §§ 628(b-c) (authorizing FCC to "prescribe regulations to specify particular conduct" that would be unlawful for cable-affiliated programming vendors "to engage in unfair methods of competition or unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to subscribers or consumers"); see also, e.g .. ACA Comments, at 7; Charter Comments, at 12-16. 9 See, e.g., ACA Comments, at 4; ITTA Comments, at 9-11; Comments of Public Knowledge, at 8-9. 10 See ACA Comments, at 7; Verizon Comments, at 12. 11 See ACA Comments, at 7; Verizon Comments, at 13-14. 3 and MVPDs. The record here contains a number of targeted proposals that could help keep costs for must-have programming reasonable and increase flexibility in consumer choices. The

Commission should consider such proposals in the context of a new rulemaking.

Respectfully submitted,

Michael E. Glover, Isl William H. Johnson Of Counsel William H. Johnson WilJiam D. Wallace 1320 N. Courthouse Road, 9th Floor Arlington, VA 22201 (703) 351-3060

Attomeys for Verizon

October 14, 2014

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