mega-mergers and impacts on local government

Government Relations Services

October 1, 2014

PRESENTED AT ANNUAL CONFERENCE, NATIONAL ASSOCIATION OF TELECOMMUNICATIONS OFFICERS AND ADVISORS

Joseph Van Eaton, Partner, Best Best & Krieger

Mega-Mergers and Impacts on Local Government

©2014 Best Best & Krieger LLP


Mergers – What’s Going On• Comcast-Time Warner – Charter (merger of 1st

and 2d largest providers of cable and broadband; spin-offs and consolidations to Charter to create regionally concentrated dominance for Charter-Comcast)

• AT&T Acquisition of DIRECTV• Both pending federal approval


Ap

plic

atio

n F

iled F.C.C. Communications Act

Transfer licenses requires public interest.

Approve

Disapprove

Condition

JusticeClayton Act/Hart Scott

Rodino/ShermanCannot lessen competition

Approve

Disapprove

Condition or Consent Decree

FTCClayton Act/Federal Trad

Commission ActCannot lessen competition

Flow Chart of the Federal Process

Clayton Act, 15 U.S.C. § 18, Sections 1 and 2 of the Sherman Act, 15 U.S.C. § 1, 2, and Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45


FCCCommunications Act

• Jurisdiction -- Communications Act poses a separate and some feel higher standard for approval of the transfer of the hundreds of licenses (e.g. microwave, satellite and other licenses,) from Time Warner to Comcast.

• Standard: Comcast bears the burden of proving that the deal is in the “public interest, convenience and necessity.”

Public interest standard offers FCC greater latitude than the DOJ has. FCC can base its actions on a determination of what the deal’s approval might

do to affect the diversity in the marketplace of ideas, competition or localism. Commission decision is afforded considerable deference.

• Process Companies required to file a detailed application showing transaction is in the

public interest Public has opportunity to file comments Response and Reply processes Opportunities to meet with staff (ex parte)


FCC• MB 14-90 is docket for AT&T – DIRECTV merger

Application materials available for public review on FCC website http://www.fcc.gov/transaction/att-directv

• Initial comments/petitions filed September 16, response Oct. 16, replies November 5

http://www.fcc.gov/transaction/att-directv


FCC• MB 14-57 is docket for Comcast-TWC-Charter

merger. Application materials available for public review on FCC website http://apps.fcc.gov/ecfs/proceeding/view?name=14-57

• Initial comments/petitions were due August 25. Nearly 12,000 comments/petitions filed

• Responses to comments/petitions filed Sept. 23; Reply comments due Oct. 8

http://apps.fcc.gov/ecfs/proceeding/view?name=14-57


FCC• Seeking conditions if approved: Cities of New York, Boston,

Dallas, Chicago, Los Angeles, Montgomery County, Maryland, Portland, NATOA, SEATOA, Public Telecomm Institute (PTI), and others, including groups supporting public, educational and government access (Alliance for Community Media and Alliance for Community Democracy (ACD). Several technology groups and “edge providers” including Netflix are in this category

• Seeking approval: Coalition of 50 mayors in support of the merger, Philadelphia, amongst others.

• Full Denials: Consumers Union, Public Knowledge, Open Technology Institute, Free Press


FCC• Major conditions proposed by local gov/PEG

Conditions to close digital divide• Enhance Internet Essentials program• System expansions to underserved areas

Conditions to preserve “open Internet” Conditions to protect consumers/availability of

alternative end user equipment Conditions to protect local programming

• Allow use of PEG support for PEG operations• Ensure PEG providers (and local governments) are able to take

advantage of capabilities of cable system Conditions to maximize competitive entry potential Extension of conditions to Charter/GreatLand


Post-Merger – National Picture

48.96%

13.45%

9.22%

8.66%

4.56%1.93%

1.53% 0.85%

10.84%

Comcast

Charter

U-Verse

Verizon

Cablevision

Suddenlink

Mediacom

Cable ONE

All others


Description of the Merger

• Effectively consolidates systems and clusters: Comcast gains in California, New England,

Tennessee, Georgia, North Carolina, Texas, Oregon, Washington and Virginia.

Charter gains in Ohio, Kentucky, Wisconsin, Indiana, and Alabama

GreatLand in Michigan, Minnesota, Indiana, Alabama, Eastern Tennessee, Kentucky and Wisconsin


Mergers – In the Context Of: • Court decision striking down net neutrality rules;

FCC considering rule to allow providers to create Internet “fast lanes”

• FCC allows VZ Wireless to sell Comcast services outside FiOS footprint, and Comcast to sell VZ Wireless across its territories

• Announcement of possible order classifying linear OTT as MVPDs (???)


What Does Comcast Say In Response?• No one submitted an economic study that rebutted

our submittal that the merger is good• There is no impact on video competition, because

there is none, and there is no impact on broadband competition

• We deal on a case by case basis with franchise issues, so no need to establish any federal standards to address franchising issues

• No conditions should be extended to Charter/GreatLand (Internet Essentials dead in Midwest)


What Does Comcast Say In Response?• No improvements to Internet Essentials required or

appropriate – unrelated to merger• No additional PEG requirements – public interest is

satisfied by extension of PEG conditions in NBC/Universal to TWC systems; PEG conditions unrelated to transaction

• No broadband/net neutrality conditions• No customer service conditions because no showing

customer service will get worse because of merger• No local enforcement of federal conditions


So…• If you don’t file something, don’t be surprised if

the merger is approved without locally important conditions


What Issues You Are Likely To Face –No Matter How Issues Are Resolved

• We’ve seen the triple play and the impact on franchise fees The developing quad play…the developing 5…6…7…play

• Should we be looking at 47 U.S.C. 542(h)?

(h) ….Nothing in this chapter shall be construed to limit any authority of a franchising authority to impose a tax, fee, or other assessment… on any person (other than a cable operator) with respect to cable service or other communications service provided by such person over a cable system for which charges are assessed to subscribers but not received by the cable operator….


What Issues You Are Likely To Face –No Matter How Issues Are Resolved

• What is the cable system? What about other facilities attached to the “cable system.”

• How do we deal with a mobile population and our own P, E & G communications?

• What are consumer rights in this multi-play world? Rate regulation limitations v. consumer protection

• How do we deal with competitive equity (and should we?)

• Do localities need to develop their own alternatives, and what does the alternative look like?


Questions?

Joseph Van Eaton

Best Best & Krieger LLP

2000 Pennsylvania Avenue N.W.

Suite 4300

Washington, DC 20006

(202) 370-5306

[email protected]

mega-mergers and impacts on local government

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