FOR PUBLIC INSPECTION December 22
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Stephanie A. Roy 202 429 6278 [email protected] 1330 Connecticut Avenue, NW Washington, DC 20036-1795 202 429 3000 main www.steptoe.com REDACTED – FOR PUBLIC INSPECTION December 22, 2014 VIA ELECTRONIC FILING Marlene H. Dortch Secretary Federal Communications Commission 445 Twelfth Street, S.W. Washington, DC 20554 Re: Applications of Comcast Corp. and Time Warner Cable Inc. for Consent to Assign or Transfer Control of Licenses and Authorizations, MB Docket No. 14-57 Dear Ms. Dortch: Pursuant to the Second Amended Modified Joint Protective Order1 (“Modified Joint Protective Order”) in the above-captioned proceeding, DISH Network Corporation (“DISH”) herby submits a public, redacted version of its December 22, 2014 Reply. The {{ }} symbols denote where Highly Confidential Information has been redacted, and the [[ ]] symbols denote where Confidential Information has been redacted. The Highly Confidential and Confidential versions of this filing are being simultaneously filed with the Commission and will be made available pursuant to the terms of the Modified Joint Protective Order. 1 Applications of Comcast Corp. and Time Warner Cable Inc. for Consent to Assign or Transfer Control of Licenses and Authorizations, Docket No. 14-57, Second Amended Modified Joint Protective Order, DA 14-1639 (Nov. 12, 2014) (“Modified Joint Protective Order”). Ms. Marlene Dortch December 22, 2014 Page 2 of 2 Please contact me with any questions. Respectfully submitted, Sincerely, Pantelis Michalopoulos Stephanie A. Roy Counsel for DISH Network Corporation Enclosure REDACTED - FOR PUBLIC INSPECTION Before the FEDERAL COMMUNICATIONS COMMISSION Washington, DC 20554 In the Matter of ) ) Applications of ) ) Comcast Corporation and Time Warner ) MB Docket No. 14-57 Cable Inc. ) ) For Consent To Assign or Transfer Control ) of Licenses and Authorizations ) REPLY OF DISH NETWORK CORPORATION Pantelis Michalopoulos Jeffrey H. Blum, Senior Vice President Stephanie A. Roy & Deputy General Counsel STEPTOE & JOHNSON LLP Alison Minea, Director and Senior Counsel, 1330 Connecticut Avenue, NW Regulatory Affairs Washington, DC 20036 Hadass Kogan, Associate Corporate Counsel (202) 429-3000 DISH NETWORK CORPORATION 1110 Vermont Avenue, NW, Suite 750 Counsel for DISH Network Corporation Washington, DC 20005 (202) 293-0981 December 22, 2014 REDACTED - FOR PUBLIC INSPECTION Table of Contents INTRODUCTION .......................................................................................................................... 1 I. SUMMARY ........................................................................................................................ 5 II. THE APPLICANTS IGNORE OR DISMISS MANY OF DISH’S LEGAL ARGUMENTS AND FACTUAL ASSERTIONS ........................................................... 18 III. ALMOST NO ONE APPEARS TO LEAVE COMCAST TODAY ................................ 21 IV. THE GEOGRAPHIC MARKET IS NATIONAL ............................................................ 34 A. The Applicants’ Rebuttal of a National Market Mistakes the Identity of the Supplier, the Customer, and the Service ............................................................... 34 B. There Is No Limiting Principle to the Applicants’ Balkanized View of the Geographic Market ............................................................................................... 37 C. The Commission’s Own Analysis Shows that the Combined Company Will Control an Alarming Share of a Properly Constructed Market ............................ 38 D. Legal Precedent Supports Reviewing the Merger’s Effect on the National Market ............................................................................................................................... 39 V. THE APPLICANTS’ VIEW OF THE RELEVANT PRODUCT MARKET IS WRONG ........................................................................................................................................... 50 A. The Product Market is High-Speed Access Suitable for the Long-Form, HD Video Consumed by a Household ................................................................................... 50 B. The Applicants Themselves Tout the Need for 25 Mbps–Plus Speeds ................ 56 C. DSL and Wireless Remain Inadequate Substitutes for Cable Broadband ............ 62 VI. THE APPLICANTS’ CLAIM THAT THEY LACK THE ABILITY TO THWART COMPETING OVD SERVICES IS NOT PERSUASIVE ............................................... 68 VII. CONTRARY TO APPLICANTS’ CLAIMS, THE COMBINED COMCAST-TWC WILL HAVE A GREATER INCENTIVE TO THWART COMPETING OVDS .......... 78 A. Comcast’s Supposed Fear of Broadband Subscriber Loss Is Unjustified............. 78 B. The Video Distribution Business Is Still Very Important to Comcast.................. 81 C. NBCUniversal Content Provides No Disincentive for Comcast to Harm or Degrade the Performance or Viability of OVDs................................................... 82 i REDACTED - FOR PUBLIC INSPECTION D. The Applicants Do Not Deny that the Merger Will Greatly Increase the Harm Comcast Can Inflict on OVDs .............................................................................. 86 VIII. THE TRANSACTION WILL ELIMINATE EXISTING CABLE COMPETITION AND POTENTIAL OUT-OF-AREA OVD COMPETITION BETWEEN COMCAST AND TWC .................................................................................................................................. 88 IX. THE COMBINED COMCAST-TWC WILL HAVE A GREATER INCENTIVE TO FORECLOSE ACCESS TO NBCUNIVERSAL PROGRAMMING .............................. 94 X. THE MERGER’S CLAIMED BENEFITS SHOULD BE DISCOUNTED ..................... 99 A. TWC Will Likely Upgrade Absent the Merger .................................................. 100 B. The Touted Success of Internet Essentials is Illusory at Best ............................ 109 C. The Purported Scale Efficiencies Would Inure Solely to the Applicants’ Benefit ............................................................................................................................. 111 D. Incumbent Merger Applicants Often Make Promises They Do Not Keep ......... 113 E. The Transition Period Would Disrupt SpinCo Customers ................................. 115 F. Comcast Has Repeatedly Broken its Promises ................................................... 118 XI. CONDUCT CONDITIONS WOULD BE INADEQUATE TO AMELIORATE THE MERGER’S HARMS ..................................................................................................... 122 XII. CONCLUSION ............................................................................................................... 127 Exhibit A: Reply Declaration of Roger Lynch Exhibit B: Reply Declaration of Professor David Sappington Exhibit C: Declaration of William P. Zarakas ii REDACTED - FOR PUBLIC INSPECTION Before the FEDERAL COMMUNICATIONS COMMISSION Washington, DC 20554 In the Matter of ) ) Applications of ) ) Comcast Corporation and Time Warner ) MB Docket No. 14-57 Cable Inc. ) ) For Consent To Assign or Transfer Control ) of Licenses and Authorizations ) REPLY OF DISH NETWORK CORPORATION “We know that no one ever seizes power with the intention of relinquishing it.” George Orwell, 1984 INTRODUCTION DISH Network Corporation (“DISH”)1 replies to the Opposition to Petitions to Deny and Response to Comments (“Opposition”) filed by Comcast Corporation (“Comcast”) and Time Warner Cable, Inc. (“Time Warner Cable” or “TWC”) (collectively the “Applicants”) in the 1 DISH is a competitor in the multichannel video programming distributor (“MVPD”) market with Comcast, TWC, and Charter Communications, Inc. (“Charter”), and is a purchaser of content both from Comcast and from its NBCUniversal division. DISH is also a competitor in the online video market with Comcast, TWC, and Charter. For these and other reasons described herein, DISH is a party in interest under Section 309(d)(l) of the Communications Act. See 47 U.S.C. § 309(d)(l). DISH filed a Petition to Deny this merger. See DISH Network Corporation, Petition to Deny, MB Docket No. 14-57 (Aug. 25, 2014) (“DISH Petition” or “Petition”). 1 REDACTED - FOR PUBLIC INSPECTION above-referenced proceeding.2 The 80,000 plus comments from consumers and the 22 substantive Petitions to Deny make clear that a diverse group of stakeholders warn against the merger.3 Consumers don’t want it,4 programmers don’t want it,5 other MVPDs don’t want it,6 2 Comcast Corporation and Time Warner Cable Inc., Opposition to Petitions to Deny and Response to Comments, MB Docket No. 14-57 (Sept. 23, 2014) (“Opposition”). 3 These figures count only individuals and organizations that have filed directly with the Commission. In addition, almost 600,000 public comments have been submitted through Common Cause, Consumers Union, DailyKos, Demand Progress, Free Press, Media Mobilizing Project, Presente, and The Blaze. See Press Release, Consumers Union, Merger Opponents Have Submitted Nearly 600,000 Public Comments to FCC (Dec. 19, 2014) (“Consumers Union Press Release”), available at http://consumersunion.org/news/comcast-merger-opponents-have- submitted-nearly-600000-public-comments-to-fcc/. All told, more than 680,000 individuals and organizations in this country oppose this merger enough to formally register their opposition to it with the Commission. Id. 4 See, e.g., Consumer Federation of America, et al., Petition to Deny, MB Docket No. 14-57 (Aug. 25, 2014); Consumers Union and Common Cause, Joint Petition to Deny, MB Docket No. 14-57 (Aug. 25, 2014); Future of Music Coalition and Writers