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Groups Seek FCC Conditions On Comcast-NBCU Deal

The American Cable Association, along with five other organizations representing rural communications providers, sent a letter to Federal Communications Commission Chairman Julius Genachowski raising concerns about regulatory approval of the Comcast-NBC Universal merger without meaningful conditions that would prevent the new company from using its market power to hike programming fees well above market norms.

The letter -- sent Nov. 22 as the FCC is reportedly nearing completion of its review -- stressed the need for conditions that would both prohibit Comcast-NBCU from engaging in price gouging and allow competitors to rely on cost-efficient remedies for demonstrating that Comcast-NBCU had in fact violated FCC-imposed conditions.

"As the record demonstrates, the proposed combination would significantly and unjustly increase the prices smaller [pay-TV providers] would pay to carry Comcast and NBCU programming, and these additional costs would be largely passed through to their customers. Such an outcome is clearly contrary to the public interest," the three-page letter said.

ACA President and CEO Matthew M. Polka said the FCC letter on behalf of his organization. The other signatories were Shirley Bloomfield, CEO of the National Telecommunications Cooperative
Association (NTCA); Bill Wade, Chairman of the Rural Independent Competitive Alliance (RICA); Jack Harvey, Interim President and Chief Executive Officer of the National Rural Telecommunications
Cooperative (NRTC); John N. Rose, President Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO); and Kelly Worthington, Executive Vice President
Western Telecommunications Alliance (WTA).

In terms of specifics, the letter noted that past FCC merger conditions were not as effective as they could have been because of the time and expense involved for a small cable operator to pursue a claim. The six organizations noted that the Comcast-NBCU deal represented consolidation among owners of major local, regional and national programming owners on a scale not seen in previous mergers.
The groups urged in their letter that the FCC craft conditions that would produce clearly defined market-based rates for Comcast-NBCU programming and that enforcement of these conditions can be fulfilled in a cost-effective manner.

Following is the full text of the letter:

Dear Chairman Genachowski:

Over the past year, smaller cable operators and other multi-channel video distributors ("MVPDs") have demonstrated to the Commission that the proposed combination of Comcast and NBC Universal ("NBCU") will result in significantly increased video programming prices - anywhere from 22 percent to more than 100 percent depending on the type of programming.

Just recently, the American Cable Association ("ACA") presented evidence that the total magnitude of the programming price increases from the deal would rise to $2.6 billion over nine years. In contrast, the quantifiable consumer benefits presented by Comcast and NBCU are relatively insignificant. In other words, the proposed combination would not serve the public interest without the inclusion of robust, meaningful and durable remedies to ameliorate this significant harm.

The Commission, of course, has extensive experience in addressing concerns about media combinations that raise the prices consumers pay for programming. In reviewing the News Corp.-DirecTV and Adelphia-Time Warner-Comcast transactions, the Commission found these vertical combinations to be in the public interest only after the parties agreed to a series of conditions that would rein in the expected price increases and other perceived potential harms. These prior conditions provide a good foundation upon which the Commission can begin to address the harms that arise from the proposed combination of Comcast-NBCU. However, they alone are insufficient for two principal reasons.

First, there is abundant evidence in the record demonstrating that the Commission's prior conditions have proven to be of little, if any, benefit for consumers served by smaller MVPDs. In particular, binding baseball-style commercial arbitration proved to be too expensive for smaller MVPDs to employ, leaving them with no real recourse when negotiations for "must have" programming break down. Consequently, these MVPDs, without a cost-effective alternative, simply had to accept the above-market rates that the Commission predicted would occur as a result of these transactions.

Second, these prior transactions only addressed vertical integration and not the significant horizontal integration of Comcast's and NBCU's programming assets. The ACA's recent study on the magnitude of harm showed that the extent of horizontal and vertical harms is roughly equivalent, and, thus, equally effective remedies are needed for both.

As parties that have participated extensively in the Commission's review of the Comcast-NBCU transaction, we have each endorsed a series of transaction-specific remedies that ameliorate the harms that have been demonstrated and fix the weaknesses in previous conditions. Common among all of our proposed conditions are remedies for smaller MVPDs that prevent Comcast-NBCU from raising programming fees above levels they would be able to command without combining assets.

In particular, we agree that the Commission must ensure that there are clear provisions that would prevent Comcast-NBCU from charging smaller MVPDs more than a clearly defined market-based rate, and that a cost effective process be established to enforce these rules. Such an approach, which the undersigned support, should be viewed as baseline conditions to which should be added the other important and targeted proposals each of us has also submitted.

As the record demonstrates, the proposed combination would significantly and unjustly increase the prices smaller MVPDs would pay to carry Comcast and NBCU programming, and these additional costs would be largely passed through to their customers. Such an outcome is clearly contrary to the public interest. We urge the Commission to adopt the remedies discussed above, and others presented in the pleadings of the undersigned, that will help to ensure that smaller MVPDs and their customers are not harmed.

Matthew M. Polka
President and Chief Executive Officer
American Cable Association (ACA)

Shirley Bloomfield
Chief Executive Office
National Telecommunications Cooperative
Association (NTCA)

Bill Wade
Chairman
Rural Independent Competitive Alliance
(RICA)

Jack Harvey
Interim President and Chief Executive
Officer
National Rural Telecommunications
Cooperative (NRTC)

John N. Rose
President
Organization for the Promotion and
Advancement of Small Telecommunications
Companies (OPASTCO)

Kelly Worthington
Executive Vice President
Western Telecommunications Alliance
(WTA)

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