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					                                                                                                       Vol. 76                           Monday,
                                                                                                       No. 20                            January 31, 2011

                                                                                                       Part III

                                                                                                       Department of Justice

                                                                                                       Antitrust Division

                                                                                                       United States, et al. v. Comcast Corp., et al.; Proposed Final Judgment
                                                                                                       and Competitive Impact Statement; Notice
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                                                 5440                          Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices

                                                 DEPARTMENT OF JUSTICE                                   Washington, DC 20530 (telephone: 202–                  demanding new ways of viewing their
                                                                                                         514–5621).                                             favorite television shows and movies at
                                                 Antitrust Division                                                                                             times convenient to them and on
                                                                                                         Patricia A. Brink,
                                                                                                                                                                devices of their own choosing.
                                                 United States, et al. v. Comcast Corp.,                 Director of Civil Enforcement.
                                                                                                                                                                Consumers also are demanding
                                                 et al.; Proposed Final Judgment and                     United States District Court for the                   alternatives to high monthly prices
                                                 Competitive Impact Statement                            District of Columbia                                   charged by cable providers, such as
                                                                                                                                                                Comcast, for hundreds of channels of
                                                                                                            United States of America, United States
                                                    Notice is hereby given pursuant to the               Department of Justice, Antitrust Division, 450         programming that many of them neither
                                                 Antitrust Procedures and Penalties Act,                 Fifth Street, NW., Suite 7000, Washington,             desire nor watch.
                                                 15 U.S.C. § 16(b)–(h), that a proposed                  DC 20530; State of California, Office of the              2. Today, consumers buy video
                                                 Final Judgment, Stipulation and Order,                  Attorney General, CSB No. 184162, 300                  programming services only from the
                                                 and Competitive Impact Statement have                   South Spring Street, Suite 1702, Los Angeles,          distributors serving their local areas.
                                                 been filed with the United States                       CA 90013; State of Florida, Antitrust                  Incumbent cable companies continue to
                                                                                                         Division, PL–01, The Capitol, Tallahassee, FL          serve a majority of customers, offering
                                                 District Court for the District of                      32399–1050; State of Missouri, Missouri
                                                 Columbia in United States of America,                                                                          services consisting of multiple channels
                                                                                                         Attorney General’s Office, P.O. Box 899,
                                                 et al. v. Comcast Corp., et al., Civil                  Jefferson City, MO 65109; State of Texas,
                                                                                                                                                                of linear or scheduled programming.
                                                                                                         Office of the Attorney General, 300 W. 15th            Beginning in the mid-1990s, cable
                                                 Action No. 1:11-cv-00106. On January
                                                                                                         Street, 7th Floor, Austin, TX 78701; and State         companies first faced competition from
                                                 18, 2011, the United States filed a
                                                                                                         of Washington, Office of the Attorney General          the direct broadcast satellite (‘‘DBS’’)
                                                 Complaint alleging that the proposed                    of Washington, 800 Fifth Avenue, Suite 2000,           providers. More recently, firms that
                                                 joint venture between Comcast Corp.                     Seattle, WA 98104–3188, Plaintiffs, v.                 traditionally offered only voice
                                                 and General Electric Co., which would                   Comcast Corp., 1 Comcast Center,                       telephony services—the telephone
                                                 give Comcast control over NBC                           Philadelphia, PA 19103; General Electric Co.,          companies or ‘‘telcos,’’ such as AT&T
                                                 Universal, Inc., would violate Section 7                3135 Easton Turnpike, Fairfield, CT 06828;
                                                                                                         and NBC Universal, Inc., 30 Rockefeller
                                                                                                                                                                and Verizon—have emerged as
                                                 of the Clayton Act, 15 U.S.C. 18. The                                                                          competitors. The video programming
                                                                                                         Plaza, New York, NY 10112, Defendants.
                                                 proposed Final Judgment, filed                                                                                 offerings of these competitors are
                                                                                                         Case: 1:11–cv–00106.
                                                 simultaneously with the Complaint,                      Assigned to: Leon, Richard J.                          similar to the cable incumbents’
                                                 requires the defendants to license the                  Assign. Date: 1/18/2011.                               programming packages, and their
                                                 joint venture’s content to online video                 Description: Antitrust.                                increased competition has pushed cable
                                                 programming distributors under certain                                                                         companies to offer new features,
                                                                                                         Complaint                                              including additional channels, digital
                                                 conditions, relinquish its management
                                                 rights in Hulu, LLC, and subject itself to                 The United States of America, acting                transmission, video-on-demand
                                                 Open Internet and anti-retaliation                      under the direction of the Attorney                    (‘‘VOD’’) offerings, and high-definition
                                                 provisions, along with other                            General of the United States, and the                  (‘‘HD’’) picture quality.
                                                 requirements.                                           States of California, Florida, Missouri,                  3. Most recently, online video
                                                                                                         Texas, and Washington, acting under                    programming distributors (‘‘OVDs’’)
                                                    Copies of the Complaint, proposed                    the direction of their respective                      have begun to provide professional
                                                 Final Judgment, and Competitive Impact                  Attorneys General or other authorized                  video programming to consumers over
                                                 Statement are available for inspection at               officials (‘‘Plaintiff States’’) (collectively,        the Internet. This programming can be
                                                 the Department of Justice, Antitrust                    ‘‘Plaintiffs’’), bring this civil action               viewed at any time, on a variety of
                                                 Division, Antitrust Documents Group,                    pursuant to the antitrust laws of the                  devices, wherever the consumer has
                                                 450 Fifth Street, NW., Suite 1010,                      United States to permanently enjoin a                  high-speed access to the Internet. Cable
                                                 Washington, DC 20530 (telephone: 202–                   proposed joint venture (‘‘JV’’) and                    companies, DBS providers, and telcos
                                                 514–2481); on the Department of                         related transactions between Comcast                   have responded to this entry with
                                                 Justice’s Web site at http://                           Corporation (‘‘Comcast’’) and General                  further innovation, including expanding
                                       ; and at the Office of                 Electric Company (‘‘GE’’) that would                   their VOD offerings and allowing their
                                                 the Clerk of the United States District                 allow Comcast, the largest cable                       subscribers to view programming over
                                                 Court for the District of Columbia.                     company in the United States, to control               the Internet under certain conditions.
                                                 Copies of these materials may be                        some of the most popular video                            4. Through the JV, Comcast seeks to
                                                                                                         programming among consumers,                           gain control of NBCU’s programming, a
                                                 obtained from the Antitrust Division
                                                                                                         including the NBC Television Network                   potent tool that would allow it to
                                                 upon request and payment of the
                                                                                                         (‘‘NBC broadcast network’’) and the                    disadvantage its traditional video
                                                 copying fee set by Department of Justice                                                                       programming distribution competitors,
                                                                                                         cable networks of NBC Universal, Inc.
                                                 regulations.                                                                                                   such as cable, DBS, and the telcos, and
                                                                                                         (‘‘NBCU’’). If the JV proceeds, tens of
                                                    Public comment is invited within                     millions of U.S. consumers will pay                    curb nascent OVD competition by
                                                 sixty (60) days of the date of this notice.             higher prices for video programming                    denying access to, or raising the cost of,
                                                 Such comments, and responses thereto,                   distribution services, receive lower-                  this important content. If Comcast is
                                                 will be published in the Federal                        quality services, and enjoy fewer                      allowed to exercise control over this
                                                 Register and filed with the Court.                      benefits from innovation. To prevent                   vital programming, innovation in the
                                                 Comments should be directed to Nancy                    this harm, the United States and the                   market for video programming
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                                                 Goodman, Chief, Telecommunications &                    Plaintiff States allege as follows:                    distribution will be diminished, and
                                                 Media Enforcement Section, Antitrust                                                                           consumers will pay higher prices for
                                                                                                         I. Introduction and Background                         programming and face fewer choices.
                                                 Division, Department of Justice, 450
                                                 Fifth Street, NW., Suite 7000,                             1. This case is about how, when, from                  5. Attractive content is vital to video
                                                                                                         whom, and at what price the vast                       programming distribution. Today,
                                                                                                         majority of American consumers will                    consumers subscribe to traditional video
                                                                                                         receive and view television and movie                  programming distributors in order to
                                                                                                         content. Increasingly, consumers are                   view their favorite programs (scheduled

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                                                                               Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices                                             5441

                                                 or on demand), discover new shows and                   II. Jurisdiction and Venue                             Northwest, CSN Philadelphia, CSN
                                                 networks, view live sports and news,                       11. The United States brings this                   Southeast, and CSN Southwest; and
                                                 and watch old and newly available                       action under Section 15 of the Clayton                 partial interests in three other RSNs:
                                                 movies. Distributors compete for                        Act, as amended, 15 U.S.C. 25, to                      CSN Chicago, SportsNet New York, and
                                                 viewers by marketing the rich array of                  prevent and restrain Comcast, GE, and                  The Mtn. Comcast also owns digital
                                                 programming and other features                          NBCU from violating Section 7 of the                   properties such as,
                                                 available on their services. This                       Clayton Act, 15 U.S.C. 18.                   , and Fancast, its online
                                                 marketing often promotes programming                       12. The Plaintiff States, by and                    video Web site. In 2009, Comcast
                                                 that is exclusive to the distributor or                 through their respective Attorneys                     reported total revenues of $36 billion.
                                                 highlights the distributor’s rivals’ lack of                                                                   Over 94 percent of Comcast’s revenues,
                                                                                                         General and other authorized officials,
                                                 specific programming or features.                                                                              or $34 billion, were derived from its
                                                                                                         bring this action under Section 16 of the
                                                                                                                                                                cable business, including $19 billion
                                                    6. NBCU content, especially the NBC                  Clayton Act, 15 U.S.C. 26, to prevent
                                                                                                                                                                from video services, $8 billion from
                                                 broadcast network, is important to                      and restrain Comcast, GE, and NBCU
                                                                                                                                                                high-speed Internet services, and $1.4
                                                 consumers and video programming                         from violating Section 7 of the Clayton
                                                                                                                                                                billion from local advertising on
                                                 distributors’ ability to attract and retain             Act, 15 U.S.C. 18. The Plaintiff States
                                                                                                                                                                Comcast’s cable systems. In contrast,
                                                 customers. Programming is often at the                  bring this action in their sovereign
                                                                                                                                                                Comcast’s cable programming networks
                                                 center of disputes between subscription                 capacities and as parens patriae on
                                                                                                                                                                earned only about $1.5 billion in
                                                 video programming distributors and                      behalf of the citizens, general welfare,
                                                                                                                                                                revenues from advertising and fees
                                                 broadcast and cable network owners.                     and economy of each of the Plaintiff                   collected from video programming
                                                 The public outcry when certain                          States.                                                distributors.
                                                 programming is unavailable, even                           13. In addition to distributing video                  16. GE is a New York corporation
                                                 temporarily, underscores the damage                     programming, Comcast owns                              with its principal place of business in
                                                 that can occur when a video distributor                 programming. Comcast and NBCU sell                     Fairfield, Connecticut. GE is a global
                                                 loses access to valuable programming.                   programming to distributors in the flow                infrastructure, finance, and media
                                                 The JV will give Comcast control over                   of interstate commerce. Comcast’s and                  company. GE owns 88 percent of NBCU,
                                                 access to valuable content, and the                     NBCU’s activities in selling                           a Delaware corporation, with its
                                                 terms on which its rivals can purchase                  programming to distributors, as well as                headquarters in New York, New York.
                                                 it, including the possibility of denying                Comcast’s activities in distributing                   NBCU is principally involved in the
                                                 them the programming entirely.                          video programming to consumers,                        production, packaging, and marketing of
                                                                                                         substantially affect interstate commerce               news, sports, and entertainment
                                                    7. NBCU content is especially                        and commerce in each of the Plaintiff
                                                 important to OVDs. NBCU has been an                                                                            programming. NBCU wholly owns the
                                                                                                         States. The Court has subject-matter                   NBC and Telemundo broadcast
                                                 industry leader in making its content                   jurisdiction over this action and these
                                                 available over the Internet. If OVDs                                                                           networks, as well as ten local NBC
                                                                                                         defendants pursuant to Section 15 of the               owned and operated television stations
                                                 cannot gain access to NBCU content,                     Clayton Act, as amended, 15 U.S.C. 25,
                                                 their ability to develop into stronger                                                                         (‘‘O&Os’’), 16 Telemundo O&Os, and
                                                                                                         and 28 U.S.C. 1331, 1337(a), and 1345.                 one independent Spanish-language
                                                 video programming distribution                             14. Venue is proper in this District
                                                 competitors will be impeded.                                                                                   television station. Seven of the NBC
                                                                                                         under Section 12 of the Clayton Act, 15                O&Os are located in areas in which
                                                    8. Comcast itself recognizes the                     U.S.C. 22, and 28 U.S.C. 1391(b)(1) and                Comcast has incumbent cable systems—
                                                 importance of the NBC broadcast                         (c). Defendants Comcast, GE, and NBCU                  Chicago, Hartford/New Haven, Miami,
                                                 network, which it describes as an                       transact business and are found within                 New York, Philadelphia, San Francisco,
                                                 ‘‘American icon.’’ NBC broadcasts such                  the District of Columbia. Comcast, GE,                 and Washington, DC. In addition, NBCU
                                                 highly rated programming as the                         and NBCU have submitted to personal                    wholly owns national cable
                                                 Olympics, Sunday Night Football, NBC                    jurisdiction in this District.                         programming networks—Bravo, Chiller,
                                                 Nightly News, The Office, 30 Rock, and                                                                         CNBC, CNBC World, MSNBC, mun2,
                                                                                                         III. Defendants and the Proposed Joint
                                                 The Today Show. NBCU also owns                          Venture                                                Oxygen, Sleuth, SyFy, and the USA
                                                 other important programming, including                                                                         Network—and partially owns A&E
                                                 the USA Network, the number-one-rated                      15. Comcast is a Pennsylvania                       Television Networks (including the
                                                 cable channel; CNBC, the leading cable                  corporation headquartered in                           Biography, History, and Lifetime cable
                                                 financial news network; other top-rated                 Philadelphia, Pennsylvania. It is the                  networks), The Weather Channel, and
                                                 cable networks, such as Bravo and SyFy;                 largest video programming distributor in               ShopNBC.
                                                 and The Weather Channel, in which it                    the nation, with approximately 23                         17. NBCU also owns Universal
                                                 holds a significant stake and has                       million video subscribers. Comcast is                  Pictures, Focus Films, and Universal
                                                 management rights.                                      also the largest high-speed Internet                   Studios, which produce films for
                                                                                                         provider, with over 16 million                         theatrical and digital video disk
                                                    9. Comcast faces little video                        subscribers for this service. Comcast                  (‘‘DVD’’) release, as well as content for
                                                 programming distribution competition                    wholly owns national cable                             NBCU’s and other companies’ broadcast
                                                 in many of the areas it serves. Entry into              programming networks, including E!                     and cable programming networks.
                                                 traditional video programming                           Entertainment, G4, Golf, Style, and                    NBCU produces approximately three-
                                                 distribution is expensive, and new entry                Versus, and has partial interests in                   quarters of the original, primetime
                                                 is unlikely in most areas. OVDs’
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                                                                                                         Current Media, MLB Network, NHL                        programming shown on the NBC
                                                 Internet-based offerings are likely the                 Network, PBS KIDS Sprout, Retirement                   broadcast network and the USA cable
                                                 best hope for additional video                          Living Television, and TV One. In                      network—NBCU’s two highest-rated
                                                 programming distribution competition                    addition, Comcast has controlling                      networks. In addition to its
                                                 in Comcast’s cable franchise areas.                     interests in the following regional sports             programming-related assets, NBCU
                                                    10. Thus, the United States and the                  networks (‘‘RSNs’’): Comcast SportsNet                 owns several theme parks and digital
                                                 Plaintiff States ask this Court to enjoin               (‘‘CSN’’) Bay Area, CSN California, CSN                properties, such as
                                                 the proposed JV permanently.                            Mid-Atlantic, CSN New England, CSN                     Finally, NBCU is a founding partner and

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                                                 5442                          Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices

                                                 32 percent owner of Hulu, LLC, an OVD.                  A. Content Production                                  popular networks, by far, are the four
                                                 In 2009, NBCU had total revenues of                        21. Television production studios                   broadcast networks. The first cable
                                                 $15.4 billion.                                          produce television shows and license                   network was HBO, which launched in
                                                    18. On December 3, 2009, Comcast,                    that content to broadcast and cable                    the early 1970s. Since then, cable
                                                 GE, NBCU, and Navy, LLC (‘‘Newco’’),                    networks. Content producers typically                  networks have grown in popularity and
                                                 a Delaware corporation, entered into a                  retain the rights to license their content             number. As of the end of 2009, there
                                                 Master Agreement, whereby Comcast                       for syndication (e.g., licensing of series             were an estimated 600 national, plus
                                                                                                         to networks or television stations after               another 100 regional, cable
                                                 agreed to pay $6.5 billion in cash to GE,
                                                                                                                                                                programming networks. More than 100
                                                 and Comcast and GE each agreed to                       the initial run of the programming) as
                                                                                                                                                                of these networks were also available in
                                                 contribute certain assets to the JV to be               well as for DVD distribution and VOD
                                                 called Newco. Specifically, GE agreed to                or pay-per-view (‘‘PPV’’) services. In
                                                 contribute all of the assets of NBCU,                   addition to first-run rights (i.e., the                1. Broadcast Networks
                                                 including its interest in Hulu and the 12               rights to premiere the content), content                  25. Owners of broadcast network
                                                 percent interest in NBCU it does not                    producers such as NBCU also license                    programming or broadcasters (e.g.,
                                                 currently own but has agreed to                         the syndication rights to their own                    NBCU) license their broadcast networks
                                                 purchase from Vivendi SA. Comcast                       programming to broadcast and cable                     (e.g., NBC, Telemundo) either to third-
                                                 agreed to contribute all its cable                      networks. For example, House is                        party television stations affiliated with
                                                 programming assets, including its                       produced by NBCU, licensed for its first               that network (‘‘network affiliates’’), or to
                                                 national networks as well as its RSNs,                  run on the FOX broadcast network, and                  their owned and operated television
                                                 and some digital properties, but not its                then rerun on the USA Network, a cable                 stations or O&Os. The network affiliates
                                                 cable systems or its online video Web                   network owned by NBCU. These                           and O&Os distribute the broadcast
                                                 site, Fancast. As a result of the content               content licenses often include ancillary               network feeds over the air to the public
                                                 contributions and cash payment by                       rights to related content (e.g., short                 and, importantly, retransmit them to
                                                 Comcast, Comcast will own 51 percent                    segments of programming or clips,                      professional video programming
                                                 of the JV, and GE will retain a 49                      extras such as cast interviews, camera                 distributors such as cable companies
                                                 percent interest. The JV will be managed                angles, and alternative feeds), as well as             and DBS providers, which in turn
                                                 by a separate board of directors initially              the right to offer some programming on                 distribute the feeds to their subscribers.
                                                 consisting of three Comcast-designated                  demand (both online and through                           26. The Cable Television Consumer
                                                 directors and two GE-designated                         traditional cable, satellite, and telco                Protection and Competition Act of 1992
                                                 directors. Board decisions will be made                 distribution methods).                                 (‘‘1992 Cable Act’’), Public Law 102–
                                                 by majority vote.                                          22. A content owner controls which                  385, 106 Stat. 1460 (1992), gave
                                                                                                         entity receives its programming and                    broadcast television stations, whether
                                                    19. Comcast is precluded from                        when, through a process known as                       network affiliates or O&Os, the option to
                                                 transferring its interest in the JV for a               ‘‘windowing.’’ Historically, the first                 demand ‘‘retransmission consent,’’ a
                                                 four-year period, and GE is prohibited                  television release window was reserved                 process through which a distributor
                                                 from transferring its interest for three                for broadcast on one of the four major                 negotiates with the station for the right
                                                 and one-half years. Thereafter, either                  broadcast networks (ABC, CBS, NBC,                     to carry the station’s programming for
                                                 party may sell its respective interest in               and FOX), followed by broadcast                        agreed-upon terms. Alternatively,
                                                 the JV, subject to Comcast’s right to                   syndication, and, ultimately, cable                    stations can elect ‘‘must carry’’ status,
                                                 purchase at fair market value any                       syndication. Over the past couple of                   which involves a process through which
                                                 interest that GE proposes to sell.                      years, however, content owners have                    the station can demand to be carried
                                                 Additionally, three and one-half years                  created new windows and begun to                       without compensation. Stations
                                                 after closing, GE will have the right to                allow their content to be distributed                  affiliated with the four major broadcast
                                                 require the JV to redeem 50 percent of                  over the Internet on either a catch-up                 networks, including the O&Os, all have
                                                 GE’s interest; after seven years, GE will               (e.g., next day) or syndicated (e.g., next             elected retransmission consent.
                                                 have the right to require the JV to                     season) basis.                                         Historically, these stations negotiated
                                                 redeem all of its remaining interest. If                   23. In addition to producing content                for non-monetary reimbursement (e.g.,
                                                 GE elects to exercise its first right of                for television and cable networks, NBCU                carriage of new cable channels) in
                                                 redemption, Comcast will have the                       produces and distributes first-run                     exchange for retransmission consent.
                                                 contemporaneous right to purchase the                   movies through Universal Pictures,                     Today, most broadcast stations seek fees
                                                 remainder of GE’s ownership interest                    Universal Studios, and Focus Films.                    based on the number of subscribers to
                                                 once a purchase price is determined. If                 Typically, these movies are distributed                the cable, DBS, or telco service
                                                 GE does not exercise its first redemption               to theaters before being released on                   distributing their content. Less popular
                                                 right, Comcast will have the right to buy               DVD, then licensed to VOD/PPV                          broadcast networks generally have
                                                 50 percent of GE’s initial ownership                    providers, then to premium cable                       elected must carry status, although
                                                 interest five years after closing and all               channels (e.g., Home Box Office                        recently they also have begun to
                                                 of GE’s remaining ownership interest                    (‘‘HBO’’)), then to regular cable                      negotiate retransmission payments.
                                                 eight years after closing. It is expected               channels, and finally to broadcast                        27. In the past, NBCU has negotiated
                                                 that Comcast ultimately will own 100                    networks. As they have with television                 the retransmission rights only for its
                                                 percent of the JV.                                      distribution, over the past several years              O&Os, but it has expressed interest in
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                                                 IV. The Professional Video                              content owners have experimented with                  and made efforts to obtain the rights
                                                 Programming Industry                                    different windows for distributing films               from its NBC broadcast network
                                                                                                         over the Internet.                                     affiliates to negotiate retransmission
                                                   20. The professional video                                                                                   consent agreements on their behalf.
                                                 programming industry has had three                      B. Programming Networks                                NBCU could also seek to renegotiate its
                                                 different levels: Content production,                      24. Networks aggregate content to                   agreements with its affiliates to obtain a
                                                 content aggregation or networks, and                    provide a 24-hour-per-day service that is              share of any retransmission consent fees
                                                 distribution.                                           attractive to consumers. The most                      the affiliates are able to command.

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                                                                               Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices                                              5443

                                                 2. Cable Networks                                       program access rules do not apply to                   least a portion of their traditional video
                                                    28. In addition to the broadcast                     online distribution or to retransmission               programming distribution services.
                                                 networks, programmers produce cable                     of broadcast station content.                          These consumers buy smaller content
                                                 networks and sell them to video                                                                                packages from traditional distributors,
                                                                                                         C. Professional Video Programming
                                                 programming distributors. Most cable                                                                           decline to take certain premium
                                                 networks are based on a dual revenue-                                                                          channels, or purchase fewer VOD
                                                                                                           31. Video programming distributors                   offerings, and instead watch that
                                                 stream business model. They derive                      acquire the rights to transmit
                                                 roughly half their revenues from                                                                               content online, a practice known as
                                                                                                         professional, full-length broadcast and                ‘‘cord-shaving.’’ A smaller but growing
                                                 licensing fees paid by distributors and                 cable programming networks or
                                                 the other half from advertising fees. The                                                                      number of MVPD customers also are
                                                                                                         individual programs or movies,                         ‘‘cutting the cable cord’’ completely in
                                                 revenue split varies depending on                       aggregate the content, and distribute it               favor of OVDs. These trends indicate the
                                                 several factors, including the type of                  to their subscribers or users.                         growing significance of competition
                                                 programming (e.g., financial news or
                                                                                                         1. Multichannel Video Programming                      between OVDs and MVPDs.
                                                 general entertainment) and whether the                                                                            35. OVD services, individually or
                                                 program is established or newly                         Distributors (‘‘MVPDs’’)
                                                                                                                                                                collectively, are likely to continue to
                                                 launched.                                                  32. Traditional video programming                   develop into better substitutes for
                                                    29. Generally, an owner of a cable                   distributors offer hundreds of channels                MVPD video services. Evolving
                                                 network receives a monthly per-                         of professional video programming to                   consumer demand, improving
                                                 subscriber fee that may vary based upon                 residential customers for a fee. They                  technology (e.g., higher Internet access
                                                 the popularity or ratings of a network’s                include incumbent cable companies,                     speeds, better compression to improve
                                                 programming, the volume of subscribers                  DBS providers, cable overbuilders, also                picture quality, improved digital rights
                                                 served by the distributor, the packages                 known as broadband service providers                   management to fight piracy), and
                                                 in which the programming is included,                   or ‘‘BSPs’’ (e.g., RCN), and telcos. These             advertisers’ increasing willingness to
                                                 the percentage of the distributor’s                     distributors are often collectively                    place their ads on the Internet, likely
                                                 subscribers receiving the programming,                  referred to as MVPDs (‘‘multichannel                   will make OVDs stronger competitors to
                                                 and other factors. In addition to the                   video programming distributors’’). In                  MVPDs for greater numbers of existing
                                                 right to carry the network, a distributor               response to increasing consumer                        and new viewers.
                                                 of the cable network often receives two                 demand to record and view video                           36. Comcast and other MVPDs
                                                 to three minutes of advertising time per                content at different times, many MVPDs                 recognize the impact of OVDs. Their
                                                 hour on the network that it can sell to                 offer services such as digital video                   documents consistently portray the
                                                 local businesses (e.g., car dealers). A                 recorders (‘‘DVRs’’) that allow                        emergence of OVDs as a significant
                                                 distributor may also receive marketing                  consumers to record programming and                    competitive threat. MVPDs, including
                                                 payments or discounts to encourage                      view it later, and VOD services that                   Comcast, have responded by improving
                                                 greater penetration of its potential                    allow viewers to view broadcast or cable               existing services and developing new,
                                                 consumers. In the case of a completely                  network programming or movies on                       innovative services for their customers.
                                                 new cable network, a programmer may                     demand at times of their choosing.                     For example, MVPDs have improved
                                                 pay a distributor to carry the network or                                                                      user interfaces and video search
                                                 offer other discounts.                                  2. Online Video Programming
                                                                                                                                                                functionality, offered more VOD
                                                    30. Over time, some video                            Distributors (‘‘OVDs’’)
                                                                                                                                                                programming, and begun to offer
                                                 programming distributors, such as                          33. OVDs offer numerous choices for                 programming online.
                                                 Comcast and Cablevision Corp., have                     on-demand professional (as opposed to                     37. GE, through its ownership of
                                                 purchased or launched their own cable                   user-generated, e.g., typical YouTube                  NBCU, is a content producer and an
                                                 networks. Vertical integration between                  videos), full-length (as opposed to clips)             owner of broadcast and cable channels.
                                                 content and distribution was a reason                   video programming over the Internet,                   Comcast is primarily a distributor of
                                                 for the passage of Section 19 of the 1992               whether streamed to Internet-connected                 video programming, although it owns
                                                 Cable Act, 47 U.S.C. 548. Pursuant to                   televisions or other devices, or                       some cable networks. Through the
                                                 the Act, Congress directed the Federal                  downloaded for later viewing.                          proposed JV, Comcast will control assets
                                                 Communications Commission (‘‘FCC’’)                     Currently, OVDs employ several                         that produce and aggregate some of the
                                                 to promulgate rules that place                          business models, including free                        most significant video content. Comcast
                                                 restrictions on how cable programmers                   advertiser-supported streaming (e.g.,                  also will continue to own the nation’s
                                                 affiliated with a cable company can deal                        ´
                                                                                                         Hulu), a la carte downloads or                         largest distributor of video programming
                                                 with unaffiliated distributors. These                   electronic sell-through (‘‘EST’’) (e.g.,               to residential customers.
                                                 ‘‘program access rules’’ apply to a cable               Apple iTunes, Amazon), subscription
                                                 company that owns a cable network,                      streaming models (e.g., Hulu Plus,                     V. Relevant Market
                                                 and prohibit both the cable company                     Netflix), per-program rentals (e.g., Apple                38. The relevant product market
                                                 and the network from engaging in unfair                 iTunes, Vudu), and hybrid hardware/                    affected by this transaction is the timely
                                                 acts or practices, including (1) Entering               subscription models (e.g., Tivo, Apple                 distribution of professional, full-length
                                                 into exclusive agreements for the cable                 TV/iTunes).                                            video programming to residential
                                                 network; (2) selling the cable network to                  34. Consumer desire for on-demand                   customers (‘‘video programming
                                                 the cable company’s competitors on                      viewing and increased broadband                        distribution’’). Both MVPDs and OVDs
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                                                 discriminatory terms and conditions;                    speeds that have greatly improved the                  are participants in this market. Video
                                                 and (3) unduly influencing the cable                    quality of the viewing experience have                 programming distribution is
                                                 network in deciding whom, and on                        led to distribution of more professional               characterized by the aggregation of
                                                 what terms and conditions, to sell its                  content by OVDs. Online video viewing                  professionally produced content,
                                                 programming. 47 CFR 76.1001–76.1002.                    has grown enormously in the last                       consisting of entire episodes of shows
                                                 The prohibition on exclusivity sunsets                  several years and is expected to                       and movies, rather than short clips. This
                                                 in October 2012, unless extended by the                 increase. Today, some consumers regard                 content includes live programming,
                                                 FCC after a rulemaking proceeding. The                  OVDs as acceptable substitutes for at                  sports, and general entertainment

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                                                 5444                          Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices

                                                 programming from a mixture of                           customer in the continental United                       44. A hypothetical monopolist of
                                                 broadcast and cable networks, as well as                States who has an unobstructed line of                 video programming distribution in any
                                                 from movie studios. Video programming                   sight to their satellites. OVDs are                    of these geographic areas could
                                                 distributors typically offer various                    available to any consumer with a high-                 profitably raise prices by a small but not
                                                 packages of content (e.g., basic,                       speed Internet service sufficient to                   insignificant, non-transitory amount.
                                                 expanded basic, digital), quality levels                receive video of an acceptable quality.                While consumers naturally look for
                                                 (e.g., standard-definition, HD, 3D), and                However, wireline cable distributors                   other options in response to higher
                                                 business models (e.g., free ad-supported,               such as Comcast and Verizon generally                  prices, the number of consumers that
                                                 subscription). Video programming can                    must obtain a franchise from local,                    would likely find these other options to
                                                 be viewed immediately by consumers,                     municipal, or state authorities in order               be adequate substitutes is insufficient to
                                                 whether on demand or as scheduled                       to construct and operate a wireline                    make the higher prices unprofitable for
                                                 (i.e., in a cable network’s linear stream).             network in a specific area, and then                   the hypothetical monopolist. Thus,
                                                    39. A variety of companies distribute                build lines only to homes in that area.                video programming distribution in any
                                                 video programming—cable, DBS,                           A consumer cannot purchase video                       of these geographic areas is a well-
                                                 overbuilder, telco, and online. Cable has               programming distribution services from                 defined antitrust market and is
                                                 remained the dominant distributor even                  a wireline distributor operating outside               susceptible to the exercise of market
                                                 as other companies have entered video                   its area because that firm does not have               power.
                                                 programming distribution. In the mid-                   the facilities to reach the consumer’s
                                                 1990s, DirecTV and DISH Network                                                                                VI. Market Concentration
                                                                                                         home. Thus, although the set of video
                                                 began offering hundreds of channels                     programming distributors able to offer                    45. The incumbent cable companies
                                                 using small satellite dishes. Around the                service to individual consumers’                       often dominate any particular market
                                                 same time, firms known as                               residences generally is the same within                with market shares within their
                                                 ‘‘overbuilders’’ began building their                   each local community, that set differs                 franchise areas well above 50 percent.
                                                 own wireline networks, primarily in                     from one local community to another                    For example, Comcast has the market
                                                 urban areas, to compete with the                        and can vary even within a local                       shares of 64 percent in Philadelphia, 62
                                                 incumbent cable operator and offer                      community.                                             percent in Chicago, 60 percent in
                                                 video, high-speed Internet, and voice                      42. For ease of analysis, it is useful to           Miami, and 58 percent in San Francisco
                                                 telephony services—the ‘‘triple-play.’’                 aggregate consumers who face the same                  (based on MVPD subscribers).
                                                 More recently, Verizon and AT&T                         competitive choices in video                           Combined, the DBS providers account
                                                 entered the market with their own                       programming distribution by, for                       for approximately 31 percent of total
                                                 networks and also offer the triple-play.                example, aggregating customers in a                    video programming distribution
                                                 Competition from these video                            county or other jurisdiction served by                 subscribers nationwide, although their
                                                 programming distributors has provoked                   the same group of distributors. The                    shares vary and may be lower in any
                                                 incumbent cable operators across the                    United States thus comprises numerous                  particular local market. AT&T and
                                                 country to upgrade their systems and                    local geographic markets for video                     Verizon have had great success and
                                                 thereby offer substantially more video                  programming distribution, each                         achieved penetration (i.e., the
                                                 programming channels, as well as the                    consisting of a community whose                        percentage of households to which a
                                                 triple-play. Now, OVDs are introducing                  residents face the same competitive                    provider’s service is available that
                                                 new and innovative business models                      choices. In the vast majority of local                 actually buys its service) as high as 40
                                                 and services to inject even more                        markets, customers can choose from                     percent in the selected communities
                                                 competition into the video programming                  among the local cable incumbent and                    they have entered, although they
                                                 distribution market.                                    the two DBS operators. Approximately                   currently have limited expansion plans.
                                                    40. Historically, over-the-air (‘‘OTA’’)             38 percent of consumers can also buy                   Overbuilders serve only about one
                                                 distribution of broadcast network                       video services from a telco, and a much                percent of U.S. television households
                                                 content has not served as a significant                 smaller percentage live in areas where                 nationwide.
                                                 competitive constraint on MVPDs                         overbuilders provide service. OVDs are                    46. Today, OVDs have a de minimis
                                                 because of the limited number of                        emerging as another viable option for                  share of the video programming
                                                 channels offered. In addition, OTA                      consumers who have access to high-                     distribution market in any geographic
                                                 distribution likely will not expand in                  speed Internet services. OVDs rely on                  area. OVD services are available to any
                                                 the future, as no new broadcast                         other companies’ high-speed Internet                   consumer who purchases a broadband
                                                 networks are likely to be licensed for                  services to deliver content to                         connection. However, established
                                                 distribution. This diminishes the                       consumers.                                             distributors, such as Comcast, view
                                                 possibility that OTA could increase its                    43. The geographic markets relevant                 OVDs as a growing competitive threat
                                                 content package substantially to                        to this transaction are the numerous                   and have taken steps to respond to that
                                                 compete with MVPDs. Thus, OTA is                        local markets throughout the United                    threat. OVDs’ current market shares,
                                                 unlikely to become a significant video                  States where Comcast is the incumbent                  therefore, greatly understate both their
                                                 programming distributor. By contrast,                   cable operator, covering over 50 million               future and current competitive
                                                 OVDs, though they may offer more                        U.S. television households (about 45                   significance in terms of the influence
                                                 limited viewing options than MVPDs                      percent nationwide), and where                         they are having on traditional video
                                                 currently, are expanding rapidly and                    Comcast will be able to withhold NBCU                  programming distributors’ investment
                                                 have the potential to provide increased                 programming from, or raise the                         decisions to expand offerings and
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                                                 and more innovative viewing options in                  programming costs to, its rival                        embrace Internet distribution
                                                 the future.                                             distributors, both MVPDs and OVDs.                     themselves.
                                                    41. Consumers purchasing video                       Because these competitors serve areas
                                                 programming distribution services                       outside Comcast’s cable footprint, other               VII. Anticompetitive Effects
                                                 select from among those distributors                    local markets served by these rival                      47. Today, Comcast competes with
                                                 that can offer such services directly to                distributors may be affected, with the                 DBS, overbuilder, and telco competitors
                                                 their home. The DBS operators, DirecTV                  competitive effects of the transaction                 by upgrading its existing services (e.g.,
                                                 and DISH, can reach almost any                          potentially extending to all Americans.                improving its network, expanding its

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                                                 VOD and HD offerings), and through                      networks are widely distributed and                    absent the JV, would benefit from
                                                 promotional and other forms of price                    command high fees.                                     increased competition from OVDs.
                                                 discounts. In particular, Comcast strives                  51. As a result of the JV, Comcast will                54. Comcast has an incentive to
                                                 to provide a service that it can promote                gain control over the NBC O&Os in local                encumber, through its control of the JV,
                                                 as better than its rivals’ services in terms            television markets where Comcast is the                the development of nascent distribution
                                                 of variety of programming choices,                      dominant video programming                             technologies and the business models
                                                 higher-quality services, and unique                     distributor. The JV will give Comcast                  that underlie them by denying OVDs
                                                 features (e.g., unique programming or                   the ability to raise the fees for                      access to NBCU content or substantially
                                                 ease of use). Consumers benefit from                    retransmission consent for the NBC                     increasing the cost of obtaining such
                                                 this competition by receiving better                    O&Os or effectively deny this                          content. As a result, Comcast will face
                                                 quality services and, in some cases,                    programming entirely to certain video                  less competitive pressure to innovate,
                                                 lower prices. This competition has also                 programming distribution competitors.                  and the future evolution of OVDs will
                                                 fostered innovation, including the                      In addition, Comcast may be able to gain               likely be muted. Comcast’s incentives
                                                 development of digital transmission, HD                 the right to negotiate on behalf of its                and ability to raise the cost of or deny
                                                 and 3D programming, and the                             broadcast network affiliate stations or                NBCU programming to its distribution
                                                 introduction of DVRs and VOD                            the ability to influence the affiliates’               rivals, especially OVDs, will lessen
                                                 offerings.                                              negotiations with its distribution                     competition in video programming
                                                    48. The proposed JV would allow                      competitors. In either case, these                     distribution.
                                                 Comcast to limit competition from                       distributors would be less effective
                                                                                                         competitors to Comcast. Comcast also                   VIII. Absence of Countervailing Factors
                                                 MVPD competitors and from the
                                                 growing threat of OVDs. The JV would                    will control NBCU’s cable networks and                 A. Entry
                                                 give Comcast control over NBCU                          film content, increasing the ability of
                                                                                                                                                                  55. Entry or expansion of traditional
                                                 content that is important to its                        the JV to obtain higher fees for that
                                                                                                                                                                video programming distributors on a
                                                 competitors. Comcast has long                           programming. The JV will have less
                                                                                                         incentive to distribute NBCU                           widespread scale or entry of
                                                 recognized that by withholding certain                                                                         programming networks comparable to
                                                 content from competitors, it can gain                   programming to Comcast’s video
                                                                                                         distribution rivals than a stand-alone                 NBCU’s will not be timely, likely, or
                                                 additional cable subscribers and limit                                                                         sufficient to reverse the competitive
                                                 the growth of emerging competition.                     NBCU. Faced with weakened
                                                                                                         competition, Comcast can charge                        harm that would likely result from the
                                                 Comcast has refused to license one of its                                                                      proposed JV. OVDs are less likely to
                                                 RSNs, CSN Philadelphia, to DirecTV or                   consumers more and will have less
                                                                                                         incentive to innovate.                                 develop into significant competitors if
                                                 DISH. As a result, DirecTV’s and DISH’s                                                                        denied access to NBCU content.
                                                                                                            52. The impact of the JV on emerging
                                                 market shares in Philadelphia are much
                                                                                                         competition from the OVDs is extremely                 B. Efficiencies
                                                 lower than in other areas where they
                                                                                                         troubling given the nascent stage of
                                                 have access to RSN programming.                         OVDs’ development and the potential of                   56. The proposed JV will not generate
                                                    49. Control of NBCU programming                      these distributors to significantly                    verifiable, merger-specific efficiencies
                                                 will give Comcast an even greater ability               increase competition through the                       sufficient to reverse the competitive
                                                 to disadvantage its competitors. Carriage               introduction of new and innovative                     harm of the proposed JV.
                                                 of NBCU programming, including the                      features, packaging, pricing, and                      IX. Violations Alleged
                                                 NBC broadcast network, is important for                 delivery methods. NBCU has been one
                                                 video programming distributors to                       of the content providers most willing to               Violation of Section 7 of the Clayton Act
                                                 compete effectively. Out of hundreds of                 support OVDs and experiment with                       by Each Defendant
                                                 networks, the NBC broadcast network                     different methods of online distribution.                 57. The United States and the Plaintiff
                                                 consistently is ranked among the top                    It was a founding partner in Hulu, the                 States hereby incorporate paragraphs 1
                                                 four in consumer interest surveys. It                   largest OVD today, and prior to the                    through 56.
                                                 receives high Nielsen ratings, which                    announcement of the transaction                           58. Pursuant to a Master Agreement
                                                 distributors and advertisers use as a                   entered into several contracts with                    dated December 3, 2009, Comcast, GE,
                                                 proxy for a network’s value. The                        OVDs, such as Apple iTunes, Amazon,                    and NBCU intend to form a joint
                                                 importance of the NBC broadcast                         and Netflix.                                           venture.
                                                 network to a distributor is underscored                    53. Comcast and other MVPDs have                       59. The effect of the proposed JV and
                                                 by the fact that NBCU has recently                      significant concerns over emerging                     Comcast’s acquisition of 51 percent of it
                                                 negotiated significant retransmission                   competition by OVDs. To the extent that                would be to lessen competition
                                                 fees with certain distributors that when                consumers, now or in the future, view                  substantially in interstate trade and
                                                 combined with its advertising revenues,                 OVDs as substitutes for traditional video              commerce in numerous geographic
                                                 rival the most valuable cable network                   programming distributors, they will be                 markets for video programming
                                                 programming. Economic studies show                      able to challenge Comcast’s dominant                   distribution, in violation of Section 7 of
                                                 that distributors that lose important                   position as a video programming                        the Clayton Act, 15 U.S.C. 18, and
                                                 broadcast content for any significant                   distributor. Comcast has taken several                 Sections 1 and 2 of the Sherman Act, 15
                                                 period of time suffer substantial                       steps to keep its customers from cord-                 U.S.C. 1, 2.
                                                 customer losses to their competitors.                   shaving or cord-cutting in favor of                       60. This proposed JV threatens loss or
                                                    50. NBCU’s cable networks also are                   OVDs. These efforts include launching                  damage to the general welfare and
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                                                 important to consumers and therefore to                 its own online video portal (Fancast),                 economies of each of the Plaintiff States,
                                                 video programming distributors. USA                     improving its VOD library and online                   and to the citizens of each of the
                                                 Network has been the highest-rated                      interactive interface (in order to                     Plaintiff States. The Plaintiff States and
                                                 cable network the past four years. CNBC                 compete with, e.g., Netflix and                        their citizens will be subject to a
                                                 is by far the highest-rated financial news              Amazon), and deploying its                             continuing and substantial threat of
                                                 cable network, and Bravo and SyFy are                   ‘‘authenticated’’ online, on-demand                    irreparable injury to the general welfare
                                                 top-rated cable networks for their                      service. Consumers have benefited from                 and economy, and to competition, in
                                                 particular demographics. NBCU’s cable                   Comcast’s competitive responses and,                   their respective jurisdictions unless the

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                                                 5446                          Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices

                                                 Defendants are enjoined from carrying                   Laury E. Bobbish                                       P.O. Box 899 Jefferson City, MO 65109
                                                 out this transaction, or from entering                  Assistant Chief, Telecommunications &                  573/751–7445, F: 573/751–2041,
                                                 into or carrying out any agreement,                     Media Enforcement                            ,
                                                 understanding, or plan by which                         /s/ lllllllllllllllllll                                For Plaintiff State of Texas
                                                 Comcast would acquire control over                      John R. Read (DC Bar #419373)                          Greg Abbott
                                                 NBCU or any of its assets.                              Chief                                                  Attorney General of Texas
                                                    61. The proposed JV will likely have                 David C. Kully (DC Bar #448763)                        Daniel T. Hodge
                                                 the following effects, among others:                    Assistant Chief, Litigation III                        First Assistant Attorney General
                                                    a. Competition in the development,                   /s/ lllllllllllllllllll                                Bill Cobb
                                                 provision, and sale of video                            Yvette F. Tarlov* (DC Bar #442452)                     Deputy Attorney General for Civil Litigation
                                                 programming distribution services in                    Attorney, Telecommunications & Media                   /s/ lllllllllllllllllll
                                                 each of the relevant geographic markets                 Enforcement, Antitrust Division, U.S.
                                                                                                                                                                John T. Prud’homme, Jr.
                                                                                                         Department of Justice, 450 Fifth Street, NW.,
                                                 will likely be eliminated or substantially              Suite 7000, Washington, DC 20530,
                                                                                                                                                                Chief, Antitrust Division, Office of the
                                                 lessened;                                                                                                      Attorney General, 300 W. 15th St., 7th floor,
                                                                                                         Telephone: (202) 514–5621, Facsimile: (202)
                                                    b. Prices for video programming                                                                             Austin, Texas 78701, (512) 936–1697, (512)
                                                                                                         514–6381, E-mail:
                                                 distribution services will likely increase                                                                     320–0975—facsimile
                                                                                                         Matthew J. Bester (DC Bar #465374)
                                                 to levels above those that would prevail                                                                       For Plaintiff State of Washington
                                                                                                         Shobitha Bhat
                                                 absent the JV; and                                      Hillary B. Burchuk (DC Bar #366755)                    /s/ lllllllllllllllllll
                                                    c. Innovation and quality of video                   Luin P. Fitch                                          David M. Kerwin
                                                 programming distribution services will                  Paul T. Gallagher (DC Bar #439701)                     Assistant Attorney General, Antitrust
                                                 likely decrease to levels below those                   Peter A. Gray                                          Division, Office of the Attorney General of
                                                 that would prevail absent the JV.                       F. Patrick Hallagan                                    Washington, 800 Fifth Avenue, Suite 2000,
                                                                                                         Michael K. Hammaker (DC Bar #233684)                   Seattle, WA 98104–3188, 206/464–7030,
                                                 X. Requested Relief                                     Matthew C. Hammond                           
                                                                                                         Joyce B. Hundley
                                                    62. The United States and the Plaintiff                                                                     United States District Court for the
                                                                                                         Robert A. Lepore
                                                 States request that:                                    Erica S. Mintzer (DC Bar #450997)                      District of Columbia
                                                    a. The proposed JV be adjudged to                    H. Joseph Pinto III
                                                 violate Section 7 of the Clayton Act, 15                                                                       United States of America, State of California,
                                                                                                         Warren A. Rosborough IV (DC Bar #495063)
                                                 U.S.C. 18;                                                                                                     State of Florida, State of Missouri, State of
                                                                                                         Natalie Rosenfelt
                                                    b. Comcast, GE, NBCU, and Newco be                                                                          Texas, and State of Washington, Plaintiffs, v.
                                                                                                         Blake W. Rushforth
                                                                                                                                                                Comcast Corp., General Electric Co., and
                                                 permanently enjoined from carrying out                  Anthony D. Scicchitano
                                                                                                                                                                NBC Universal, Inc., Defendants.
                                                 the proposed JV and related                             Jennifer A. Wamsley (DC Bar #486540)
                                                                                                         Frederick S. Young (DC Bar #421285)                    Case: 1:11–cv–00106.
                                                 transactions; carrying out any other                                                                           Assigned To: Leon, Richard J.
                                                 agreement, understanding, or plan by                    Attorneys for the United States
                                                                                                         * Attorney of Record                                   Assign. Date: 1/18/2011.
                                                 which Comcast would acquire control                                                                            Description: Antitrust.
                                                 over NBCU or any of its assets; or                      For Plaintiff State of California
                                                 merging;                                                Kamala D. Harris                                       Competitive Impact Statement
                                                    c. The United States and the Plaintiff               Attorney General                                          The United States of America
                                                 States be awarded their costs of this                   /s/ lllllllllllllllllll                                (‘‘United States’’), acting under the
                                                 action;                                                 Jonathan M. Eisenberg                                  direction of the Attorney General of the
                                                    d. The Plaintiff States be awarded                   Deputy Attorney General, California                    United States, pursuant to Section 2(b)
                                                 their reasonable attorneys’ fees; and                   Department of Justice, Office of the Attorney          of the Antitrust Procedures and
                                                    e. The United States and the Plaintiff               General, CSB No. 184162, 300 South Spring              Penalties Act (‘‘APPA’’ or ‘‘Tunney Act’’),
                                                 States receive such other and further                   Street, Suite 1702, Los Angeles, California            15 U.S.C. 16(b)–(h), files this
                                                 relief as the case requires and the Court               90013, Phone: (213) 897–6505, Facsimile:
                                                                                                                                                                Competitive Impact Statement relating
                                                 deems just and proper.                                  (213) 620–6005,
                                                                                                                         to the proposed Final Judgment
                                                 Dated: January 18, 2011                                                                                        (attached hereto as Exhibit A) submitted
                                                                                                         For Plaintiff State of Florida                         for entry in this civil antitrust
                                                 Respectfully submitted,
                                                                                                         Pamela Jo Bondi                                        proceeding.
                                                 For Plaintiff United States:                            Attorney General, State of Florida
                                                 /s/ lllllllllllllllllll                                 /s/ lllllllllllllllllll                      I. Nature and Purpose of the Proceeding
                                                 Christine A. Varney (DC Bar #411654)                    Patricia A. Conners                             On December 3, 2009, Comcast
                                                 Assistant Attorney General for Antitrust                Associate Deputy Attorney General            Corporation (‘‘Comcast’’), General
                                                 /s/ lllllllllllllllllll                                 Eli A. Friedman                              Electric Company (‘‘GE’’), NBC
                                                 Molly S. Boast                                          Assistant Attorney General                   Universal, Inc. (‘‘NBCU’’), and Navy,
                                                 Deputy Assistant Attorney General                       Lizabeth A. Brady                            LLC (‘‘Newco’’), announced plans to
                                                 /s/ lllllllllllllllllll                                 Chief, Multistate Antitrust Enforcement,     form a new Joint Venture (‘‘JV’’) to which
                                                 Gene I. Kimmelman (DC Bar #358534)                      Antitrust Division, PL–01, The Capitol,      Comcast and GE will contribute
                                                 Chief Counsel for Competition Policy and                Tallahassee, FL 32399–1050, Tel: (850) 414–  broadcast and cable network assets. As
                                                 Intergovernmental Relations                             3300, Fax: (850)488–9134, E-mail:            a result of the transaction, Comcast—the
                                                 /s/ lllllllllllllllllll                       
                                                                                                                                                      nation’s largest cable company—will
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                                                 Patricia A. Brink                                       For Plaintiff State of Missouri              have majority control of a JV holding
                                                 Director of Civil Enforcement                           /s/ lllllllllllllllllll highly valued video programming
                                                 /s/ lllllllllllllllllll                                 Chris Koster                                 needed by Comcast’s video distribution
                                                 Joseph J. Matelis (DC Bar #462199)                      Attorney General                             rivals to compete effectively.
                                                 Counsel to the Assistant Attorney General               Anne E. Schneider                               The United States filed a civil
                                                 /s/ lllllllllllllllllll                                 Assistant Attorney General/Antitrust Counsel antitrust Complaint on January 18, 2011,
                                                 Nancy M. Goodman                                        Andrew M. Hartnett                           seeking to enjoin the proposed
                                                 Chief                                                   Assistant Attorney General                   transaction because its likely effect

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                                                                               Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices                                             5447

                                                 would be to lessen competition                          proposed Final Judgment also contains                  collected from video programming
                                                 substantially in the market for timely                  provisions to prevent Defendants from                  distributors.
                                                 distribution of professional, full-length               interfering with an OVD’s ability to
                                                                                                                                                                2. GE and NBCU
                                                 video programming to residential                        obtain content or deliver its services
                                                 customers (‘‘video programming                          over the Internet.                                        GE is a New York corporation with its
                                                 distribution’’) in major portions of the                   The proposed Final Judgment will                    principal place of business in Fairfield,
                                                 United States in violation of Section 7                 provide a prompt, certain, and effective               Connecticut. GE is a global
                                                 of the Clayton Act, 15 U.S.C. 18. The                   remedy for consumers by diminishing                    infrastructure, finance, and media
                                                 transaction would allow Comcast to                      Comcast’s ability to use the JV’s                      company. GE owns 88 percent of NBCU,
                                                 disadvantage its traditional competitors                programming to harm competition. The                   a Delaware corporation, headquartered
                                                 (direct broadcast satellite (‘‘DBS’’) and               United States and Defendants have                      in New York, New York. NBCU is
                                                 telephone companies (‘‘telcos’’) that                   stipulated that the proposed Final                     principally involved in the production,
                                                 provide video services), as well as                     Judgment may be entered after                          packaging, and marketing of news,
                                                 competing emerging online video                         compliance with the APPA. Entry of the                 sports, and entertainment programming.
                                                 distributors (‘‘OVDs’’). This loss of                                                                             NBCU wholly owns the NBC and
                                                                                                         proposed Final Judgment would
                                                 current and future competition likely                                                                          Telemundo broadcast networks, as well
                                                                                                         terminate this action, except that the
                                                 would result in lower-quality services,                                                                        as ten local NBC owned and operated
                                                                                                         Court would retain jurisdiction to
                                                 fewer choices, and higher prices for                                                                           television stations (‘‘O&Os’’), 16
                                                                                                         construe, modify, or enforce the
                                                 consumers, as well as reduced                                                                                  Telemundo O&Os, and one independent
                                                                                                         provisions of the proposed Final
                                                 investment and less innovation in this                                                                         Spanish language television station. In
                                                                                                         Judgment, and to punish and remedy
                                                 dynamic industry.                                                                                              addition, NBCU wholly owns national
                                                                                                         violations thereof.
                                                    On January 18, 2011, the Federal                                                                            cable programming networks—Bravo,
                                                 Communications Commission (‘‘FCC’’)                     II. Description of Events Giving Rise to               Chiller, CNBC, CNBC World, MSNBC,
                                                 adopted a Memorandum Opinion and                        the Alleged Violation                                  mun2, Oxygen, Sleuth, SyFy, and USA
                                                 Order relating to the foregoing                                                                                Network—and partially owns A&E
                                                                                                         A. Defendants, the Proposed
                                                 transaction.1 The FCC’s Order approved                                                                         Television Networks (including the
                                                                                                         Transaction, and the Department’s
                                                 the transaction subject to certain                                                                             Biography, History, and Lifetime cable
                                                 conditions.                                                                                                    networks), The Weather Channel, and
                                                    Under the proposed Final Judgment                    1. Comcast                                             ShopNBC.
                                                 filed by the United States Department of                                                                          NBCU also owns Universal Pictures,
                                                                                                            Comcast is a Pennsylvania                           Focus Films, and Universal Studios,
                                                 Justice simultaneously with this
                                                                                                         corporation headquartered in                           which produce films for theatrical and
                                                 Competitive Impact Statement and
                                                 explained more fully below, Defendants                  Philadelphia, Pennsylvania. It is the                  digital video disk (‘‘DVD’’) release, as
                                                 will be required, among other things, to                largest cable company in the nation,                   well as content for NBCU’s and other
                                                 license the JV’s programming to                         with approximately 23 million video                    companies’ broadcast and cable
                                                 Comcast’s emerging OVD competitors in                   subscribers. Comcast is also the largest               programming networks. NBCU produces
                                                 certain circumstances. When                             Internet service provider (‘‘ISP’’), with              approximately three-quarters of the
                                                 Defendants and OVDs cannot reach                        over 16 million subscribers. Comcast                   original primetime programming shown
                                                 agreement on the terms and conditions                   also wholly owns national cable                        on the NBC broadcast network and the
                                                 of the license, the aggrieved OVD may                   programming networks, including E!                     USA cable network, NBCU’s two
                                                 apply to the Department for permission                  Entertainment, G4, Golf, Style, and                    highest-rated networks. In addition to
                                                 to submit its dispute to commercial                     Versus, and has partial ownership                      its programming assets, NBCU owns
                                                 arbitration under the proposed Final                    interests in Current Media, MLB                        several theme parks and digital assets,
                                                 Judgment. The FCC Order contains a                      Network, NHL Network, PBS KIDS                         such as In 2009, NBCU
                                                 similar provision. For so long as                       Sprout, Retirement Living Television,                  had total revenues of $15.4 billion.
                                                 commercial arbitration is available for                 and TV One. In addition, Comcast has                      NBCU also is a founding partner and
                                                 the resolution of such disputes in a                    controlling and partial interests in                   32 percent owner of Hulu, LLC,
                                                 timely manner under the FCC’s rules                     regional sports networks (‘‘RSNs’’).2                  currently one of the most successful
                                                 and orders, the Department will                         Comcast also owns digital properties                   OVDs. Hulu is a joint venture between
                                                 ordinarily defer to the FCC’s                           such as,                                NBCU, News Corp., The Walt Disney
                                                 commercial arbitration process to             , and Fancast, its online                  Company, and a private equity investor.
                                                 resolve such disputes. However, the                     video Web site. In 2009, Comcast                       Each of the media partners has
                                                 Department reserves the right, in its sole              reported total revenues of $36 billion.                representation on the Hulu Board,
                                                 discretion, to permit arbitration under                 Over 94 percent of Comcast’s revenues,                 possesses management rights, and
                                                 the proposed Final Judgment to advance                  or $34 billion, were derived from its                  licenses content for Hulu to deliver over
                                                 the Final Judgment’s competitive                        cable business, including $19 billion                  the Internet.
                                                 objectives. In addition, the Department                 from video services, $8 billion from
                                                 may seek relief from the Court to                       high-speed Internet services, and $1.4                 3. The Proposed Transaction
                                                 address violations of any provisions of                 billion from local advertising on                         On December 3, 2009, Comcast, GE,
                                                 the proposed Final Judgment. The                        Comcast’s cable systems. In contrast,                  NBCU, and Newco, entered into a
                                                                                                         Comcast’s cable programming networks                   Master Agreement (‘‘Agreement’’),
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                                                   1 Memorandum Opinion and Order, In re                 earned only about $1.5 billion in                      whereby Comcast agreed to pay $6.5
                                                 Applications of Comcast Corp., General Electric Co.     revenues from advertising and fees                     billion in cash to GE, and Comcast and
                                                 and NBC Universal, Inc. for Consent to Assign
                                                 Licenses and Transfer Control of Licensees, FCC MB                                                             GE each agreed to contribute certain
                                                 Docket No. 10–56 (adopted Jan. 18, 2011). Under           2 Comcast owns Comcast SportsNet (‘‘CSN’’) Bay       assets to the JV. Specifically, GE agreed
                                                 the Communications Act, the FCC has jurisdiction        Area, CSN California, CSN Mid-Atlantic, CSN New        to contribute all of the assets of NBCU,
                                                 to determine whether mergers involving the transfer     England, CSN Northwest, CSN Philadelphia, CSN
                                                 of a telecommunications license are in the ‘‘public     Southeast, and CSN Southwest, and holds partial
                                                                                                                                                                including its interest in Hulu, and the
                                                 interest, convenience, and necessity.’’ 47 U.S.C.       ownership interests in CSN Chicago, SportsNet          12 percent interest in NBCU that GE
                                                 310(d).                                                 New York, and The Mtn.                                 does not own but has agreed to purchase

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                                                 5448                          Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices

                                                 from Vivendi SA. Comcast agreed to                      research. The Department also                          distribution, studios have experimented
                                                 contribute all its cable programming                    consulted extensively with the FCC to                  with different windows for film
                                                 assets, including its national                          ensure that the agencies conducted their               distribution over the past several years.
                                                 programming networks, its RSNs, and                     reviews in a coordinated and
                                                                                                                                                                2. Programming Networks
                                                 some digital properties, but not its cable              complementary fashion and created
                                                 systems or its Internet video service,                  remedies that were both comprehensive                     Networks aggregate content to provide
                                                 Fancast. As a result of the content                     and consistent.                                        a 24-hour service that is attractive to
                                                 contributions and cash payment by                                                                              consumers. The most popular networks,
                                                                                                         B. The Video Programming Industry                      by far, are the four broadcast networks.3
                                                 Comcast, Comcast will own 51 percent
                                                 of the JV, and GE will retain a 49                         NBCU and Comcast are participants                   However, cable networks have grown in
                                                 percent interest. The JV will be managed                in the video programming industry, in                  popularity and number, and at the end
                                                 by a separate Board of Directors                        which content is produced and                          of 2009 there were an estimated 600
                                                 consisting initially of three Comcast-                  distributed to viewers through their                   national, plus another 100 regional,
                                                 designated directors and two GE-                        television sets or, increasingly, through              cable programming networks.
                                                 designated directors. Board decisions                   Internet-connected devices. Historically,
                                                                                                         the video programming industry has                     a. Broadcast Networks
                                                 will be made by majority vote.
                                                    The Agreement precludes Comcast                      had three different levels: content                       Owners of broadcast network
                                                 from transferring its interest in the JV                production, content aggregation or                     programming or broadcasters like NBCU
                                                 for a four-year period, and prohibits GE                networks, and distribution.                            license their broadcast networks either
                                                 from transferring its interest for three                                                                       to third-party television stations
                                                                                                         1. Content Production
                                                 and one-half years. Thereafter, either                                                                         affiliated with that network (‘‘network
                                                 party may sell its respective interest in                  Television production studios                       affiliates’’), or to their owned and
                                                 the JV, subject to Comcast’s right to                   produce television shows and                           operated television stations (‘‘O&Os’’).
                                                 purchase at fair market value any                       coordinate how, when, and where their                  The network affiliates and O&Os
                                                 interest that GE proposes to sell.                      content is licensed in order to maximize               distribute the broadcast network feeds
                                                 Additionally, three and one-half years                  revenues. They usually license to                      over the air (‘‘OTA’’) to the public and
                                                 after closing, GE will have the right to                broadcast and cable networks the right                 also retransmit them to video
                                                 require the JV to redeem 50 percent of                  to show a program first (i.e., the first-run           programming distributors, such as cable
                                                 GE’s interest and, after seven years, GE                rights). Content producers also license                companies and DBS providers, which in
                                                 will have the right to require the JV to                their content for subsequent ‘‘windows’’               turn distribute the feeds to their
                                                 redeem all of its remaining interest. If                such as syndication (e.g., licensing                   subscribers.
                                                 GE elects to exercise its first right of                series to broadcast and cable networks                    Under the Cable Television Consumer
                                                 redemption, Comcast will have the                       after the first run of the programming),               Protection and Competition Act of 1992
                                                 contemporaneous right to purchase the                   as well as for DVD distribution, video                 (‘‘1992 Cable Act’’), Public Law 102–
                                                 remainder of GE’s ownership interest                    on demand (‘‘VOD’’), and pay per view                  385, 106 Stat. 1460 (1992), broadcast
                                                 once a purchase price is determined. If                 (‘‘PPV’’) services. For example, the                   television stations, whether network
                                                 GE does not exercise its first redemption               television show House is produced by                   affiliates or O&Os, may elect to obtain
                                                 right, Comcast will have the right to buy               NBCU, licensed for its first run on the                ‘‘retransmission consent’’ from a
                                                 50 percent of GE’s initial ownership                    FOX broadcast network and then rerun                   programming distributor, in which case
                                                 interest five years after closing and all               on the USA Network, a cable network                    a distributor negotiates with a station for
                                                 of GE’s remaining ownership interest                    owned by NBCU. These content licenses                  the right to carry the station’s
                                                 eight years after closing. It is expected               often include ancillary rights such as                 programming for agreed-upon terms.
                                                 that Comcast ultimately will own 100                    the right to offer some programming on                 Alternatively, stations may elect ‘‘must
                                                 percent of the JV.                                      demand.                                                carry’’ status and demand carriage but
                                                                                                            Historically, first-run licenses were               without compensation. Stations
                                                 4. The Department’s Investigation                       reserved for one of the four major                     affiliated with the four major broadcast
                                                    The Department opened an                             broadcast networks (ABC, CBS, NBC,                     networks and the networks’ O&Os have
                                                 investigation soon after the JV was                     and FOX), followed by broadcast                        elected retransmission consent.
                                                 announced and conducted a thorough                      syndication and, ultimately, cable                     Historically, these stations negotiated
                                                 and comprehensive review of the video                   syndication. Over the past several years,              for non-monetary compensation (e.g.,
                                                 programming distribution industry and                   however, content owners have begun to                  carriage of new cable channels owned
                                                 the potential implications of the                       license their content for first run on                 by the broadcaster) in exchange for
                                                 transaction. The Department                             cable networks and distribution over the               retransmission consent. Today, most
                                                 interviewed more than 125 companies                     Internet on either a catch-up (e.g., next              broadcast stations seek retransmission
                                                 and individuals involved in the                         day) or syndicated (e.g., next season)                 consent fees based on the number of
                                                 industry, obtained testimony from                       basis.                                                 subscribers to the cable, DBS, or telco
                                                 Defendants’ officers, required                             In addition to producing content for                service distributing their content.4 Less
                                                 Defendants to provide the Department                    television and cable networks, NBCU
                                                 with responses to numerous questions,                   produces and distributes first-run                        3 The four largest broadcast networks attract 8 to
                                                 reviewed over one million business                      movies through Universal Pictures,                     12 million viewers each, whereas the most popular
                                                 documents from Defendants’ officers                     Universal Studios, and Focus Films.                    cable networks typically attract approximately 2
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                                                 and employees, obtained and reviewed                    Typically, producers distribute movies                 million viewers each. SNL Kagan, Economics of
                                                                                                                                                                Basic Cable Networks 43 (2009); The Nielsen
                                                 tens of thousands of third-party                        to theaters before releasing them on                   Company, Snapshot of Television Use in the U.S.
                                                 documents, obtained and extensively                     DVD, then license them to VOD/PPV                      2 (Sept. 2010),
                                                 analyzed large volumes of industry                      providers, then to premium cable                       wp-content/uploads/2010/09/Nielsen-State-of-TV-
                                                 financial and economic data, consulted                  channels (e.g., Home Box Office                        09232010.pdf.
                                                                                                                                                                   4 In the past, NBCU negotiated the retransmission
                                                 with industry and economic experts,                     (‘‘HBO’’)), then to regular cable                      rights only for its O&Os, but recently it has made
                                                 organized product demonstrations, and                   channels, and finally to broadcast                     efforts to obtain the rights from its network affiliates
                                                 conducted independent industry                          networks. As with television                           to negotiate retransmission consent agreements on

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                                                                               Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices                                                      5449

                                                 popular broadcast networks generally                    expanded basic, digital) with different                 and Cablevision Corp., have purchased
                                                 elect must carry status, although                       quality levels (e.g., standard definition,              or launched their own cable networks.
                                                 recently they also have begun to                        HD, 3D), and employ different business                  This vertical integration of content and
                                                 negotiate retransmission payments.                      models (e.g., ad-supported,                             distribution was one reason for the
                                                 Despite these retransmission payments,                  subscription).                                          passage of Section 19 of the 1992 Cable
                                                 broadcast stations earn the majority of                 a. Multichannel Video Programming                       Act, 47 U.S.C. 548. Pursuant to the Act,
                                                 their revenues from local advertising                   Distributors                                            Congress directed the FCC to
                                                 sales. The broadcast networks earn most                                                                         promulgate rules that place restrictions
                                                 of their revenues from national                            Traditional video programming                        on how cable programmers affiliated
                                                 advertising sales.                                      distributors include incumbent cable                    with a cable company deal with
                                                                                                         companies, DBS providers, cable                         unaffiliated distributors. These
                                                 b. Cable Networks                                       overbuilders, also known as broadband                   ‘‘program access rules’’ were designed
                                                    Popular cable networks include                       service providers (‘‘BSPs,’’ such as                    to prevent vertically integrated cable
                                                 ESPN, USA, MTV, CNN, and Bravo.                         RCN), and telcos. These distributors are                companies from refusing to provide
                                                 Cable networks typically derive roughly                 referred to as multichannel video                       popular programming to their
                                                 one half of their revenues from licensing               programming distributors (‘‘MVPDs’’),                   competitors. The rules prohibit both the
                                                 fees paid by video programming                          and typically offer hundreds of channels                cable company and a cable network
                                                 distributors and the other half from                    of professional video programming to                    owned by it from engaging in unfair acts
                                                 advertising fees. Generally, a distributor              residential customers for a fee.                        and practices, including: (1) Entering
                                                 pays an owner of cable networks a                       b. Online Video Programming                             into exclusive agreements to distribute
                                                 monthly per-subscriber fee that may                     Distributors                                            the cable network; (2) selling the cable
                                                 vary based upon the number of                                                                                   network to the cable company’s
                                                 subscribers served by the distributor,                     OVDs are relatively recent entrants
                                                                                                                                                                 competitors on discriminatory terms
                                                 the programming packages in which the                   into the video programming distribution
                                                                                                                                                                 and conditions; and (3) unduly
                                                 program is included, the percentage of                  market. They deliver a variety of on-
                                                                                                                                                                 influencing the cable network in
                                                 the distributor’s subscribers receiving                 demand professional, full-length video
                                                                                                                                                                 deciding to whom, and on what terms
                                                 the programming, and other factors.                     programming over the Internet, whether
                                                                                                                                                                 and conditions, to sell its
                                                 Typically, the popularity or ratings of a               streamed to Internet-connected
                                                                                                                                                                 programming.6 The FCC program access
                                                 network’s programming affects the                       televisions or other devices, or
                                                                                                                                                                 rules do not apply to online distribution
                                                 ability of a content owner to negotiate                 downloaded for later viewing. Hulu,
                                                                                                                                                                 or to retransmission of broadcast station
                                                 higher license fees. In addition to the                 Netflix, Amazon, and Apple are
                                                 right to carry the network, a distributor               examples of OVDs, although the content
                                                 of the cable network often receives two                 delivered and business model used                       C. The Market for Video Programming
                                                 to three minutes of advertising time per                varies greatly among them.                              Distribution in the United States
                                                                                                            Unlike MVPDs, OVDs do not own
                                                 hour on the network for sale to local                                                                             The relevant product market affected
                                                                                                         distribution facilities and are dependent
                                                 businesses (e.g., car dealers). A                                                                               by this transaction is the market for
                                                                                                         upon ISPs for the delivery of their
                                                 distributor also may receive marketing                                                                          timely distribution of professional, full-
                                                                                                         content to viewers. Therefore, the future
                                                 payments or discounts to encourage                                                                              length video programming to residential
                                                                                                         growth of OVDs depends, in part, on
                                                 wider distribution of the programming.                                                                          customers (‘‘video programming
                                                                                                         how quickly ISPs expand and upgrade
                                                 In the case of a completely new cable                                                                           distribution’’). Professionally produced
                                                                                                         their broadband facilities and the
                                                 network, a programmer may pay a                                                                                 content is video programming that is
                                                                                                         preservation of their incentives to
                                                 distributor to carry the network or offer                                                                       created or produced by media and
                                                                                                         innovate and invest.5 The higher the
                                                 other discounts.                                                                                                entertainment companies using
                                                                                                         bandwidth available from the ISP, the
                                                                                                                                                                 professional equipment, talent, and
                                                 3. Video Programming Distribution                       greater the speed and the better the
                                                                                                                                                                 production crews, and for which those
                                                    Video programming distributors                       quality of the picture delivered to an
                                                                                                                                                                 companies hold or maintain distribution
                                                 acquire the rights to transmit                          OVD’s users.
                                                                                                            ISPs’ management and pricing of                      and syndication rights. Video
                                                 professional (as opposed to user-                                                                               programming distribution is
                                                                                                         broadband services may also affect
                                                 generated videos such as those typically                                                                        characterized by the aggregation of
                                                                                                         OVDs. In particular, OVDs would be
                                                 seen on YouTube), full-length (as                                                                               professionally produced content
                                                                                                         harmed competitively if ISPs that are
                                                 opposed to clips) broadcast and cable                                                                           consisting of entire episodes of shows
                                                                                                         also MVPDs (e.g., cable companies,
                                                 programming networks or individual                                                                              and movies, rather than short clips. The
                                                                                                         telcos) were to impair or delay the
                                                 programs or movies, aggregate the                                                                               market for video programming
                                                                                                         delivery of video because OVDs pose a
                                                 content, and distribute it to their                                                                             distribution includes both MVPDs and
                                                                                                         threat to those MVPDs’ traditional video
                                                 subscribers or users. This content                                                                              OVDs.
                                                                                                         programming distribution businesses.
                                                 includes live programming, sports, and
                                                                                                         Because Comcast is the country’s largest                1. Traditional Video Programming
                                                 general entertainment programming
                                                                                                         ISP, an inherent conflict exists between                Distribution
                                                 from a variety of broadcast and cable
                                                                                                         Comcast’s provision of broadband
                                                 networks and from movie studios, and                                                                              Cable companies first began operating
                                                                                                         services to its customers, who may use
                                                 can be viewed either on demand or as                                                                            in the 1940s and initially were granted
                                                                                                         this service to view video programming
                                                 scheduled in a broadcast or cable                                                                               exclusive franchises to serve local
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                                                                                                         provided by OVDs, and its desire to
                                                 network’s linear stream. Video                                                                                  communities. Although they now face
                                                                                                         continue to sell them MVPD services.
                                                 programming distributors offer various                                                                          competition, the incumbent cable
                                                                                                            Growth of OVDs also will depend, in
                                                 packages of content (e.g., basic,                                                                               companies continue to serve a dominant
                                                                                                         part, on their ability to acquire
                                                                                                         programming from content producers.
                                                 their behalf. NBCU also may seek to renegotiate its                                                                6 47 CFR 76.1001–76.1002. The prohibition on

                                                 agreements with its affiliates to obtain a share of     Some cable companies, such as Comcast                   exclusivity sunsets in October 2012, unless
                                                 any retransmission consent fees the affiliates are                                                              extended by the FCC pursuant to a rulemaking. Id.
                                                 able to command.                                          5 See   discussion infra Section II.C.2.b.            § 76.1002(c)(6).

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                                                 share of subscribers in most areas. In the              about 45 percent of households                         Internet to televisions is expected to
                                                 mid-1990s, DirecTV and DISH Network                     nationwide, with nearly half of those                  grow from $2 billion in 2009 to over $17
                                                 began to offer competing services using                 households (23 million) subscribing to                 billion in 2014.9
                                                 small satellite dishes installed on                     at least one Comcast service.                            One reason for the dramatic growth of
                                                 consumers’ homes. Around the same                       Competitive effects also may be felt in                online distribution is the increased
                                                 time, cable overbuilders began building                 other areas because Comcast’s                          consumer interest in on-demand
                                                 their own wireline networks in order to                 competitors serve territories outside its              viewing, especially among younger
                                                 compete with the incumbent cable                        cable footprint. If Comcast can                        viewers who have grown up with the
                                                 operator and offer video, high-speed                    disadvantage these rivals, for example                 Internet, and are accustomed to viewing
                                                 Internet, and telephony services—the                    by raising their costs, competition will               video at a time and on a device of their
                                                 ‘‘triple-play.’’ More recently, Verizon                 be reduced everywhere these                            choosing.10 In response to competition
                                                 and AT&T entered the market with their                  competitors provide service reflecting                 by OVDs, MVPDs increasingly are
                                                 own video distribution services, also                   these higher costs. Thus, the potential                offering more on-demand choices.
                                                 offering the triple-play. Competition                   anticompetitive effects of the                         a. OVD Business Models and
                                                 from these video programming                            transaction could extend to almost all                 Participants
                                                 distributors encouraged incumbent                       Americans.
                                                 cable operators across the country to                      The incumbent cable companies often                    Recognizing the enormous potential
                                                 upgrade their systems and offer many                    dominate any particular market and                     of OVDs, dozens of companies are
                                                 more video programming channels, as                     typically hold well over 50 percent                    innovating and experimenting with
                                                 well as the triple-play. Further                        market shares within their franchise                   products and services that either
                                                 innovations have included digital video                 areas. For example, Comcast has market                 distribute online video programming or
                                                 recorders (‘‘DVRs’’) that allow                         shares of 64 percent in Philadelphia, 62               facilitate such distribution. New
                                                 consumers to record programming and                     percent in Chicago, 60 percent in                      developments, products, and models are
                                                 view it later, and VOD services that                    Miami, and 58 percent in San Francisco                 announced on almost a daily basis by
                                                 enable viewers to watch broadcast or                    (based on MVPD subscribers).                           companies seeking to satisfy consumer
                                                 cable network programming or movies                     Combined, the DBS providers account                    demand. A number of companies are
                                                 on demand at the consumer’s                             for approximately 31 percent of video                  committing significant resources to this
                                                 convenience for a limited time.                         programming subscribers nationwide,                    industry.
                                                    A consumer purchasing video                          although their shares vary and may be                     OVDs provide content using a variety
                                                 programming distribution services                       lower in any particular local market.                  of different business models. Some offer
                                                 selects from those distributors offering                Although AT&T and Verizon have had                     content on an ad-supported basis
                                                 such services directly to that consumer’s               great success and achieved penetration                 pursuant to which consumers pay
                                                 home. The DBS operators—DirecTV and                     (i.e., the percentage of households to                 nothing. One firm using this model is
                                                 DISH—can reach almost any consumer                      which a provider’s service is available                Hulu, which aggregates primarily
                                                 who lives in the continental United                     that actually buys its service) as high as             current-season broadcast content from
                                                 States and has an unobstructed line of                  40 percent in the selected communities                 NBC, FOX, ABC, and others. Hulu has
                                                 sight to the DBS operators’ satellites.                 they have entered, they currently have                 experienced substantial growth since its
                                                 However, wireline cable distributors,                   limited expansion plans. Overbuilders                  launch in 2008, reaching 39 million
                                                 such as Comcast and Verizon, generally                  serve an even smaller portion of the                   unique viewers by February 2010.11
                                                 must obtain a franchise from local or                                                                             Netflix has pursued a different
                                                                                                         United States.
                                                 state authorities to construct and                                                                             business model. It initially offered DVDs
                                                 operate a wireline network in a specific                2. Competition From OVDs                               delivered by mail and then added
                                                 area, and can build lines only to the                      OVDs are relatively recent entrants                 unlimited streaming of a limited library
                                                 homes in that area. A consumer cannot                   into the video programming distribution                of content over the Internet for a
                                                 purchase video programming                              market. Their services are available to                monthly subscription fee. Netflix has
                                                 distribution services from a wireline                   any consumer with high-speed Internet                  expanded its online library and
                                                 distributor operating outside its area                  service sufficient to receive video of an              introduced an Internet-only
                                                 because that firm does not have the                     acceptable quality. OVDs have increased                subscription service. Netflix content
                                                 facilities to reach the consumer’s home.                substantially the amount of full-length                primarily consists of relatively recent
                                                 Consequently, although the set of video                 professional content they distribute                   movies, older movies, and past-season
                                                 programming distributors able to offer                  online. Viewership of video content                    television shows. Netflix recently
                                                 service to individual consumers’                        distributed over the Internet has grown                announced a deal with premium cable
                                                 residences generally is the same within                 enormously and is expected to continue                 network EPIX for access to more movie
                                                 each local community, that set differs                  to grow. The number of adult Internet
                                                 from one local community to another                     users who watch full-length television
                                                                                                                                                                  9 Robert Briel, Faster growth for web-to-TV video,

                                                 and can even vary within a local                                                                               Broadband TV News (Aug. 17, 2010), http://
                                                                                                         shows online is expected to increase         
                                                 community. The markets for video                        from 41.1 million in 2008 to 72.2                      growth-for-web-to-tv-video.
                                                 programming distribution therefore are                  million in 2011.7 The total number of                    10 See R. Thomas Umstead, Younger Viewers
                                                 local.                                                  unique U.S. viewers of video who watch                 Watching More TV on the Web, Multichannel News
                                                    The geographic markets relevant to                                                                          (Apr. 12, 2010),
                                                                                                         full-length television shows online grew               article/451376–Younger_Viewers_Watching_More_
                                                 this transaction are the numerous local
                                                                                                         21 percent from 2008 to 2009.8 OVD
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                                                                                                                                                                Television_On_The_Web.php (survey of more than
                                                 markets throughout the United States
                                                                                                         revenues also have increased                           1,000 people shows 23 percent under the age of 25
                                                 where Comcast is the incumbent cable                                                                           watch most of their television online).
                                                                                                         dramatically. Revenue associated with
                                                 operator and where Comcast through                                                                               11 Press Release, comScore Releases February
                                                                                                         video content delivered over the
                                                 the JV will be able to withhold NBCU                                                                           2010 U.S. Online Video Rankings, Hulu Viewer
                                                 programming from, or raise                                                                                     Engagement Up 120 percent vs. Year Ago to 2.4
                                                                                                           7 Reaching Online Video Viewers with Long-Form
                                                                                                                                                                Hours of Video per Viewer in February (Apr. 13,
                                                 programming costs to, Comcast’s rival                   Content, (July 26, 2010), http://        2010),
                                                 distributors. Comcast service areas cover                  Press_Releases/2010/4/comScore_February
                                                 50 million U.S. television households or                  8 Id.                                                _2010_U.S._Online_Video_Rankings.

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                                                                               Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices                                              5451

                                                 content that it will distribute over the                ability to obtain popular content, its                    The development of the video
                                                 Internet.12 Netflix also has grown                      ability to protect the licensed content                programming distribution market—and
                                                 substantially in the last several years,                from piracy, its financial strength, and               in particular the success of OVDs—may
                                                 from 7.5 million subscribers at the end                 its technical capabilities to deliver high-            influence any future analysis of
                                                 of 2007 to 16.9 million in the third                    quality content. Moreover, as noted                    consolidation in this market. Such
                                                 quarter of 2010.13                                      previously, OVDs’ future competitive                   analysis would follow standard merger
                                                   Apple also is experimenting with                      significance depends, in part, on robust               evaluation principles and consider not
                                                 different business models for video                     broadband capacity. Accordingly, the                   only the role of OVDs, but also factors
                                                 programming distribution. For several                   competitive significance of OVDs is                    such as the extent to which the merging
                                                 years it has offered content on an                      fostered by protecting broadband                       firms’ offerings are close substitutes and
                                                 electronic sell-through (‘‘EST’’) basis                 providers’ economic incentives to                      compete directly. In this case,
                                                 through its Apple iTunes Store.                         upgrade and improve their broadband                    Defendants’ own assessments—as
                                                 Customers pay a per-transaction fee to                  infrastructure, and obtain fair returns on             reflected in numerous internal
                                                 buy television shows and movies and                     that investment.                                       documents and their executives’
                                                 download them onto various electronic                      Today, some consumers regard OVDs                   testimony—of the importance of OVDs
                                                 devices (e.g., iPod). Apple recently                    as acceptable substitutes for at least a               and their potential to alter dramatically
                                                 announced a service that allows                         portion of their traditional video                     the existing competitive landscape are
                                                 consumers to rent television content on                 programming distribution services.                     particularly important to determining
                                                 a per-transaction basis (e.g., $0.99 per                These consumers buy smaller content                    the relevant product market.
                                                 show) and view it for a limited time.                   packages from traditional distributors,                c. Comcast’s and Other MVPDs’
                                                 Other major companies are offering or                   decline to take certain premium                        Reactions to the Growth of OVDs
                                                 planning to offer OVD services.14                       channels, or purchase fewer VOD
                                                   b. The Impact of OVDs                                 offerings, and instead watch that                         Comcast and other MVPDs recognize
                                                   Some of these OVD products and                        content online, a practice known as                    the threat posed to their video
                                                 services undoubtedly will be viewed by                  ‘‘cord-shaving.’’ A small but growing                  distribution business from the growth of
                                                 consumers as closer substitutes for                     number of MVPD customers are also                      OVDs. Many internal documents reflect
                                                 MVPD services than others. The extent                   ‘‘cutting the cable cord’’ completely in               Comcast’s assessment that OVDs are
                                                 to which an OVD service has the                         favor of OVDs. These customers may                     growing quickly and pose a competitive
                                                 potential to become a better substitute                 rely on an individual OVD or may view                  threat to traditional forms of video
                                                 for MVPD service will depend on a                       video content from a number of OVDs                    programming distribution. In response
                                                 number of factors, such as the OVD’s                    (e.g., Hulu ad-supported service, Netflix              to this threat, Comcast has taken
                                                                                                         subscription service, Apple EST service)               significant steps to improve the quality
                                                   12 Netflix, Inc., Q3 10 Management’s commentary
                                                                                                         as a replacement for their MVPD                        of Fancast, its own Internet video
                                                 and financial highlights, at 2 (Oct. 20, 2010),                                                                service. Among other things, Comcast
                                                 available at              service.
                                                 downloads/NFLX/1118542273x0x411049/                        When measured by the number of                      has attempted to obtain additional—and
                                                 157a4bc4-4cad-4d7b-9496-b59006d73344/                   customers who are cord-shaving or                      at times exclusive—content from
                                                                                                         cord-cutting, OVDs currently have a de                 programmers, and has made Fancast’s
                                                 27s%20commentary%20and%20%20highlights.                                                                        user interface easier to navigate.
                                                 pdf.                                                    minimis share of the video programming
                                                   13 Netflix, Inc., Form 10–K at 32 (Feb. 22, 2010);    distribution market. Their current                     Comcast also has increased the quality
                                                 Press Release, Netflix, Inc. Netflix Announces Q3       market share, however, greatly                         and quantity of the VOD content it
                                                 2010 Financial Results, at 1 (Oct 20, 2010),
                                                                                                         understates their potential competitive                offers as an adjunct to its traditional
                                                 available at                                                                     cable service.
                                                 downloads/NFLX/1118542273x0x411037/                     significance in this market. Whether
                                                 5a757dd5-b423-40d7-bb60-3418356e582e/                   viewers buy individual or a                               In addition, Comcast has created and
                                                 3Q10_Earnings_Release.pdf.                              combination of OVD services, OVDs are                  implemented an ‘‘authentication’’
                                                   14 For example, Google recently launched
                                                                                                         likely to continue to develop into better              system that enables its existing cable
                                                 GoogleTV, a device that enables viewers                                                                        subscribers to view some video content
                                                 simultaneously to search the Internet and their         substitutes for MVPD video services.
                                                 MVPD service for content, and to switch back and        Evolving consumer demand, improving                    over the Internet if the subscriber
                                                 forth on their televisions between content delivered    technology (e.g., higher Internet access               already pays for and receives the same
                                                 over the Internet and content delivered by their        speeds, better compression technologies                content from Comcast through its
                                                 MVPD. Press Release, Google, Industry Leaders                                                                  traditional cable service. Internal
                                                 Announce Open Platform to Bring Web to TV (May          to improve picture quality, improved
                                                 20, 2010),         digital rights management to combat                    documents expressly acknowledge that
                                                 pressrel/20100520_googletv.html. Walmart recently       piracy), the increased choice of viewing               ‘‘authentication’’ is Comcast’s and other
                                                 acquired VUDU, an OVD service, and is making            devices, and advertisers’ increasing                   MVPDs’ attempt to counter the
                                                 content available for EST and rental to VUDU-                                                                  perceived threat posed by OVDs.
                                                 enabled devices. Press Release, Walmart Announces       willingness to place their ads on the
                                                 Acquisition of Digital Entertainment Provider,          Internet likely will make OVDs stronger                   Comcast’s and other MVPDs’
                                                 VUDU (Feb. 22, 2010), http://www.walmartstores.         competitors to MVPDs for an increasing                 reactions to the emergence of OVDs
                                                 com/pressroom/news/9661.aspx. Amazon is                 number of viewers.15                                   demonstrate that they view OVDs as a
                                                 reportedly developing an OVD service that allows                                                               future competitive threat and are
                                                 Amazon service subscribers to stream television
                                                 and movie content over the Internet. Nick Wingfield        15 Historically, OTA distribution of broadcast      adjusting their investment decisions
                                                 & Sam Schechner, No Longer Tiny, Netflix Gets           network content has not served as a significant        today in response to that threat. Because
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                                                 Respect—and Creates Fear, Wall St. J. (Dec. 6,          competitive constraint on MVPDs because of the         OVDs today affect MVPDs’ decisions,
                                                 2010),            limited number of channels offered. In addition,       they are appropriately treated as
                                                 424052748704493004576001781352962132.html.              OTA distribution likely will not expand in the
                                                 Sears and Kmart recently announced the launch of        future because no new broadcast networks are
                                                                                                                                                                participants in the market. Market
                                                 an online video store, called Alphaline, which sells    likely to be licensed for distribution. Thus, OTA is   definition considers future substitution
                                                 and rents movies and television shows. Paul Bond,       unlikely to become a more significant video            patterns, and the investment decisions
                                                 Sears, Kmart launch Alphaline online video              programming distributor. By contrast, OVDs are         of MVPDs are strong evidence of market
                                                 store,Reuters (Dec. 30, 2010), http://                  expanding rapidly and have the potential to provide
                                                        increased and more innovative viewing options in
                                                                                                                                                                participants’ view of the increased
                                                 101230.                                                 the future.                                            likelihood of consumer substitution

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                                                 5452                          Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices

                                                 between MVPD and OVD services.16                         has led at least one noted commentator                    SyFy—also are highly rated and valued
                                                 This effect on investment is significant                 to argue that restraints on innovation                    by their audiences.
                                                 and could be diminished or even lost                     ‘‘very likely produce a far greater                          The proposed transaction would give
                                                 altogether if Comcast, through the JV,                   amount of economic harm than classical                    Comcast, through the JV, control of an
                                                 acquires the ability to delay or deter the               restraints on competition,’’ and thus                     important portfolio of current and
                                                 development of OVDs.                                     deserve special attention.18 By quashing                  library content. The ratings of each
                                                                                                          or delaying the progress of rivals that                   NBCU network are based on the
                                                 D. The Anticompetitive Effects of the
                                                                                                          attempt to introduce new products and                     popularity of the particular slate of
                                                 Proposed Transaction
                                                                                                          technologies, the merged firm could                       shows currently on that network and
                                                    Antitrust law, including Section 7 of                 slow the pace of innovation in the                        can increase or decrease significantly
                                                 the Clayton Act, protects consumers                      market and thus harm consumers.19                         from one television season to the next
                                                 from anticompetitive conduct, such as                                                                              based on the gain or loss of hit shows.
                                                 firms’ acquisition of the ability to raise               1. The Importance of Access to NBCU
                                                                                                          Content                                                   NBCU also has the ability to switch
                                                 prices above levels that would prevail in                                                                          programming from one network to
                                                 a competitive market. It also ensures                       Generally, programmers want to                         another, or otherwise make popular
                                                 that firms do not acquire the ability to                 distribute their content in multiple ways                 content from one network available to
                                                 stifle innovation. Vertical mergers are                  to maximize viewers’ exposure to the                      another. Through the JV, Comcast
                                                 those that occur between firms at                        content and the impact of any                             would gain the ability to impair
                                                 different stages of the chain of                         advertising revenues. Likewise,                           emerging OVD competition by
                                                 production and distribution. Vertical                    distributors must be able to license a                    withholding or raising the prices of
                                                 mergers have the potential to harm                       sufficient quantity and quality of                        individual NBCU shows, or of linear
                                                 competition by changing the merged                       content to create a compelling video                      feeds of one or more NBCU cable or
                                                 firm’s ability or incentives to deal with                programming service. A distributor also                   broadcast networks. It is reasonable to
                                                 upstream or downstream rivals. For                       must gain access to a sufficient variety                  examine the competitive impact of
                                                 example, the merger may give the                         of content from different sources. This                   withholding NBCU content in the
                                                 vertically integrated entity the ability to              ‘‘aggregation’’ of a variety of content is                aggregate, rather than analyzing the
                                                 establish or protect market power in a                   important to a distributor’s ability to                   value of any individual show or
                                                 downstream market by denying or                          succeed.                                                  network to a competitor, because an
                                                 raising the price of an input to                            NBCU content is extremely valuable
                                                                                                                                                                    aggregate withholding strategy would
                                                 downstream rivals that a stand-alone                     to video programming distributors. NBC
                                                                                                                                                                    have the greatest impact on Comcast’s
                                                 upstream firm otherwise would sell to                    is one of the original three broadcast
                                                                                                                                                                    downstream rivals.
                                                 those downstream firms. The merged                       networks and has decades of history and
                                                 firm may find it profitable to forego the                brand name recognition. It carries                        2. The Proposed Transaction Increases
                                                 benefits of dealing with its rivals in                   general interest content that appeals to                  the JV’s Incentive and Ability To Harm
                                                 order to hobble them as competitors to                   a wide variety of viewers. Surveys                        Competitors
                                                 its own downstream operations.                           routinely rank the NBC network as one                     a. Ability and Incentive To Harm Rival
                                                    A merged firm can more readily harm                   of the top four of all broadcast and cable
                                                 competition when its rivals offer new                    networks. Similarly, NBCU’s USA
                                                 products or technologies whose                           Network is highly valued and has been                        If the proposed transaction is
                                                 competitive potential is evolving.                       rated the top cable network for four of                   approved, Comcast through the JV will
                                                 Nascent competitors may be relatively                    the past five years. Many of NBCU’s                       gain control of NBCU’s content,
                                                 easy to quash. For example, denying an                   other networks—Bravo, CNBC, MSNBC,                        including a substantial amount of
                                                 important input, such as a popular                                                                                 valuable broadcast and cable
                                                 television show, to a nascent competitor                 Property § 1 (Apr. 1995), available at http://            programming. Competing MVPDs will
                                                 with a small customer base is much less
                                                                                                        be forced to obtain licenses for NBCU
                                                                                                          (‘‘The antitrust laws promote innovation and
                                                 costly in terms of foregone revenues                     consumer welfare by prohibiting certain actions
                                                                                                                                                                    content from their rival, Comcast.
                                                 than denying that same show to a more                    that may harm competition with respect to either          Unlike a stand-alone programmer,
                                                 established rival with a larger customer                 existing or new ways of serving consumers.’’); see        Comcast’s pricing and distribution
                                                                                                          also 19A Phillip E. Areeda et al., Antitrust Law, ¶       decisions will take into account the
                                                 base. Even if a vertical merger only                     1902a (2d ed. 2005) (‘‘Our capitalist economic
                                                 delays nascent competition, an increase                  system places a very strong value on competition,
                                                                                                                                                                    impact of those decisions on the
                                                 in the duration of a firm’s market power                 not only to reduce costs but also to innovate new         competitiveness of rival MVPDs. As a
                                                 can result in significant competitive                    products and processes.’’).                               result, Comcast will have a strong
                                                 harm. The application and enforcement
                                                                                                             18 Herbert Hovenkamp, Restraints on Innovation,
                                                                                                                                                                    incentive to disadvantage its
                                                                                                          29 Cardozo L. Rev. 247, 253–54, 260 (2007) (‘‘[N]o        competitors by denying them access to
                                                 of antitrust law is appropriate in such                  one doubts [the] basic conclusion that innovation
                                                 situations because promoting                             and technological progress very likely contribute         valuable programming or raising their
                                                 innovation is one of its important                       much more to economic growth than policy                  licensing fees above what a stand-alone
                                                 goals.17 The crucial role of innovation
                                                                                                          pressures that drive investment and output toward         NBCU would have found it profitable to
                                                                                                          the competitive level.’’); see also 4B Phillip E.         charge.
                                                                                                          Areeda et al., Antitrust Law, ¶ 407a (3d ed. 2007);
                                                    16 Cf. U.S. Dep’t of Justice & Fed. Trade Comm’n,     Willow A. Sheremata, Barriers to innovation: a               A stand-alone programmer typically
                                                 Horizontal Merger Guidelines § 5.2 (Aug. 19, 2010),      monopoly, network externalities, and the speed of         attempts to maximize the combined
                                                 available at          innovation, 42 Antitrust Bull. 937, 938 (1997) (‘‘‘[I]n   license fee and advertising revenues
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                                                 guidelines/hmg-2010.html (‘‘However, recent or           the long run it is dynamic performance that counts.’      from its programming by making its
                                                 ongoing changes in market conditions may indicate        The speed of innovation is important to social
                                                 that the current market share of a particular firm       welfare.’’ (quoting F.M. Scherer & David Ross,            content available in multiple ways. The
                                                 either understates or overstates the firm’s future       Industrial Market Structure & Economic                    JV would continue to value widespread
                                                 competitive significance. The Agencies consider          Performance 613 (3d ed. 1990))).                          distribution of NBCU content, but it also
                                                 reasonably predictable effects or ongoing changes in        19 See Sheremata, supra note 18, at 944 (‘‘When
                                                                                                                                                                    would likely consider how access to
                                                 market conditions when calculating and                   owners of current technology raise artificial barriers
                                                 interpreting market share data.’’).                      to entry of new technology, opportunities for
                                                                                                                                                                    that content makes Comcast’s MVPD
                                                    17 U.S. Dep’t of Justice & Fed. Trade Comm’n,         innovation decline to the detriment of                    rivals better competitors. This could
                                                 Antitrust Guidelines for the Licensing of Intellectual   consumers.’’).                                            lead the JV to withhold content

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                                                                               Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices                                             5453

                                                 altogether or, more likely, to insist on                Comcast’s subscription fees are higher                 willing to experiment with different
                                                 higher fees for the NBCU content from                   in Philadelphia than in comparable                     methods of online distribution. It was a
                                                 Comcast’s MVPD competitors. Whether                     markets. This appears to have been a                   driving force behind the creation and
                                                 Comcast’s rival MVPDs refuse to                         profitable strategy for Comcast because                success of Hulu, and is now a partner
                                                 purchase the programming or agree to                    the overall benefit to its cable business              in, and major content contributor to, the
                                                 pay the higher fees, Comcast would                      of retaining subscribers seems to have                 recently launched Hulu Plus, a
                                                 benefit from weakening its MVPD rivals.                 outweighed the substantial losses                      subscription version of Hulu. Prior to
                                                 Likewise, high licensing fees charged to                associated with failing to earn licensing              the JV announcement, NBCU entered
                                                 other MVPDs and OVDs will also                          fees for the withheld RSN from DBS                     into several contracts with OVDs to
                                                 induce customers to switch to (or stay                  companies.                                             distribute its content online through
                                                 with) Comcast. These higher licensing                      Post-transaction, Comcast’s rival                   Apple iTunes and Amazon, and on a
                                                 fees will be reflected either in higher                 MVPDs would realize that, unlike the                   subscription basis through Netflix.
                                                 subscriber fees or, in the case of MVPDs                stand-alone NBCU, the JV will set                      Allowing the JV to proceed removes
                                                 building alternative cable distribution                 higher licensing fees for NBCU that take               NBCU content from the control of a
                                                 infrastructures, a smaller level of                     into consideration Comcast’s business                  company that supported the
                                                 investment and, consequently, a smaller                 profits. Some MVPDs might find it                      development of OVDs and places it in
                                                 coverage area for the MVPD competing                    unprofitable to carry the programming                  the control of a company that views
                                                 with Comcast. In either case, higher                    at the prices the JV could command.                    OVDs as a serious competitive threat.
                                                 licensing fees will reduce pricing                      Other MVPDs might agree to the JV’s                      Finally, Comcast, through the JV,
                                                 pressure on Comcast’s MVPD business                     increased prices for the NBCU content                  would gain control of NBCU’s
                                                 and increase its ability to raise prices to             given the likelihood that they would                   governance rights and 32 percent
                                                 its subscribers.                                        lose a large number of their subscribers               ownership interest in Hulu, a current
                                                    By disadvantaging competitors in this                if they did not carry the NBCU content.                and future competitor to Comcast’s
                                                 manner, Comcast through the JV will                        Lowering the profitability of                       MVPD services. Hulu has achieved
                                                 cause some of its rivals’ customers to                  Comcast’s MVPD rivals also would                       significant success since its launch in
                                                 seek an alternative MVPD provider.                      weaken the incentives of some existing                 early 2008.
                                                 Many of these dissatisfied customers                    and future entrants to build out their                   Each of the media partners in Hulu,
                                                 likely will become Comcast subscribers,                 systems, especially in areas Comcast                   including NBCU, contributes content to
                                                 making it profitable for Comcast and the                currently serves, weakening the                        Hulu and holds three seats on Hulu’s
                                                 JV to increase licensing fees above the                 competitive constraints faced by                       Board of Directors. Significantly, any
                                                 stand-alone NBCU levels. Those                          Comcast. This weakened state of                        important or strategic decisions by Hulu
                                                 increased fees likely will lead to higher               competition would allow Comcast, in                    require the unanimous approval of all
                                                 prices for subscribers of other MVPDs                   turn, to decrease its investments and                  members of the Board. Comcast’s
                                                 and perhaps further migration by those                  innovation to improve its own offerings.               acquisition of NBCU’s interest in Hulu
                                                 subscribers to Comcast.                                 Higher subscription fees for Comcast                   would give it the ability to hamper
                                                    Licensing disputes in which a major                  services or decreased investment in                    Hulu’s strategic and competitive
                                                 broadcast network has pulled a network                  improving their quality are less likely to             development by refusing to agree to
                                                 signal from an MVPD have resulted in                    induce customer switching to Comcast’s                 major actions by Hulu, or by blocking
                                                 the MVPD’s loss of significant numbers                  MVPD rivals where those rivals are                     Hulu’s access to NBCU content.
                                                 of subscribers to its competitors.                      unable to match its programming or
                                                                                                                                                                3. How the Formation of the JV Changes
                                                 Through the formation of the JV,                        prices. As a result, Comcast could
                                                                                                                                                                Comcast’s Incentives and Abilities
                                                 Comcast gains the rights to negotiate on                reinforce and even increase its
                                                 behalf of the seven O&Os that operate in                dominant market share of video                            Post-transaction, the JV would gain
                                                 areas where it is the dominant cable                    programming distribution in all areas of               increased bargaining leverage sufficient
                                                 company. It also becomes the owner of                   the country in which it operates.                      to negotiate higher prices or withhold
                                                 the NBC network, which may give it                                                                             NBCU content from Comcast’s MVPD
                                                 leverage to seek the rights to negotiate                b. Incentive and Ability To Harm OVDs                  competitors. Comcast’s rival distributors
                                                 on behalf of NBCU’s NBC network                            Comcast, through the JV, also could                 would have to pay the increased prices
                                                 affiliate television stations, or at least              discriminate against competing OVDs in                 or not carry the programming. In either
                                                 the ability to influence affiliate                      similar ways, thereby diminishing the                  case, the MVPDs likely would be less
                                                 negotiations, for retransmission consent                competitive threat posed by individual                 effective competitors to Comcast, and
                                                 rights in other areas of the United                     OVDs and impeding the development of                   Comcast would be able to delay or
                                                 States. Comcast, through the JV, can                    OVDs, generally. The JV could charge                   otherwise substantially impede the
                                                 withhold or raise the price of the NBC                  OVDs higher content fees than the                      development of OVDs as alternatives to
                                                 network to its rivals, thereby causing                  stand-alone NBCU would have charged,                   MVPDs.
                                                 customers to shift away from the rival.                 or impose different terms for NBCU                        All of these activities could have a
                                                 Other NBCU programming also is                          content than Comcast negotiates for                    substantial anticompetitive effect on
                                                 important to consumers, and similar                     itself. The JV also could withhold NBCU                consumers and the market. Because
                                                 switching behavior could result if the JV               content completely, thereby                            Comcast would face less competition
                                                 were to withhold it from Comcast’s rival                diminishing OVDs’ ability to compete                   from other video programming
                                                 MVPDs.                                                  for video programming distribution                     distributors, it would be less
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                                                    Comcast has engaged in such                          customers, again to Comcast’s benefit.                 constrained in its pricing decisions and
                                                 strategies in the past. For example,                    Either situation could delay                           have a reduced incentive to innovate.
                                                 Comcast has withheld its RSN in                         significantly the development of OVDs                  As a result, consumers likely would be
                                                 Philadelphia in order to discriminate                   as a competitive alternative to                        forced to pay higher prices to obtain
                                                 against, and thereby disadvantage, DBS                  traditional video programming                          their video content or receive fewer
                                                 providers against which Comcast                         distribution services.                                 benefits of innovation. They also would
                                                 competes in that city. The DBS                             Over the last several years, NBCU has               have fewer choices in the types of
                                                 providers’ market shares are lower and                  been one of the content providers most                 content and providers to which they

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                                                 5454                           Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices

                                                 would have access, and there would be                     5. Any Efficiencies Arising From the                  efficiencies associated with this
                                                 lower levels of investment, less                          Deal Are Negligible or Not Merger-                    transaction would be sufficient to undo
                                                 experimentation with new models of                        Specific                                              the competitive harm that otherwise
                                                 delivering content, and less diversity in                    The Department considers expected                  would result from the JV.
                                                 the types and range of product offerings.                 efficiencies in determining whether to                III. Explanation of the Proposed Final
                                                 4. Entry Is Unlikely To Reverse the                       challenge a vertical merger. The                      Judgment
                                                 Anticompetitive Effects of the JV                         potential anticompetitive harms from a
                                                                                                                                                                    The proposed Final Judgment ensures
                                                                                                           proposed transaction are balanced
                                                                                                                                                                 that Comcast, through the JV, will not
                                                    Over the last decade, Comcast and                      against the asserted efficiencies of the
                                                                                                                                                                 impede the development of emerging
                                                 other traditional video distributors                      transaction. The evidence does not
                                                                                                                                                                 online video distribution competition
                                                 benefited from an industry with limited                   show substantial efficiencies from the
                                                                                                                                                                 by denying access to the JV’s content to
                                                 competition and increasing prices,20 in                   transaction.
                                                                                                              In particular, the JV is unlikely to               such competitors. The proposed Final
                                                 part because successful entry into the                                                                          Judgment also contains provisions that
                                                 traditional video programming                             achieve substantial savings from the
                                                                                                           elimination of double marginalization.                protect Comcast’s traditional video
                                                 distribution business is difficult and                                                                          distribution competitors. The proposed
                                                 requires an enormous investment to                        Double marginalization occurs when
                                                                                                           two independent companies at different                Final Judgment thereby protects
                                                 create a distribution infrastructure such                                                                       consumers by eliminating the likely
                                                 as building out wireline facilities or                    points in a product’s supply chain each
                                                                                                           extract a profit margin above marginal                anticompetitive effects of the proposed
                                                 obtaining spectrum and launching                                                                                transaction.
                                                                                                           cost. Because each firm in the supply
                                                 satellites. Accordingly, additional entry
                                                                                                           chain treats the other firm’s price (in               A. The Proposed Final Judgment
                                                 into wireline or DBS distribution is not
                                                                                                           lieu of its marginal cost) as a cost of               Protects Emerging Online Video
                                                 likely in the foreseeable future.21 Telcos
                                                                                                           producing the final good, each firm                   Competition
                                                 have been willing to incur some of the                    finds it profitable to produce a lower
                                                 enormous costs to modify their existing                   output than the firms would have                      1. The Proposed Final Judgment Ensures
                                                 telephone infrastructure to distribute                    produced had they accurately accounted                That OVDs Have Access to the JV’s
                                                 video, but only in certain areas, and                     for the social cost of producing the                  Video Programming
                                                 they have recently indicated that further                 output. This ultimately results in a                     The proposed Final Judgment requires
                                                 expansion will be limited for the                         lower output (and a higher price to                   the JV to license its broadcast, cable,
                                                 foreseeable future.22                                     consumers) than would have occurred if                and film content to OVDs on terms
                                                    OVDs, therefore, represent the most                    the product had been produced by a                    comparable to those in similar licensing
                                                 likely prospect for successful                            combined firm. Despite a higher price,                arrangements with MVPDs or OVDs. It
                                                 competitive entry into the existing video                 the lower output from double                          provides two options through which an
                                                 programming distribution market.                          marginalization ultimately results in                 OVD will be able to obtain the JV’s
                                                 However, they face the difficulty of                      lower total profits for the entire supply             content.
                                                 obtaining access to a sufficient amount                   chain.                                                   Under the first option, set forth in
                                                 of content to become viable distribution                     Vertical mergers often are                         Section IV.A of the proposed Final
                                                 businesses. In addition, OVDs rely upon                   procompetitive because they enable the                Judgment, the JV must license linear
                                                 the infrastructure of others, including                   merged firm to properly account for                   feeds of video programming to any
                                                 Comcast, to deliver service to their                      costs when determining output and                     requesting OVD on terms that are
                                                 customers. After the JV is formed,                        setting a final product price. The                    economically equivalent to the terms on
                                                 Comcast will control some of the most                     combined firm no longer treats the                    which the JV licenses that programming
                                                 significant content needed by OVDs to                     profit of the other firm as part of the cost          to MVPDs. Subject to some exceptions,
                                                 successfully position themselves as a                     of production. Because the combined                   the JV must make available to an OVD
                                                 replacement for traditional video                         firm faces lower marginal costs, it may               any channel or bundle of channels, and
                                                                                                           find it profitable to expand output and               all quality levels and VOD rights, it
                                                 distribution providers.
                                                                                                           reduce the final product price. Lower                 provides to any MVPD with more than
                                                    20 See, e.g., Report on Cable Industry Prices, In re
                                                                                                           marginal costs may result in better                   one million subscribers.
                                                 Implementation of Section 3 of the Cable Television       service, greater product quality or                      The terms of the JV’s license with the
                                                 Consumer Protection and Competition Act of 1992,          innovation, or other improvements.                    OVD need not match precisely any
                                                 24 F.C.C.R. 259, ¶ 2 & chart 1 (rel. Jan. 16, 2009),         In certain industries, however,                    existing license between the JV and the
                                               including the one at issue here, vertical             MVPD, but it must reasonably
                                                 DA-09-53A1.pdf (data showing price of expanded
                                                 basic service increased more than three times the
                                                                                                           mergers are far less likely to reduce or              approximate, in the aggregate, an
                                                 consumer price index (CPI) between 1995 and               eliminate double marginalization.                     existing licensing agreement. That
                                                 2008).                                                    Documents, data, and testimony                        approximation must account for factors,
                                                    21 Similarly, it is unlikely that an entrant would
                                                                                                           obtained from Defendants and third                    such as advertising revenues and any
                                                 attempt to provide a traditional MVPD service with        parties demonstrate that much, if not                 technical and economic limitations of
                                                 wireless technology, particularly given the
                                                 difficulty in acquiring spectrum and the costs and        all, of any potential double                          the OVD seeking a license.
                                                 risks of constructing such a system. See generally        marginalization is reduced, if not                       The first option ensures that the JV
                                                 U.S. Dep’t of Justice, Ex Parte Submission, In re         completely eliminated, through the                    will not be able to use its control of
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                                                 Economic Issues in Broadband Competition, A               course of contract negotiations between               content to impede competitive pressure
                                                 National Broadband Plan for our Future, FCC GN
                                                 Docket No. 09–51, at 8–11 (filed Jan. 4, 2010),           programmers and distributors over                     exerted on traditional forms of video
                                                 available at           quantity and penetration discounts,                   programming distribution from OVDs
                                                 comments/_.htm.                                           tiering requirements, and other explicit              that choose to offer linear channels and
                                                    22 See, e.g., Transcript, Verizon at Credit Suisse
                                                                                                           and verifiable conditions.                            associated VOD content. The proposed
                                                 Group Global Media and Communications
                                                 Conference, at 11 (Mar. 8, 2010), available at
                                                                                                              Other efficiencies claimed by Comcast              Final Judgment uses Defendants’ own
                                       ;              are not specific to this transaction or not           contracts with MVPDs, including
                                                 20100308_transcript.pdf.                                  verifiable, or both. It is unlikely that the          MVPDs that do not compete with

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                                                 Comcast, as proxies for the content and                 with the FCC in designing effective                    increased competitive pressure on
                                                 terms the JV would be willing to                        relief in this case. For so long as                    Comcast’s cable business. If the
                                                 provide to distributors if it did not have              commercial arbitration is available for                proposed transaction were to be
                                                 the incentive or ability to disadvantage                resolution of disputes in a timely                     consummated without conditions,
                                                 them in order to maintain customers in                  manner under the FCC’s rules and                       Defendants would hold seats on Hulu’s
                                                 or drive customers to Comcast’s service.                orders, the Department will ordinarily                 Board of Directors and could exercise
                                                    Under the second option, set forth in                defer to the FCC’s commercial                          their voting and other governance rights
                                                 Section IV.B, the proposed Final                        arbitration process to resolve such                    to compromise strategic and competitive
                                                 Judgment requires the JV to license to an               disputes. OVDs are nascent competitors,                initiatives Hulu may wish to pursue.
                                                 OVD, broadcast, cable, or film content                  however, and consistent with the                       Requiring Defendants to relinquish their
                                                 comparable in scope and quality to the                  Department’s competition law                           voting and governance rights in Hulu,
                                                 content the OVD receives from one of                    enforcement mandate, the Department                    and barring access to competitively
                                                 the JV’s programming peers. For                         reserves the right, in its sole discretion,            sensitive information, will prevent
                                                 example, if an OVD receives each                        to permit arbitration pursuant to Section              Comcast, through the JV, from
                                                 episode of five primetime television                    VII to advance the competitive                         interfering with Hulu’s competitive and
                                                 series from CBS for display in a                        objectives of the proposed Final                       strategic plans.
                                                 subscription VOD service within 48                      Judgment. Although the Department                         At the same time, NBCU should not
                                                 hours of the original airing, the JV must               may seek enforcement of the Final                      be permitted to abandon its
                                                 provide the OVD a comparable set of                     Judgment through traditional judicial                  commitments to provide Hulu video
                                                 NBC broadcast television programs, as                   process, the arbitration process will                  programming under agreements
                                                 measured by volume and economic                         help ensure that OVDs can obtain                       currently in place and deny Hulu
                                                 value, for display during the same                      content from the JV at a competitive                   customers the value of the JV’s content.
                                                 subscription VOD window. The                            price, without involving the Department                Therefore, Section IV.G of the proposed
                                                 requirement applies to all JV content,                  or the Court in expensive and time-                    Final Judgment requires the JV to
                                                 even non-NBCU content, in order to                      consuming litigation.23 To support the                 continue to supply Hulu with content
                                                 ensure that the JV cannot undermine the                 proposed Final Judgment’s requirement                  commensurate with the supply of
                                                 purposes of the proposed Final                          that the JV license its programming to                 content provided to Hulu by its other
                                                 Judgment by shifting content from one                   OVDs and assist the Department’s                       media owners.
                                                 network to another.                                     oversight of this nascent competition,
                                                    While the first option ensures that                                                                         3. The Proposed Final Judgment
                                                                                                         Comcast and NBCU are required,                         Prohibits Defendants From
                                                 Comcast, through the JV, will not                       pursuant to Sections IV.M and IV.N, to
                                                 disadvantage OVD competitors in                                                                                Discriminating Against, Retaliating
                                                                                                         maintain copies of agreements the JV                   Against, or Punishing Video
                                                 relation to MVPDs, the second option
                                                                                                         has with any OVD as well as the                        Programmers and OVDs
                                                 ensures that the programming licensed
                                                                                                         identities of any OVD that has requested                  The proposed Final Judgment protects
                                                 by the JV to OVDs will reflect the
                                                                                                         video programming from the JV.                         the development of OVDs by prohibiting
                                                 licensing trends of its peers as the
                                                 industry evolves. Because the OVD                       2. The Proposed Final Judgment                         Defendants from engaging in certain
                                                 industry is still developing, the                       Prevents Comcast, Through the JV, From                 conduct that would deter video
                                                 contracts of the JV’s peers also provide                Adversely Affecting Hulu                               programmers and OVDs from
                                                 an appropriate benchmark for                                                                                   contracting with each other. Section V.A
                                                                                                           Section IV.D of the proposed Final
                                                 determining the terms and conditions                                                                           of the proposed Final Judgment
                                                                                                         Judgment requires Defendants to
                                                 under which content should be licensed                                                                         prohibits Defendants from
                                                                                                         relinquish their voting and other
                                                 to OVDs. The programming peers                                                                                 discriminating against, retaliating
                                                                                                         governance rights in Hulu, and Section
                                                 include the owners of the three major                                                                          against, or punishing any content
                                                                                                         IV.E prohibits them from receiving
                                                 non-NBC broadcast networks (CBS,                                                                               provider for providing programming to
                                                                                                         confidential or competitively sensitive
                                                 FOX, and ABC), the largest cable                                                                               any OVD. Section V.A also prohibits
                                                                                                         information concerning Hulu. As noted
                                                 network groups (including News                                                                                 Defendants from discriminating against,
                                                                                                         above, Hulu is one of the most
                                                 Corporation, Time Warner, Inc.,                                                                                retaliating against, or punishing any
                                                                                                         successful OVDs to date. Comcast has
                                                 Viacom, and The Walt Disney                                                                                    OVD for obtaining video programming,
                                                                                                         an incentive to prevent Hulu from
                                                 Company), and the six largest                                                                                  for invoking any provisions of the
                                                                                                         becoming an even more attractive
                                                 production studios (including News                                                                             proposed Final Judgment or any FCC
                                                                                                         avenue for viewing video programming
                                                 Corporation, Viacom, Sony Corporation                                                                          rule or order, or for furnishing
                                                 of America, Time Warner Inc., and The                   because Hulu would then exert
                                                                                                                                                                information to the Department
                                                 Walt Disney Company).                                     23 Under Section VI of the proposed Final            concerning Defendants’ compliance
                                                    If an OVD and the JV are unable to                   Judgment, Defendants are required to license only      with the proposed Final Judgment.
                                                 reach an agreement for carriage of the                  video programming subject to their management or
                                                 JV’s programming under either of these                  control or over which Defendants possess the power     4. The Proposed Final Judgment
                                                 options, an OVD may apply to the                        or authority to negotiate content licenses. NBCU has   Prohibits Defendants From Limiting
                                                 Department for permission to submit its                 management rights in The Weather Channel,              Distribution to OVDs Through
                                                                                                         including the right to negotiate programming           Restrictive Licensing Practices
                                                 dispute to commercial arbitration in                    contracts on its behalf. NBCU currently is not
                                                 accordance with Section VII of the                      exercising these rights. However, Section V.F             The proposed Final Judgment further
srobinson on DSKHWCL6B1PROD with NOTICES2

                                                 proposed Final Judgment. The FCC                        provides that if the JV exercises them or otherwise    protects the development of OVDs by
                                                                                                         influences The Weather Channel, this programming
                                                 Order requires the JV to license content                will be covered under the requirements of the
                                                                                                                                                                preventing Comcast from using its
                                                 on reasonable terms to OVDs and                         proposed Final Judgment. Similarly, Section V.E        influence either as the nation’s largest
                                                 includes an arbitration mechanism for                   exempts The Weather Channel, TV One, FearNet,          MVPD or as the licensor, through the JV,
                                                 resolution of disputes over access to                   the Pittsburgh Cable News Channel, and Hulu from       of important video programming to
                                                                                                         the definitions of ‘‘Defendants’’ and other related
                                                 programming. The FCC is the expert                      terms unless the Defendants gain control over those
                                                                                                                                                                enter into agreements containing
                                                 communications industry agency, and                     channels or the ability to negotiate or influence      restrictive contracting terms. Video
                                                 the Department worked very closely                      carriage contracts for those channels.                 programming agreements often grant

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                                                 5456                          Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices

                                                 licensees preferred or exclusive access                 hinder OVD development. If Comcast                     programming agreements that the JV’s
                                                 to the programming content for a                        could use exclusivity provisions to                    peers are able to offer OVDs, thereby
                                                 particular time period. Such exclusivity                prevent the JV’s peers from licensing                  hindering the development of OVDs.
                                                 provisions can be competitively neutral,                content to OVDs that otherwise would
                                                                                                                                                                5. The Proposed Final Judgment
                                                 but also can have either pro- or                        obtain the rights to offer the                         Prohibits Unreasonable Discrimination
                                                 anticompetitive purposes or effects.                    programming, other provisions of the                   in Internet Broadband Access
                                                 Sections V.B and V.C of the proposed                    proposed Final Judgment designed to
                                                 Final Judgment set forth broad                          preserve and foster OVD competition                       Section V.G of the proposed Final
                                                 prohibitions on restrictive contracting                 could be effectively nullified.                        Judgment requires Comcast to abide by
                                                 practices, including exclusives, but then                                                                      certain restrictions on the operation and
                                                                                                            The proposed Final Judgment strikes
                                                 delineate a narrowly tailored set of                                                                           management of its Internet facilities.
                                                                                                         a balance by allowing reasonable and
                                                 exceptions to those bans. These                                                                                Without these restrictions Comcast
                                                                                                         customary exclusivity provisions that
                                                 provisions ensure that Comcast, through                                                                        would have the ability and the incentive
                                                                                                         enhance competition while prohibiting
                                                 the JV, cannot use restrictive contract                                                                        to undermine the effectiveness of the
                                                                                                         those provisions that, without any
                                                 terms to harm the development of OVDs                                                                          proposed Final Judgment. Comcast is
                                                                                                         offsetting procompetitive benefits,
                                                 and, at the same time, preserve the JV’s                                                                       the dominant high-speed ISP in much of
                                                                                                         hinder the development of effective
                                                 incentives to produce and exploit                                                                              its footprint and therefore could
                                                                                                         competition from OVDs. Section V.B of
                                                 quality programming.                                                                                           disadvantage OVDs in ways that would
                                                                                                         the proposed Final Judgment prohibits                  prevent them from becoming better
                                                    The video programming distribution                   the JV from entering into any agreement
                                                 industry frequently uses exclusive                                                                             competitive alternatives to Comcast’s
                                                                                                         containing terms that forbid, limit, or                video programming distribution
                                                 contract terms that can be
                                                                                                         create economic incentives for the                     services. OVDs are dependent upon
                                                 procompetitive. For instance, as
                                                                                                         licensee to limit distribution of the JV’s             ISPs’ access networks to deliver video
                                                 discussed above, content producers
                                                                                                         video programming through OVDs,                        content to their subscribers. Without the
                                                 often sequence the release of their
                                                                                                         unless such terms are common and                       protections secured in the proposed
                                                 content to various distribution
                                                                                                         reasonable in the industry. Evidence of                Final Judgment, Comcast would have
                                                 platforms, a practice known as
                                                                                                         what is common and reasonable                          the ability, for instance, to give priority
                                                 ‘‘windowing.’’ These windows of
                                                                                                         industry practice includes, among other                to non-OVD traffic on its network, thus
                                                 exclusivity enable a content producer to
                                                                                                         things, Defendants’ contracting practices              adversely affecting the quality of OVD
                                                 maximize the revenues it earns on its
                                                 content by separating customers based                   prior to the date that the JV was                      services that compete with Comcast’s
                                                 on their willingness to pay and                         announced, as well as practices of the                 own MVPD or OVD services. Comcast
                                                 effectively increasing the price charged                JV’s video programming peers. This                     also would be able to favor its own
                                                 to the customers that place a higher                    provision allows the JV to employ those                services by not subjecting them to the
                                                 value on receiving content earlier.                     pricing and contractual strategies used                network management practices imposed
                                                 Exclusivity also encourages the various                 by its peers to maximize the value of the              on other services.
                                                 distributors, such as cable companies, to               content it produces, while limiting                       Section V.G.1 of the proposed Final
                                                 promote the content during a                            Comcast’s incentives, through the JV, to               Judgment prohibits Comcast from
                                                 distribution window by assuring the                     craft unusually restrictive contractual                unreasonably discriminating in the
                                                 distributor that the content will not be                terms in the JV’s contracts with third                 transmission of lawful traffic over its
                                                 available through other distribution                    parties, the purpose of which is to limit              Internet access service, with the proviso
                                                 channels at a lower price. This ability to              the access of OVDs to content produced                 that reasonable network management
                                                 price discriminate across types of                      by the JV. Section V.C of the proposed                 practices do not constitute unreasonable
                                                 customers and increase promotion of                     Final Judgment prohibits Comcast from                  discrimination. This provision requires
                                                 the content increases the profitability of              entering into or enforcing agreements                  Comcast to treat all Internet traffic the
                                                 producing quality programming and                       for carriage of video programming on its               same and, in particular, to ensure that
                                                 encourages the production of more high-                 cable systems that forbid, limit, or create            OVD traffic is treated no worse than any
                                                 quality programming than otherwise                      incentives that limit the provision of                 other traffic on Comcast’s Internet
                                                 would be the case. Exclusivity also may                 video programming to OVDs. Section                     access service, including traffic from
                                                 help a new competitor gain entry to a                   V.C establishes three narrow exceptions                Comcast and NBCU sites. Similarly,
                                                 market by encouraging users to try a                    to this broad prohibition. First, Comcast              Section V.G.2 prohibits Comcast from
                                                 service they would not otherwise                        may obtain a 30-day exclusive from free                excluding their own services from any
                                                 consider. For example, an OVD may                       online display if Comcast pays for the                 caps, tiers, metering, or other usage-
                                                 desire a limited exclusivity window in                  video programming. Second, Comcast                     based billing plans, and requires them
                                                 order to market its exclusive access to                 may enter into an agreement in which                   to ensure that OVD traffic is counted in
                                                 certain programming provided by its                     the programmer provides content                        the same way as Comcast’s traffic, and
                                                 service. This unique content makes the                  exclusively to Comcast, and to no other                that billing plans are not used to
                                                 service more attractive to consumers                    MVPD or OVD, for 14 days or less.                      disadvantage an OVD in favor of
                                                 and gives them a reason to replace their                Third, Comcast may condition carriage                  Comcast. Many high-speed Internet
                                                 existing service or try something new.                  of programming on its cable system on                  providers are evaluating usage-based
                                                    However, exclusivity restrictions also               terms which require it to be treated in                billing plans. These plans may more
                                                 can serve anticompetitive ends. As a                    material parity with other similarly                   efficiently apportion infrastructure costs
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                                                 cable company, Comcast has the                          situated MVPDs, except to the extent                   across users, offer lower-cost service to
                                                 incentive to seek exclusivity provisions                such terms would be inconsistent with                  low-volume subscribers, or divert high-
                                                 that would prevent content producers                    the purpose of the proposed Final                      volume usage to non-peak hours.
                                                 from licensing their content to                         Judgment. These provisions are                         However, these plans also have the
                                                 alternative distributors, such as OVDs,                 designed to ensure that Comcast, either                potential to increase the cost of high-
                                                 for a longer period than the content                    alone or in conjunction with the JV,                   volume services, such as video
                                                 producer ordinarily would find                          cannot use existing or new contracts to                distribution, that may compete with an
                                                 economically reasonable, in order to                    dictate the terms of the video                         MVPD’s video services. Section V.G.2

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                                                 addresses this concern by ensuring that                 B. The Proposed Final Judgment                          Comcast’s OVD competitors at a crucial
                                                 under these plans Comcast must treat                    Preserves Traditional Video                             point in their development but
                                                 other OVD services just as it treats its                Competition                                             otherwise short enough to account for
                                                 own Internet-based video services.                         A number of FCC orders issued in                     the rapidly evolving nature of the video
                                                                                                         prior mergers established a commercial                  distribution market.
                                                   Specialized Services are offered to
                                                 consumers over the same last-mile                       arbitration process for resolution of                   IV. Remedies Available to Potential
                                                 facilities as Internet access services, but             disputes over access to broadcast                       Private Litigants
                                                 are separate from the public Internet.                  network programming and regional
                                                                                                                                                                    Section 4 of the Clayton Act, 15
                                                 The potential benefits of Specialized                   sports networks. The FCC Order
                                                                                                                                                                 U.S.C. 15, provides that any person who
                                                 Services include the facilitation of                    approving this transaction requires the
                                                                                                                                                                 has been injured as a result of conduct
                                                                                                         JV to license all of its programming to
                                                 services that might not otherwise be                                                                            prohibited by the antitrust laws may
                                                                                                         MVPDs, including its cable networks,
                                                 technically or economically feasible on                                                                         bring suit in federal court to recover
                                                                                                         and includes an arbitration mechanism
                                                 current networks and the development                                                                            three times the damages the person has
                                                                                                         that contains several enhancements to
                                                 of new and innovative services, such as                                                                         suffered, as well as costs and reasonable
                                                                                                         its existing commercial arbitration
                                                 services that may compete directly with                                                                         attorneys’ fees. Entry of the proposed
                                                                                                         process when licensing disputes
                                                 Comcast’s own MVPD offerings. If                                                                                Final Judgment will neither impair nor
                                                                                                         between Defendants and other MVPDs
                                                 Comcast were to offer online video                                                                              assist the bringing of any private
                                                                                                         arise.24 The Department believes that
                                                 services through Specialized Services,                                                                          antitrust damage action. Under the
                                                                                                         these enhancements, combined with the
                                                 however, it could effectively avoid the                                                                         provisions of Section 5(a) of the Clayton
                                                                                                         FCC’s experience in MVPD arbitration
                                                 prohibitions in Sections V.G.1 and                                                                              Act, 15 U.S.C. 16(a), the proposed Final
                                                                                                         disputes, should protect MVPDs’ access
                                                 V.G.2. Sections V.G.3 and V.G.4                                                                                 Judgment has no prima facie effect in
                                                                                                         to the JV’s programming without need of
                                                                                                                                                                 any subsequent private lawsuit that may
                                                 recognize both the potential benefits                   another commercial arbitration
                                                                                                                                                                 be brought against Defendants.
                                                 and the risks of Specialized Services                   mechanism for MVPDs under this
                                                 and strike a balance to protect the                     proposed Final Judgment.                                V. Procedures Available for
                                                 beneficial development of these services                   In addition to the protections                       Modification of the Proposed Final
                                                 while preventing Comcast from using                     contained in the FCC Order, the                         Judgment
                                                 them anticompetitively to benefit its                   proposed Final Judgment, in Section                        The Department and Defendants have
                                                 own content. Section V.G.3 prohibits                    V.A, prohibits Defendants from                          stipulated that the proposed Final
                                                 Comcast from offering Specialized                       discriminating against, retaliating                     Judgment may be entered by the Court
                                                 Services that are comprised                             against, or punishing any MVPD for                      after compliance with the provisions of
                                                 substantially or entirely of the JV’s                   obtaining video programming, for                        the APPA, provided that the Department
                                                                                                         furnishing any information to the                       has not withdrawn its consent. The
                                                 content. Section V.G.4 requires Comcast
                                                                                                         United States about any noncompliance                   APPA conditions entry upon the Court’s
                                                 to allow any OVD access to a
                                                                                                         with the proposed Final Judgment, or                    determination that the proposed Final
                                                 Specialized Service if other OVDs,
                                                                                                         for invoking the arbitration provisions                 Judgment is in the public interest.
                                                 including Comcast, are being offered                    of the FCC Order. Section V.D also
                                                 access. Together, these two provisions                                                                             The APPA provides a period of at
                                                                                                         prevents Defendants from requiring or                   least 60 days preceding the effective
                                                 ensure that OVDs will have access to                    encouraging their local broadcast
                                                 any Specialized Service Comcast may                                                                             date of the proposed Final Judgment
                                                                                                         network affiliates to deny MVPDs the                    within which any person may submit to
                                                 offer that includes comparable services.                right to carry the local network signals.               the Department written comments
                                                   Finally, Section V.G.5 ensures that                   To aid the enforcement of this                          regarding the proposed Final Judgment.
                                                 Comcast will maintain its public                        prohibition, pursuant to Sections IV.J                  Any person who wishes to comment
                                                 Internet access service at a level that                 and IV.K, Comcast and NBCU are                          should do so within 60 days of the date
                                                 typically would allow any user on the                   required to maintain not only their                     of publication of this Competitive
                                                 network to download content from the                    network affiliate agreements, but also all              Impact Statement in the Federal
                                                 public Internet at speeds of at least 12                documents discussing whether any of                     Register, or the last date of publication
                                                 megabits per second in markets where it                 their affiliates has withheld or                        in a newspaper of the summary of this
                                                 has deployed DOCSIS 3.0. The                            threatened to withhold retransmission                   Competitive Impact Statement,
                                                 requirement to maintain service at this                 consent from any MVPD.                                  whichever is later. All comments
                                                 speed may be adjusted by the Court                      C. Term of the Proposed Final Judgment                  received during this period will be
                                                 upon a showing that other comparable                                                                            considered by the Department, which
                                                                                                           Section XI of the proposed Final
                                                 high-speed Internet access providers                                                                            remains free to withdraw its consent to
                                                                                                         Judgment provides that the Final
                                                 offer higher or lower speeds. These                                                                             the proposed Final Judgment at any
                                                                                                         Judgment will expire seven years from
                                                 speeds are sufficient to ensure that                                                                            time prior to the Court’s entry of
                                                                                                         the date of entry unless extended by the
                                                 Comcast’s Internet access services can                                                                          judgment. The comments and the
                                                                                                         Court. The FCC Order also lasts for
                                                 support the development of OVDs as                                                                              response of the Department will be filed
                                                                                                         seven years. The Department believes
                                                 well as other services that are                                                                                 with the Court and published in the
                                                                                                         this time period is long enough to
                                                 potentially competitive with Comcast’s                                                                          Federal Register.
                                                                                                         ensure that the JV cannot deny access to                   Written comments should be
                                                 own offerings.
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                                                                                                            24 For example, the FCC Order allows an MVPD
                                                                                                                                                                 submitted to: Nancy M. Goodman,
                                                   In interpreting Section V.G and the                                                                           Chief, Telecommunications and Media
                                                                                                         claimant to demand arbitration of programming on
                                                 terms used therein, the Department will                 a stand-alone basis in certain circumstances. It also   Enforcement Section, Antitrust
                                                 be informed by the FCC’s Report and                     allows a claimant whose contract with the JV has        Division, United States Department of
                                                 Order, In re Preserving the Open                        expired to continue to carry the JV’s programming       Justice, 450 Fifth Street, NW., Suite
                                                 Internet Broadband Industry Practices,                  during the pendency of the dispute, subject to a
                                                                                                         true-up. The FCC Order also contains further            7000, Washington, DC 20530.
                                                 GN Docket No. 90–191 & WC Docket No.                    modifications to the arbitration process relating to       The proposed Final Judgment
                                                 07–52, adopted December 21, 2010.                       smaller MVPDs.                                          provides that the Court retains

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                                                 jurisdiction over this action, and the                  Dist. LEXIS 84787, at *3 (D.D.C. Aug.                    determining whether a proposed
                                                 parties may apply to the Court for any                  11, 2009) (noting that the court’s review                settlement is in the public interest, a
                                                 order necessary or appropriate for the                  of a consent judgment is limited and                     district court ‘‘must accord deference to
                                                 modification, interpretation, or                        only inquires ‘‘into whether the                         the government’s predictions about the
                                                 enforcement of the Final Judgment.                      government’s determination that the                      efficacy of its remedies, and may not
                                                                                                         proposed remedies will cure the                          require that the remedies perfectly
                                                 VI. Alternatives to the Proposed Final                                                                           match the alleged violations.’’ SBC
                                                                                                         antitrust violations alleged in the
                                                 Judgment                                                                                                         Comm., 489 F. Supp. 2d at 17; see also
                                                                                                         complaint was reasonable, and whether
                                                    The United States considered, as an                  the mechanisms to enforce the final                      Microsoft, 56 F.3d at 1461 (noting the
                                                 alternative to the proposed Final                       judgment are clear and manageable.’’).                   need for courts to be ‘‘deferential to the
                                                 Judgment, seeking preliminary and                       See generally United States v. SBC                       government’s predictions as to the effect
                                                 permanent injunctions against                           Comm., Inc., 489 F. Supp. 2d 1 (D.D.C.                   of the proposed remedies’’); United
                                                 Defendants’ transaction and proceeding                  2007) (assessing public interest standard                States v. Archer-Daniels-Midland Co.,
                                                 to a full trial on the merits. The United               under the Tunney Act).25                                 272 F. Supp. 2d 1, 6 (D.D.C. 2003)
                                                 States is satisfied, however, that the                     As the United States Court of Appeals                 (noting that the court should grant ‘‘due
                                                 relief in the proposed Final Judgment                   for the District of Columbia Circuit has                 respect to the government’s prediction
                                                 will preserve competition for the                       held, under the APPA a court considers,                  as to the effect of proposed remedies, its
                                                 provision of video programming                          among other things, the relationship                     perception of the market structure, and
                                                 distribution services in the United                     between the remedy secured and the                       its views of the nature of the case’’).
                                                 States. Thus, the proposed Final                        specific allegations set forth in the                       Courts have greater flexibility in
                                                 Judgment would protect competition as                   government’s complaint, whether the                      approving proposed consent decrees
                                                 effectively as would any remedy                         decree is sufficiently clear, whether                    than in crafting their own decrees
                                                 available through litigation, but avoids                enforcement mechanisms are sufficient,                   following a finding of liability in a
                                                 the time, expense, and uncertainty of a                 and whether the decree may positively                    litigated matter. ‘‘[A] proposed decree
                                                 full trial on the merits.                               harm third parties. Microsoft, 56 F.3d at                must be approved even if it falls short
                                                                                                         1458–62. With respect to the adequacy                    of the remedy the court would impose
                                                 VII. Standard of Review Under the                                                                                on its own, as long as it falls within the
                                                 APPA for the Proposed Final Judgment                    of the relief secured by the decree, a
                                                                                                         court may not ‘‘engage in an                             range of acceptability or is ‘within the
                                                   The Clayton Act, as amended by the                    unrestricted evaluation of what relief                   reaches of public interest.’’’ United
                                                 APPA, requires that proposed consent                    would best serve the public.’’ United                    States v. Am. Tel. & Tel. Co., 552 F.
                                                 judgments in antitrust cases brought by                 States v. BNS, Inc., 858 F.2d 456, 462                   Supp. 131, 151 (D.D.C. 1982) (citations
                                                 the United States be subject to a sixty-                (9th Cir. 1988) (citing United States v.                 omitted) (quoting United States v.
                                                 day comment period, after which the                     Bechtel Corp., 648 F.2d 660, 666 (9th                    Gillette Co., 406 F. Supp. 713, 716 (D.
                                                 court shall determine whether entry of                  Cir. 1981)); see also Microsoft, 56 F.3d                 Mass. 1975)), aff’d sub nom. Maryland
                                                 the proposed Final Judgment ‘‘is in the                 at 1460–62; United States v. Alcoa, Inc.,                v. United States, 460 U.S. 1001 (1983);
                                                 public interest.’’ 15 U.S.C. 16(e)(1). In               152 F. Supp. 2d 37, 40 (D.D.C. 2001);                    see also United States v. Alcan
                                                 making that determination, the court, in                InBev, 2009 U.S. Dist. LEXIS 84787, at                   Aluminum Ltd., 605 F. Supp. 619, 622
                                                 accordance with the statute as amended                  *3. Courts have held that:                               (W.D. Ky. 1985) (approving the consent
                                                 in 2004, is required to consider:                                                                                decree even though the court might
                                                                                                         [t]he balancing of competing social and                  have imposed a greater remedy if the
                                                    (A) the competitive impact of such                   political interests affected by a proposed
                                                 judgment, including termination of alleged                                                                       matter had been litigated). To meet this
                                                                                                         antitrust consent decree must be left, in the
                                                 violations, provisions for enforcement and              first instance, to the discretion of the                 standard, the Department ‘‘need only
                                                 modification, duration of relief sought,                Attorney General. The court’s role in                    provide a factual basis for concluding
                                                 anticipated effects of alternative remedies             protecting the public interest is one of                 that the settlements are reasonably
                                                 actually considered, whether its terms are              insuring that the government has not                     adequate remedies for the alleged
                                                 ambiguous, and any other competitive                    breached its duty to the public in consenting            harms.’’ SBC Comm., 489 F. Supp. 2d at
                                                 considerations bearing upon the adequacy of             to the decree. The court is required to                  17.
                                                 such judgment that the court deems                      determine not whether a particular decree is                Moreover, the court’s role under the
                                                 necessary to a determination of whether the             the one that will best serve society, but
                                                 consent judgment is in the public interest;
                                                                                                                                                                  APPA is limited to reviewing the
                                                                                                         whether the settlement is ‘‘within the reaches           remedy in relationship to the violations
                                                 and                                                     of the public interest.’’ More elaborate
                                                    (B) the impact of entry of such judgment                                                                      that the United States has alleged in its
                                                                                                         requirements might undermine the
                                                 upon competition in the relevant market or              effectiveness of antitrust enforcement by
                                                                                                                                                                  Complaint, and does not authorize the
                                                 markets, upon the public generally and                  consent decree.                                          court to ‘‘construct [its] own
                                                 individuals alleging specific injury from the                                                                    hypothetical case and then evaluate the
                                                 violations set forth in the complaint                   Bechtel, 648 F.2d at 666 (emphasis                       decree against that case.’’ Microsoft, 56
                                                 including consideration of the public benefit,          added) (citations omitted).26 In                         F.3d at 1459; see also InBev, 2009 U.S.
                                                 if any, to be derived from a determination of                                                                    Dist. LEXIS 84787, at *20 (‘‘[T]he
                                                 the issues at trial.                                      25 The 2004 amendments substituted ‘‘shall’’ for

                                                                                                         ‘‘may’’ in directing relevant factors for court to
                                                                                                                                                                  ‘public interest’ is not to be measured by
                                                 15 U.S.C. 16(e)(1)(A), (B). In considering              consider and amended the list of factors to focus on     comparing the violations alleged in the
                                                 these statutory factors, the court’s                    competitive considerations and to address                complaint against those the court
                                                 inquiry is necessarily a limited one as                 potentially ambiguous judgment terms. Compare 15         believes could have, or even should
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                                                 the government is entitled to ‘‘broad                   U.S.C. 16(e) (2004), with 15 U.S.C. 16(e)(1) (2006);
                                                                                                         see also SBC Comm., 489 F. Supp. 2d at 11
                                                                                                                                                                  have, been alleged.’’). Because the
                                                 discretion to settle with the defendant                 (concluding that the 2004 amendments ‘‘effected          ‘‘court’s authority to review the decree
                                                 within the reaches of the public                        minimal changes’’ to Tunney Act review).
                                                 interest.’’ United States v. Microsoft                    26 Cf. BNS, 858 F.2d at 464 (holding that the          picture not hypercritically, nor with a microscope,
                                                 Corp., 56 F.3d 1448, 1461 (DC Cir.                      court’s ‘‘ultimate authority under the [APPA] is         but with an artist’s reducing glass’’). See generally
                                                                                                         limited to approving or disapproving the consent         Microsoft, 56 F.3d at 1461 (discussing whether ‘‘the
                                                 1995); see also United States v. InBev                  decree’’); United States v. Gillette Co., 406 F. Supp.   remedies [obtained in the decree are] so
                                                 N.V./S.A., No. 08–1965 (JR), 2009–2                     713, 716 (D. Mass. 1975) (noting that, in this way,      inconsonant with the allegations charged as to fall
                                                 Trade Cas. (CCH) ¶ 76,736, 2009 U.S.                    the court is constrained to ‘‘look at the overall        outside of the ‘reaches of the public interest’ ’’).

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                                                 depends entirely on the government’s                    No. 10–56 (adopted Jan. 18, 2011), was                 consent of Defendants, it is ordered,
                                                 exercising its prosecutorial discretion by              the only determinative document or                     adjudged, and decreed:
                                                 bringing a case in the first place,’’ it                material within the meaning of the
                                                                                                                                                                I. Jurisdiction
                                                 follows that ‘‘the court is only                        APPA considered by the Department in
                                                 authorized to review the decree itself,’’               formulating the proposed Final                            This Court has jurisdiction over the
                                                 and not to ‘‘effectively redraft the                    Judgment. The Department will file a                   subject matter of and each of the parties
                                                 complaint’’ to inquire into other matters               notice and link to this document as soon               to this action. The Complaint states a
                                                 that the United States did not pursue.                  as it is posted on the FCC’s Web site.                 claim upon which relief may be granted
                                                 Microsoft, 56 F.3d at 1459–60. As this                                                                         against Defendants under Section 7 of
                                                                                                         Dated: January 18, 2011.
                                                 Court recently confirmed in SBC                                                                                the Clayton Act, as amended, 15 U.S.C.
                                                                                                         Respectfully submitted,
                                                 Communications, courts ‘‘cannot look                                                                           18.
                                                                                                         /s/ lllllllllllllllllll
                                                 beyond the complaint in making the                                                                     II. Definitions
                                                 public interest determination unless the                Yvette F. Tarlov (D.C. Bar #442452)
                                                                                                         Attorney, Telecommunications & Media              As used in this Final Judgment:
                                                 complaint is drafted so narrowly as to                  Enforcement, Antitrust Division, U.S.
                                                 make a mockery of judicial power.’’ SBC                                                                   A. ‘‘AAA’’ means the American
                                                                                                         Department of Justice, 450 Fifth Street, N.W., Arbitration Association.
                                                 Comm., 489 F. Supp. 2d at 15. In its                    Suite 7000, Washington, DC 20530,                 B. ‘‘Affiliated’’ means directly or
                                                 2004 amendments, Congress made clear                    Telephone: (202) 514–5621, Facsimile: (202)
                                                                                                                                                        indirectly controlling, controlled by, or
                                                 its intent to preserve the practical                    514–6381, Email: Yvette.Tarlov@usdoj.go.
                                                                                                                                                                under common control with a Person.
                                                 benefits of utilizing consent decrees in                                                                          C. ‘‘Broadcast Network’’ means The
                                                                                                         In the United States District Court for
                                                 antitrust enforcement, adding the                                                                              Walt Disney Company (ABC), CBS Inc.
                                                                                                         the District of Columbia
                                                 unambiguous instruction that ‘‘[n]othing                                                                       (CBS), News Corporation (FOX), NBCU
                                                 in this section shall be construed to                   United States of America, State of California,
                                                                                                         State of Florida, State of Missouri, State of          (NBC and Telemundo), or any other
                                                 require the court to conduct an                                                                                Person that provides live or recorded
                                                 evidentiary hearing or to require the                   Texas, and State of Washington, Plaintiffs, v.
                                                                                                         Comcast Corp., General Electric Co., and               Video Programming for broadcast over a
                                                 court to permit anyone to intervene.’’ 15                                                                      group of local television stations.
                                                                                                         NBC Universal, Inc., Defendants.
                                                 U.S.C. 16(e)(2). The language wrote into                                                                          D. ‘‘Broadcast Network Peer’’ means
                                                 the statute what Congress intended                      Civil Action No.
                                                                                                                                                                (1) CBS Inc. (CBS), News Corporation
                                                 when it enacted the Tunney Act in                       [Proposed] Final Judgment                              (FOX), or The Walt Disney Company
                                                 1974, as Senator Tunney explained:                         Whereas, Plaintiffs, the United States              (ABC); or (2) any of the top four
                                                 ‘‘[t]he court is nowhere compelled to go                of America and the States of California,               Broadcast Networks, measured by the
                                                 to trial or to engage in extended                       Florida, Missouri, Texas, and                          total annual net revenue earned by the
                                                 proceedings which might have the effect                 Washington, filed their Complaint on                   Broadcast Network from the broadcast
                                                 of vitiating the benefits of prompt and                 January 18, 2011, alleging that                        of live or recorded Video Programming
                                                 less costly settlement through the                      Defendants propose to enter into a joint               over a group of local television stations.
                                                 consent decree process.’’ 119 Cong. Rec.                venture that will empower Defendant                    Defendants are not Broadcast Network
                                                 24,598 (1973) (statement of Senator                     Comcast Corporation to block                           Peers, even if they are one of the top
                                                 Tunney). Rather, the procedure for the                  competition from video programming                     four Broadcast Networks.
                                                 public interest determination is left to                distribution competitors in violation of                  E. ‘‘Business Model’’ means the
                                                 the discretion of the court, with the                   Section 7 of the Clayton Act, as                       primary method by which Video
                                                 recognition that the court’s ‘‘scope of                 amended, 15 U.S.C. 18, and Plaintiffs                  Programming is monetized (e.g., ad-
                                                 review remains sharply proscribed by                    and Defendants, by their respective                    supported, subscription without ads,
                                                 precedent and the nature of Tunney Act                  attorneys, have consented to the entry of              subscription with ads, electronic sell
                                                 proceedings.’’ SBC Comm., 489 F. Supp.                  this Final Judgment without trial or                   through, or pay per view/transactional
                                                 2d at 11.27                                             adjudication of any issue of fact or law,              video on demand).
                                                 VIII. Determinative Documents                           and without this Final Judgment                           F. ‘‘Cable Programmer’’ means Time
                                                                                                         constituting any evidence against or                   Warner, Inc., The Walt Disney
                                                   Appendix F to the FCC’s                                                                                      Company, News Corporation, Viacom,
                                                                                                         admission by any party regarding any
                                                 Memorandum Opinion and Order, In re                                                                            Inc., NBCU, or any other Person that
                                                                                                         issue of fact or law;
                                                 Applications of Comcast Corp., General                                                                         provides Video Programming for
                                                                                                            And whereas, Defendants agree to be
                                                 Electric Co. and NBC Universal, Inc. for                                                                       distribution through MVPDs. A Person
                                                                                                         bound by the provisions of this Final
                                                 Consent to Assign Licenses and Transfer                                                                        that provides Video Programming to
                                                                                                         Judgment pending its approval by the
                                                 Control of Licensees, FCC MB Docket                                                                            MVPDs solely as a Broadcast Network or
                                                    27 See United States v. Enova Corp., 107 F. Supp.
                                                                                                            And whereas, Plaintiffs require                     as a Network Affiliate, O&O, or local
                                                 2d 10, 17 (D.D.C. 2000) (noting that the ‘‘Tunney       Defendants to agree to undertake certain               television station operating within its
                                                 Act expressly allows the court to make its public       actions and refrain from certain conduct               licensed territory is not a Cable
                                                 interest determination on the basis of the              for the purpose of remedying the loss of               Programmer.
                                                 competitive impact statement and response to            competition alleged in the Complaint;                     G. ‘‘Cable Programmer Peer’’ means
                                                 comments alone’’); United States v. Mid-Am.
                                                 Dairymen, Inc., 1977–1 Trade Cas. (CCH) ¶ 61,508,          And whereas, Defendants have                        (1) News Corporation, Time Warner,
                                                 at 71,980 (W.D. Mo. 1977) (‘‘Absent a showing of        represented to the United States that the              Inc., Viacom, Inc., or The Walt Disney
                                                 corrupt failure of the government to discharge its      actions and conduct restrictions can and               Company; or (2) any of the top five
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                                                 duty, the Court, in making its public interest          will be undertaken and that Defendants                 Cable Programmers, measured by the
                                                 finding, should * * * carefully consider the
                                                 explanations of the government in the competitive       will later raise no claim of hardship or               total annual net revenue earned by the
                                                 impact statement and its responses to comments in       difficulty as grounds for asking the                   Cable Programmer from its cable
                                                 order to determine whether those explanations are       Court to modify any of the provisions                  networks, as reported by SNL Kagan (or
                                                 reasonable under the circumstances.’’); S. Rep. No.     contained below;                                       another source commonly relied upon
                                                 93–298, 93d Cong., 1st Sess., at 6 (1973) (‘‘Where
                                                 the public interest can be meaningfully evaluated
                                                                                                            Now therefore, before any testimony                 in the television industry), excluding
                                                 simply on the basis of briefs and oral arguments,       is taken, without trial or adjudication of             revenues earned from regional sports
                                                 that is the approach that should be utilized.’’).       any issue of fact or law, and upon                     networks. Defendants are not Cable

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                                                 Programmer Peers, even if they are one                  private network services, content                         Y. ‘‘Production Studio’’ means Time
                                                 of the top five Cable Programmers.                      delivery network services, multichannel                Warner, Inc. (Warner Bros. Television
                                                    H. ‘‘Comcast’’ means Comcast                         video programming services, hosting or                 and Warner Bros. Pictures), News
                                                 Corporation, a Pennsylvania corporation                 data storage services, or Internet                     Corporation (20th Century Fox
                                                 with its principal place of business in                 backbone services (if those services are               Television and 20th Century Fox),
                                                 Philadelphia, Pennsylvania, its                         separate from Internet Access Services).               Viacom, Inc. (Viacom’s television
                                                 successors and assigns, and its                            Q. ‘‘MVPD’’ means a multichannel                    production subsidiaries and Paramount
                                                 Subsidiaries (whether partially or                      video programming distributor as that                  Pictures), Sony Corporation of America
                                                 wholly owned), divisions, groups,                       term is defined on the date of entry of                (Sony Pictures Television and Sony
                                                 Partnerships, and Joint Ventures, and                   this Final Judgment in 47 CFR                          Pictures Entertainment), The Walt
                                                 their directors, officers, managers,                    76.1200(b).                                            Disney Company (Disney-ABC Studios
                                                 agents, and employees.                                     R. ‘‘NBCU’’ means NBC Universal,                    and the Walt Disney Motion Pictures
                                                    I. ‘‘Defendants’’ means Comcast,                     Inc., a Delaware corporation with its                  Group), NBCU (Universal Pictures,
                                                 General Electric, and NBCU, acting                      principal place of business in New                     Focus Films, and Universal Studios),
                                                 individually or collectively, as                        York, New York, its successors and                     and any other Person that produces
                                                 appropriate. Where the Final Judgment                   assigns, and its Subsidiaries (whether                 Video Programming for distribution
                                                 imposes an obligation to engage in or                   partially or wholly owned), divisions,                 through Broadcast Networks or Cable
                                                 refrain from engaging in certain                        groups, Partnerships, and Joint                        Programmers.
                                                 conduct, that obligation shall apply to                 Ventures, and their directors, officers,                  Z. ‘‘Production Studio Peer’’ means
                                                 each Defendant individually and to any                  managers, agents, and employees.                       (1) News Corporation, Viacom, Inc.,
                                                 Joint Venture established by any two or                    S. ‘‘Network Affiliate’’ means a local              Sony Corporation of America, Time
                                                 more Defendants.                                        television station that broadcasts some                Warner, Inc., or The Walt Disney
                                                    J. ‘‘Department of Justice’’ means the               or all of the Video Programming of                     Company; or (2) any of the top six
                                                 United States Department of Justice                     Defendants’ Broadcast Networks (i.e.,                  Production Studios, measured by the
                                                 Antitrust Division.                                     NBC or Telemundo). A Network                           total annual net revenue earned by the
                                                    K. ‘‘Experimental Deal’’ means an                                                                           Production Studio from the sale or
                                                                                                         Affiliate is owned and operated by
                                                 agreement between an OVD and a Peer                                                                            licensing of Video Programming.
                                                                                                         Persons other than Defendants.
                                                 for a term of six months or less.                                                                              Defendants are not Production Studio
                                                    L. ‘‘Film’’ means a feature-length                      T. ‘‘O&O’’ means a local television
                                                                                                                                                                Peers, even if they are one of the top six
                                                 motion picture that has been theatrically               station owned and operated by
                                                                                                                                                                Production Studios.
                                                 released.                                               Defendants that broadcasts the Video                      AA. ‘‘Qualified OVD’’ means any
                                                    M. ‘‘Final Offer’’ means a proposed                  Programming of one of Defendants’                      OVD that has an agreement with a Peer
                                                 contract identifying the Video                          Broadcast Networks (i.e., NBC or                       for the license of Video Programming to
                                                 Programming Defendants are to provide                   Telemundo).                                            the OVD (other than an agreement under
                                                 to OVDs pursuant to Section IV.A or                        U. ‘‘OVD’’ means any Person that                    which an OVD licenses only short
                                                 IV.B of this Final Judgment and                         distributes Video Programming in the                   programming segments or clips from the
                                                 containing the proposed price, terms,                   United States by means of the Internet                 Peer), where the OVD is not Affiliated
                                                 and conditions on which Defendants                      or another IP-based transmission path                  with the Peer.
                                                 will provide that Video Programming.                    provided by a Person other than the                       BB. ‘‘Specialized Service’’ means any
                                                    N. ‘‘General Electric’’ means General                OVD. This definition (1) includes an                   service provided over the same last-mile
                                                 Electric Company, a New York                            MVPD that offers Video Programming                     facilities used to deliver Internet Access
                                                 corporation with its principal place of                 by means of the Internet or another IP-                Service other than (1) Internet Access
                                                 business in Fairfield, Connecticut, its                 based transmission path outside its                    Services, (2) services regulated either as
                                                 successors and assigns, and its                         MVPD footprint as a service separate                   telecommunications services under
                                                 Subsidiaries (whether partially or                      and independent of an MVPD                             Title II of the Communications Act or as
                                                 wholly owned), divisions, groups,                       subscription; and (2) excludes an MVPD                 MVPD services under Title VI of the
                                                 Partnerships, and Joint Ventures, and                   that offers Video Programming by means                 Communications Act, or (3) Defendants’
                                                 their directors, officers, managers,                    of the Internet or another IP-based                    existing VoIP telephony service.
                                                 agents, and employees.                                  transmission path to homes inside its                     CC. ‘‘Subsidiary,’’ ‘‘Partnership,’’ and
                                                    O. ‘‘Hulu’’ means Hulu, LLC, a                       MVPD footprint as a component of an                    ‘‘Joint Venture’’ refer to any Person in
                                                 Delaware limited liability company with                 MVPD subscription.                                     which there is partial (25 percent or
                                                 its headquarters in Los Angeles,                           V. ‘‘Peer’’ means any Broadcast                     more) or total ownership or control
                                                 California, its successors and assigns,                 Network Peer, Cable Programmer Peer,                   between the specified Person and any
                                                 and its Subsidiaries (whether partially                 or Production Studio Peer, its                         other Person.
                                                 or wholly owned), divisions, groups,                    successors, assigns, and any Person that                  DD. ‘‘Value’’ means the economic
                                                 Partnerships, and Joint Ventures, and                   is managed or controlled by any                        value of Video Programming based on,
                                                 their directors, officers, managers,                    Broadcast Network Peer, Cable                          among other factors, the Video
                                                 agents, and employees.                                  Programmer Peer, or Production Studio                  Programming’s ratings (as measured by
                                                    P. ‘‘Internet Access Service’’ means a               Peer. Defendants are not Peers.                        The Nielsen Company or other Person
                                                 mass-market retail communications                          W. ‘‘Person’’ means any natural                     commonly relied upon in the television
                                                 service by wire or radio that provides                  person, corporation, company,                          industry for television ratings), affiliate
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                                                 the capability to transmit data to and                  partnership, joint venture, firm,                      fees, advertising revenues, and the time
                                                 receive data from all or substantially all              association, proprietorship, agency,                   elapsed since the Video Programming
                                                 Internet endpoints, including any                       board, authority, commission, office, or               was first distributed to consumers by a
                                                 capabilities that are incidental to and                 other business or legal entity, whether                Broadcast Network or Cable
                                                 enable the operation of the                             private or governmental.                               Programmer.
                                                 communications service, but excluding                      X. ‘‘Plaintiff States’’ means the States               EE. ‘‘Video Programming’’ means
                                                 dial-up Internet access service. Internet               of California, Florida, Missouri, Texas,               programming provided by, or generally
                                                 Access Service does not include virtual                 and Washington.                                        considered comparable to programming

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                                                                               Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices                                              5461

                                                 provided by, a Broadcast Network or                     evidence concerning differences in                     Provision of Comparable Video
                                                 Cable Programmer, regardless of the                     revenues earned by Defendants in                       Programming to OVDs
                                                 medium or method used for                               connection with the provision of Video                    B. At the request of any Qualified
                                                 distribution, and includes programming                  Programming to the OVD rather than to                  OVD, Defendants shall provide
                                                 prescheduled by the programming                         an MVPD.                                               Comparable Video Programming to the
                                                 provider (also known as scheduled                          2. Defendants shall provide to any                  Qualified OVD on terms that are
                                                 programming or a linear feed);                          requesting OVD all Video Programming                   Economically Equivalent to the price,
                                                 programming offered to viewers on an                    subject to Defendants’ management or                   terms, and conditions on which the
                                                 on-demand, point-to-point basis (also                   control and all Video Programming,                     Qualified OVD receives Video
                                                 known as video on demand); pay per                      including Video Programming owned by                   Programming from a Peer.
                                                 view or transactional video on demand;                  another Person, over which Defendants                     For purposes of this Section IV.B:
                                                 short programming segments related to                   possess the power or authority to                         1. ‘‘Economically Equivalent’’ means
                                                 other full-length programming (also                     negotiate content licenses.                            price, terms, and conditions that, in the
                                                 known as clips); programming that                                                                              aggregate, reasonably approximate those
                                                                                                            3. At the request of the OVD,
                                                 includes multiple video sources (also                                                                          on which the Peer provides Video
                                                                                                         Defendants shall provide any bundle of
                                                 known as feeds, including camera                                                                               Programming to the Qualified OVD, and
                                                                                                         channels, and all quality formats (e.g.,
                                                 angles); programming that includes                                                                             shall take account of, among other
                                                                                                         high definition, 3D) and video-on-
                                                 video in different qualities or formats                                                                        things, any difference between the
                                                                                                         demand rights that Defendants provide
                                                 (including high-definition and 3D); and                                                                        Value of the Video Programming the
                                                                                                         to any MVPD in the United States with
                                                 Films for which a year or more has                                                                             Qualified OVD seeks from Defendants
                                                                                                         more than one million subscribers.
                                                 elapsed since their theatrical release.                                                                        and the Value of the Video
                                                 For purposes of this Final Judgment,                       4. Subject to other provisions of this
                                                                                                         Section IV.A, Defendants shall not                     Programming it receives from a Peer.
                                                 Video Programming shall not include                                                                               2. ‘‘Comparable’’ Video Programming
                                                 programming over which General                          apply to an OVD any terms or
                                                                                                         conditions contained in Defendants’                    means Defendants’ Video Programming
                                                 Electric possesses ownership or control                                                                        that is reasonably similar in kind and
                                                 that is unrelated to its ownership                      agreements with MVPDs that would not
                                                                                                         be technically or economically                         amount to the Video Programming
                                                 interest in NBCU.                                                                                              provided by the Peer, considering the
                                                                                                         practicable if applied generally to Video
                                                 III. Applicability                                      Programming distributed by OVDs (e.g.,                 volume (i.e., number of channels or
                                                                                                         that the OVD distribute Video                          shows) of Video Programming and its
                                                   This Final Judgment applies to                                                                               Value.
                                                 Defendants and all other Persons in                     Programming over an MVPD system).
                                                                                                                                                                   3. The following, among other types
                                                 active concert or participation with any                   5. In any agreement they enter into                 of Video Programming, are not
                                                 of them who receive actual notice of this               with an OVD under this Section IV.A,                   Comparable:
                                                 Final Judgment by personal service or                   Defendants may require that the OVD                       a. First-day Video Programming and
                                                 otherwise.                                              not distribute Defendants’ Video                       Video Programming distributed after
                                                 IV. Required Conduct                                    Programming to consumers (a) if                        Defendants’ first-day distribution of that
                                                                                                         Defendants’ Video Programming                          Video Programming to consumers;
                                                 Provision of Economically Equivalent                    constitutes more than 45 percent of the                   b. Repeat, prior-season Video
                                                 Video Programming Terms to OVDs                         OVD’s Video Programming (measured                      Programming and original, first-run
                                                    A. At the request of any OVD,                        by hours available to subscribers), and                Video Programming;
                                                 Defendants shall provide, for                           (b) until at least one Peer has agreed to                 c. Non-sports Video Programming and
                                                 distribution to consumers through a                     provide Video Programming to the OVD                   sports Video Programming;
                                                 linear feed (plus any associated video-                 (including, if the Defendants agree to                    d. Broadcast Video Programming and
                                                 on-demand rights), all Video                            provide NBC Video Programming to the                   cable Video Programming;
                                                 Programming they provide to any MVPD                    OVD, at least one Broadcast Network                       e. Video Programming directed to
                                                 in the United States with more than one                 Peer).                                                 children and Video Programming not
                                                 million subscribers, on terms that are                     6. Defendants may condition their                   directed to children;
                                                 Economically Equivalent to the terms on                 provision of Video Programming to an                      f. Local news Video Programming and
                                                 which Defendants provide Video                          OVD under this Section IV.A on the                     Video Programming that is not local
                                                 Programming to that MVPD.                               OVD’s (a) Agreement not to distribute                  news;
                                                    For purposes of this Section IV.A:                   the Video Programming to consumers                        g. Film and non-Film Video
                                                    1. ‘‘Economically Equivalent’’ means                 through a Web site promoting or                        Programming; and
                                                 the price, terms, and conditions that, in               communicating the availability or                         h. Film between one and five years
                                                 the aggregate, reasonably approximate                   accessibility of pornography, gambling,                from initial distribution and Film over
                                                 those on which Defendants provide                       or unlawful activities; (b) reasonable                 five years from initial distribution.
                                                 Video Programming to an MVPD, and                       demonstration of its ability to meet its                  4. In any agreement they enter into
                                                 shall take account of, among other                      financial obligations; (c) demonstration               with an OVD under this Section IV.B,
                                                 things, any difference in advertising                   of its ability to satisfy reasonable quality           Defendants shall not be required to
                                                 revenues earned by Defendants through                   and technical requirements for the                     include exclusivity provisions for
                                                 OVD distribution and those earned                       display and secure protection of                       Comparable Video Programming even if
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                                                 through MVPD distribution; any                          Defendants’ Video Programming; (d)                     the Qualified OVD’s Peer agreement
                                                 limitation of Defendants’ legal rights to               agreement to limit the distribution of an              includes exclusivity provisions,
                                                 provide Video Programming as a linear                   O&O’s Video Programming linear feed                    provided that the price, terms, and
                                                 feed over the Internet or other IP-based                solely to that O&O’s designated market                 conditions on which Defendants
                                                 transmission path; any generally                        area or ‘‘DMA’’; or (e) agreement to limit             provide Video Programming to the
                                                 applicable, market-based requirements                   the distribution of Defendants’ Video                  Qualified OVD shall be adjusted so that,
                                                 regarding minimum subscriber and                        Programming to the territory of the                    in the aggregate, they reasonably
                                                 penetration rates; and any other                        United States.                                         approximate the price, terms, and

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                                                 5462                          Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices

                                                 conditions on which the Peer provides                   channels to a Qualified OVD for                        complete divestiture of their ownership
                                                 Video Programming to the Qualified                      distribution to consumers through a                    interests in Hulu.
                                                 OVD.                                                    linear feed, Defendants may meet their                    E. Defendants shall not read, receive,
                                                   5. If a Qualified OVD receives Video                  obligation under this Section IV.B to                  obtain, or attempt to obtain any
                                                 Programming from two or more Peers in                   provide Comparable Video                               confidential or competitively sensitive
                                                 any single Peer category (i.e., Broadcast               Programming by providing to the                        information concerning Hulu or
                                                 Network Peers, Cable Programmer Peers,                  Qualified OVD and requiring the
                                                 or Production Studio Peers) and                                                                                influence, interfere, or attempt to
                                                                                                         Qualified OVD to distribute
                                                 pursuant to the same Business Model,                                                                           influence or interfere in the
                                                                                                         substantially all of Defendants’
                                                 Defendants shall provide, pursuant to                                                                          management or operation of Hulu.
                                                 this Section IV.B, Video Programming                                                                           Notwithstanding the foregoing,
                                                 Comparable to the Video Programming                     OVD Rights to Commercial Arbitration                   Defendants may request and receive
                                                 of one Peer in that category selected by                   C. If, after negotiations, in which                 from Hulu regularly prepared,
                                                 the Qualified OVD. If a Qualified OVD                   Defendants shall participate in good                   aggregated financial statements and
                                                 receives Video Programming from a Peer                  faith and with reasonable diligence,                   information reasonably necessary for
                                                 in two or more Peer categories,                         Defendants and any OVD fail to agree on                Defendants to exercise their rights to
                                                 Defendants shall provide Video                          appropriate Economically Equivalent                    purchase advertising inventory from
                                                 Programming Comparable to the Peer in                   terms on which Defendants must                         Hulu and to comply with their
                                                 both or all categories. If a Qualified OVD              provide Video Programming under                        obligations under Section IV.G of this
                                                 receives Video Programming from two                     Sections IV.A or IV.B of this Final                    Final Judgment.
                                                 or more Peers in the same Peer category                 Judgment or on Comparable Video                           F. Defendants shall not obtain or
                                                 but pursuant to different Business                      Programming under Section IV.B of this                 acquire any ownership interest in Hulu
                                                 Models, Defendants shall provide Video                  Final Judgment, the OVD may apply to                   beyond that which it possessed on
                                                 Programming Comparable to each Peer                     the Department of Justice (but not to the              January 1, 2011. Nothing in this Section
                                                 pursuant to the Business Model                          Plaintiff States) for permission to submit
                                                                                                                                                                IV.F shall prohibit Defendants from
                                                 specified in each Peer contract.                        its dispute with Defendants to
                                                                                                                                                                receiving a proportional or less than
                                                   6. In responding to a request from a                  commercial arbitration in accordance
                                                                                                                                                                proportional distribution of Hulu equity
                                                 Qualified OVD to which Defendants                       with Section VII of this Final Judgment.
                                                                                                         For so long as commercial arbitration is               securities in connection with any future
                                                 have provided Video Programming
                                                 under this Section IV.B, Defendants                     available for the resolution of such                   conversion of Hulu into a corporation,
                                                 shall not be required to provide                        disputes in a timely manner under the                  provided that Defendants’ economic
                                                 additional Video Programming unless                     Federal Communications Commission’s                    share in Hulu may not increase in
                                                 the Qualified OVD enters into a Video                   rules and orders, the Department of                    connection with such distribution.
                                                 Programming agreement with (a) A Peer                   Justice will ordinarily defer to the                      G. Defendants shall continue to
                                                 in a different Peer category (i.e.,                     Federal Communications Commission’s                    provide Video Programming to Hulu of
                                                 Broadcast Network Peers, Cable                          commercial arbitration process to                      a type, quantity, ratings, and quality
                                                 Programmer Peers, or Production Studio                  resolve such disputes; provided that the               comparable to that of the Broadcast
                                                 Peers), (b) the same Peer under a                       Department of Justice reserves the right,              Network owner of Hulu providing the
                                                 different Business Model, or (c) the                    in its sole discretion, to permit                      greatest quantity of Video Programming
                                                 same Peer for additional Video                          arbitration under this Final Judgment to               to Hulu. Provided that the other current
                                                 Programming pursuant to the same                        advance the competitive objectives of                  Broadcast Network owners of Hulu
                                                 Business Model.                                         this Final Judgment. Nothing in this                   renew their agreements with Hulu,
                                                   7. At the request of an OVD with                      Section IV.C shall limit the right of the              Defendants also either shall continue to
                                                 which Defendants have an agreement to                   United States to apply to this Court,                  provide Video Programming to Hulu on
                                                 provide Video Programming that                          pursuant to Section IX of this Final                   substantially the same terms and
                                                 subsequently becomes a Qualified OVD,                   Judgment, either before or in place of                 conditions as were in place on January
                                                 Defendants shall provide additional or                  commercial arbitration under Section                   1, 2011, or shall enter into agreements
                                                 different Video Programming so the                      VII of this Final Judgment, for an order               with Hulu on substantially the same
                                                 Video Programming Defendants provide                    enforcing Defendants’ compliance or                    terms and conditions as those of the
                                                 to the Qualified OVD (including any                     punishing their noncompliance with                     Broadcast Network owner whose
                                                 Video Programming the Defendants                        their obligations under Sections IV.A                  renewed agreement is the most
                                                 have previously agreed to provide to the                and IV.B of this Final Judgment.                       economically advantageous to Hulu.
                                                 OVD) is Comparable to that which the                    Disposition of Control Over Hulu
                                                 Qualified OVD receives from the Peer.                                                                          Clear Delineation of Rights
                                                   8. Defendants may require the                            D. Within ten days after entry of this
                                                 Qualified OVD to distribute Video                       Final Judgment, Defendants shall (1)                      H. Any agreement Defendants enter
                                                 Programming obtained from Defendants                    delegate any voting and other rights                   into with any Production Studio
                                                 pursuant to the Business Model under                    they hold pursuant to their ownership                  concerning Defendants’ distribution of
                                                 which the Qualified OVD distributes the                 interest in Hulu in a manner that directs              the Production Studio’s Video
                                                 Peer’s Video Programming.                               and authorizes Hulu to cast any votes                  Programming shall include, unless
                                                   9. The number of Experimental Deals                   related to such ownership interest in an               inconsistent with common and
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                                                 to which Defendants, at the request of                  amount and manner proportional to the                  reasonable industry practice and subject
                                                 Qualified OVDs, must respond by                         vote of all other votes cast by other Hulu             to any agreements not prohibited by
                                                 providing Comparable Video                              owners; and (2) relinquish any veto                    Section V.B of this Final Judgment,
                                                 Programming is limited to the maximum                   right or other right to influence, control,            either (1) an express grant by the
                                                 number of Experimental Deals any                        or participate in the governance or                    Production Studio to Defendants of the
                                                 single Peer has entered into with OVDs.                 management of Hulu; provided that                      right to provide the Video Programming
                                                   10. If a Cable Programmer Peer                        such delegation and relinquishment                     to OVDs, or (2) an express retention of
                                                 provides substantially all of its cable                 shall terminate upon Defendants’                       that right by the Production Studio.

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                                                                               Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices                                              5463

                                                 Document Retention and Disclosures                      Defendants by an MVPD or OVD seeking                   Contractual Provisions
                                                    I. Comcast and NBCU shall furnish to                 Video Programming or by a Network
                                                                                                                                                                   B. Defendants shall not enter into any
                                                 the Department of Justice and the                       Affiliate, local television station,
                                                                                                                                                                agreement pursuant to which
                                                 Plaintiff States quarterly electronic                   Broadcast Network, or Cable
                                                                                                                                                                Defendants provide Video Programming
                                                 copies of any communications with any                   Programmer seeking carriage or
                                                                                                                                                                to any Person in which Defendants
                                                 MVPD, OVD, Broadcast Network, Cable                     retransmission on Defendants’ MVPD,
                                                                                                                                                                forbid, limit, or create economic
                                                 Programmer, or Production Studio                        and Defendants’ most recent response or
                                                                                                                                                                incentives to limit the distribution of
                                                 containing allegations of Defendants’                   offer to any such Persons.
                                                                                                                                                                such Video Programming through
                                                 noncompliance with any provision of                       N. Comcast and NBCU shall identify                   OVDs, provided that, nothing in this
                                                 this Final Judgment.                                    for the Department of Justice and the                  Section V.B shall prohibit Defendants
                                                    J. Comcast and NBCU shall collect                    Plaintiff States semiannually                          from entering into agreements
                                                 and maintain one copy of each of the                      1. the name of each Person that in                   consistent with common and reasonable
                                                 following agreements, currently in effect               writing has requested or submitted to                  industry practice. Evidence relevant to
                                                 or established after entry of this Final                Defendants a contractual offer for Video               determining common and reasonable
                                                 Judgment:                                               Programming (other than short                          industry practice may include, among
                                                    1. Each affiliation agreement between                programming segments or clips) for                     other things, Defendants’ contracting
                                                 Defendants and any Network Affiliate;                   distribution to consumers, the date of                 practices prior to December 3, 2009, and
                                                    2. Each agreement under which a                      such Person’s most recent written                      the contracting practices of Defendants’
                                                 Network Affiliate authorizes Defendants                 request or contractual offer, and the date             Peers. Notwithstanding any other
                                                 to negotiate on its behalf for carriage or              of Defendants’ most recent response or                 provision in this Section V.B, in
                                                 retransmission on MVPDs;                                offer to such Person; and                              providing Comparable Video
                                                    3. Each agreement for the carriage or                                                                       Programming to a Qualified OVD under
                                                 retransmission of an O&O’s or a                           2. the name of each Person that in
                                                                                                         writing has requested or submitted a                   Section IV.B of this Final Judgment,
                                                 Network Affiliate’s (to the extent                                                                             Defendants may include exclusivity
                                                 Defendants possess the power or                         contractual offer for carriage or
                                                                                                         retransmission of the Person’s Video                   provisions only to the extent those
                                                 authority to negotiate on behalf of the                                                                        provisions are no broader than any
                                                 Network Affiliate) Video Programming                    Programming on Defendants’ MVPD, the
                                                                                                         date of such Person’s most recent                      exclusivity provisions in the Qualified
                                                 on an MVPD; and                                                                                                OVD’s agreement with a Peer.
                                                    4. Each syndication agreement under                  written request or contractual offer, and
                                                                                                         the date of Defendants’ most recent                       C. Defendants shall not enter into or
                                                 which Defendants provide Video                                                                                 enforce any agreement for Defendants’
                                                 Programming to an O&O or Network                        response or offer to such Person.
                                                                                                                                                                carriage or retransmission on their
                                                 Affiliate for distribution to consumers.                  O. Comcast and NBCU shall collect                    MVPD of Video Programming from a
                                                    K. Comcast and NBCU shall collect                    and maintain each document sent to or                  local television station, Network
                                                 and maintain each document in their                     received from General Electric relating                Affiliate, Broadcast Network, or Cable
                                                 possession, custody, or control                         to (1) Defendants’ provision of Video                  Programmer under which Defendants
                                                 discussing an O&O’s or a Network                        Programming to any MVPD or OVD, (2)                    forbid, limit, or create incentives to
                                                 Affiliate’s denial or threat to deny Video              any OVD’s distribution of any Person’s                 limit the local television station’s,
                                                 Programming to an MVPD or OVD.                          Video Programming to consumers, (3)                    Network Affiliate’s, Broadcast
                                                 Defendants shall notify the Department                  carriage or retransmission of any                      Network’s, or Cable Programmer’s
                                                 of Justice and the Plaintiff States within              Person’s Video Programming on                          provision of its Video Programming to
                                                 30 days of learning that an O&O or a                    Defendants’ MVPD, or (4) Defendants’                   one or more OVDs, provided that,
                                                 Network Affiliate has denied or                         compliance or noncompliance with the                   nothing in this Section V.C shall
                                                 threatened to deny Video Programming                    terms of this Final Judgment.                          prohibit Defendants from
                                                 to any MVPD or OVD.
                                                    L. Comcast and NBCU shall collect                    V. Prohibited Conduct                                     1. entering into and enforcing an
                                                 and maintain documents sufficient to                                                                           agreement under which Defendants
                                                                                                         Discrimination and Retaliation                         discourage or prohibit a local television
                                                 show the compensation each O&O and
                                                 each Network Affiliate (about which                        A. Defendants shall not discriminate                station, Network Affiliate, Broadcast
                                                 Comcast or NBCU possesses                               against, retaliate against, or punish (1)              Network, or Cable Programmer from
                                                 information) receives from any MVPD or                  any Broadcast Network, Cable                           making Video Programming for which
                                                 OVD.                                                    Programmer, Production Studio, local                   Defendants pay available to consumers
                                                    M. Comcast and NBCU shall collect                    television station, or Network Affiliate               for free over the Internet within the first
                                                 and maintain complete copies of any                     for providing Video Programming to any                 30 days after Defendants first distribute
                                                 final agreement or unsigned but                         MVPD or OVD, or (2) any MVPD or OVD                    the Video Programming to consumers;
                                                 operative agreement (1) under which                     (i) for obtaining Video Programming                       2. entering into and enforcing an
                                                 Defendants provide Video Programming                    from any Broadcast Network, Cable                      agreement under which the local
                                                 (other than short programming segments                  Programmer, Production Studio, local                   television station, Network Affiliate,
                                                 or clips) to any MVPD or OVD, and (2)                   television station, or Network Affiliate,              Broadcast Network, or Cable
                                                 for Defendants’ carriage or                             (ii) for invoking any provisions of this               Programmer provides Video
                                                 retransmission on their MVPD of Video                   Final Judgment, (iii) for invoking the                 Programming exclusively to Defendants,
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                                                 Programming from a Network Affiliate,                   provisions of any rules or orders                      and to no other MVPD or OVD, for a
                                                 a local television station, a Broadcast                 concerning Video Programming adopted                   period of time of not greater than 14
                                                 Network, or a Cable Programmer. For                     by the Federal Communications                          days; or
                                                 any ongoing negotiations that have not                  Commission, or (iv) for furnishing                        3. entering into and enforcing an
                                                 yet produced a final or operative                       information to the United States or the                agreement which requires that
                                                 agreement, Comcast and NBCU shall                       Plaintiff States concerning Defendants’                Defendants are treated in material parity
                                                 also collect and maintain electronic                    compliance or noncompliance with this                  with other similarly situated MVPDs,
                                                 copies of the most recent offer made to                 Final Judgment.                                        except to the extent application of other

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                                                 5464                          Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices

                                                 MVPDs’ terms would be inconsistent                      Reasonable network management shall                    VI. Permitted Conduct
                                                 with the purpose of this Final Judgment.                not constitute unreasonable                              Nothing in this Final Judgment
                                                                                                         discrimination. A network management                   prohibits Defendants from refusing to
                                                 Control or Influence Over Other Persons
                                                                                                         practice is reasonable if it is appropriate            provide to any MVPD or OVD any Video
                                                    D. Except as permitted by Section V.B                and tailored to achieving a legitimate
                                                 of this Final Judgment, Defendants shall                                                                       Programming (1) for which Defendants
                                                                                                         network management purpose, taking                     do not possess copyright rights; (2) not
                                                 not require, encourage, unduly                          into account the particular network
                                                 influence, or provide incentives to any                                                                        subject to Defendants’ management or
                                                                                                         architecture and technology of the                     control or over which Defendants do not
                                                 local television station or Network                     Internet Access Service.
                                                 Affiliate to                                                                                                   possess the power or authority to
                                                                                                            2. If Comcast offers consumers                      negotiate content licenses; or (3) the
                                                    1. Deny Video Programming to (a) any
                                                                                                         Internet Access Service under a package                provision of which would require
                                                 MVPD that provides Video
                                                                                                         that includes caps, tiers, metering, or                Defendants’ to breach any contract not
                                                 Programming to consumers in any zip
                                                                                                         other usage-based pricing, it shall not                prohibited by Sections V.B or V.C of this
                                                 code in which Comcast also provides
                                                                                                         measure, count, or otherwise treat                     Final Judgment.
                                                 Video Programming to consumers or (b)
                                                                                                         Defendants’ affiliated network traffic
                                                 any OVD; or                                                                                                    VII. Arbitration
                                                                                                         differently from unaffiliated network
                                                    2. Provide Video Programming on
                                                                                                         traffic. Comcast shall not prioritize                     A. Defendants shall negotiate in good
                                                 terms that exceed its Value.
                                                    E. Notwithstanding any other                         Defendants’ Video Programming or                       faith and with reasonable diligence to
                                                 provisions of this Final Judgment,                      other content over other Persons’ Video                provide Video Programming sought by
                                                 including the definitions of                            Programming or other content.                          an OVD pursuant to Sections IV.A and
                                                 ‘‘Defendant,’’ ‘‘Comcast,’’ ‘‘NBCU,’’                      3. Comcast shall not offer a                        IV.B of this Final Judgment and, upon
                                                 ‘‘General Electric,’’ ‘‘Subsidiary,’’                   Specialized Service that is substantially              demand by an OVD approved by the
                                                 ‘‘Partnership,’’ or ‘‘Joint Venture,’’                  or entirely comprised of Defendants’                   Department of Justice pursuant to
                                                 unless Comcast, NBCU, or General                        affiliated content.                                    Section IV.C of this Final Judgment,
                                                 Electric possesses or acquires control                     4. If Comcast offers any Specialized                shall participate in commercial
                                                 over The Weather Channel, TV One,                       Service that makes content from one or                 arbitration in accordance with the
                                                 FearNet, the Pittsburgh Cable News                      more third parties available to (or that               procedures herein.
                                                 Channel, or Hulu, or the right or ability               otherwise enables the exchange of                         B. Defendants and an OVD may, by
                                                 to negotiate for any of those Persons or                network traffic between one or more                    agreement, modify any time periods
                                                 to influence negotiations for the                       third parties and) its subscribers,                    specified in this Section VII.
                                                 provision of any such Person’s Video                    Comcast shall allow any other                             C. Any OVD seeking to invoke
                                                 Programming to MVPDs or OVDs, such                      comparable Person to be included in a                  commercial arbitration under this Final
                                                 Person is not a Defendant subject to the                similar Specialized Service on a                       Judgment must, pursuant to Section
                                                 obligations of this Final Judgment.                     nondiscriminatory basis.                               IV.C of this Final Judgment, apply to the
                                                    F. Defendants shall not exercise any                                                                        Department of Justice for permission to
                                                                                                            5. Comcast shall offer Internet Access
                                                 rights under any existing management                                                                           do so. If the Department of Justice
                                                                                                         Service that is sufficiently provisioned
                                                 or operating agreement with The                                                                                determines the commercial arbitration
                                                                                                         to ensure, in DOCSIS 3.0 or better
                                                 Weather Channel to participate in                                                                              should proceed, the OVD shall furnish
                                                                                                         markets, that an Internet Access Service
                                                 negotiations for the provision of any of                                                                       a written notice to Defendants and the
                                                                                                         subscriber can typically achieve
                                                 The Weather Channel’s Video                                                                                    Department of Justice expressly (1)
                                                                                                         download speeds of at least 12 megabits
                                                 Programming to any MVPD or OVD, to                                                                             waiving all rights to invoke any dispute
                                                                                                         per second. The United States or
                                                 advise The Weather Channel concerning                                                                          resolution process under Federal
                                                                                                         Defendants may petition this Court,
                                                 any such negotiations, or to approve or                                                                        Communications Commission orders
                                                                                                         based upon a showing that comparable
                                                 obtain any information (other than                                                                             and rules to resolve a dispute with
                                                                                                         Internet Access Service providers (e.g.,
                                                 aggregated financial reports) about any                                                                        Defendants concerning the same Video
                                                                                                         Persons using hybrid fiber-coax
                                                 agreement between The Weather                                                                                  Programming; and (2) stating that the
                                                                                                         technology to provide service on a mass-
                                                 Channel and any MVPD or OVD. If, in                                                                            OVD consents to be bound by the terms
                                                                                                         market scale) have generally increased
                                                 the future, Defendants acquire the right                                                                       in the Final Offer selected by the
                                                                                                         or decreased the speed of their services
                                                 to negotiate for The Weather Channel or                                                                        arbitrator. Arbitration under this Final
                                                                                                         after the entry of this Final Judgment, to
                                                 to exercise any control or influence over                                                                      Judgment is not available if a dispute
                                                                                                         modify Comcast’s required download
                                                 The Weather Channel’s negotiation of                                                                           between an OVD and Defendants
                                                                                                         speeds. This Section V.G does not
                                                 agreements with MVPDs or OVDs,                                                                                 concerning the same Video
                                                                                                         restrict Comcast’s ability to impose byte
                                                 Defendants shall provide The Weather                                                                           Programming is the subject of any
                                                                                                         caps or consumption-based billing,
                                                 Channel Video Programming to OVDs                                                                              Federal Communications Commission
                                                                                                         subject to the other provisions of this
                                                 when required to do so under Sections                                                                          dispute resolution process. Defendants
                                                                                                         Final Judgment.
                                                 IV.A or IV.B of this Final Judgment.                                                                           shall not (a) commence arbitration of
                                                                                                            6. Nothing in this Section V.G                      any dispute under the arbitration
                                                 Practices Concerning Comcast’s Internet                    a. Supersedes any obligation or                     procedures contained in this Final
                                                 Facilities                                              authorization Comcast may have to                      Judgment, or (b) upon receipt of the
                                                    G. Comcast shall abide by the                        address the needs of emergency                         notice from the OVD that it intends to
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                                                 following restrictions on the                           communications or law enforcement,                     commence arbitration under this Final
                                                 management and operation of its                         public safety, or national security                    Judgment, commence any Federal
                                                 Internet facilities:                                    authorities, consistent with or as                     Communications Commission dispute
                                                    1. Comcast, insofar as it is engaged in              permitted by applicable law, or limits                 resolution process to resolve the same
                                                 the provision of Internet Access Service,               Comcast’s ability to do so; or                         dispute with the OVD.
                                                 shall not unreasonably discriminate in                     b. Prohibits reasonable efforts by                     D. Arbitration pursuant to this Final
                                                 transmitting lawful network traffic over                Comcast to address copyright                           Judgment shall be conducted in
                                                 a consumer’s Internet Access Service.                   infringement or other unlawful activity.               accordance with the AAA’s Commercial

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                                                                               Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices                                              5465

                                                 Arbitration Rules and Expedited                           I. After an OVD receives approval                       6. Documents reflecting Nielsen or
                                                 Procedures, except where inconsistent                   from the Department of Justice,                        other ratings of the Video Programming
                                                 with specific procedures prescribed by                  pursuant to Section IV.C of this Final                 at issue or of Comparable Video
                                                 this Final Judgment. As described below                 Judgment, the OVD may commence                         Programming; and
                                                 in Sections VII.P and VII.Q, the                        arbitration by filing with the AAA and                    7. Documents reflecting the number of
                                                 arbitrator shall select the Final Offer of              furnishing to Defendants and to the                    subscribers to the OVD. There shall be
                                                 either the OVD or the Defendants and                    Department of Justice.                                 no discovery or use in the arbitration of
                                                 may not alter, or request or demand                       1. An assertion that Defendants must                 documents or information not in the
                                                 alteration of, any terms of those Final                 provide Video Programming to the OVD                   possession, custody, or control of the
                                                 Offers. The decision of the arbitrator                  pursuant to Section IV.A or IV.B of this               OVD or the Defendants, of draft
                                                 shall be binding on the parties, and                    Final Judgment; and                                    agreements or other documents
                                                 Defendants shall abide by the                             2. If the Qualified OVD’s assertion is               concerning negotiations between the
                                                 arbitrator’s decision.                                  based, pursuant to Section IV.B of this                OVD and the Defendants (other than
                                                    E. The AAA, in consultation with the                 Final Judgment, on Comparable Video                    formal offers to renew previous
                                                 United States, shall assemble a list of                 Programming provided by a Peer or                      agreements, pursuant to Section VII.N.2
                                                 potential arbitrators, to be furnished to               Peers, each agreement with any such                    of this Final Judgment), or of the costs
                                                 the OVD and Defendants as soon as                       Peers.                                                 associated with Defendants’ production
                                                 practicable after commencement of the                     J. Simultaneously with the                           of their Video Programming.
                                                 arbitration. Within five business days                  commencement of arbitration, the OVD                      O. In reaching his or her decision, the
                                                 after receipt of this list, the OVD and                 must file with the AAA its Final Offer                 arbitrator may consider only documents
                                                 Defendants each may submit to the                       for the Video Programming it believes                  exchanged in discovery between the
                                                 AAA the names of up to 20 percent of                    Defendants must provide.                               parties and the following:
                                                 the persons on the list to be excluded                    K. Within five business days of the                     1. Testimony explaining the
                                                 from consideration, and shall rank the                  commencement of an arbitration,                        documents and the parties’ Final Offers;
                                                 remaining arbitrators in their orders of                Defendants shall file with the AAA and                    2. Briefs submitted and arguments
                                                 preference. The AAA, in consultation                    furnish to the Department of Justice                   made by counsel; and
                                                 with the United States, will appoint as                 their Final Offer for the Video                           3. Summary exhibits illustrating the
                                                 arbitrator the candidate with the highest               Programming sought by the OVD.                         terms of Defendants’ agreements with
                                                 ranking who is not excluded by the                        L. After the AAA has received Final                  MVPDs or other OVDs or of the party
                                                 OVD or Defendants.                                      Offers from the OVD and Defendants, it                 OVD’s agreements with other Broadcast
                                                    F. Defendants shall continue to                      will immediately furnish a copy of each                Networks, Cable Programmers, or
                                                 provide Video Programming to an OVD                     Final Offer to the other party.                        Production Studios.
                                                 pursuant to the terms of any existing                     M. At any time after the                                P. Arbitrations under Section IV.A of
                                                 agreement until the arbitration is                      commencement of arbitration, the OVD                   this Final Judgment shall begin within
                                                 completed. If the arbitrator’s decision                 and Defendants may agree to suspend                    30 days of the AAA furnishing to the
                                                 changes the financial terms on which                    the arbitration, for periods not to exceed             OVD and to the Defendants, pursuant to
                                                 Defendants must provide Video                           14 days in the aggregate, to attempt to                Section VII.L of this Final Judgment,
                                                 Programming to the OVD, Defendants or                   resolve their dispute through                          each party’s Final Offer. The arbitration
                                                 the OVD, as the case may be, shall                      negotiation. The OVD and the                           hearing shall last no longer than ten
                                                 compensate the other based on                           Defendants shall effectuate such                       business days, after which the arbitrator
                                                 application of the new financial terms                  suspension through a joint writing filed               shall have five business days to inform
                                                 for the period dating from expiration of                with the AAA and furnished to the                      the OVD and the Defendants which
                                                 the existing agreement (plus appropriate                Department of Justice. Either the OVD or               Final Offer best reflects the appropriate
                                                 interest).                                              the Defendants may terminate the                       Economically Equivalent terms under
                                                    G. Within five business days of the                  suspension at any time by filing with                  Section IV.A of the Final Judgment.
                                                 commencement of an arbitration, the                     the AAA and furnishing to the                             Q. Arbitrations under Section IV.B of
                                                 OVD and the Defendants each shall                       Department of Justice a writing calling                this Final Judgment shall be conducted
                                                 furnish a writing to the other and to the               for the arbitration to resume.                         in two stages, the first of which shall
                                                 Department of Justice committing to                       N. The OVD and the Defendants shall                  begin within 30 days of the AAA
                                                 maintain the confidentiality of the                     exchange written discovery requests                    furnishing to the Qualified OVD and to
                                                 arbitration and of any Final Offers and                 within five business days of receiving                 the Defendants, pursuant to Section
                                                 discovery materials exchanged during                    the other party’s Final Offer, and shall               VII.L of this Final Judgment, each
                                                 the arbitration, and to limit the use of                exercise reasonable diligence to respond               party’s Final Offer. The first stage shall
                                                 any Final Offers and discovery materials                within 14 days. Discovery shall be                     last no longer than ten business days,
                                                 to the arbitration. The writing shall                   limited to the following items in the                  after which the arbitrator shall have five
                                                 expressly state that all records of the                 possession of the parties:                             business days to inform the Qualified
                                                 arbitration and any discovery materials                   1. Previous agreements between the                   OVD and the Defendants which Final
                                                 may be disclosed to the Department of                   OVD and the Defendants;                                Offer encompasses the appropriate
                                                 Justice..                                                 2. Formal offers to renew previous                   Comparable Video Programming under
                                                    H. Defendants shall not be bound by                  agreements;                                            Section IV.B of this Final Judgment.
                                                 the provisions of this Section VII if an                  3. Current and prior agreements                      Within five business days of the
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                                                 OVD commences arbitration under this                    between the Defendants and MVPDs or                    arbitrator’s decision, the Qualified OVD
                                                 Final Judgment more than 60 days prior                  other OVDs;                                            and the Defendants shall file with the
                                                 to the expiration of an existing Video                    4. Current and prior agreements                      AAA, furnish to the Department of
                                                 Programming agreement, or less than 30                  between the OVD and other Broadcast                    Justice, and exchange revised Final
                                                 days after an OVD first requests                        Networks, Cable Programmers, or                        Offers containing proposed financial
                                                 Defendants to provide Video                             Production Studios;                                    terms for the Comparable Video
                                                 Programming under Section IV.A or                         5. Records of past arbitrations                      Programming selected by the arbitrator.
                                                 IV.B of this Final Judgment.                            pursuant to this Final Judgment;                       The second stage of the arbitration shall

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                                                 5466                          Federal Register / Vol. 76, No. 20 / Monday, January 31, 2011 / Notices

                                                 commence within ten days of the                         the Antitrust Division, Defendants shall               to punish violations of its provisions.
                                                 exchange of the revised Final Offers and                submit written reports or respond to                   Notwithstanding the foregoing, the
                                                 shall last no longer than ten business                  written interrogatories, under oath if                 Plaintiff States shall have no right to
                                                 days, after which the arbitrator shall                  requested, relating to any of the matters              apply to the Court for further orders or
                                                 have five business days to inform the                   contained in this Final Judgment as may                directions with respect to Sections IV.C,
                                                 Qualified OVD and the Defendants                        be requested. Written reports authorized               IV.D, IV.E, IV.F, V.G, or VII of this Final
                                                 which Final Offer best reflects the                     under this paragraph may, at the sole                  Judgment. In particular, the Plaintiff
                                                 appropriate Economically Equivalent                     discretion of the United States (after                 States shall not be able to apply to this
                                                 terms under Section IV.B of this Final                  consultation with the Plaintiff States),               Court to carry out, construe, modify,
                                                 Judgment.                                               require Defendants to conduct, at their                enforce, or punish violations of Sections
                                                                                                         cost, an independent audit or analysis                 IV.C, IV.D, IV.E, IV.F, V.G, or VII of this
                                                 VIII. Compliance Inspection
                                                                                                         relating to any of the matters contained               Final Judgment.
                                                   A. For purposes of determining or                     in this Final Judgment.
                                                 securing compliance with this Final                       C. No information or documents                       X. No Limitation On Government
                                                 Judgment, or of determining whether                     obtained by the means provided in this                 Rights
                                                 the Final Judgment should be modified                   section shall be divulged by the United                  Nothing in this Final Judgment shall
                                                 or vacated, and subject to any legally                  States to any person other than an
                                                 recognized privilege, from time to time                                                                        limit the right of the United States or the
                                                                                                         authorized representative of (1) the
                                                 duly authorized representatives of the                                                                         Plaintiff States to investigate and bring
                                                                                                         executive branch of the United States,
                                                 Department of Justice, including                                                                               actions to prevent or restrain violations
                                                                                                         (2) the Plaintiff States, or (3) the Federal
                                                 consultants and other persons retained                                                                         of the antitrust laws concerning any
                                                                                                         Communications Commission, except in
                                                 by the Department of Justice, shall,                                                                           past, present, or future conduct, policy,
                                                                                                         the course of legal proceedings to which
                                                 upon written request of an authorized                                                                          or practice of the Defendants.
                                                                                                         the United States is a party (including
                                                 representative of the Assistant Attorney                grand jury proceedings), or for the                    XI. Expiration of Final Judgment
                                                 General in charge of the Antitrust                      purpose of securing compliance with
                                                 Division, and on reasonable notice to                   this Final Judgment, or as otherwise                     Unless this Court grants an extension,
                                                 Defendants, be permitted                                required by law.                                       this Final Judgment shall expire seven
                                                   1. Access during the Defendants’                        D. If at the time information or                     years from the date of its entry.
                                                 office hours to inspect and copy, or at                 documents are furnished by a Defendant                 XII. Public Interest Determination
                                                 the option of the United States, to                     to the United States and the Plaintiff
                                                 require Defendants to provide to the                    States, the Defendant represents and                      Entry of this Final Judgment is in the
                                                 United States and the Plaintiff States                  identifies in writing the material in any              public interest. The parties have
                                                 hard copy or electronic copies of, all                  such information or documents to                       complied with the requirements of the
                                                 books, ledgers, accounts, records, data,                which a claim of protection may be                     Antitrust Procedures and Penalties Act,
                                                 and documents in the possession,                        asserted under Rule 26(c)(1)(G) of the                 15 U.S.C. 16, including making copies
                                                 custody, or control of Defendants,                      Federal Rules of Civil Procedure, and                  available to the public of this Final
                                                 relating to any matters contained in this               the Defendant marks each pertinent                     Judgment, the Competitive Impact
                                                 Final Judgment, including documents                     page of such material, ‘‘Subject to claim              Statement, and any comments thereon
                                                 Defendants are required to collect and                  of protection under Rule 26(c)(1)(G) of                and the United States’ responses to
                                                 maintain pursuant to Sections IV.J, IV.K,               the Federal Rules of Civil Procedure,’’                comments. Based upon the record
                                                 IV.L, IV.M, or IV.O of this Final                       then the United States and the Plaintiff               before the Court, which includes the
                                                 Judgment; and                                           States shall give the Defendant ten                    Competitive Impact Statement and any
                                                   2. To interview, either informally or                 calendar days notice prior to divulging                comments and response to comments
                                                 on the record, the Defendants’ officers,                such material in any civil or                          filed with the Court, entry of this Final
                                                 employees, or agents, who may have                      administrative proceeding.                             Judgment is in the public interest.
                                                 their individual counsel present,
                                                 regarding such matters. The interviews                  IX. Retention of Jurisdiction                          Date: llllllllllllllllll
                                                 shall be subject to the reasonable                         This Court retains jurisdiction to                    Court approval subject to procedures set
                                                 convenience of the interviewee and                      enable any party to apply to this Court                forth in the Antitrust Procedures and
                                                 without restraint or interference by                    at any time for further orders and                     Penalties Act, 15 U.S.C. 16
                                                                                                                                                                /s/ lllllllllllllllllll
                                                 Defendants.                                             directions as may be necessary or
                                                   B. Upon the written request of an                     appropriate to carry out or construe this              United States District Judge
                                                 authorized representative of the                        Final Judgment, to modify any of its                   [FR Doc. 2011–1821 Filed 1–28–11; 8:45 am]
                                                 Assistant Attorney General in charge of                 provisions, to enforce compliance, and                 BILLING CODE 4410–11–P
srobinson on DSKHWCL6B1PROD with NOTICES2

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