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STATE OF NEW YORKPUBLI C SERVI CE COMMI SSI ON

Case 14- M- 0183 J oi nt Pet i t i on of Ti me Warner Cabl e, I nc. andComcast Cor por at i on f or Appr oval of a Hol di ngCompany Level Transf er of Cont r ol

COMMENTS OF THE NEW YORK STATEDEPARTMENT OF PUBLI C SERVI CE STAFF

Gr aham J esmerJ ohn Favr eauBr i an Ossi asAssi st ant Counsel sNew Yor k Depart ment ofPubl i c Ser vi ce St af f

St ate of New Yor kThr ee Empi r e Stat e Pl azaAl bany, NY 12223- 1350

DATED: August 8, 2014


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Table of Contents

I NTRODUCTI ON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

SUMMARY OF APPLI CATI ON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

PROCESS TO DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6SCOPE OF REVI EW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

STANDARD OF REVI EW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Gener al . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Appl i cat i on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

PROPOSED BENEFI TS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Capi t al i nvest ment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Enhanced vi deo programmi ng . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Accel erat ed t r ans i t i on t o al l - di gi tal vi deo net work . . . . . . . . . . . . . 22Expanded l ow- i ncome br oadband servi ces . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Enhanced Wi - Fi Hotspot Depl oyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Enhanced resi dent i al voi ce servi ces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Pot ent i al f or gr eat er compet i t i on i n t he busi ness mar ket . . . . . . . . 25

Mi scel l aneous asser t i ons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

POTENTI AL DETRI MENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Cust omer ser vi ce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Comcast s vi deo ser vi ce pr i ci ng may r esul t i n sl i ght l y hi gher r at es

f or consumer s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Uni ver sal br oadband af f or dabi l i t y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

J obs and f ocus i n New Yor k St at e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

I nf r ast r uct ure expansi on i nvest ment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Mar ket power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

ANALYSI S AND RECOMMENDATI ONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Cust omer ser vi ce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

J obs and f ocus i n New Yor k St at e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Uni ver sal br oadband af f or dabi l i t y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Broadband speed enhancements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

I nf r astr uct ur e expansi on i nvestment : Connect NY . . . . . . . . . . . . . . . . . 46

I nf r ast r uctur e expansi on i nvest ment : capi t al i nvest ment . . . . . . . . . 47

I nf ras t ructure expans i on i nvestment : other . . . . . . . . . . . . . . . . . . . . . . 48

CONCLUSI ON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48


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CASE 14- M- 0183

t he publ i c i nt er est st andar d has been appl i ed i n Commi ssi on

deci si ons r egar di ng ut i l i t y acqui si t i ons and mer ger s over t he

past sever al year s; most r ecent l y, as appl i ed i n t he r evi ew of

For t i sUS, I nc. s ( For t i s) acqui si t i on of Cent r al Hudson Gas &

El ect r i c Cor por at i on ( Cent r al Hudson) . 3 Accor di ngl y, Commi ss i on

appr oval of t he pr oposed t r ansact i on shoul d onl y be gr ant ed

subj ect t o t he addi t i onal commi t ment s and condi t i ons di scussed

her ei n.

SUMMARY OF APPLI CATI ON

Under t he t erms of t he Acqui si t i on Agr eement , Comcast

wi l l acqui r e 100 per cent of Ti me War ner s equi t y i n exchange f orComcast st ock. The r esul t of t he pr oposed t r ansact i on i s t hat

t he company curr ent l y operat i ng as Ti me Warner wi l l become a

whol l y- owned subsi di ar y of Comcast . Fol l owi ng t he cl ose of t he

pr oposed t r ansact i on, Comcast woul d have appr oxi matel y 30

mi l l i on subscr i ber s i n t he Uni t ed St at es. I n New Yor k, Comcast

cur r ent l y pr ovi des cabl e t el evi si on, I nt er net and t el ephone

ser vi ces t o a r el at i vel y smal l number of subscr i ber s consi st i ng

of appr oxi matel y 22, 000, i n Dut chess, West chest er and Put nam

count i es, wher eas, Ti me War ner cur r ent l y pr ovi des cabl e

t el evi si on, I nt er net and t el ephone ser vi ces t o appr oxi mat el y 2. 5

mi l l i on subscr i ber s i n appr oxi mat el y 1, 150 ci t i es, t owns, and

vi l l ages. Ti me War ner i s al so a maj or pr esence i n t he f our of

t he f i ve New Yor k Ci t y boroughs and each of t he maj or upst ate

ci t i es. Whi l e t he J oi nt Pet i t i on does not seek i mmedi at e

aut hor i t y f or changes t o New Yor k cust omer s r at es, t er ms or

3 Case 12- M- 0192, J oi nt Pet i t i on of For t i s I nc. et al . and CHEner gy Gr oup, I nc. et al . f or Appr oval of t he Acqui si t i on ofCH Ener gy Gr oup, I nc. by For t i s I nc. and Rel at ed Tr ansact i ons,Or der Aut hor i zi ng Acqui si t i on Subj ect t o Condi t i ons ( i ssuedJ une 26, 2013) ( For t i s Or der ) .

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CASE 14- M- 0183

condi t i ons of ser vi ce, or f or di r ect assi gnment of f r anchi ses,

cer t i f i cat es, asset s or cust omer s, af t er t he cl ose of t he

pr oposed t r ansact i on, t he Pet i t i oner s assert t hat i f Comcast

wi shes t o make addi t i onal changes t hat r equi r e r egul at or y

appr oval , Comcast wi l l f ol l ow appl i cabl e New Yor k f i l i ng and

not i ce requi r ement s associ at ed wi t h such changes.

The Pet i t i oner s st at e t hat t he proposed t r ansact i on

wi l l enhance compet i t i on and pr ovi de cur r ent Ti me Warner

cust omer s wi t h addi t i onal pr ogr ammi ng opt i ons, f ast er I nt er net

speeds and del i ver ot her publ i c i nt er est benef i t s. Among t he

benef i t s put f or war d by t he Pet i t i oner s ar e gr eat er avai l abi l i t y

of br oadband I nt er net servi ce ( br oadband) and voi ce servi ces f orcust omer cl asses not cur r ent l y served by ei t her Comcast or Ti me

War ner t oday ( e. g. , busi ness cust omer s of var i ous si zes) ,

expansi on of l ow- i ncome br oadband ser vi ce of f er i ngs, new

servi ces f or school s and l i br ar i es and a commi t ment t o cont i nue

t o ser ve r ur al cust omer s. Addi t i onal l y, Comcast st at es t hat i t

wi l l extend t o New Yor k St at e the publ i c i nt er est commi t ment s i t

made t o t he Federal Communi cat i ons Commi ssi on ( FCC) when i t

acqui r ed NBC- Uni ver sal , whi ch i ncl ude net and cont ent neut r al i t y

r ul es. 4

Comcast st at es t hat i t s pr oduct s, i ncl udi ng XFI NI TY

hi gh- speed I nt er net , t he X1 and X2 cabl e t el evi si on ( TV)

systems, and XFI NI TY di gi t al voi ce ser vi ces ar e super i or t o

si mi l ar ser vi ces cur r ent l y avai l abl e f r om Ti me War ner i n New

York St at e and t hat t he publ i c wi l l benef i t f r om t hese enhanced

of f er i ngs. Comcast al so st at es t hat i t expect s t o accel er at e

4 MB Docket No. 10- 56, I n t he Mat t er of Appl i cat i ons of ComcastCor por at i on, Gener al El ect r i c Company and NBC Uni ver sal , I nc.f or Consent t o Assi gn Li censes and Tr ansf er Cont r ol ofLi censes, Memorandum Opi ni on and Or der ( i ssued J anuary 20,2011) ( Comcast / NBCU Or der ) .

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t he t r ansi t i on of Ti me War ner s i nf r ast r uct ur e t o an al l - di gi t al

system, enabl i ng i t t o of f er t hese and ot her r el at ed ser vi ces i n

ar eas of New Yor k wher e di gi t al cabl e i s not cur r ent l y

avai l abl e. Comcast f ur t her submi t s t hat consumer s wi l l have

addi t i onal means of accessi ng pr ogr ammi ng t hr ough a wi der

sel ect i on of On- Demand pr ogr ammi ng as wel l as Comcast s TV

Ever ywhere pr oduct s, whi ch al l ows cust omers t o access 50 l i ve TV

channel s t hr ough i t s XFI NI TY TV Go appl i cat i on f or mobi l e

devi ces. Fi nal l y, t he Pet i t i oner s st at e t hat t he pr oposed

t r ansact i on wi l l not have any negat i ve i mpact on compet i t i on

because t he t wo compani es do not compete di r ect l y wi t h one

anot her t oday.St af f s anal ysi s of t he r el at i ve benef i t s of t he

t r ansact i on, as wel l as i dent i f i ed pot ent i al det r i ment s and

har ms t hat coul d r esul t f r om t he pr oposed t r ansact i on, ar e

di scussed i n det ai l bel ow. I n addi t i on, we put f or war d speci f i c

r ecommendat i ons f or mi t i gat i on of t hose det r i ment s and harms,

i ncl udi ng f oreseen and unf oreseen r i sks t hat may come as a

r esul t of t he mer ger .

PROCESS TO DATE

Fol l owi ng t he f i l i ng of t he J oi nt Pet i t i on on May 15,

2014, t he Commi ssi on i ssued a Not i ce I nvi t i ng Comment s on May

16, 2014. I n addi t i on, pur suant t o t he St at e Admi ni st r at i ve

Procedur e Act , a Not i ce of Proposed Rul emaki ng was publ i shed i n

t he St ate Regi st er on J une 4, 2014. The comment per i ods f or

bot h Not i ces wer e set t o expi r e on J ul y 21, 2014. On J ul y 17,

2014, Comcast agr eed t o ext end t he st atut ory t i me per i od f or

Commi ss i on r evi ew. Accor di ngl y, t he Commi ss i on s May 16 Not i ce

I nvi t i ng Comment s was ext ended unt i l August 8, 2014, wi t h

r epl i es due August 25, 2014.

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The Commi ssi on al so hel d t hree I nf or mat i onal For ums

and Publ i c St at ement Hear i ngs concer ni ng t he J oi nt Pet i t i on and

t he pr oposed t r ansact i on. Those hear i ngs wer e hel d i n Buf f al o

on J une 16, 2014, i n Al bany on J une 18, 2014 and i n New Yor k

Ci t y on J une 19, 2014. At t hem, dozens of speaker s, i ncl udi ng

non- pr of i t or gani zat i ons, good gover nment and busi ness gr oups

and members of t he general publ i c pr ovi ded t hei r i nput on

whether t he Commi ss i on shoul d appr ove t he pr oposed t r ansact i on.

Some of t he st atement s made ref l ect ed a need f or l ow- i ncome

I nt er net access, addi t i onal compet i t i on and consumer choi ce i n

t he cabl e market , enhanced cust omer ser vi ce and meani ngf ul

I nt er net neut r al i t y condi t i ons.I n addi t i on, t o dat e, t he Commi ssi on has r ecei ved over

2, 700 el ect r oni cal l y f i l ed comment s f r om t he publ i c at - l ar ge.

The vast maj or i t y of t hose comment s oppose t he proposed

t r ansact i on asser t i ng that , among ot her t hi ngs, t he combi ned

company wi l l have t oo much cont r ol over t he vi deo and broadband

mar ket s, pr i ces wi l l i ncr ease, and cust omer ser vi ce wi l l

decr ease.

SCOPE OF REVI EW

The pur pose of t he Commi ssi on s r evi ew i n a mer ger

pr oceedi ng i s t o det er mi ne t he i mpact on t he publ i c i nt er est

t hat t he pr oposed t r ansact i on wi l l have on consumer s. I t s

r evi ew shoul d not be l i mi t ed t o t el ephone and cabl e servi ces and

shoul d i ncl ude br oadband. Whi l e St af f i s not r ecommendi ng t hat

t he Commi ssi on r egul at e br oadband i n t he t r adi t i onal sense of

t he word, i t must consi der t he i mpact s of br oadband t hat may

r esul t f r om t he mer ger as par t of i t s br oader publ i c i nt er est

r evi ew under t he mer ger and acqui si t i on pr ovi si ons of t he PSL.

I n l ooki ng at t el ephone and cabl e mar ket s i n New Yor k, i t i s

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essent i al t o al so l ook at br oadband because al l of t hese

servi ces f al l under t he r ubr i c of communi cat i ons and ar e

i nt er changeabl e t o an extent .

Appl i cat i on of t he publ i c i nt er est st andar d t o i ncl ude

consi der at i on of br oadband i s r easonabl e f or sever al r easons.

Fi r st , not onl y does br oadband r el y upon t he same network as

t el ephone and cabl e servi ces, but , mor e i mpor t ant l y, i n many

i nst ances, i t compet es di r ect l y wi t h cabl e and t el ephone

servi ces f or mar ket shar e i n New Yor k. For exampl e, t he

Pet i t i oner s st andal one br oadband ser vi ce of f er i ngs al l ow t hei r

cust omers t he abi l i t y to downl oad and st r eam cont ent t hr ough

t hi r d- par t y pr ovi der s such as Net f l i x, Hul u, and Appl e TV, whi chcompet e di r ect l y wi t h t r adi t i onal cabl e vi deo ser vi ces.

Fur t her , as downl oad speeds i ncr ease, of f er i ngs l i ke t hese and

many ot hers wi l l onl y become more r obust and compet i t i ve.

Addi t i onal l y, Voi ce over I nt er net Pr ot ocol ( VoI P) , t he

t echnol ogy behi nd t he Pet i t i oner s voi ce ser vi ce of f er i ngs

r el i es on t he same net wor k as cabl e and I nt er net servi ces, and

i s i ncreasi ngl y r epl aci ng t r adi t i onal l andl i ne t el ephone ser vi ce

i n New Yor k. The pr eval ence of br oadband networks pr ovi ded by

l andl i ne t el ephone and cabl e compani es, as wel l as t er r est r i al

wi r el ess compani es, has opened up opport uni t i es f or advanced

servi ces, such as VoI P phone ser vi ce, t o become wi del y avai l abl e

t o consumers. Over t he cour se of t he l ast decade, more t han

f our mi l l i on New Yor k r esi dent i al and busi ness consumer s have

adopt ed VoI P phone ser vi ce. Si nce 2000, i ncumbent t el ephone

company access l i ne count s have f al l en f r om more than 13mi l l i on, t o appr oxi mat el y f our mi l l i on. 5 Mi l l i ons of t hose

i ncumbent l ocal exchange car r i er l i ne l osses wer e cust omer s

5 I ncumbent t el ephone company access l i ne count s are pr ovi ded i ncompany Annual Repor t f i l i ngs pur suant t o 16 NYCRR 641. 1.

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mi gr at i ng t o VoI P phone servi ce, as were many secondary l i ne

mi gr at i ons f r om di al - up I nt er net ser vi ces, t o f ast er , mor e

advanced cabl e modem, di gi t al subscr i ber l i ne ( DSL) and opt i cal

car r i er br oadband servi ces now of f ered by most compani es

pr ovi di ng br oadband servi ce i n New Yor k. The f ol l owi ng chart s

i l l ust r at e t he i mpact of VoI P on t r adi t i onal wi r el i ne ser vi ce.

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I t shoul d al so be not ed t hat , under Feder al l aw, t he

Publ i c Ser vi ce Commi ssi on i s obl i gat ed t o encour age t he

depl oyment on a reasonabl e and t i mel y basi s of advanced

t el ecommuni cat i ons capabi l i t y to al l ( i ncl udi ng, i n

par t i cul ar , el ement ar y and secondar y school s and cl assr ooms) by

ut i l i zi ng, i n a manner consi st ent wi t h t he publ i c i nt er est ,

conveni ence, and necessi t y, pr i ce cap r egul at i on, r egul at or y

f or bear ance, measures t hat pr omot e compet i t i on i n t he l ocal

t el ecommuni cat i ons mar ket , or ot her r egul at i ng met hods t hat

r emove bar r i er s t o i nf r ast r uct ur e i nvest ment . 47 U. S. C.

1302( a) . That st at ut e def i nes advanced t el ecommuni cat i ons

capabi l i t y to i ncl ude broadband t el ecommuni cat i onscapabi l i t y. 47 U. S. C. 1302( d) ( 1) . Thus, under t hi s cl ear

Federal mandate, t he Commi ss i on must consi der t he i mpact of

br oadband on t he pr oposed t r ansact i on i n New Yor k St ate. 6

Fi nal l y, even t he Pet i t i oner s r el y heavi l y on t he

i ncr ement al benef i t s of enhanced br oadband of f er i ngs i n t hei r

J oi nt Pet i t i on, t out i ng, among ot her t hi ngs, f ast er downl oad

speeds and t echnol ogi cal i nnovat i ons as benef i t s f or New York

consumer s i nher ent i n t he pr oposed t r ansact i on at i ssue. 7

I ndeed, t hey i mpl i ci t l y acknowl edge t hat any Commi ssi on publ i c

i nt er est r evi ew of t he net posi t i ve benef i t s and pot ent i al

det r i ment s and har ms of t he pr oposed t r ansact i on shoul d i ncl ude

an exami nat i on of br oadband, i n addi t i on t o t el ephone and cabl e

ser vi ces. Theref ore, t he Commi ss i on shoul d not exami ne t he

6 The Uni t ed St at es Cour t of Appeal s f or t he Di st r i ct ofCol umbi a Ci r cui t r eached t he same st at ut or y i nt er pr et at i on.See, Ver i zon v. Feder al Communi cat i ons Commi ssi on, et al . , No.11- 1355 ( deci ded J anuar y 14, 2014) , pp. 18- 19.

7 Case 14- M- 0183, J oi nt Pet i t i on of Ti me War ner Cabl e I nc. andComcast Corporat i on f or Appr oval of a Hol di ng Company LevelTr ansf er of Cont r ol , J oi nt Pet i t i on, pp. 25- 27.

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CASE 14- M- 0183

i mpact s of t he pr oposed t r ansact i on on t he t el ephone and cabl e

market s i n New Yor k wi t hout al so consi der i ng br oadband.

STANDARD OF REVI EW

General

Under PSL 99( 2) : [ n] o t el ephone cor por at i on shal l

t r ansf er or l ease i t s wor ks wi t hout t he wr i t t en consent of t he

commi ssi on. Any ot her t r ansf er or l ease bet ween non- af f i l i at es

r egar dl ess of cost shal l be ef f ect i ve wi t hout t he commi ssi on' s

wr i t t en consent wi t hi n ni net y days af t er such cor por at i on

not i f i es t he commi ssi on t hat i t pl ans t o compl et e such t r ansf er

or l ease unl ess t he commi ssi on, or i t s desi gnee, det er mi neswi t hi n such ni net y days t hat t he publ i c i nt er est r equi r es t he

commi ss i on' s r evi ew and wr i t t en consent . Si nce Ti me Warner

cur r ent l y operates under a dul y aut hor i zed and appr oved

Cer t i f i cat e of Publ i c Conveni ence and Necessi t y, Commi ssi on

appr oval of t he pr oposed t r ansact i on i s r equi r ed. 8 Whi l e a PSL

99 t r ansf er i s pr esumed t o be i n t he publ i c i nt er est , t he

Commi ss i on may det er mi ne t hat t he publ i c i nt er est r equi r es

8 Case 93- C- 0569, Pet i t i on of Ti me War ner AxS Rochest er L. P. f ora Cer t i f i cat e of Publ i c Conveni ence and Necessi t y t o pr ovi deswi t ched and non- swi t ched t el ecommuni cat i ons ser vi ces on ani nt r aLATA, i nt er LATA, i nt er and i nt r a- ci t y basi s wi t hi n t heStat e of New York ( i ssued December 31, 1993) and Case 93- C-

0899, Pet i t i on of Ti me War ner AxS of New Yor k Ci t y, L. P. t oAmend t he Cer t i f i cat e of Publ i c Conveni ence and Necessi t ygr ant ed to Manhat t an Cabl e Tel evi si on, I nc. by Commi ssi onOr der I ssued August 29, 1986 and t r ansf er r ed t o Ti me WarnerAxS of New Yor k Ci t y by Or der I ssued August 9, 1993, t oi ncl ude the pr ovi si on of al l f or ms of t el ecommuni cat i onsser vi ce on an i nt r aLATA, i nt r aci t y basi s t hr oughout t he St at eof New Yor k, f i l ed i n C 27091 ( i ssued August 25, 1994) .

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CASE 14- M- 0183

f ur t her r evi ew and wr i t t en consent and, i t has made such a

f i ndi ng i n t hi s case. 9

Under PSL 100( 1) and ( 3) : [ n] o t el egr aph cor por at i on

or t el ephone cor por at i on, domest i c or f or ei gn, shal l her eaf t er

pur chase or acqui r e, t ake or hol d any par t of t he capi t al st ock

of any tel egr aph cor por at i on or t el ephone cor por at i on unl ess

aut hor i zed so t o do by t he commi ss i on. Moreover , [ n] o consent

shal l be gi ven by the commi ssi on unl ess i t shal l have been

shown t hat such acqui si t i on i s i n t he publ i c i nt er est ; pr ovi ded,

however , t hat any such consent shal l be deemed t o be gr ant ed by

t he commi ssi on ni net y days af t er such cor por at i on appl i es t o t he

commi ssi on f or i t s consent , unl ess t he commi ssi on, or i t sdesi gnee, det er mi nes and i nf or ms t he appl i cant i n wr i t i ng wi t hi n

such ni net y day per i od t hat t he publ i c i nt er est r equi r es t he

commi ss i on' s r evi ew and i t s wr i t t en consent . Thus, t he bur den

of demonst r at i ng t hat t he t r ansact i on sat i sf i es t he publ i c

i nt er est r est s wi t h t he Pet i t i oner s. I f Ti me War ner and Comcast

cannot sat i sf y t hi s bur den, t he Commi ssi on may, i n i t s

di scr et i on, conduct a f ur t her r evi ew of t he publ i c har ms t hat

may r esul t f r om t he pr oposed t r ansact i on. Agai n, i t has made

such a determi nat i on here. 10

Si mi l ar l y, under t he newl y amended PSL 222( 3) ( b) :

[ t ] he commi ssi on shal l not appr ove t he appl i cat i on f or a

t r ansf er of a f r anchi se, any t r ansf er of cont r ol of a f r anchi se

or cer t i f i cat e of conf i r mat i on, or of f aci l i t i es consti t ut i ng a

si gni f i cant par t of any cabl e t el evi si on syst em unl ess t he

appl i cant demonst r at es t hat t he pr oposed t r ansf er ee and t hecabl e t el evi si on syst em conf or m t o t he st andar ds est abl i shed i n

9 See, Let t er Dated May 21, 2014 f r omChad Hume, Di r ector ,Of f i ce of Tel ecommuni cat i ons t o Comcast and Ti me Warner .

10 I d.

12


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CASE 14- M- 0183

t he r egul at i ons pr omul gated by t he commi ss i on t hat appr oval

woul d not be i n vi ol at i on of l aw, or any regul at i on or st andar d

pr omul gat ed by t he commi ss i on, and t hat t he t r ansf er i s

ot her wi se i n t he publ i c i nt er est . 11

The new PSL 222 speci f i cal l y r equi r es t hat t he

Pet i t i oner s make a demonst r at i on t hat t he pr oposed t r ansact i on

i s i n t he publ i c i nt er est . The bur den f al l s t o t he Pet i t i oner s

i n t he f i r st i nst ance t o show t hat t he pr oposed t r ansact i on s

benef i t s out wei gh i t s det r i ment s i n or der t o obt ai n Commi ssi on

appr oval . The st andard enumerated under PSL 222 i s i n l i ne

wi t h t hat used i n PSL 70 f or el ect r i c and gas cor por at i on

mer ger s and acqui si t i ons. Under t he PSL 70 publ i c i nt er est cr i t er i on, a pet i t i oner must show t hat t he t r ansact i on woul d

pr ovi de r at epayer s a posi t i ve net benef i t . I n i mpl ement i ng t he

publ i c i nt er est st andar d, t he Commi ssi on s exami nat i on of t he

r el at i ve benef i t s and det r i ment s of t he pr oposed t r ansact i on i s

ver y br oad. For exampl e, t he i mpact of I ber dr ol a s acqui si t i on

of Rochest er Gas & El ect r i c Corporat i on ( RG&E) and New Yor k

St at e El ect r i c & Gas Cor por at i on ( NYSEG) on t he ver t i cal market

power of I berdr ol a i n t he wi nd energy i ndust r y was exami ned at

l engt h by t he Commi ssi on i n i t s anal ysi s and ul t i mat e appr oval

of t hat t r ansact i on. 12

11 L. 2014, Ch 57 ( Par t R) .12 Case 07- M- 0906, J oi nt Pet i t i on of I ber dr ol a, S. A. , Ener gy East

Cor por at i on, RGS Ener gy Gr oup, I nc. , Gr een Acqui si t i onCapi t al , I nc. , New Yor k St at e El ect r i c & Gas Cor por at i on andRochest er Gas and El ect r i c Cor por at i on f or Appr oval of t heAcqui si t i on of Ener gy East Cor por at i on by I ber dr ol a, S. A. ,Or der Aut hor i zi ng Acqui si t i on Subj ect t o Condi t i ons ( i ssuedJ anuar y 6, 2009) pp. 63- 89 ( I berdrol a Or der ) ; see al so,Di gi t al Pagi ng Syst ems, I nc. v Publ i c Ser v. Commn. , 360N. Y. S. 2d 931 ( 3d Dep t 1974) ( where t he Commi ss i on, i nanal yzi ng a request f or aut hor i zat i on t o pur chase mor e than 10per cent of t he vot i ng capi t al st ock, det er mi ned t hat t het r ansact i on was not i n t he publ i c i nt er est because t he

13


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CASE 14- M- 0183

I n amendi ng PSL 222, we bel i eve t hat i t was t he New

York St at e Legi sl at ure s i ntent t o al i gn t he Commi ssi on s r evi ew

and appr oval pr ocess f or PSL 222 pr oposed t r ansact i ons wi t h PSL

70 r evi ews and appr oval s. The f ormer PSL 222 r evi ew r equi r ed

Commi ssi on appr oval i f i t di d not f i nd a vi ol at i on of t he publ i c

i nt er est , whi l e t he amended st at ut e now r equi r es a demonst r at i on

of t he publ i c i nt er est by t he appl i cant . Thi s modi f i cat i on,

t oget her wi t h t he f act t hat t her e i s no pr ovi si on f or a

t r ansact i on t o go i nt o ef f ect by oper at i on of l aw, makes t he

amended PSL 222 consi st ent wi t h t he PSL 70 merger and

acqui si t i on st andar d. Ther ef or e, i t makes sense, bot h as a

pr act i cal and l egal mat t er , t o consi der appl i cat i ons f or t het r ansf er and acqui si t i on of cabl e f r anchi ses, asset s and st ock

under t he same t r ansf er and acqui si t i on anal ysi s used f or

el ect r i c or gas cor por at i ons. A r evi ew and i nt er pr et at i on of

t he publ i c i nt er est st andar d under PSL 70 i s par amount t o

est abl i shi ng t he appr opr i at e publ i c i nt er est st andar d t o be

appl i ed her e under PSL 222. Such r evi ew wi l l def i ne what i s

meant by t he phr ase publ i c i nt er est , as wel l as i dent i f y what

i s r equi r ed t o sat i sf y t hat st andar d.

Under t he Commi ss i on s PSL 70 merger and acqui si t i on

pr ecedent , 13 t he publ i c i nt er est st andar d i s sat i sf i ed i f t he

pr oposed pur chase woul d exacerbate conf l i ct betweenst ockhol der gr oups, whi ch woul d be an obst acl e t o f i nanci ngand a drai n on t i me and resources of management of t hecar r i er ) .

13 Case 06- M- 0878, Nat i onal Gr i d PLC and KeySpan Corp. St ockAcqui si t i on, Abbr evi at ed Or der Aut hor i zi ng Acqui si t i on Subj ectt o Condi t i ons and Maki ng Some Revenue Requi r ementDetermi nat i ons f or KEDNY and KEDLI ( i ssued August 23, 2007)and Or der Aut hor i zi ng Acqui si t i on Subj ect t o Condi t i ons andMaki ng Some Revenue Requi r ement Det er mi nat i ons f or KEDNY andKEDLI ( i ssued Sept ember 17, 2007) ( t ogether KeySpan Or ders) ;Case 07- M- 0906, Acqui si t i on of Ener gy East Cor p. By I ber dr ol a,S. A. , Abbr evi at ed Or der Aut hor i zi ng Acqui si t i on ( i ssued

14


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CASE 14- M- 0183

mer ger or acqui si t i on i s f ound t o pr oduce a net posi t i ve

benef i t f or r at epayer s. As st at ed by t he Commi ssi on i n i t s

For t i s Or der : t he cl ear est ar t i cul at i on [ of t he] publ i c

i nt erest anal ysi s under whi ch the Commi ssi on appr oves a merger

or acqui si t i on i s t hat i t r equi r e[ s] Pet i t i oner s t o make a

t hr ee- par t showi ng: t hat t he t r ansact i on woul d pr ovi de cust omer s

posi t i ve net benef i t s, af t er consi der i ng ( 1) t he expect ed

benef i t s pr oper l y at t r i but abl e t o t he t r ansact i on, of f set by ( 2)

any r i sks or det r i ment s t hat woul d r emai n af t er appl yi ng ( 3)

r easonabl e mi t i gat i on measur es. 14 Fur t her , once t he Commi ss i on

has compar ed t he t r ansact i on s benef i t s and det r i ment s: [ i t ]

can assess whet her t he achi evement of net posi t i ve benef i t sr equi r es t hat t he i nt r i nsi c benef i t s be suppl ement ed wi t h

monet i zed benef i t s r ef er r ed t o as posi t i ve benef i t adj ust ment s

( PBAs) . 15 Ther ef or e, i f t he pr oposed t r ansact i ons benef i t s do

not out wei gh unmi t i gated det r i ment s, monet ary PBAs can be used

t o suf f i ci ent l y t i p t he scal e t o est abl i sh t hat t he

t r ansact i on pr ovi des a net posi t i ve benef i t f or exi st i ng

cust omer s. I f t hi s i s accompl i shed, t he t r ansact i on shoul d be

f ound t o be i n t he publ i c i nt er est and ul t i mat el y appr oved.

Appl yi ng t he publ i c i nt er est st andar d i n a manner t hat

ensur es consumer s obt ai n a net posi t i ve benef i t i s not uni que to

New Yor k. I n f act t he FCC, 16 t he publ i c ut i l i t y commi ssi ons of

Sept ember 9, 2008) ; I ber dr ol a Or der , supr a; For t i s Or der ,supr a.

14

Case 12- M- 0192, supr a, For t i s Or der , p. 59.15 I d.16 See, Comcast / NBCU Or der . The FCC st ated t hat i t s publ i c

i nt er est r evi ew ent ai l s a t hor ough exami nat i on of t hepot ent i al har ms and benef i t s of t he pr oposed t r ansact i on,i ncl udi ng any vol unt ary commi t ment s made by the Appl i cant s t of ur t her t he publ i c i nt er est . As par t of t hi s pr ocess, t heCommi ss i on may i mpose remedi al condi t i ons t o addr ess pot ent i al

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CASE 14- M- 0183

t he St at es of Cal i f or ni a, 17 and Or egon, 18 as wel l as t he

Commonweal t h of Massachuset t s, 19 al l have a net posi t i ve

benef i t st andar d t hat i s appl i ed t o ut i l i t y mer ger s.

Appl i cat i onThe Commi ssi on shoul d seek net posi t i ve benef i t s i n

t he f or m of condi t i ons and, i f necessary, a PBA her e because the

Pet i t i oner s have made no commi t ment s t hat t he combi ned company

wi l l shar e t he pr oj ect ed syner gy savi ngs associ at ed wi t h t he

pr oposed t r ansact i on wi t h New Yor k cust omers. Condi t i onal

har ms l i kel y t o r esul t f r om t he t r ansact i on. I f , on bal ance,t he benef i t s associ at ed wi t h t he pr oposed t r ansact i on out wei gh

t he remai ni ng harms, t he Commi ssi on must appr ove the t r ansf eri f i t ser ves t he publ i c i nt er est . See al so, Appl i cat i ons f orConsent t o t he Tr ansf er of Cont r ol of Li censes, XM Sat el l i t eRadi o Hol di ngs I nc. , Tr ansf er or , t o Si r i us Sat el l i t e Radi oI nc. , Transf eree, Memorandum Opi ni on and Or der and Repor t andOr der , 23 FCC Rcd 12348, 12363 ( 2008) ; News Cor p. and DI RECTVGr oup, I nc. and Li ber t y Medi a Cor p. f or Aut hor i t y to Tr ansf erCont r ol , Memor andum Opi ni on and Or der , 23 FCC Rcd 3265, 3276( 2008) ; SBC Comm. I nc. and AT&T Corp. Appl i cat i ons f orAppr oval of Tr ansf er of Cont r ol , Memor andum Opi ni on and Or der ,20 FCC Rcd 18290, 18300 ( 2005) .

17 See, Cal . Pub. Ut i l . Code 854( b) ( 1996) . Cal i f or ni a has ast at ut or y mandat e t hat ami ni mum of 50% of t he shor t - andl ong- t er m net economi c benef i t s of el ect r i c ut i l i t y mer ger beshar ed wi t h i t s cust omer s.

18 See, Or . Pub. Ut i l . Comm n, I n r e Legal St andar d f or t heAppr oval of Merger s, 212 Pub. Ut i l . Rep. 4t h 449, 455457( 2001) ; I / M/ O t he Appl i cat i on of Enr on Cor p. For an Or derAut hor i zi ng t he Exer ci se of I nf l uence Over Por t l and Gener alEl ect r i c Company, 177 PUR 4t h 587, 595- 596 ( J une 4, 1997) .Or egon has gone so f ar as t o requi r e that 100% of t he merger

savi ngs f l ow t hr ough t o r at epayer s i n or der f or a t r ansact i ont o be consi der ed i n t he publ i c i nt er est .19 See, J oi nt Pet i t i on f or Appr oval of Mer ger bet ween NSTAR and

Nor t heast Ut i l i t i es, pur suant t o G. L. c. 164, 96,I nt er l ocut or y Or der on St andar d of Revi ew, D. P. U. 10- 170( Mar ch 10, 2011) . Massachuset t s as r ecent l y changed i t sst andar d of r evi ew of ut i l i t y mer ger s t o requi r e a showi ng ofnet benef i t s.

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CASE 14- M- 0183

appr oval of t he pr oposed t r ansact i on t o ensure t hat syner gy

savi ngs i nur e to the benef i t of New Yor k cust omer s bui l ds upon

t he pr emi se that syner gy savi ngs benef i t cust omer s i n a f ul l y

compet i t i ve market and pr ovi des assur ance t hat New Yor k

cust omer s wi l l r ecei ve a f ai r shar e of t hose pr omi sed savi ngs.

Such condi t i ons and commi t ment s al so ser ve t o l end cr edi bi l i t y

t o Pet i t i oner s cl ai ms r egar di ng t he benef i t s of t he t r ansact i on

and ar e consi st ent wi t h est abl i shed Commi ss i on pr ecedent i n

appl yi ng t he publ i c i nt er est st andar d t o mer ger and acqui si t i on

cases. For t hi s t r ansact i on, St af f uses two met hodol ogi es t o

quant i f y t he dol l ar val ue of t he publ i c i nt er est benef i t s t hat

shoul d i nur e t o New Yor k cust omers: 1) an est i mate of t he amountof synergy savi ngs t hat woul d be r ecei ved by cust omers i n a

compet i t i ve market , and 2) a PBA est i mate based on methodol ogi es

used by t he Commi ssi on i n r evi ewi ng ot her proposed merger s and

acqui s i t i ons.

As par t of t he pr oposed t r ansact i on, Comcast

publ i cal l y announced t hat t he acqui si t i on and mer ger of Ti me

War ner and Comcast wi l l pr oduce $1. 5 bi l l i on of syner gy

savi ngs. 20 Post acqui si t i on, New Yor k cust omer s woul d r epr esent

appr oxi mat el y 7. 642% of t he Comcast s t ot al cust omer base

( 2, 522, 000 out of 33, 000, 000) . I n a f ul l y compet i t i ve mar ket ,

t he vast maj or i t y of savi ngs t hat ar e r epl i cabl e by ot her mar ket

par t i ci pant s shoul d i nur e t o t he benef i t of cust omer s. A

conservat i ve pr esumpt i on of a 50% cust omer / 50% shar ehol der

shar i ng of t hese syner gi es, appl i ed to Comcast s expect ed New

20 Ti me Warner Cabl e t o Merge wi t h Comcast Corporat i on t o Cr eat ea Wor l d- Cl ass Technol ogy and Medi a Company,ht t p: / / cor por at e. comcast . com/ news- i nf or mat i on/ news- f eed/ t i me-war ner - cabl e- t o- mer ge- wi t h- comcast - cor por at i on ( Febr uar y 13,2014) . Comcast al so f or ecast s $400 mi l l i on i n capi t alexpendi t ur e ef f i ci enci es, whi ch St af f does not seek t ocondi t i on.

17
http://corporate.comcast.com/news-information/news-feed/time-warner-cable-to-merge-with-comcast-corporationhttp://corporate.comcast.com/news-information/news-feed/time-warner-cable-to-merge-with-comcast-corporationhttp://corporate.comcast.com/news-information/news-feed/time-warner-cable-to-merge-with-comcast-corporationhttp://corporate.comcast.com/news-information/news-feed/time-warner-cable-to-merge-with-comcast-corporation


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CASE 14- M- 0183

York cust omer per cent age, est abl i shes t hat New Yor k cust omer s

shoul d r ecei ve appr oxi mat el y $57, 315, 000 ( 7. 642% x $750 mi l l i on)

i n benef i t s annual l y f r om t he pr oposed t r ansact i on. 21 Over t he

f i r st t en post - acqui si t i on year s, New Yor k cust omer syner gy

savi ngs shoul d be appr oxi matel y $530. 0 mi l l i on assumi ng t hat 50%

of syner gi es ar e achi eved i n t he f i r st year , 75% i n t he second

year , and 100% t her eaf t er ( $57. 3 mi l l i on X 50% + $57. 3 mi l l i on X

75% + $57. 3 mi l l i on X 8 = $530. 0 mi l l i on) . Usi ng t he cur r ent

accept ed di scount r ate of 12%, based on t he market cost of

capi t al , t he net pr esent val ue of t hi s $530. 0 mi l l i on woul d

equal a cur r ent val ue of appr oxi mat el y $303 mi l l i on. 22

A commi t ment f r om t he Pet i t i oner s t o pr ovi de at l east$303. 5 mi l l i on of i ncr ement al benef i t s woul d obvi at e or gr eat l y

l essen t he j ust i f i cat i on f or condi t i ons or a PBA t o est abl i sh a

net posi t i ve benef i t i n t hi s case. However , wi t hout such a

commi t ment , condi t i ons woul d become necessary to est abl i sh a net

posi t i ve benef i t t o sat i sf y t he publ i c i nt er est st andar d. 23

I n bot h t he I ber dr ol a and For t i s pr oceedi ngs, PBAs

wer e ei t her r equi r ed by t he Commi ssi on, or set t l ed upon by t he

par t i es and adopt ed by t he Commi ssi on, t o creat e a net posi t i ve

benef i t f or r at epayer s. The met hodol ogy used by St af f i n t hose

pr oceedi ngs was r el at i vel y st r ai ght f or war d and was based on t he

del i ver y revenues of each ut i l i t y.

21 I t shoul d be not ed t hat i n bot h t he I ber dr ol a and For t i st r ansact i ons, 100% of t he expect ed syner gi es wer e appl i ed as acust omer benef i t . But , St af f r ecogni zes her e t hat t he

t el ecommuni cat i on and cabl e markets are somewhat compet i t i veand, t her ef or e, we use 50% of t he expect ed syner gi es as agauge of dedi cat ed cust omer benef i t i n t hi s case.

22 Thi s est i mate may be conser vat i ve because i t does not i ncl udesavi ngs t hat Comcast char act er i zes as capi t al expendi t ur esyner gi es and revenue syner gi es.

23 Case 07- M- 0906, supr a, I ber dr ol a Or der , p. 131.

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CASE 14- M- 0183

I n t hi s pr oposed t r ansact i on t her e ar e no st at ed

del i ver y r evenues t o use as a vi abl e benchmark. However ,

Commi ss i on assessed r evenues are common t o al l i ndust r i es -

el ect r i c, gas, t el ephone and vi deo - and can be used as a

r easonabl e benchmar k. Ther ef or e, a f ai r net posi t i ve benef i t

benchmark woul d be t o compare t he r ecent publ i c i nt erest

benef i t s i n bot h I ber dr ol a and For t i s t o t he r espect i ve

assessabl e r evenues of t he compani es i nvol ved i n t hose

t r ansact i ons. I n 2007, NYSEG and RG&E assessabl e r evenues

equal ed appr oxi matel y $2. 711 bi l l i on and t he PBA r equi r ed was

$275 mi l l i on. 24 The I berdr ol a PBA was appr oxi matel y 10% of t he

compani es assessabl e r evenues. I n 2011, Cent r al Hudson sassessabl e revenues were appr oxi matel y $869 mi l l i on and the

publ i c i nt er est benef i t ( i ncl udi ng mi ni mal syner gi es) set t l ed

upon by t he par t i es and approved by t he Commi ssi on was cl ose t o

$49 mi l l i on t hat i ncl uded a publ i c i nt er est benef i t of $40

mi l l i on and dedi cat ed syner gy savi ngs of $9. 5 mi l l i on, whi ch

equated t o 5. 6% of Cent r al Hudson s assessabl e r evenues. When

Ti me War ner s assessabl e cabl e r evenues ar e added t o i t s

assessabl e tel ephone revenues, Ti me Warner s Commi ss i on assessed

r evenues equal appr oxi mat el y $3. 180 bi l l i on. Usi ng I ber dr ol a as

a benchmar k woul d r equi r e publ i c i nt er est benef i t s of about $320

mi l l i on f or t hi s t r ansact i on, whi l e t he For t i s benchmar k woul d

pr oduce publ i c i nt er est benef i t s of appr oxi mat el y $180 mi l l i on.

The di f f er ence i n t he approved publ i c benef i t

per cent ages f or I ber dr ol a and For t i s can be at t r i but ed t o t he

r emai ni ng unmi t i gat ed r i sks of t he r espect i ve t r ansact i ons af t err i sk/ det r i ment mi t i gat i on was achi eved thr ough Commi ssi on

appr oved condi t i ons. I n For t i s, t he Commi ssi on f ound t hat any

24 I d. , pp. 136- 137.

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CASE 14- M- 0183

of f set t i ng r i sks or det r i ment s ha[ d] been mi ni mi zed. 25 I n

essence, af t er appl yi ng r i sk mi t i gat i on t er ms and condi t i ons and

consi der i ng t he ot her benef i t s shar ed wi t h cust omer s, t he

t r ansact i on r i sk was mi ni mal f or Cent r al Hudson cust omers and a

PBA r epr esent i ng onl y 4. 6% of Cent r al Hudson s assessabl e

r evenues, i n addi t i on t o t he $9. 5 mi l l i on of concr et e consumer

commi t ment s, was r equi r ed t o cr eat e a suf f i ci ent net posi t i ve

benef i t . On t he ot her hand, t he unmi t i gat ed t r ansact i on r i sks

f or NYSEG and RG&E cust omers was great er i n the I berdr ol a

t r ansact i on and t he Commi ss i on f ound t hat t he onl y real and

si gni f i cant publ i c benef i t t o be der i ved f r om t he t r ansact i on i s

t he possi bi l i t y of pr ovi di ng cust omer s PBAs as a monet i zedbenef i t , 26 and, t heref ore, t he much gr eat er PBA percent age of

appr oxi matel y 10% was necessary f or Commi ss i on appr oval .

As st at ed i n t he I ber dr ol a Or der , t he appr opr i at e PBA

l evel det er mi nat i on requi r es an exer ci se of i nf or med j udgment

r at her t han a pur el y mat hemat i cal cal cul at i on, but t her e ar e

benchmarks we can appl y t o avoi d basi ng a deci si on sol el y on

subj ect i ve not i ons of equi t y. 27 However , t he Commi ssi on has

r ecogni zed that ever y t r ansact i on, no mat t er how condi t i oned,

r epr esent s uni que f act or s. Her e, we have pr omi sed ef f i ci ency

gai ns and f or eseen and unf or eseen r i sks and det r i ment s. As

di scussed i n f ur t her det ai l bel ow, whi l e assumi ng t hat FCC

mandat ed condi t i ons wi l l mi t i gat e pot ent i al r i sks i n t he ar ea of

ver t i cal mar ket power , t he unmi t i gat ed r i sks of t hi s t r ansact i on

ar e real and pot ent i al l y subst ant i al , t hough t hey may now appear

t o be unknown i n nat ur e. Ther ef or e, i n addi t i on t o r i skmi ni mi zi ng condi t i ons, usi ng the benchmar ks descr i bed above,

25 Case 12- M- 0192, supr a, For t i s Or der , p. 60.26 Case 07- M- 0906, supr a, I ber dr ol a Or der , p. 112.27 I d. , p. 132.

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CASE 14- M- 0183

Comcast s cl ai med syner gy savi ngs and Commi ss i on assessabl e

r evenues f or Ti me War ner and Comcast , Staf f r ecommends an

over al l net posi t i ve benef i t of appr oxi mat el y $300 mi l l i on f or

t hi s t r ansact i on, i n t he f or m of concr et e commi t ment s by t he

combi ned company, Commi ss i on i mposed condi t i ons, and, i f needed,

a PBA. Thi s amount capt ur es t he uni que benef i t s t hat New Yor k

pr esent s t he combi ned company i n t erms of val ue synergi es not

capt ur ed by or i ncl uded i n t he $1. 5 bi l l i on of ef f i ci ency gai ns.

PROPOSED BENEFI TS

St af f r evi ewed and anal yzed t he pr oposed t r ansact i on.

I dent i f i ed her ei n ar e t he f ol l owi ng benef i t s t hat we bel i evewoul d accr ue t o New Yor k cust omers, i f approved, as compared t o

no such t r ansf er occur r i ng between t he t wo compani es. I n each

i nst ance, St af f at t empt s t o anal yze t he r el at i ve si gni f i cance of

each benef i t .

Capital investment Comcast suggest s t hat i t wi l l

i ncr ease capi t al i nvest ment i n New Yor k beyond t hat of Ti me

War ner . But , t he Pet i t i oner s have not made any speci f i c

i nvest ment commi t ment s i n t he J oi nt Pet i t i on. I ndeed, accor di ng

to its response to DPS-54, [BEGIN CONFIDENTIAL INFORMATION]

________________________________________________________________

________________________________________________________________

________________________________________________________________

________________________________________________________________

______________________________END CONFIDENTIAL INFORMATION].

Ther ef or e, t o consi der Comcast s capi t al i nvest ment as an

i ncr ement al benef i t , t he combi ned company must demonst r at e a

commi t ment t o make new i nvest ment s or i nvest beyond Ti me

War ner s cur r ent capi t al i nvest ment budget s.

21


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CASE 14- M- 0183

Enhanced video programming Comcast s XFI NI TY On-

Demand vi deo pr ogr ammi ng of f er s approxi mat el y 50, 000 progr ammi ng

choi ces and i s more ext ensi ve than Ti me Warner s 15, 000- 20, 000

pr ogr ammi ng choi ces. Comcast al so recent l y l aunched ( November

2013) t he XFI NI TY TV St or e, gi vi ng cust omer s t he abi l i t y t o

pur chase movi es and TV shows f or downl oadi ng and st r eami ng and

st or e t hem i n t he Cl oud. Ti me War ner does not cur r ent l y of f er

any such el ect r oni c sel l - t hr ough ser vi ce. St af f vi ews t he

r el at i ve benef i t s of Comcast s expanded TV of f er i ngs wi t h some

skept i ci sm, however , because, as di scussed i n t he det r i ment s

sect i on bel ow, t hi s expanded pr ogr ammi ng comes wi t h a

pot ent i al l y hi gher pr i ce t ag. However , not wi t hst andi ng t hef oregoi ng, we concede t hat t hi s expanded progr ammi ng does

r epr esent an i ncr ement al benef i t f or New Yor k cust omer s.

Accelerated transition to all-digital video network

Appr oxi matel y 40 percent of Ti me Warner s New Yor k cust omers are

ser ved by an al l - di gi t al system. 28 [BEGIN CONFIDENTIAL

INFORMATION]____________________________________________________

__________________[END CONFIDENTIAL INFORMATION]. 29 Comcast

compl et ed i t s t r ansi t i on t o an al l - di gi t al pl at f or m i n 2012. 30

As a col l at er al benef i t of an al l - di gi t al net wor k, St af f

bel i eves t her e wi l l be addi t i onal bandwi dt h f or net wor k

ser vi ces, i ncl udi ng f ast er I nt er net speeds. Whi l e Comcast

i ndi cat es t hat t he pr oposed al l - di gi t al t r ansi t i on of Ti me

War ner s f oot pr i nt wi l l be accel er at ed, we not e that Comcast has

not pr ovi ded any speci f i c schedul i ng commi t ment s i n t he J oi nt

Pet i t i on. Ther ef or e, any i ncrement al benef i t i s mi t i gat ed by

28 Response t o DPS- 4129 Conf i dent i al Response t o DPS- 5530 I d.

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CASE 14- M- 0183

t he l ack of a def i ni t i ve al l - di gi t al bui l d- out or ot her capi t al

i nvest ment schedul e i n New Yor k.

Expanded low-income broadband services Comcast s

I nt er net Essent i al s of f er s qual i f i ed l ow- i ncome f ami l i es l ow-

cost br oadband servi ce f or $9. 95 per mont h, t he opt i on t o

pur chase an I nt ernet r eady comput er f or l ess t han $150. 00, and

mul t i pl e opt i ons t o access f r ee di gi t al l i t er acy t r ai ni ng i n

pr i nt , onl i ne and i n per son. Ther e ar e no pr i ce i ncr eases, no

act i vat i on f ees and no equi pment r ent al f ees. Comcast pr omotes

I nt er net Essent i al s t hr ough l ocal communi t y par t ner s and

conduct s out r each t o publ i c school s and l i br ar i es i n t he

communi t i es i t cur r ent l y ser ves. Ear l i er t hi s year , Comcastannounced t hat t hi s pr ogr am, whi ch pr ovi des 5Mbps downl oad

speeds and 1Mbps upl oad speeds, woul d be ext ended i ndef i ni t el y.

Post - t r ansact i on, qual i f i ed l ow- i ncome f ami l i es i n t he expanded

ser vi ce ar ea wi l l be el i gi bl e f or I nt er net Essent i al s,

t her eby, al l owi ng New Yor k chi l dr en and t hei r f ami l i es t o

benef i t f r om t hi s pr ogr am. Ti me War ner does not have a si mi l ar

l ow- i ncome pr ogr am i n New Yor k.

I nt er net Essent i al s appear s t o be a posi t i ve pr ogr am

t o i nt r oduce br oadband ser vi ce and t he I nt er net t o househol ds i n

New Yor k t hat do not have home I nt ernet ser vi ce due t o

af f or dabi l i t y. Whi l e t hi s i s a l audabl e pr ogr am, i t shoul d be

not ed that dur i ng the Publ i c Stat ement hear i ngs hel d i n New Yor k

Ci t y, Al bany and Buf f al o, t her e wer e si gni f i cant concer ns r ai sed

r egar di ng t he el i gi bi l i t y r equi r ement s of t hi s pr ogr am. Among

ot her t hi ngs, peopl e st at ed t hat t he pr ogr am was t oo r est r i ct i veand encour aged Comcast t o avoi d enr ol l ment obst acl es by havi ng

I nt er net Essent i al s suppor t f ami l i es wi t h a r ange of home

l anguages, not j ust Engl i sh and Spani sh, r emove rest r i ct i ons

t hat pr ecl ude f ami l i es f r om enr ol l i ng who have subscr i bed t o

Comcast I nt ernet ser vi ce wi t hi n t he l ast 90 days and r emove

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CASE 14- M- 0183

r estr i ct i ons f or i nel i gi bi l i t y based on ar r ear s. 31 Thus, whi l e

t her e i s a benef i t associ at ed wi t h havi ng a pr ogr am i n New Yor k

l i ke I nt er net Essent i al s, concer ns remai n r egar di ng

el i gi bi l i t y i n t hi s pr ogr am, as wel l as t he gener al avai l abi l i t y

of br oadband ser vi ce t o l ow- i ncome cust omers, whi ch must be

t aken i nt o consi der at i on when wei ghi ng i t s r el at i ve benef i t .

Enhanced Wi-Fi Hotspot Deployment - Comcast st at es

t hat i t i s on t ar get t o compl et e i nst al l at i on of i t s ei ght

mi l l i ont h Wi - Fi hot spot by t he end of t hi s year , i n par t t hr ough

t he depl oyment of dual - band wi r el ess r out er s at r esi dent i al and

busi ness l ocat i ons, cr eat i ng ext ensi ve Wi - Fi cover age ar eas

wher e none exi st ed bef ore. Ti me Warner has no such depl oymentpl ans i n New Yor k. However , agai n, Comcast pr ovi des no speci f i c

t i me- f r ame f or t he speci f i c depl oyment of Wi - Fi hot spot s i n New

York and, t her ef or e, wi t hout such commi t ment i t i s di f f i cul t t o

acknowl edge a quant i f i abl e net benef i t .

Enhanced residential voice services - Comcast of f er s

i t s XFI NI TY voi ce cust omer s f eat ur es such as cal l er

i dent i f i cat i on pr ovi ded over t el evi si on, l apt op, or mobi l e

devi ce and r eadabl e voi cemai l . Comcast s new advanced I nt ernet

Pr ot ocol ( I P) Mul t i medi a Subsystem ( I MS) net wor k ar chi t ect ur e

enabl es cust omer s t o access ser vi ce f r om di f f er ent l ocat i ons

31 See e. g. , Case 14- M- 0183, supr a, I nf or mat i on For um/ Publ i cSt atement Hear i ng (dated J une 19, 2014) Tr . 29- 33. We notet hat Comcast r ecent l y announced t hat i t woul d gr ant amnest y t ocust omer s t hat have an out st andi ng bi l l t hat i s mor e t han mor e

year ol d but otherwi se qual i f y f or t he pr ogr am. See, ComcastOf f ers up to Si x Months of Compl i mentary I nternet Servi ce and AmnestyProgramf or Low- I ncome Fami l i es i n Col orado and across the U. S.(Augst 5, 2014) , available atht tp: / / www. marketwatch. com/ story/comcast - of f ers- up- to- si x- months- of -compl i mentary- i nternet - servi ce- and- amnest y-program- f or - l ow- i ncome-f ami l i es- i n- col orado- and- across- the- us- 2014- 08- 05.

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CASE 14- M- 0183

usi ng a var i et y of met hods and net wor ks, i ncl udi ng wi r ed

connect i ons provi ded by Comcast , Wi - Fi connect i ons and publ i c

I nt er net connect i ons pr ovi ded by thi r d- par t i es, whet her wi r ed or

wi r el ess. The I MS net wor k ar chi t ect ur e enabl es Voi ce 2go,

whi ch al l ows user s t o pl ace cal l s over a Wi - Fi or dat a

connect i on f r om t hei r Comcast - assi gned tel ephone number s usi ng

an appl i cat i on downl oaded t o mobi l e devi ces, and al so t o r ecei ve

cal l s t o t hei r home numbers at mul t i pl e l ocat i ons and on

mul t i pl e devi ces usi ng t he Advanced Cal l For war di ng f eat ur e.

Ti me War ner does not provi de any such ser vi ces. Staf f consi der s

t hese enhancement s t o r esi dent i al voi ce a benef i t of t he

pr oposed t r ansact i on.Potential for greater competition in the business

market Accor di ng t o t he Pet i t i oner s, t he pr oposed t r ansact i on

wi l l r esul t i n a st r onger , mor e cost - ef f i ci ent compet i t or t hat

can of f er new opt i ons and aggr essi vel y pr i ce ser vi ces t o smal l ,

medi um, and ent erpr i se busi nesses acr oss a wi der- area of New

York. The combi ned company s l ar ger f ootpr i nt shoul d al l ow i t

t o serve New Yor k busi ness cust omer s mor e ef f ect i vel y, i ncl udi ng

r egi onal and super - r egi onal busi ness cust omer s wi t h of f i ces i n

New Yor k and surr oundi ng st at es. I n addi t i on, Comcast cur r ent l y

of f ers some servi ces t o busi ness cust omers t hat Ti me Warner does

not , i ncl udi ng Comcast s Busi ness Voi ceEdge ( BVE) , whi ch

pr ovi des web- based pr i vat e br anch exchange f unct i onal i t y wi t h a

host of nomadi c f eat ur es l i ke Be Anywher e t hat al l ows

cust omers t o make and recei ve cal l s f r om any devi ce at any

l ocat i on wi t h one phone number , and t o use f our - di gi t extensi onst o cont act ot her mobi l e phones. BVE al so i ncl udes the

Tel ewor ker servi ce, whi ch enabl es seaml ess i nt egr at i on of

r emot e and wor k- at - home empl oyees i nto a company s phone

i nf r ast r uct ur e. St af f consi der s t hi s one of t he mor e i mpor t ant

benef i t s of t he pr oposed t r ansact i on because compet i t i on i n t he

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CASE 14- M- 0183

smal l and medi um voi ce and data markets has not evol ved at t he

same pace as t he r esi dent i al market and t hese ser vi ces shoul d

serve t o i ncr ease such compet i t i on.

Miscellaneous assertions - I n addi t i on t o t he

f or egoi ng, t he Pet i t i oner s cl ai m t hat t he pr oposed t r ansact i on

wi l l not r esul t i n a r educt i on i n compet i t i on. They not e, t hat

nei t her Comcast nor Ti me Warner di r ect l y compete agai nst one

another f or cabl e cust omers anywhere i n New Yor k St ate, t hus,

t hey ar gue t hat t her e wi l l not be a decr ease i n compet i t i ve

cabl e opt i ons as a r esul t of t he t r ansf er of cont r ol . The

Pet i t i oner s al so cl ai m t hat , t her e wi l l be no di srupt i on i n

cust omer ser vi ces because upon compl et i on of t he pr oposedt r ansact i on, Ti me War ner subsi di ar i es wi l l become i ndi r ect ,

whol l y owned subsi di ar i es of Comcast . The Pet i t i oner s st at e

t hat t hey ar e not seeki ng aut hor i t y f or t he t r ansf er of

cust omer s or f or any changes i n r at es, t er ms or condi t i ons of

ser vi ce and t he combi ned company wi l l al so cont i nue t o pr ovi de

Li f el i ne Di scount ed Tel ephone Ser vi ce ( Li f el i ne) pur suant t o

Ti me War ner s exi st i ng el i gi bl e t el ecommuni cat i ons car r i er

desi gnat i on.

St af f expect s t hat cust omer s wi l l r et ai n t he same

di gi t al phone number t hey had wi t h Ti me Warner ; wi l l have t he

same bi l l i ng account ; and, t he same cabl e box and other

t echnol ogy wi l l cont i nue t o oper at e. I n ot her wor ds, t he

t r ansact i on shoul d be t echnol ogi cal l y t r anspar ent f or consumer s.

We al so acknowl edge t hat , f ol l owi ng t he pr oposed t r ansact i on,

t her e shoul d be no di mi nut i on i n t he number of servi ce pr ovi deropt i ons avai l abl e t o consumers i n t he vi deo market because

Comcast and Ti me Warner do not cur r ent l y have over l appi ng

ser vi ce ar eas i n New Yor k. Si nce t he pot ent i al f or di r ect

compet i t i on no l onger exi st s, however , t hi s asser t i on i s i n no

way a benef i t of t he pr oposed t r ansact i on. Mor eover , r egar di ng

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CASE 14- M- 0183

t he Pet i t i oner s asser t i on t hat t her e wi l l be no di sr upt i on i n

cust omer ser vi ce, we al so note that i f Comcast wi shes t o make

addi t i onal changes f ol l owi ng t he pr oposed t r ansact i on t hat

r equi r e r egul at or y appr oval , i t has expl i ci t l y asser t ed i t

r i ght s t o f ol l ow appl i cabl e Commi ssi on f i l i ng and not i ce

r equi r ement s associ at ed wi t h such changes. As a r esul t , t her e

i s no guar ant ee that Comcast wi l l mai nt ai n the st at us quo f or

any l engt h of t i me f ol l owi ng t he pr oposed mer ger , and,

t heref ore, no such commensur ate benef i t s accr ue t o New Yor k

consumer s.

POTENTI AL DETRI MENTSDespi t e t he Pet i t i oner s asser t i ons t hat t her e wi l l be

no negat i ve i mpact s as a r esul t of t he pr oposed t r ansact i on,

St af f has i dent i f i ed a number of pot ent i al det r i ment s and har ms

t hat ar e l i kel y t o r esul t i f t he mer ger i s appr oved wi t hout any

enf orceabl e condi t i ons or commi t ment s. The det r i ment s

i dent i f i ed by St af f ar e l i st ed bel ow.

Customer service Bot h Comcast and Ti me War ner have

poor cust omer servi ce sat i sf act i on as measured by sur vey

r esul t s. For exampl e, accor di ng t o a May 2014 r epor t f r om t he

Amer i can Cust omer Sat i sf act i on I ndex ( ACSI ) , Ti me Warner and

Comcast were t he l owest and the next t o l owest r ated cabl e

t el evi si on compani es, r espect i vel y. 32 Si mi l ar l y, among I nt er net

Ser vi ce Pr ovi der s ( I SPs) , cust omer s r at ed Comcast and Ti me

War ner as t he compani es wi t h t he l owest cust omer sat i sf act i on i n

t he i ndust r y. 33 Accor di ng t o ACSI , cust omers rated Comcast and

32 See, ACSI , Tel ecommuni cat i ons and I nf ormat i on Report 2014, p.2, available at ht t p: / / www. t heacsi . or g/ news- and-r esour ces/ cust omer - sat i sf act i on- r epor t s/ r epor t s- 2014/ acsi -t el ecommuni cat i ons- and- i nf or mat i on- r epor t - 2014.

33 I d. , p. 4.

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CASE 14- M- 0183

Ti me War ner even l ower f or I nter net ser vi ce t han f or cabl e

t el evi si on ser vi ce. 34 Thi s i s al so t r ue wi t h r espect t o t he

t el ephone servi ce sect or . 35

J . D. Power and Associ at es ( J . D. Power ) al so conduct s

per i odi c sur veys of cust omer sat i sf act i on i n var i ous i ndust r i es,

measur ed separ at el y i n di f f er ent areas of t he count r y. J . D.

Power s sur veys of cust omer sat i sf act i on ar e one of , i f not , t he

most wi del y known and publ i ci zed measures of cust omer

sat i sf act i on. I t s 2013 sur vey of r esi dent i al cust omer s showed

t hat i n t he East Regi on, 36 f or I SPs, of seven l ar ge pr ovi der s,

Comcast s XFI NI TY pr oduct and Ti me Warner were r ated f i f t h and

si xt h, r espect i vel y; of seven l ar ge r esi dent i al t el ephoneservi ce pr ovi der s, Comcast and Ti me War ner r at ed f i f t h and

sevent h, r espect i vel y; and, of ei ght l ar ge r esi dent i al

t el evi si on servi ce pr ovi der s, Comcast and Ti me War ner r at ed

sevent h and ei ght h, r espect i vel y.

Fi nal l y, t he PSC Compl ai nt Rat e, a met r i c used by the

Commi ss i on t o i ndependent l y measure servi ce qual i t y, apar t f r om

servi ce qual i t y per f or mance r epor t ed by the car r i er s under t he

Commi ss i on s Ser vi ce St andards, demonst r ates t hat Comcast s

t el ephone and vi deo ser vi ce compl ai nt r at es have hi st or i cal l y

been hi gher t han t hose of Ti me War ner over t he l ast t hr ee year s.

Consumer compl ai nt data col l ected by t he Depart ment s Of f i ce of

Consumer Ser vi ces i ndi cat es t hat , on an annual i zed basi s f r om

2011 t hrough 2013, Comcast exceeded t he PSC Compl ai nt Rat e

t hr eshol d of 0. 075 compl ai nt s per 1, 000 access l i nes or l ess per

34 I d.35 I d. , p. 6.36 The East Regi on as def i ned by J . D. Power i ncl udes Mai ne, New

Hampshi r e, Vermont , New Yor k, Pennsyl vani a, New J ersey,Massachuset t s, Rhode I sl and, Connect i cut , Mar yl and, WestVi r gi ni a and Vi r gi ni a.

28


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CASE 14- M- 0183

mont h f or vi deo ser vi ce, and exceeded t he PSC Compl ai nt Rat e

t hr eshol d i n 2011 f or phone ser vi ce. Comcast s PSC Compl ai nt

Rat e f or 2012 and 2013 wer e bel ow t he 0. 075 t hreshol d. However

Comcast s PSC Compl ai nt Rat e was st i l l subst ant i al l y wor se than

t hat of Ti me War ner f or t he pr evi ous t hr ee year s, i f eval uat ed

usi ng t he methodol ogy pr escr i bed i n Case 97- C- 0139, r egardi ng

Car r i er - t o- Car r i er Ser vi ce Qual i t y Gui del i nes. 37

The Of f i ce of Consumer Ser vi ces compl ai nt dat a does

i ndi cat e that f or t he f i r st si x mont hs of 2014, Comcast s PSC

Compl ai nt Rate has i mpr oved, and i s now ver y cl ose t o t he l evel

of Ti me War ner s. However , gi ven Comcast s past i nconsi st ent

t r ack r ecor d as i t r el at es t o t he PSC Compl ai nt Rat e f or vi deoand phone ser vi ce qual i t y, we ar e concer ned about backsl i di ng

and mai nt ai ni ng ser vi ce qual i t y goi ng f or war d, and i t i s

i mperat i ve t hat Comcast s r ecent l y i mpr oved PSC Compl ai nt Rate

i s at l east consi st ent wi t h t he l evel s demonst r at ed by Ti me

Warner f or t he combi ned company f ol l owi ng t he proposed

t r ansact i on. Backsl i di ng f r om est abl i shed Ti me War ner PSC

Compl ai nt Rate l evel s descr i bed above woul d be cont r ary to t he

publ i c i nt er est and r esul t i n a negat i ve ef f ect on subscr i ber s

t o vi deo and phone servi ces post - acqui si t i on.

Comcasts video service pricing may result in slightly

higher rates for consumers Accor di ng t o t he Pet i t i oner s

r esponse t o DPS- 11, cabl e TV r at e car d i nf or mat i on cont ai ned i n

Exhi bi t 11- 1 and Exhi bi t 11- 2, and f r om publ i cal l y avai l abl e

i nf or mat i on obt ai ned f r om Comcast and Ti me War ner s websi t es f or

a sampl e of zi p codes i n New Yor k St ate, Comcast s average cabl e

37 See, Case 97- C- 0139, Proceedi ng on Mot i on of t he Commi ss i on t oRevi ew Servi ce Qual i t y St andards f or Tel ephone Compani es,Or der Est abl i shi ng Addi t i onal I nt er - Car r i er Ser vi ce Qual i t yGui del i nes and Gr ant i ng i n Par t Pet i t i ons f or Reconsi der at i onand Cl ar i f i cat i on ( i ssued Febr uar y 16, 2000) .

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CASE 14- M- 0183

r at es are sl i ght l y hi gher t han t hose of Ti me War ner f or

compar abl e ser vi ces, acr oss most package l evel s, as i l l ust r at ed

i n t he t abl e bel ow.

Comparison of Cable Rates Between Time Warner Cable and Comcast

Retail Rate Promo Rate Average Rate

Ti me Warner St ar t er ( Basi c) Cabl eLocal and PEG Channels, Religious,

Shopping ( ~20 Channel s)

Comcast Basi c Cabl eLocal and PEG Channels, Religious,

Shopping (Channels Vary)

~$8- 23/ mo

~$17- 20/ mo

N/ A

N/ A

~$8- 23/ mo

~$17- 20/ mo

Comcast Di gi t al EconomyUp to 50 Channels, 40+ Music Channels

$39. 95/ mo $29. 95/ mo $34. 95/ mo

Ti me Warner Standard TV70+ Channels

Comcast Di gi t al St art er80+ Channels, On Demand, 40+ MusicChannels

$76. 99/ mo

$69. 95/ mo

$39. 95/ mo

$49. 99/ mo

$58. 45/ mo

$59. 97/ mo

Ti me Warner Cabl e Pr ef er r ed TV200+ Channels

Comcast Di gi t al Pref err ed160+ Channels, On Demand, 40+ Music

Channels

$86. 99/ mo

$87. 90/ mo

$49. 99/ mo

$59. 99/ mo

$68. 49/ mo

$73. 95/ mo

Comcast Di gi t al Premi erPremium Channels, Sports Packages, with

Digital Preferred TV

$127. 40/ mo $69. 99/ mo $98. 70/ mo

We not e t hat Comcast s cabl e pr i ci ng i s uni f or m acr oss

i t s var i ous ser vi ce t er r i t or i es, and whi l e t he Pet i t i oner s have

st at ed t hat t hey do not i nt end t o r ai se cabl e r at es at t hi s

t i me, t her e r emai ns a possi bi l i t y t hat Comcast wi l l i nst i t ut e

t hese uni f or m pr i ces i n t he f ut ur e. Wer e Comcast t o i nst i t ut e

i t s cur r ent uni f or m pr i ci ng t hr oughout Ti me War ner s f oot pr i nt

f ol l owi ng t he pr oposed t r ansact i on, t hese i ncr eases woul d have

an i mpact on New York consumer s, who woul d be f or ced t o pay

sl i ght l y mor e f or cer t ai n cabl e t el evi si on ser vi ces, whi l e

38 Ti me Warner s St ar t er Package and Comcast s Basi c Packagevar y i n pr i ce and channel l i neup dependi ng on t he f r anchi sear ea bei ng ser ved and t he number of l ocal channel s car r i ed i na gi ven geogr aphi c ar ea. The r ange of pr i ces l i st ed f or t heseservi ces at t empt t o pr esent t he ent i r e r ange of cost s acr ossNew Yor k St ate.

30


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CASE 14- M- 0183

r ecei vi ng onl y t he l i mi t ed benef i t s associ at ed wi t h some

addi t i onal pr ogr ammi ng choi ces.

Universal broadband affordability - The merger coul d

negat i vel y i mpact consumer choi ce i n t he br oadband and emergi ng

on- l i ne vi deo mar ket s and dr i ve up pr i ces. Ti me War ner

cur r ent l y of f er s a st andal one br oadband of f er i ng under i t s

Ever yday Low Pr i ce banner . Thi s ser vi ce i s avai l abl e t o al l

cust omer s r egar dl ess of i ncome or ot her el i gi bi l i t y cri t er i a.

Thi s Ti me War ner of f er i ng i s $14. 99/ mont h f or speeds of up t o

2Mbps, has been avai l abl e si nce November 2013 and repl aced a

pr evi ousl y gener al l y avai l abl e l ow- pr i ce opt i on. 39 I n addi t i on,

Ti me War ner of f er s a Basi c $47. 99/ 3Mbps opt i on as wel l as aSt andard $57. 99/ 15Mbps opt i on. 40 I n cont r ast , Comcast s l east

expensi ve gener al l y avai l abl e of f er i ng f or st andal one I nt er net

servi ce i s i t s Economy Pl us Ser vi ce of f er ed at $39. 95 per

mont h f or speeds of up t o 3Mbps. Comcast s Per f ormance

ser vi ce i s $54. 99/ mont h f or speeds up t o 25Mbps. 41 The f ol l owi ng

t abl e i l l ust r at es a pr i ce compar i son of Ti me War ner and

Comcast s r espect i ve of f er i ngs, f or t he f i r st 24 mont hs of

39 Ti mes Uni on, Time Warner launches low-cost Internet: $14.99 amonth ( November 7, 2013) , available atht t p: / / bl og. t i mesuni on. com/ busi ness/ t i mewar ner - l aunches- l ow-cost - i nt er net - 14- 99- a- mont h/ 57799/ .

40 Ti me War ner I nt er net Ser vi ces ( l ast vi si t ed August 7, 2014) ,available atht t p: / / www. t i mewar ner cabl e. com/ en/ i nt er net / i nt er net - ser vi ce-

pl ans. ht ml . The r at es l i st ed by St af f ar e t he r et ai l r at esf or t he r espect i ve ser vi ce of f er i ngs, t he pr omot i onal r at esf or t he f i r st 12 mont hs f or t hese t wo ser vi ces ar e $29. 99 and$34. 99 per mont h, r espect i vel y. The r et ai l s rat es appl yf ol l owi ng t hat per i od.

41 Comcast Hi gh Speed I nt er net Ser vi ces ( l ast vi si t ed August 7,2014) , available at ht t p: / / www. comcast . com/ i nt er net -servi ce. ht ml .

31
http://blog.timesunion.com/business/time-warner-launches-low-cost-internet-14-99-a-month/57799/http://blog.timesunion.com/business/time-warner-launches-low-cost-internet-14-99-a-month/57799/http://www.timewarnercable.com/en/internet/internet-service-plans.htmlhttp://www.timewarnercable.com/en/internet/internet-service-plans.htmlhttp://www.comcast.com/internet-service.htmlhttp://www.comcast.com/internet-service.htmlhttp://www.comcast.com/internet-service.htmlhttp://www.comcast.com/internet-service.htmlhttp://www.timewarnercable.com/en/internet/internet-service-plans.htmlhttp://www.timewarnercable.com/en/internet/internet-service-plans.htmlhttp://blog.timesunion.com/business/time-warner-launches-low-cost-internet-14-99-a-month/57799/http://blog.timesunion.com/business/time-warner-launches-low-cost-internet-14-99-a-month/57799/


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CASE 14- M- 0183

ser vi ce, based on publ i cal l y avai l abl e r at e l i st s f or New Yor k

St ate cust omers of both compani es as of August , 2014.

Comparison of Internet Rates Between Time Warner Cable and Comcast

Retail Rate Promo Rate Average Rate

Ti me Warner Ever yday Low Pr i ce2Mbps Download/1Mbps Upload

$14. 99/ mo N/ A $14. 99/ mo

Ti me Warner Basi c3Mbps Download/1Mbps Upload

Comcast Economy Pl us3Mbps Download

$47. 99/ mo

$39. 95/ mo

$29. 99/ mo

N/ A

$38. 99/ mo

$39. 95/ mo

Comcast Per f ormance Start er6Mbps Download

$49. 95/ mo N/ A $49. 95/ mo

Ti me Warner St andar d15Mbps Download/1Mbps Upload

$57. 99/ mo $34. 99/ mo $46. 49/ mo

Ti me Warner Tur bo20Mbps Download/2Mbps Upl oad

Comcast Per f or mance25Mbps Download

$67. 99/ mo

$66. 95/ mo

$44. 99/ mo

$39. 99/ mo

$56. 49/ mo

$53. 47/ mo

Ti me Warner Ext r eme30Mbps Download/5Mbps Upl oad

$77. 99/ mo $54. 99/ mo $66. 49/ mo

Ti me Warner Ul t i mat e50Mbps Download/5Mbps Upl oad

$107. 99/ mo $64. 99/ mo $86. 49/ mo

Comcast Bl ast 105Mbps Download

$76. 95/ mo $59. 99/ mo $68. 47/ mo

Comcast Ext r eme 150150Mbps Download

$114. 95/ mo $89. 99/ mo $102. 47/ mo

I mpor t ant l y, Ti me War ner s l ower pr i ced of f er i ngs,

especi al l y t he Ever yday Low Pr i ce pr oduct , r epr esent choi ces

f or New Yor k consumer s. Any l oss of t hese servi ces woul d l i kel y

r esul t i n consumers payi ng more t o ensure t hey have access t o

t he same l evel of hi gh- speed I nt er net servi ce and i t s i mpor t ant

r esour ces. Cust omers usi ng Ti me Warner s St andard 15Mbps

of f er i ng t o ut i l i ze t he I nt er net as t hei r al t er nat i ve vi deo

cont ent pr ovi der , f or exampl e, woul d al so be f or ced t o pay

br oadband pr i ces commensur ate wi t h Comcast s cur r ent vi deo

of f er i ngs t o cont i nue t o exer ci se t hat opt i on.

St af f has addi t i onal concer ns. As a condi t i on of i t sacqui si t i on of NBC/ Uni ver sal , Comcast was r equi r ed t o of f er

Per f or mance St ar t er , a $49. 99/ 6Mbps broadband of f er i ng.

42 Thi s ser vi ce has r ecent l y been upgr aded t o 105Mbps and var i esi n r et ai l pr i ce dependi ng on t he ser vi ce t er r i t or y.

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33/49

CASE 14- M- 0183

However , based on Comcast s hi st or y of f ai l i ng t o adequat el y

market t hi s Per f ormance St art er st andal one br oadband

of f er i ng, 43 we ar e skept i cal t hat Comcast wi l l of f er or

aggr essi vel y market t he i mport ant Ti me Warner st andal one

br oadband of f er i ngs di scussed above. And, as i ndi cat ed,

Comcast s I nt er net Essent i al s pr ogr am i s not a vi abl e

subst i t ut e f or t hese Ti me War ner servi ces because i t r equi r es

t hat consumer s meet cer t ai n el i gi bi l i t y cri t er i a. I nt er net

Essent i al s i s a needs- based pr ogr am avai l abl e t o househol ds

t hat have a chi l d el i gi bl e f or t he nat i onal school l unch

pr ogr am, do not have any over due bi l l s or unr etur ned equi pment ,

and have not subscr i bed t o a Comcast I nt er net servi ce wi t hi n t hel ast 90 days. The l oss of t hese I nt er net ser vi ce opt i ons i s,

t her ef or e, a det r i ment .

Jobs and focus in New York State The pot ent i al f or

l oss of j obs i n New Yor k i s mat er i al f ol l owi ng t he pr oposed

t r ansact i on. The combi ned Ti me War ner / Comcast wi l l i nevi t abl y

have l ess of a f ocus on New Yor k i n t erms of both j obs and the

l evel of cust omer ser vi ce pr ovi ded t o t he New Yor k market

because the st at e wi l l r epr esent a smal l er por t i on of t he

combi ned company s cust omer base post - merger . Accor di ng t o t he

Pet i t i oner s r esponse t o DPS- 17, Comcast cur r ent l y has one cabl e

oper at i ons cent er wi t h a si ngl e empl oyee i n New Yor k. I t has no

43 Feder al Communi cat i ons Commi ssi on, FCC Resolves Comcast-NBCUInvestigation ( J une 27, 2012) , available atht t ps: / / www. f cc. gov/ document / f cc- r esol ves- comcast - nbcu-

i nvest i gat i on; and Comcast Consent Decree Stand AloneBroadband ( J une 27, 2012) , available atht t p: / / www. f cc. gov/ document / comcast - consent - decr ee- st and-al one- br oadband. Comcast di d not have a l i nk t o Per f ormanceSt ar t er on i t s websi t e, di d not i ncl ude Per f or mance St ar t er on i t s r at e car ds, and pai d an $800, 000 penal t y t o the U. S.Tr easur y f or t hi s appar ent f ai l ure t o compl y wi t h i t scommi t ment s t o t he FCC.

33
https://www.fcc.gov/document/fcc-resolves-comcast-nbcu-investigationhttps://www.fcc.gov/document/fcc-resolves-comcast-nbcu-investigationhttp://www.fcc.gov/document/comcast-consent-decree-stand-alone-broadbandhttp://www.fcc.gov/document/comcast-consent-decree-stand-alone-broadbandhttp://www.fcc.gov/document/comcast-consent-decree-stand-alone-broadbandhttp://www.fcc.gov/document/comcast-consent-decree-stand-alone-broadbandhttps://www.fcc.gov/document/fcc-resolves-comcast-nbcu-investigationhttps://www.fcc.gov/document/fcc-resolves-comcast-nbcu-investigation


34/49

CASE 14- M- 0183

cal l cent er s, no servi ce cent er s and no wal k- i n cent er s i n New

York. I n cont r ast Ti me War ner has f i ve cal l cent er s empl oyi ng

appr oxi mat el y 1, 996 st af f , 61 r et ai l / wal k- i n cent er s empl oyi ng

appr oxi mat el y 2, 674 st af f , ni ne cor por at e of f i ces empl oyi ng

appr oxi mat el y 1, 257 st af f , 26 servi ce/ mai nt enance l ocat i ons

empl oyi ng appr oxi mat el y 1, 687 st af f , t wo medi a of f i ces empl oyi ng

appr oxi mat el y 435 st af f , and 11 ot her servi ce r el at ed f unct i ons

empl oyi ng about 1, 003 st af f , wi t h t ot al empl oyment i n t he st at e

of appr oxi mat el y 9, 052. Ti me War ner i s a company wi t h i t s

headquar t ers i n New Yor k and a New Yor k cent r i c f ocus. Comcast ,

on t he ot her hand, i s headquar t er ed i n Phi l adel phi a and has a

much wi der nat i onal f oot pr i nt . For exampl e, New Yor k cur r ent l yr epr esent s about 19. 3% of Ti me War ner s over al l cust omer base. 44

New Yor k woul d r epr esent 7. 642% of t he combi ned ent i t y s

cust omer base f ol l owi ng t he pr oposed t r ansact i on.

Hence, t her e i s a r eal danger t hat Comcast wi l l l ook

t o gai n oper at i onal ef f i ci enci es by movi ng/ consol i dat i ng

cust omer - f aci ng j obs and ot her posi t i ons t o out - of - st at e

l ocat i ons. Out - of - st at e ser vi ce cent er s woul d make i t di f f i cul t

f or t he combi ned company t o mai nt ai n i t s curr ent l evel of

cust omer ser vi ce. Longer wai t t i mes and l ack of l ocal knowl edge

coul d l ead t o i ncreased f r ust r at i on and di ssat i sf act i on on t he

par t of New Yor k cust omer s, and a si gni f i cant decl i ne i n t he

over al l l evel of ser vi ce pr ovi ded. The use of l ar ger r egi onal

cal l cent er s mi ght r esul t i n ef f i ci enci es t hat coul d benef i t t he

combi ned company f i nanci al l y, but woul d be unl i kel y t o benef i t

i t s cust omer i n t er ms of i mpr oved servi ce qual i t y. Thesef aci l i t i es empl oy st af f conduct i ng a var i et y of i mpor t ant

ser vi ces f or cust omer s t hr oughout t he st at e, ser vi ces t hat ar e

best pr ovi ded at t he l ocal l evel r at her t han f r om out - of - st at e

44 Case 14- M- 0183, supr a, J oi nt Pet i t i on, p. 5.

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35/49

CASE 14- M- 0183

f aci l i t i es. Comcast has made no commi t ment r egardi ng t he number

of j obs i t wi l l creat e or r et ai n i n New Yor k f ol l owi ng t he

pr oposed t r ansact i on. Al t hough t he r esponse t o DPS- 17 i ndi cat es

t hat t he mer ger wi l l not r esul t i n a r educt i on of cust omer -

f aci ng j obs i n New Yor k, as i ndi cat ed, i t mi ght be possi bl e t o

gai n oper at i onal ef f i ci enci es by movi ng/ consol i dat i ng cust omer -

f aci ng j obs t o out - of - st at e l ocat i ons.

Infrastructure expansion investment - The combi ned

compani es est i mat e $1. 5 bi l l i on i n oper at i ng ef f i ci enci es and

$400 mi l l i on i n capi t al expendi t ur e ef f i ci enci es, wi t h

addi t i onal oppor t uni t i es f or r evenue syner gi es, as a r esul t of

t he proposed mer ger .45

Oper at i onal ef f i ci enci es t ypi cal l yencompass t he t ypes of scal e, scope, and coor di nat i on of

economi es t hat can pot ent i al l y be r eal i zed t hr ough hor i zont al

and ver t i cal i nt egr at i on. Comcast expect s t o r eal i ze oper at i ng

ef f i ci enci es, i n f ul l , wi t hi n t hr ee year s, wi t h mor e t han 50%

achi eved i n t he f i r st year . 46 [BEGIN CONFIDENTIAL INFORMATION]

________________________________________________________________

___________________________________________ [END CONFIDENTIAL

INFORMATION]. 47 The Pet i t i oner s, however , have not pr ovi ded a

r easonabl e i dent i f i cat i on of t hese oper at i onal savi ngs and

r evenue syner gi es associ ated wi t h t he pr oposed mer ger . Nor ,

accor di ng t o i t s r esponse t o DPS- 53, [BEGIN CONFIDENTIAL

INFORMATION]____________________________________________________

________________________________________________________________

45 See, Investor Presentation - Comcast and Time Warner Cable( Febr uar y 13, 2014) ,ht t p: / / f i l es. shar ehol der . com/ downl oads/ CMCSA/ 2671320491x0x725713/ 781d73e7- 0635- 47b4- b25e-34e5c7ea4f f 9/ Comcast %20I nvest or%20Present at i on. pdf p. 12.

46 I d.47 Conf i dent i al Response t o DPS- 53.

35
http://files.shareholder.com/downloads/CMCSA/2671320491x0x725713/781d73e7-0635-47b4-b25e-34e5c7ea4ff9/Comcast%20Investor%20Presentation.pdfhttp://files.shareholder.com/downloads/CMCSA/2671320491x0x725713/781d73e7-0635-47b4-b25e-34e5c7ea4ff9/Comcast%20Investor%20Presentation.pdfhttp://files.shareholder.com/downloads/CMCSA/2671320491x0x725713/781d73e7-0635-47b4-b25e-34e5c7ea4ff9/Comcast%20Investor%20Presentation.pdfhttp://files.shareholder.com/downloads/CMCSA/2671320491x0x725713/781d73e7-0635-47b4-b25e-34e5c7ea4ff9/Comcast%20Investor%20Presentation.pdfhttp://files.shareholder.com/downloads/CMCSA/2671320491x0x725713/781d73e7-0635-47b4-b25e-34e5c7ea4ff9/Comcast%20Investor%20Presentation.pdfhttp://files.shareholder.com/downloads/CMCSA/2671320491x0x725713/781d73e7-0635-47b4-b25e-34e5c7ea4ff9/Comcast%20Investor%20Presentation.pdf


36/49

CASE 14- M- 0183

___________________________________________________________[END

CONFIDENTIAL INFORMATION].

Rat her , t he Pet i t i oner s cl ai m t hat t he pr oposed

t r ansact i on wi l l never t hel ess t r ansl at e i nt o consumer benef i t s.

New Yor k consumers can benef i t f r om merger syner gi es and savi ngs

ei t her vi a l ower pr i ces or i nvest ment of t hose savi ngs and

syner gi es back i nt o t he networks used by New Yor k consumers.

Wi t hout f i r m commi t ment s, however , t her e i s t he pot ent i al t hat

oper at i onal savi ngs associ at ed wi t h di st r i but i on i mpr ovement s t o

Ti me War ner s New Yor k syst ems mi ght be al l ocat ed t o t he benef i t

of ot her st at es or t o shar ehol der s, but not New Yor k consumer s.

Market power - Pet i t i oner s descr i be t he pr oposedt r ansact i on pr i mar i l y as a mer ger of t wo f i r ms t hat do not

compet e i n each ot her s ser vi ce t er r i t or i es. Thus, t he

Pet i t i oner s ar gue t hat t he t r ansact i on wi l l have no negat i ve

i mpact on compet i t i on. 48 However , t he Pet i t i oner s hor i zont al

vi ew of compet i t i on i s t oo nar r ow. Whi l e i t i s t r ue t hat

Comcast and Ti me Warner do not compet e di r ect l y agai nst one

anot her , t hey do compet e wi t h ot her pr ovi der s of t el ephone,

t el evi si on and br oadband servi ces, whose compet i t i ve posi t i on

may be under mi ned as a r esul t of t he merger . The combi ned

company woul d be abl e to exer ci se i t s i ncr eased capi t al and

f i nanci al r esour ces t o di scour age new ent r i es i nt o t hese

mar ket s, st i f l i ng t echnol ogi cal i nnovat i on and f ur t her

compet i t i on, whi l e keepi ng pr i ces ar t i f i ci al l y hi gh.

Addi t i onal l y, gi ven Comcast s pr i or acqui si t i on of

NBC- Uni ver sal , t he ver t i cal mar ket power concer ns associ at edwi t h t he i nt er pl ay of Comcast s si gni f i cant posi t i on i n t he

upst r eam vi deo pr ogr ammi ng mar ket , wi t h i t s act i vi t i es as t he

l ar gest cabl e TV pr ovi der i n t he downst r eam vi deo di st r i but i on

48 Case 14- M- 0183, supr a, J oi nt Pet i t i on, p. 20.

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37/49

CASE 14- M- 0183

market , woul d now be magni f i ed as t he Comcast vi deo di st r i but i on

f oot pr i nt i s expanded t o i ncl ude the Ti me War ner servi ce ar eas.

And, t o the ext ent t hat t here have been shor t comi ngs wi t h t he

adequacy and enf or ceabi l i t y of t he behavi oral r emedi es put i n

pl ace by the FCC and Depar t ment of J ust i ce (DOJ ) t o addr ess

t hese ver t i cal mar ket power concer ns, t hose shor t comi ngs wi l l be

magni f i ed by Comcast s acqui si t i on of Ti me Warner . 49 As

expl ai ned by the DOJ i n i t s Compet i t i ve I mpact St at ement i n U. S.

v. Comcast / NBCU, Comcast has bot h the i ncent i ve and exper i ence

t o engage i n excl usi onar y pr act i ces whi ch may har m compet i t i ve

pr ovi ders of vi deo pr ogr ammi ng and compet i t i ve vi deo

di str i but or s.50

The i ncent i ves and success of excl usi onar ypr act i ces ar e hei ght ened wi t h r espect t o new and i nnovat i ve

market ent r ant s. 51

The combi ned company wi l l be a mor e power f ul buyer of

pr ogr ammi ng and other upst r eam whol esal e ser vi ces. On t he one

49 The Comcast / NBCU behavi or al r emedi es i nst i t uted by t he DOJ andFCC i ncl ude, among others, a requi r ement f or non-di scri mi nat or y l i censi ng of cont ent t o r i val on- l i nedi st r i but or s, a must car r y news r equi r ement whi ch al sospeci f i ed t hat news channel s t o be cl ust er ed t oget her , apr ohi bi t i on agai nst di scr i mi nat i on i n pr ogr am car r i age on t hebasi s of af f i l i at i on, a net neut r al i t y cl ause pr ohi bi t i ngComcast f r om unr easonabl e di scr i mi nat i on i n t he t r ansmi ssi onof cont ent over i t s net wor k a r equi r ement t o pr ovi de andmar ket i t s $49. 95 st andal one i nt er net br oadband servi ce f or af i xed per i od of t i me. A number of t hese r emedi es, however ,have pr oven t o be i nef f ect i ve. See, Amer i can Ant i t r ustI nst i tute, Rolling Up Video Distribution in the U.S.: Why theComcast-Time Warner Cable Merger Should Be Blocked, pp. 18- 19,

available atht t p: / / www. ant i t r ust i nst i t ut e. or g/ cont ent / ant i t r ust - exper t s-ur ge- enf or cer s- bl ock- comcast - t i mewar ner - cabl e- mer ger .

50 See, Compet i t i ve I mpact St at ement , p. 25, U. S. v. ComcastCor p. ( D. C. Ci r cui t 2011) ( 1: 11- cv- 00106) , avai l abl e atht t p: / / www. j ust i ce. gov/ at r / cases/ f 266100/ 266158. ht m.

51 I d. , p. 21.

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