Citing irreparable harm to competition and consumers, and no
discernible benefits, from the proposed union of the first and
second largest cable companies in the nation, DISH Network Corp.
(NASDAQ: DISH) filed its Reply today at the FCC to Comcast-Time
Warner Cable’s (TWC) Opposition to the Petitions to Deny their
proposed merger. The reply is available here.
“Everyone who likes to watch high-quality online video has
particular reason to worry about the proposed merger,” said Jeff
Blum, senior vice president and deputy general counsel for DISH.
“More than 54 percent of the country's high-speed broadband
connections would be controlled by the combined company, and all
online video distributors would be at the mercy of
Comcast-TWC.”
Some key points from DISH’s reply include:
p.4
“As companies such as DISH innovate and invest to meet the
growing consumer demand for broadband-reliant video products and
services, this chokehold over the broadband pipe would stifle
future video competition and innovation, all to the detriment of
consumers and the public interest. No set of conditions could
conceivably alleviate these harms.”
p.4
“The Commission’s transaction review comes down to a simple
question: does the merger serve the public interest? Based on the
facts and the law, the answer is straightforward: no.”
p.13
“Comcast-TWC will be able to destroy OVDs with impunity. And
destroy them it will: DISH’s experience based on the business case
for DISH World and DISH’s soon-to-be-launched domestic OTT service
demonstrates that an OTT could still turn a profit if it were to
suffer foreclosure at the hands of a standalone Comcast, but not if
the effects of the foreclosure spread across both of the
Applicants’ systems. Based on his analysis of that business case,
DISH’s expert economist Professor David Sappington concludes that,
while foreclosure conduct on the part of Comcast today is probably
survivable for an OVD such as DISH’s new OTT service, the same
conduct would be lethal if undertaken by Comcast-TWC.”
p.20
“The Applicants bear the burden of proving that their
unprecedented merger will serve the public interest. To satisfy
that burden in light of the merger’s competitive harms, they need
to climb a metaphorical Mt. Everest; but they are still on the
tarmac at Philadelphia International Airport. Of course, the
arguments that Comcast and TWC have left unaddressed reflect their
larger problem: they cannot show that concentrating access to half
of the country’s high-speed broadband subscribers in a single
company would serve the public interest.”
p.7-8
“Almost no broadband subscribers seem to leave Comcast
today. The Applicants claim that a large number of subscribers
leave Comcast today and therefore would also leave the new Comcast,
too, if it were to misbehave by blocking or degrading their
service… This claim is the basis of the Applicants’ contention that
the combined company would have no incentive to block or degrade
OVDs. … But the Applicants’ central factual contention is
demonstrably false… Comcast is almost like the Hotel California of
broadband, an establishment guests can check into but never
leave.”
p.27-28
“Starting in late 2013, the speed at which Comcast’s customers
were able to access Netflix content dropped from about 2.1 Mbps in
October 2013 to 1.5 Mbps in January 2014—a 25 percent decline. As a
consequence of that decline, Comcast’s customers went from being
able to access Netflix content at 720p to “nearly VHS quality.” …
What actually happened was enlightening. Comcast says that the
incident produced a dramatic increase in Netflix-related customer
calls. The customers who called Comcast to complain, however,
appear to have been venting their anger at their powerlessness to
choose another provider. Because very few … of them seem to have
left Comcast.”
p.4
“As the petitions and comments demonstrate, high-speed cable
broadband connections are the lifeblood of over-the-top (“OTT”)
video services that typically target national audiences. For that
reason, among others, the relevant geographic market for this
transaction is national. Furthermore, the relevant product market
should include only those services capable of supporting the robust
online video services that consumers demand, which requires a
household to have actual and consistent download speeds of at least
25 Megabits per second (“Mbps”). If approved, the combined
Comcast-TWC would control more than 54 percent of the broadband
pipes in the United States that have speeds of at least 25 Mbps,
and will be on a path to virtual dominance of the high-speed
broadband market given that the combined company will pass nearly
70 percent of pay-TV households in the U.S.”
p.10-11
“But the most effective witness against the Applicants’ advocacy
is Comcast and TWC’s own marketing. While the Applicants tout a
speed of 4 Mbps as suitable for HD video in this proceeding, their
marketing documents … tell an entirely different story—they present
6 Mbps as suitable for sharing photos/downloading music, but a
minimum of 50 Mbps as suitable for streaming/downloading HD
video.”
p.16
“Use of the Commission’s own method for estimating actual
departures of a rival’s subscribers due to temporary foreclosure
with a time horizon of six months leads to the conclusion that
Comcast-TWC can reap eye-popping gains from denying its competitors
NBCU programming. This will affect competition in a number of ways.
It will cause subscribers to leave the competing distributor in
favor of Comcast-TWC; it will cause dissatisfied Comcast-TWC
subscribers to stay put instead of losing their access to NBCU; and
it will let NBCU extract higher prices for its own programming by
leveraging the fear of foreclosure.”
p.16-17
“The merger’s claimed benefits, if any, cannot outweigh the
merger’s harms. In the Opposition, the Applicants devote
hundreds of pages to extolling the purported benefits of the
merger. Many of these benefits are illusory or
speculative—characteristically, the Applicants offer no more
precise quantification than “hundreds of millions of dollars.” Many
of the benefits are also not merger-specific. The upgrade of TWC
systems, supposedly made possible thanks to the merger, is a prime
example. Public documents show that TWC had planned to complete
this transition itself as a standalone company. This means that
large portions of the claimed benefits attributed to TWC upgrades
(again left unquantified) should be disallowed in their
entirety.”
p.18
“Conduct conditions would fail to address the merger’s many
harms. Conduct conditions did not work for Comcast-NBCU, and
they would not work for this transaction, which poses substantially
greater risks of harm. There is little reason to believe that
Comcast will alter its pattern of repeatedly breaking promises.
Moreover, the complexity of the gatekeeping function over the
Internet choke points alone promises a myriad of technicalities
that would likely allow circumvention of, and/or interpretive
debate over, any conditions. Ultimately, if the Commission approves
the merger believing that conditions are sufficient to address all
the harms, there is no going back. The consequences of getting it
wrong are too great, the risks too high. The public deserves
better.”
p.121
“Comcast did everything it could to circumvent implementation of
the simple and clear news neighborhooding condition for more than
three years. Bloomberg’s three-year ordeal ended only after Comcast
decided to acquire TWC.”
p.6-7
“The Applicants fail to disprove the merger’s anticompetitive
effects. What the Opposition does not do is address several
critical arguments made by DISH and others about the harms that
would result from this proposed transaction. In some cases, the
Applicants give conclusory, dismissive responses. In other
instances, they do not bother to respond at all. The gaping holes
in the Opposition include:
- The applicable case law—nothing said at
all except for one case;
- The ability to foreclose OVDs—little
said consisting of some token objections relating to the
Applicants’ three choke points;
- The proportionately smaller costs and
larger profits of foreclosure due to the merger—nothing said at
all;
- The reduced ability of consumers to
benchmark based on neighboring offerings—the Applicants respond
only that this reduced ability will not lead to higher prices;
- The argument previously made by
Comcast’s own economist that the existence of TWC as a separate
company made NBCU foreclosure unprofitable for Comcast—nothing said
at all; and
- The examples of Comcast playing for
time and thwarting the conditions already imposed on it—only two
out of four examples identified by merger opponents are addressed,
and even then only cursorily.
Instead, the Applicants hang their case on one main claim: that
the new Comcast-TWC would not have an incentive to foreclose other
distributors because it would lose subscribers if it did so. This
claim is disproved by the very data that Comcast has submitted to
the Commission, leaving the merger indefensible.”
About DISH
DISH Network Corporation (NASDAQ: DISH), through its
subsidiaries, provides approximately 14.041 million pay-TV
subscribers, as of Sept. 30, 2014, with the highest quality
programming and technology with the most choices at the best value.
Subscribers enjoy a high definition line-up with more than 200
national HD channels, the most international channels, and
award-winning HD and DVR technology. DISH Network Corporation is a
Fortune 250 company. Visit www.dish.com.
Photos/Multimedia Gallery Available:
http://www.businesswire.com/multimedia/home/20141222005972/en/
DISH Network CorporationJenna McMullin,
303-723-1695jenna.mcmullin@dish.com@DISHNews
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