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FCC Ex Parte regarding the Comcast-NBCU Joint Venture

Submission Date: 
08/29/2010

August 27, 2010

Ms. Marlene Dortch
Secretary
Federal Communications Commission
445 12th Street, SW
Room TW-A325
Washington, DC 20554

via ECFS

Re: American Cable Association ("ACA"); Notice of Ex Parte Presentation; In the Matter of Applications of Comcast Corporation, General Electric Company and NBC Universal, Inc. for Consent to Assign Licenses or Transfer Control of Licenses, MB Docket No. 10-56.

Dear Ms. Dortch:

On August 26, 2010, ACA's Matthew Polka and Ross Lieberman, Northwestern University Professor William P. Rogerson, and the undersigned, met with John Flynn, Senior Counsel to the Chairman for Transactions, William Lake, Chief, Media Bureau, Chuck Needy, Paul LaFontaine, Mark Bykowsky, Dana Scherer, Donald Stockdale, Erin McGrath, Marcia Glauberman, Judith Herman, Virginia Metallo, Jamila Bess Johnson, Jim Bird, Joel Rabinovitz, Jonathan Baker, Betsy McIntyre, and Neil Dellar. In the meeting, participants discussed the potential horizontal and vertical harms of the proposed Comcast-NBCU transaction, the lack of adequate safeguards to protect consumers and competition, and the conditions proposed to ameliorate these harms described in ACA's Comments filed June 21, 2010, ACA's Response to Comments filed July 21, 2010 and ACA's Reply filed August 19, 2010 in the above referenced proceeding.

During the meeting, Professor Rogerson reviewed his analysis of the horizontal and vertical competitive harms the transaction will cause, and described how each will result in higher programming costs to companies purchasing video programming from Comcast-NBCU. Specifically, Professor Rogerson highlighted how the horizontal combination of NBCU's key programming assets (10 NBC owned & operated stations and its block of highly rated national cable programming networks) with Comcast's key programming assets (9 regional sports networks) will increase Comcast-NBCU's market power over programming and result in higher programming fees in select regional and local markets. Professor Rogerson also discussed how the vertical integration of NBCU's key programming assets with Comcast's cable distribution assets will permit Comcast-NBCU to charge higher programming fees to multichannel video programming distributor ("MVPD") rivals in markets served by Comcast. According to Professor Rogerson's analysis, the transaction will increase the market power of Comcast-NBCU in the sale of all of its programming assets, which will create new threats to competition and result in higher carriage fees across the range of Comcast-NBCU programming for MVPDs and their customers. In addition, Professor Rogerson demonstrated why the Applicants and their economists had failed to effectively rebut any of his conclusions in their Response to Comments.  Professor Rogerson's and ACA's remarks drew from the information on the slides attached as Exhibit 1, and the list of proposed conditions, attached as Exhibit 2.

ACA described how previous remedies utilized by the Commission to address the vertical harms threatened by media transactions, while well-intentioned, had failed in practice to protect small and medium-sized MVPDs. The principal problems fall into two categories.

First, the baseball-style commercial arbitration remedy, the principal form of relief from vertical harms under the News Corp.-Hughes Order and the Adelphia Order, roved too expensive for small operators.  ACA and Professor Rogerson cited the evidence provided in ACA's Reply that the cost of pursuing commercial arbitration is about $1 million, which is not economically justifiable for small and mid-sized operators to consider as a means to resolve carriage disputes. As a result, smaller operators were left with a right without a remedy to the harms of those transactions.

Second, the Commission has previously attempted to counter the increased bargaining leverage of merging parties by granting an MVPD meeting the definition of a "small cable company" under the Commission's rules the right to appoint a bargaining agent to bargain collectively on its behalf in negotiating for carriage of broadcast stations and RSNs.  ACA explained how this remedy suffered from several flaws that prevented it from providing any relief for the small operators who are members of the National Cable Television Cooperative ("NCTC"). The NCTC is the established bargaining agent for national cable programming agreements for small and mid-size MVPDs. The definition of "bargaining agent" in those orders was not well enough defined to include the NCTC, the programmers subject to the conditions were unwilling to negotiate with the NCTC based upon its full membership, and the right to arbitration was not tailored to take account of NCTC's unique structure as a buying cooperative. As a result, not even the small operators with an established bargaining agent could avail themselves of the Commission's conditions specifically established to protect them from the vertical harms of previous combinations.

To address these problems with respect to Comcast-NBCU, ACA has proposed two main sets of conditions: general conditions targeted at remedying both horizontal and vertical harms to all MVPD purchasers of all Comcast-NBCU programming and special conditions applicable to programming carriage negotiations with smaller MVPDs. ACA and Professor Rogerson discussed how each of ACA's proposed conditions relating to program access protections and mandatory arbitration addressed specific transaction-related competitive harms and explained the rationale supporting each aspect of the proposed conditions, particularly those aimed at providing useful negotiating rights and remedies for small and mid-sized MVPDs.

In closing, ACA reiterated that its proposed conditions are narrowly-tailored and transaction specific, and designed to provide real relief to smaller operators from the horizontal and vertical harms threatened by the combination of key distribution and programming assets of Comcast and the key programming assets of NBCU.

If you have any questions or require further information, please do not hesitate to contact me directly. Pursuant to section 1.1206 of the Commission's rules, we file this letter electronically with the Commission.

Sincerely,

Barbara S. Esbin

Enclosures

via email

cc: John Flynn
William Lake
Chuck Needy
Paul LaFontaine
Mark Bykowsky
Dana Scherer
Donald Stockdale
Erin McGrath
Marcia Glauberman
Judith Herman
Virginia Metallo
Jamila Bess Johnson
Jim Bird
Joel Rabinovitz
Jonathan Baker
Betsy McIntyre
Neil Dellar

AttachmentSize
Comcast NBCU Ex Parte 082710 Final.pdf1.38 MB

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