tv ATT and Time Warner CE Os Testify on Possible Merger CSPAN December 8, 2016 8:00pm-10:47pm EST
tonight a senate hearing on the proposed merger between at&t and time warner. and senator mccain and newt gingrich discuss foreign policy. and the head of the washington, d.c., public transit hearing testifies at a house hearing looking into safety lapses in the city's metrorail system. media companies at&t and time warner are seeking approval from antitrust regulators for a merger worth $85 billion. the ceos of the two companies testified about the merger at a senate judiciary subcommittee hearing. media magnate and nba team owner
mark cuban and consumer advocates also testified. senator mike lee chairs this two hour and 45-minute hearing. >> welcome to the subcommittee on antitrust competition policy and consumer rights. before we start, i would like to thank ranking member klobuchar and for her staff in preparing for this hearing today. i'd also like to thank the chairman of the full committee, senator grassley, for his support for the hearing. after i and senators klobuchar, grassley and leahy give their remarks about this hearing, we'll hear from our panel of witnesses, and i will introduce those witnesses shortly and then
we will have seven-minute question rounds from members of the subcommittee. we're living in what some might describe as sort of a golden age of television. one tv writer recently commented that for the first time i have begun to feel like there may in fact be too much good tv, if there were possible. from "game of thrones" to "house of cards" and so many other programs across so many television networks and platforms, the quantity and quality of programming content may well be greater today than it ever has been in the past or ever could have been predicted. the creativity is not limited to content creators. networks and distributors are also innovating to allow consumers new and unprecedented
access to their content of choice. no longer are consumers limited to whatever bundle their local cable operator might have put together for them. dish, sony and directv all offer cable bundles allowing consumers to stream live television over the internet. netflix, amazon, hbo, cbs, among others, allow consumers to purchase programming directly and more innovation is on the horizon and coming at us very quickly. as many industry participants expect, wireless 5g technology to provide even more competition to broadband and land line cable, opening up even more possibilities to content creators and distributors. this brings us to the very reason we're here today, to discuss the proposed acquisition of time warner by at&t.
and ensuring this flourishing mark theplace for creative content retains its vibrancy, regardless of the outxhf this proposed acquisition. at&t is the second largest wireless carrier in the united states. and through its directv and u-verse subsidiaries, the largest u.s. cable or satellite provider. time warner is the world's third largest television network and film, tv entertainment company. at&t announced it reached a deal to purchase time warner for $85 billion. the proposed transaction could combine at&t's millions of wireless and paid television subscribers with time warner's media lineup which includes cnn, tnt, hbo and warner brothers film and television studio. now the companies claim this acquisition will result in significant benefits for consumers.
the combined company will provide, quote, stronger competitive alternative to cable and other video providers. and, quote, better value, more choices and an enhanced customer experience for over the top in mobile viewing. additionally by controlling the customer experience from content creation through distribution, the combined company says it will be able to innovate its advertising practices and introduce cust omized or targeted advertising providing an improved customer experience and significant competitor to digital advertising giants like google and facebook. this transaction involves no horizontal overlaps. however, if this fact ended the antitrust analysis, then this would be a very seinfeldian hearing. a hearing about nothing. although the vertical deals typically raise fewer concerns than do their horizontal counterparts, such deals may continue to substantially lessen
competition. the key analysis takes place under the clayton act. the principal concern is foreclosure or denying access of competing firms to suppliers and customers. a key question thus becomes, will -- what will the incentives and opportunities be for the combined firm after the transaction takes place? many critics have positted that all sorts of potential competitive abuses may take place. and that the combination of at&t and time warner could create and it could increase the price or reduce the access to the time warner content and the distributors, thereby not only rising its rival's costs but also making its directv products appear more attractive to consumers. this risk is particularly acute in the online video services
market. over the past few years, we've seen the development of products like sling and like playstation view which allow customers to watch a live stream of cable channels via their internet connection. and directv has just begun its own similar sefrks called directv now. at&t's ownership of hbo, cnn and the other must-have television products of time warner could give directv now a significant competitive advantage over its competitors. and at&t's ownership of these channels could also potentially force directv's rivals into a hobson's choice of higher prices or limited time warner content knowing that many customers would migrate to directv if its rivals refuse to pay the higher time warner prices that they would have to pay in that circumstance. the potential anti-competitive favoritism the combined form
could bestow on its own products is not limited to price or access. but extends to the quality of the offerings as well. and it's here that we get to the song of zero rating whereby a wireless or broadband distributor excludes particular data from counting towards its customers' data consumption caps. on its face, zero rating appears to be customer friendly. the content is free for subscribers and helps them to avoid having to pay overage when they exceed the applicable data caps. however, critics argue that zero rating transforms internet service providers or wireless carriers from, quote, relatively neutral conduits into gatekeepers. the fcc rooecently expressed concern that it may obstruct competition and harm consumers by constraining their ability to access existing and future mobile services, not affiliated with at&t.
critics say that such concerns would only be exacerbated if at&t were able to bring time warner content under its fold and under its ownership. however, as the fcc letter itself illustrates, in regard to this merger, we also have a regulatory framework that's designed at least to minimize if not to eliminate, many of the positive -- many of the positive anti-competitive concerns that have been expressed. the issues raised by this deal are complicated. and, like most antitrust analysis, particularly most antitrust analysis in a deal that's this big and that's this complex, they are necessarily very fact intensive. the focus of the analysis should remain on maximizing consume ir welfare and consumer welfare is,
in turn, maximized when we focus on protecting competition rather than protecting individual competitors from competition. while the final determination regarding the competitive impact of the deal will be made by the department of justice, i believe we can make a valuable contribution to the conversation today by closely examining the questions raised by this unique and significant transaction. i look forward to hearing from and engaging with our uniquely talented and capable panel of witnesses today and covering any issues that might come up. senator klobuchar will now give her statement. >> thank you very much, mr. chairman. thank you for holding this important hearing. like you, my initial statement here started out with examples of these great new offerings, and we seem to have the same ideas. i was going to mention "game of
thrones" or as you once called this hearing "game of phones." instead i'll switch to westworld to show how flexible i am in this new era in washington. examples of the content we're seeing from a variety of sources to netflix house of cards to espn's 30 for 30 documentary, we're seeing critically aclaimed and popular content coming from a wider range of networks and video on demand services. perhaps even more important, we see diverse voices being heard with networks representing different viewpoints and interests. this has been referred to as the golden age of television. however, it really is actually not quite accurate. increasingly, we stream shows on our computers, tablets and mobile phones rather than simply watching them on televisions. and consumers are relying on their broadband or wireless connections instead of their
cable connections to receive that content. this competition has increased consumer demand for video content which has benefited the content creators, according to the writers guild. there were 305 comedy/drama series during the 2015, 2016 season compared to 204 in 2010 to 2011. earnings for the guild's writers have grown by almost 50% from $570 million to $854 million in the same time period. but there are still problems. and we know what they are because as u.s. senators, we hear about them when constituents talk to us on the street or call our offices. the cost of cable television continues to be a burden on too many consumers. according to a report released just this morning, by consumer federation of america, the typical household, which is in america now two cell phones, one landline and a video/internet bundle spends about $2,700 per
year on these services. when you think of a middle class income, that say chunk of change. we've seen this plot before. like a tired movie franchise, we can predict the ending before it begins. the promise of thriving competition collapses replaced by dominant firms with monopoly power. we saw it in radio and television with the development of centralized networks and finally in cable with the rise of cable distributors and their local monopolies. this is the central question of this hearing. will this transaction accelerate the disruptive forces that will increase competition, spur innovation, improve quality and lower cost, or is this one step on the road to a few dominant firms controlling content and distribution? one school of thought believes that vertical transactions in which a distributor of content aquires a supplier rarely if
ever undermein kamine competiti. whether it will harm consumers relies on investigation and careful anal sirks not ideological presumptions. the federal communications commission and antitrust division of the department of justice have largely followed this practical approach in reviewing mergers and aqui zi s acquisition in this industry. in the of interest american consumers, i hope the new administration continues that tradition. at&t's acquisition of time warner combines one of the world's largest wireless/cable, including satellite tv and broadband providers with one of the world's largest media and entertainment companies. there are three broad questions that i think we need to look at. first, will the acquisition increase at&t's incentive and ability to suppress competition? various distributors of video content have raised concerns that at&t will increase the prices at a competitor's pay for time warner content or deprive
its competitors of access to that content. independent content providers raise similar concerns. will at&t post transaction favor its own content over independent content? if pursued, such tactics could increase the costs that distributors charge consumers or undermine the development of innovative distribution models. even more troubling, the merger could stifle the diversity of viewpoints and focus offered by independent content providers. independent content providers are responsible for much of the innovation and diversity in programming today. but they already face a tough landscape having to negotiate with large distributors. the second question, will the merger produce benefits? according to the parties and supporters of the transaction, combining programming content with video distribution would allow at&t to develop new innovative offerings for consumers, improve content
creation and allow at&t to better compete with facebook and google. i appreciate that at&t just last week launched directv now which allows customers to access directv's programming through the internet. these potential benefits need to be examined but i want to be clear. if this transaction is found to be anticompetitive, the need to compete with other companies is not a justification. the solution for less competition is not even less competition. finally, if concerns exist, would conditions remedy these problems? conditions have been used in the comcast/nbc universal merger which shares some similarities with this deal. there is, however, disagreement about the effectiveness of those conditions. further, there's growing skepticism that conditions that attempt to limit a company's conduct can ever work. mr. chairman, i have received a
statement from consumers union articulating their concerns about the transaction. i move that this statement be included in the record. and this is a very important transaction. i'm glad we're taking a close look at it today, and i look forward to hearing from the witnesses. >> thank you. those will be submitted into the record without objection. we're now going to hear opening statements from the chairman and ranking member respectively of the judiciary committee as a whole. this, of course, is a subcommittee of that committee. chairman grassley? >> also, instead of saying at the end i may have questions for the record because after 11:00, i may not be able to be here. thank you, mr. chairman, for holding this hearing on the biggest transaction of the year. the proposed at&t/time warner merger. this deal would combine one of the nation's largest phone and internet providers with a media
entertainment titan that, among other things, owns hbo, cnn, tbs, tnt and warner brothers studios. by expanding into media and entertainment, at&t strengthens its existing wireless, internet and pay tv business and also becomes a premier content owner. the justice department and possibly the federal communications commission will determine whether to approve or reject this merger and decide whether or what conditions should be in order for the parties to proceed with the transaction. nonetheless, this committee's oversight responsibilities is an important one where the committee can flesh out potential issues and highlight possible impacts of the merger on the market and consumers. it's an understatement to say that this industry is undergoing tremendous change. people are constantly
re-evaluating what, when and where and how they access the media entertainment and content. technologies are quickly evolving. and delivery platforms are converging. companies are improving their technologies so that customers can enjoy better and faster connectivity. innovation is creating more options and allowing for multiple combinations. the creativity of programming content and device apps is flourishing to satisfy any and every consumer taste, young and old. consumers are becoming increasingly knowledgeable about content offerings and their data consumption needs. no doubt this industry is going through a transformation and a disruptive time and consumers are going to enjoy and are enjoying the ride. so we want to make sure that this revolution in technologies
and content continues to thrive and evolve to the benefit of all consumers all over the country, including rural communities like mine in iowa. more content choices and better quality and affordable prices make for a happy consumer. at&t and time warner say this vertical verger will, in their words, benefit consumers, strengthen competition and encourage innovation and investment, end of quote. they claim that by consolidating the assets of the two countries -- two companies, it will be able to better compete nationwide and meet expectations of consumers. now, however, critics of the merger say this deal will have a negative impact on competition and innovations. there's concerns there that a combined at&t/time warner will
block competitor access to popular time warner content. there's concern that a combined company will give preferential treatment, for example, favorable channel placement and zero rating pricing. to time warner's premium entertainment programming than to the disadvantage of other content producers and particularly small, independent producers. there's also concern about at&t/time warner's ability to leverage their assets to negotiate better licensing arrangements or raise the price of their content to the detriment of other distributors. there's concern about the merged company's ability to prevent bullying tactics to dictate rates and terms to other networks. there's concern that this acquisition will concentrate too much power into connecticut glomerate, resulting in higher
prices and fewer options for consumers. there's also concern about the merger's implication for a free and diverse media. this is something i experienced because on weekends when i'm at the farm i watch channel 349 on directv. i found out that it wasn't there anymore. i asked why. and found out what is going on is an unfair contract negotiations. now these are all serious concerns which should be scrutinized carefully by antitrust regulators tasked with reviewing this transaction. at the same time, some warn that we should be careful about how the at&t/time warner deal should be examined because of the dynamic nature of the industry, complexity of the marketplace and fast-paced innovation and changing consumer wants and demands. they question whether the
current merger analysis methods are well suited to tackle this transaction and urge caution when determining the competitive effects of mergers between different complex interconnected platforms. secondly, they suggest they may need to redefine market power and reassess how to analyze it in a fast shifting industry with multisided platforms. with tech giants like google, facebook, amazon, netflix and others, changing the way consumers access content is legitimate to ask whether as one aei scholar recently said, quote, what looks straightforwardly anti-competitive in the old industrial merger models might not be so simple in the merger of modern media platforms, end of quote. certainly, the at&t/time warner deal warrants close and careful
scrutiny because it raises all these complex issues and concerns. we want to ensure that the proposed emergencier doesn't allow an unfair advantage over competitors or facilitate anti-competitive practices with anti-competitive effects. yet, we also need to be thoughtful, forward-looking analysis of the market that takes into account the complexities of modern interconnected media content and telecom platforms and relationships. ultimately, we want to ensure that competition thrives in this critical market, and we don't stifle innovation or deter emergence of cutting edge technologies at consumers' demand. ultimately, we want to ensure that our policies don't lead to higher costs, fewer choices and worse services for consumers. i look forward to our discussion today. thank you. >> thank you. senator leahy.
>> thank you, mr. chairman. i am glad that senator lee and senator klobuchar are having this hearing. i'll resist the temptation to go through the list of which shows i like the most and which things i use the most. i see too many people i know in the audience that i'm afraid i'll either make some happy or unhappy depending upon what i include or leave out. but i think it is an important hearing because the propose d - whether you support it or oppose it, you have to agree the proposed almost $85.5 billion merger can dramatically transform our nation's telecommunications and media landscape. it will combine two titans of industry. and you have this kind of a
massive consolidation distribution in content, it raises serious questions. was it due for competition or consumer choice? or privacy across the media or paid tv and wireless, broadband industries. we have to look at that carefully. 130 million americans depend upon at&t for their wireless internet access. last year, they acquired directv's satellite television service. and now they are seeking to acquire time warner's content. these raise the question, the obvious questions, about whether at&t can begin to act as a biased gatekeeper for its own affiliated content services. we know from the questions raised about the decision on wireless, charges to view
directv on their phones. anti-competitive and anti-consumer actions by gatekeepers can be prevented under the fcc's 2015 open internet rules to establish clear, forceful, brightline prohibitions of blocking or discriminating against unlawful content on the internet. net neutrality protections maintain the internet remaind an open platform, one that fosters innovation and free speech. strong net neutrality rules help mitigate concerns about a post merger at&t's ability to harm competitors and consumers. but the very -- the various net neutrality rules, which i believe currently protect consumers, appear to be under serious threat by the incoming administration. the president-elect is openly opposed to net neutrality.
he's formally named three staunch net neutrality opponents to oversee his fcc transition. and i think any weakness -- weakening of these rules are going to cause serious harm to consumers. and it would only be exacerbated by what we assume would be further mergers in the industry. not limited to this transaction could impact all americans who rely on the free exchange of ideas and information on the internet. mr. chairman, i'm going to submit questions for the record. i have some duties involving appropriations at the moment, but i am very concerned about this. i know you are. i know senator klobuchar is. thank you. >> thank you senator leahy. your questions and those will be submitted by chairman grassley and anyone else will be admitted
without objection. okay. we're now going to turn to our witnesses. i'm going to introduce them and then we'll swear them in and hear from each of the witnesses. we'll start from my left and move to my right. randall stephenson is the chairman and ceo of at&t. he was named to his current position in 2007. at&t has invested to become a global leader in providing integrated communications services to businesses and consumers. hang on. make sure that i don't mess yours up. video entertainment high speed entertainment mobility to ip network services and the internet of things. mr. stephenson began his career with southwestern bell's telephone company in 1982 in oklahoma. he served as the company's senior executive vice president and chief financial officer from 2001 to 2004 and from 2004 to
2007, he served as the chief operating officer. he was appointed to at&t's board of drctors in 2005. he's a member of the board of directors of emerson electric and boeing, a member of the pga tour policy board and national president of boy scouts of america. mr. stephenson received his bs in accounting from the university of central oklahoma and master of accountancy from the university of oklahoma. jeff bewkes is chairman and ceo of time warner inc. elected chairman in january 2009 having served on the board since january 2007. he was elected ceo in january 2008. part of being named chairman and ceo, he served as time warner's president and c.o.o. from 2006 to december 2007 and chairman of the entertainment and network group from july 2002 to december 2005. before joining the corporate management of time warner, mr. bewkes was chairman and ceo of
hbo and as president of ncoo of hbo. mr. bewkes serves on the board of yale university and the partnership for new york city and serves on the advisory board for the creative coalition. he's also a member of the business council. mr. bewkes has a ba from yale and mba from stanford. >> mark cuban san entrepreneur n investor and owner of the dallas mavericks, landmark theaters and magnolia pictures and is the chairman of the hd tv cable network axas tv. also one of the "shark" investors on "chashark tank." they started audionet combining mutual interest in indiana hoosier college basketball and web casting. with a single server and isdn line, audio net became broadcast.com in 1998. broadcast.com had grown to 330
employees and $13.5 million in revenue for the second quarter. in 1999, broadcast.com was acquired by yahoo! for $5.7 billion in yahoo! stock. gene kimmelman is the president and c.o.o. of public knowledge. previously he served as director of the internet freedom and human rights project at the new america foundation. and is chief counsel for the u.s. department's antitrust television. he served as vice president for financial and international affairs at consumers union. also chief counsel and staff director for the antitrust subcommittee of the senate judiciary committee and legislative director for the consumer federation of america. mr. kimmelman began his career as a consumer advocate and staff attorney for public citizens congress watch. mr. kimmelman say graduate of brown university and holds a jd from the university of virginia where he received the fordsman
fellowship. also a fulbright fellow. he presently serves as senior fellow at the silicon flat iron center for law, technology and entrepreneurship at the university of colorado and his senior associate with global partners digital. daphne ziman is a filmmaker, founder of a music label philanthropist and author living in beverly hills, california. she's the president and chief creative officer of kri nemoi, television network focussing on film, fashion and international style. founder of a music label unicorn ssd records. write edirector and award-winning author and philanthropist. she works as a writer/producer and director. her latest film "footsteps" debuted on showtime. ms. ziman also serves on the advisory board of the philanthropic arm of the state department irex as well as the board of trustees of children's
institute international. a chair person of abc love, adoption brings children love. before we begin, i'd like to swear in the witnesses. if you'd all stand and raise your right handed. do you swear that the testimony you're about to provide to the subcommittee will be the truth, the whole truth and nothing but the truth? thank you. mr. stephenson, you'll be up first. and you may begin. if you could push the button until it turns red, we can hear you better. >> and the rest of the members of the committee, i appreciate the opportunity to talk about the benefits of combinie ining s distribution with the world class content of warner brothers, hbo and turner. and for your constituents, we believe the benefits are stratforward and substantial. they will give more choices and lower priced options and that means more nation wide competition against the cable companies and each of your
respective states. what this merger is not about is consolidation either in media or in telecom. at&t is a communications company. we distribute content. time warner is a media and entertainment company. they create content. and this is a classic vertical merger and it elim flinates no competitor from any market. it increases competition, particularly against the cable companies. and our intent is to disrupt the existing pay tv model. we want to get the most content to the most people at the lowest prices. and we want consumers to pay for their content once and then watch it anywhere at any time. every episode, every season, on whatever device they choose. but disrupting entrenched business models is hard, and it generally takes bold steps. and combining scale distribution with scaled content creation, it
is such a step. it's going to allow us to accelerate innovation and without exception, when one company accel ratss innovation in a market, everyone accelerates innovation. master innovation in content delivery william naturally accelerate deployment of 5g mobile mrks with greater than one gig speeds. we've seen this happen before. it's important to recall that we launched the first iphone at at&t on a 2g network. and as demand for the iphone and more bandwidth exploded, the u.s. mobile industry accelerated deployment of 3g and then 4g mobile networks. and this drove two multibillion-dollar network upgrades in the course of five years. and we're about to experience this again. directv now and other planned innovations with time warner are 5g services that are going to be launched on 4g networks. as we witnessed with the iphone, we expect 5g deployments to
accelerate. not just for at&t. we think it will accelerate across the industry creating more competitors for cable. this is exactly what we believe consumers want. new, lower priced options and the power to decide themselves. and a good example as has been referenced in the earlier comments is our new directv now product we launched last week. this is 100 channels starting at $35 streamed to any device. the customer has no contract requirements, no credit check, no installation, no set-top box, and the price includes the data charges for mobility at&t customers. and during our first week in the market, the uptake of this new service has exceeded all expectations. and as predicted, the industry has already begun responding. in fact, just last week, shortly after we announced this product, cbs added the nfl to its all-access streaming service at no additional cost.
innovation by one invariably begets innovation by all. i've talked a lot about what will change baz of this merger and i want to really quickly talk about what will not change. at&t will continue to be a leading investor in america. we've invested more in the united states than any other company each of the past five years. you should expect that to continue. we will continue to do our part in keeping america the global leader in two specific areas. innovation and deployment of advanced communication networks and creating content people want to watch. it will encourage and support independent journalism, and we will not withhold content to disadvantage somebody else. time warner was built on a platform of broad distribution of its content into every home, and it woubld illogical for us to change that. and finally, you should expect at&t to continue doing what we've always done.
that's distributing a wide array of diverse, high-quality content across all of our platforms. so in conclusion, this merger is going to drive investment. it's going to drive innovation in an industry that we believe is begging for both of those. so mr. chairman, i thank you for the opportunity. i look forward to your questions. >> thank you, mr. stephenson. mr. bewkes? >> chairman, thank you, chairman lee, ranking member klobuchar and members of the subcommittee. thank you for inviting me. i'm jeff bewkes, chairman and ceo of time warner inc. i appreciate the opportunity to talk to you about why a combination with at&t not only makes sense for time warner but also is good for consumers. in short, combining time warner's video content with at&t's distribution will accelerate the development and delivery of the next generation of video services, providing consumers with greater choice, convenience, value and importantly, better
affordability. before i talk more about that, let me briefly tell you about time warner. since 2009, we've been focused on producing and distributing video content, film, television and video games at the wholesale level across a wide range of outlets. we do this through three divisions. warner brothers, hom box office and turner broadcasting. we do not own any cable, satellite, telephone, broadband or wireless distribution business. and as a video content company, our success depends on achieving the broadest distribution of our content and on embracing innovative ways for consumers to enjoy what we have to offer. warner brothers is a great example of this. it's the leading television studio in hollywood because the most talented producers, directors and writers come to us to make their shows. the reason they do that is they know that warners will find the best home for their shows on any
network or over the top service. warner supplies shows to every broadcast network while also producing for basic cable networks, premium cable services, including both hbo, its competitor showtime and services like netflix and hulu. warner has also been a leader in innovation, including making it possible for viewers to watch the full season of its shows on demand on broadcast networks. those principles of broad distribution and innovation hold true at hbo whose success depends on reaching and passionately engaging viewers, whether they subscribe to a pay tv service or only have broadband. that's why we launched hbo now, which offers hbo's programming without the need for a pay tv subscription. the same is true at turner. turner must distribute its networks which depend on subscription and advertising revenue broadly across all platforms and devices.
that's why turner's licensed its networks to new broadband delivered bundles offered by dish, sony, directv and hulu. we're proud of what time warner has accomplished but today we're competing for attention not just with other tv networks but with everyone from netflix and amazon to youtube and facebook. great content is not enough. you need to deliver great consumer experiences and that's what joining with at&t will allow us to do. we'll continue to work with all distributors, both, but combining with at&t will make it easier and faster for us to innovate for consumers. including offering more choice in network bundles which great interfaces, great on-demand content and interactive features. more over the top services like hbo now and film struck. more short form content, particularly on broadband and mobile. currently, when we try to introduce innovations for
consumers, we often need to roll them out distributor by distributor as part of lengthy affiliate agreement negotiations that take place only every few years. tv everywhere is a pretty good example of this. we introduced tv everywhere in june of 2009 based on the simple idea that if you subscribe to a pay tv service, you ought to be able to watch your favorite programs not just on tv and on the tv set, but on any connected device of your choice at no extra charge. it's now seven years later. and tv everywhere still isn't fully embraced by all the cable distributors. by combining with at&t, we can accelerate the process of introducing innovations on a nationwide basis, and we can have more flexibility to adjust to changing consumer expectations. providing consumers with more choices and better experience at more attractive prices while spurring industry wide competition and innovation. that's why we believe this
transaction is right for our company and good for consumers. thank you. i'll be happy to answer questions on any of these points. >> thank you, mr. bewkes. mr. cuban? >> thank you for inviting me to give my testimony and speak before you today. my name is mark cuban. i've been an active entrepreneur in many fields throughout a career spanning over three decades having started or invested in more than 200 companies creating thousands of jobs. i'm also proud of the fact that a tv show i'm part of "shark tank" helps inspire entrepreneurs every week. the media world has changed. in 1995 i started audionet and built ourselves as the broadcast network on the internet. we were one of if not the very first streaming content aggregator and distributor on the net. back then, the biggest competitors to our online streaming and consumptsion of content were radio and tv. the world has changed quite a bit since then. but maybe not in ways that are
obvious. historically, tv had been the dominant media. we all used to wonder why we spent so much time watching tv. when asked why tv, my answer kwuwas all the same. tv is the best alternative to boredom. the close of the we can come to doing nothing while thinking we're doing something. it was always our go-to way to kill time. those days are gone. and in the past, we went to our media. we came home, turned on the tv, plopped down on our favorite chair or couch and vegged out, pulled out a cold beverage. today, our media comes to us. how content comes to us is changing almost daily. and has become an important subject in a wofrld antitrust and media distribution. today our best alternative comes flom an app. fire up an app on whatever device you have in your hand no matter where in the world you are is how we kill time. the idea that tv is the dominant content delivery mechanism no longer is valid.
instead we filler time by consuming content from facebook, instagram, snapchat, mess. >>er, whatsayy and virtual realize companies. these apps reach more than 1.5 billion users a month. they can deliver any content in any manner the consumer would like be it message, video, vr, post, ad, you name it to populations around the world in a manner that dwarfs television. facebook is without question in a dominant position, if not the dominant position for content delivery. imagine what facebook and their respective competitive landscape would look like if they had not acquired instagram, oculus rift or whatsapp. if those were separate companies competing, the don't world would look much different and be far more compets fitch facebook may be the biggest competitor now but not the only major content provider. snapchat is taking over millennials as the best
alternative for boredom. we all have seen the never-ending stream of selfies, videos and more take over some of our kids' lives. for those younger than the snapchat generation and, yes, they do exist, there's musically and lively with tens of millions of users and growing. or microsoft's minecraft, an acquired property with over 100 million users. from personal experience, i can tell you punishment for my 7-year-old is take away his mooncraft sproops we could care less if he loses tv privileges. it is losing viewers to the other dominant content players in netflix, amazon with prime and twitch an acquired property, apple with music, beatz, an acquired property and finally with youtube. and google's the ultimate programming guide, their search. given our time constraints i'll pick another time to discuss the impact of having google and apple that act as the sole gatekeepers to the app ecosystem.
you may have noticed i have not mentioned at&t or time warner yet because neither is in any sort of dominant position. by themselves, at&t and time warner will have a very difficult time controlling their own destinies, let alone trying to exert influence on a market. this merger is not only one of survival and opportunity, but one that is needed by consumers. we need more companies with the ability to compete with apple, google, microsoft, amazon and facebook, delivering content to consumers in this app-driven world is not easy. it is very expensive and difficult. apple, google, amazon, microsoft and facebook are five of the seven most valuable companies by market cap in the world, and all have established dominant positions. that is exactly what the time warner acquisition -- why the time warner acquisition for at&t is an important strategic content acquisition. alone it will be difficult if not impossible to compete with either of the companies i mentioned. together it will still be difficult, but they'll have a
chance to battle the dominant players and increase consumer choice and competition for consumer attentions. i've run out of time, but i'd like to also say each of the largest content companies i've mentioned so far -- facebook, google, amazon, microsoft and apple -- present much, if not all of their content algor rhythmically. with good old-fashioned tv we get to pick the channels we want rather than have our feed tell us what we want. thank you, and i'll look forward to answering your questions. >> thank you. mr. kimmelman? >> thank you, mr. chairman, senator klobuchar, on behalf of public knowledge, i'm joined by consumer federation of america, i appreciate the opportunity to testify. i'd like to ask the report we released this morning that senator klobuchar referred to could be put in the record. i know it looks like great bedtime reading by its size. >> without objection. >> i start here because this is a description of the last 20 years of activity in this
industry, which i think is relevant to look at this morning, as you consider the impacts of this merger. all the leadership of the committee pointed out all the potential pros and significant cons of this. i raise this because what it shows is that $2700 that consumers are paying per month, there are times when lax anti-trust oversight allowed substantial mergers of cable and telephone companies and content companies. there were times when there was limited regulation, and what we conclude is, looking, comparing the prices consumers are paying with the actual competitive costs, we're probably being overcharged by at least about $45 per month, your constituents, for those services, because there are two few players already in these markets. they're massively concentrated.o few players already in these
markets. they're massively concentrated. few players already in these markets. they're massively concentrated. few players already in these markets. they're massively concentrated. few players already in these markets. they're massively concentrated. so in that context, adding firms that have more than 130 wireless subscribers nationwide, 25 plus percent of all tv viewers through satellite and wire, bundled services with market power, and the wonderful content that mr. bewkes has described with time warner raises very significant questions for could consumers. they've talked about all the wonderful things they can do. i want to highlight they are excellent companies that have begun to compete more aggressively in the over-the-top market. they're doing really good things for consumers. that's wonderful, as separate companies, contracting with each other and others in the marketplace. the question for anti-trust review and regulatory authorities is, will that continue? they've described what they have done very well, and we applaud
it as benefits to consumers in many instances, but will that really continue? with these enormous assets coming together, and in a market where there are very few players, just ask your constituents, how many broadband providers do they have, how many cable or other comparable tv providers that can give you a full panaplea of services? how many are there? i appreciate mr. cuban's points but the last time i looked google and facebook weren't charging me more than $200 a month to get those apps, to get their content, and the last time i looked, you all may remember this, too, do you remember when you as teenagers or your kids spent more than like an hour on the phone? talking to friends? do they do that anymore? no, snapchat, apps. it's voice service that has gone here, but that is not the same as professional quality video that mr. bewkes' company produces. that's something different, and
every one of those companies mr. cuban referred to relies on the fundamental infrastructure, the plumbing of the internet and telecommunications system that is controlled by very few companies, two dominant cable, two dominant phone, including at&t. it is that market power that concerns us, and is this just hypothetical or possible? well, the department of justice and fcc have already found that incomparable transactions including comcast, nbcu when you combine this quality content with market power there are enormous incentives to favor yourself and harm competitors, block competitors, raise prices to rivals and this deal is even bigger. that was a regional cable monopoly. this is nationwide satellite tv distribution nationwide, wireless, the incentives will be even greater.
in that environment, the bottom line is we urge law enforcers to reject this merger unless they can absolutely show that these competitive harms will not arise, that there are actual paths to increase benefits to consumers, and absolutely show that they truly have the regulatory tools in an environment where it appears regulations will be withdrawn and oversight will be limited. this is not just about money, mr. chairman, members of the subcommittee. it is the diversity of programming owned by different people over different platforms that fuels our democracy. no one has said it better than the president-elect. it is in that environment we urge to you look at this carefully and enforcers not to take risk with the transaction that could be harmful to that democratic process and consumers pocketbooks. thank you. >> thank you.
miss simmons? >> chairman lee, ranking member klobuchar and members of the subcommittee, i want to thank you for inviting me to testify today about the impact of the proposed at&t/time warner merger on minority channels, cultural diversity, gender diversity, and independent programmers. my name is daphne edwards ziman, and as many of you know i've spent the last 20 years of my life coming here to advocate on behalf of women and children. i'm here today as the founder, president and chief creative officer of cinewa, a women owned 24-hour award winning network dedicated to curated films, high fashion, international lifestyle, and environmentally profound programming.
cinemoi is an independent network that is trying to make a difference in the media industry. it's designed to lift the image of women. cinemoi is defined by high quality content. originally we launched the directive on september 17th, 2012. cinemoi is available on verizon and frontier and via the internet and reaches millions of subscribers. cinemoi chose not to be a part of the bundle because doing so would undermine what cinemoi is and would stifle our creativity. cinemoi is also a minority owned channel as it is one of the only two networks majority owned by a woman, the other one is oprah winfrey and she's distributed by discovery. independent programmers are the risk takers that provide innovative content.
today 90% of the content on tv is controlled by six conglomerates. the industry is currently structured to shut out new entrants, which are mostly independent programmers and keep channels like cinemoi from making it and providing competition to incumbents in the industry. independent programmers understand very well the pressures that they face from giant content providers, but more consolidation is not the answer. in the current state of the media industry, the survival of independents is at a significant risk. further consolidation would be catastrophic to diversity, additionally silencing minority and women-owned voices. at&t claims that vertical integration is not harmful. the fact is, vertical consolidation gives at&t both the means and the incentive to
discriminate against independents. for example, cinemoi competes with many cable networks, turner classic movies being one of them, which is owned by time warner. by directv's own research showed that two-thirds of tcm's viewers also watched cinemoin a nonvertically integrated market competition between cinemoi and tcm is in the best interest of the public, but when at&t owns time warner, shutting out competitive channels like cinemoi is not only easier but cheaper. such loss falls upon the american people. at&t argues that ott offers sufficient opportunity for independence but relying on ott
is the one-way ticket to bankruptcy. like other independent networks cinemoi is negotiating deals on these new platforms. however linear distribution, because of its broad reach, remains the most effective way to develop awareness, brand recognition, and consumer demands. the ott market is a maze of confusion and lots of content that's not organized. approximately 20% of television households are cold cutters, not because of preference, but because of the intolerance to the lack of curation bundles offer the repetitive and copycat programming. the remaining 80% should not be denied programming that meets their needs and interests. ott revenue alone will not allow independent networks to compete with incumbent channels that enjoy multiple revenue streams. moreover, at&t controls the distribution to more than 172 million cable, internet and
mobile subscribers and can utilize a variety of techniques to favor its own content, and disadvantage independent networks like cinemoi. these concerns are real. directv and at&t is currently under investigation by the justice department for unfair tactics against programmers. in fact, independent programmers are only offered channel on at&t if they sign a pay-for-play deal with directv. that's precisely what happened to cinemoi. look at the panel testifying today. it is supposed to represent a broad cross-section of the industry, yet it is dominated by white men. the idea that opportunity is lacking for women and minorities in media isn't hypothetical. it is clearly symbolized by this desk. women are the majority of the population, controlling 14
trillion in wealth, two-thirds of the country's wealth, and 70% to 80% of all household spending, yet only two networks are owned and controlled by a woman. women deserve presence in the media. the airways at&t utilizes belongs to the american people, bestowed upon the mvpds by the people, for the people, and at&t has a fiduciary responsibility to utilize this resource in the best public interest. that obligation includes creating opportunities for cultural diversity and democracy of voices. sadly at&t is doing everything in its power to avoid the review by the fcc, the one agency that could review this merger through the public interest lens. so the question for policymakers is this -- does a company that
will go to any lengths to avoid public interest scrutiny really care about democracy and cultural diversity, the survival of independents, risk takers, or innovation? the american consumer is ultimately the one that will be worse off from further consolidation in this industry. if we learned anything from this last election, it is that the american people are angry about the growing divide between the haves and the have nots. independent programmers are the have nots in the media landscape. diversity of content is in the public's best interest. okay, i have things to say, if you'd like to ask questions. thank you. sorry. >> thank you, ms. ziman. i will now kick off the questioning, mr. stephenson, i'm going to ask you a very simple question. will this merger, assuming it's
carried out to completion, will it result in lower prices for consumers, and if so, how and why? >> i was asked that exact same question in front of this committee a couple of years ago when we were working on the directv transaction, and i represented that yes, it would, by virtue of the innovation, we'd be able to bring lower price capabilities to the consumer, and literally within a year -- >> which wasn't the exact same question because it was a different context. >> it was a very similar transaction in that the lower prices would be a result of the innovation that would follow, and within a year, year and a half of that transaction closing, the innovation has followed, and in fact there have innovations, if you're a directv customer you can stream all of
that content to your mobile device no charge and then we launched as i said last week directv now, a little over a year since we closed the transaction, 100 channels at $35 and i think that is significant innovation that did result in lower prices to the consumer. and in $35 includes the mobile streaming, so as you put two companies together under one umbrella, this is why it's so important, senator, you can speed innovation like you can never do in our relationships and transactions. directv is a classic example of how that happens. what we are talking about doing by combining time warner and at&t is taking the innovation in directv now to a whole different place and a whole different level, because our ambition is to ensure that the customer pays for their content only one time, because today, a customer pays for content if they want to watch it on a mobile device they probably have to pay for it via an app, if they forget to watch a show and want to look at it on over-the-top means they have to pay for it again. our objective is to pay for it one time, give the consumer the ability to watch it any time, anywhere, on any device they
want. we think that will result in lower prices, and lower cost to the consumer. >> mr. kimmelman, what is your response to that? mr. stephenson says it will result in lower prices. what do you say? >> hard for me to see it for sure, mr. chairman because in the directv deal which we had concerns with which were addressed by regulators and the anti-trust officials, there were clear efficiencies of putting together a bundle that a satellite company could not do on its own for transmission. it couldn't really offer both video and broadband. so i am extremely pleased to see mr. stephenson's companies responding to that and taking advantage of the efficiencies to lower prices. i don't see those here in this transaction. they could contract to do the same things that he's talking about as wonderful innovations without the risks of the merger. >> mr. cuban? what's your reaction to the answers given by mr. kimmelman and mr. stephenson? >> that's not really my wheelhouse. i don't have a comment on it. >> got it, got it.
>> mr. bewkes on a slightly different question, you can get back to that if you'd like but i first want to ask you, i'm encouraged to hear that time warner's business model is based on broad distribution for content. other companies obviously have taken a different approach, netflix for example has been a successful company. it's got a market camp, $52.9 billion and that's a viable be option to take a different approach. can you tell me how time warner weighs broad distribution versus exclusive content, how do you balance those relative to attractiveness. >> we're been able to build our networks, cnn, hbo, tnt, cartoon network only because we have broad distribution and if we were to, and we've never done
this, if we were to not offer our networks over any of the cable satellite, telco or over-the-top platforms that are now the place where increasing number of americans are choosing which one to get their tv service through we would be cutting off meaningful revenue for our company. there's no incentive to do that. secondly, we invest a lot of money in making these brands relevant. cnn, hbo, if you all think about them and we'd be doing that in a manner where we'd be hurting the investment we're making and having these brands mean something. third there's a considerable amount of advertising support behind the turner networks including cnn, and if we didn't have full coverage we can't sell advertising effectively to advertisers. fourth it's important and essentially the life blood of our company to attract the best talent, best directors, the newest movie idea. these come from independent producers, they come to us
because we have the resources and distribution reach to put their product in every home. if we didn't have that, we wouldn't be able to get the next hit show, the next hit movie. those are essentially the reasons why we would never even think of doing this and then a final point which gene you might want to comment on. we owned time warner cable for 20 some-odd years, a big piece or minority piece and managed it. it never occurred to us to do anything restrictive or different in terms of price position, packaging, access to networks for that company when we owned it versus what we then did after. so there's just no incentive for us to do it and in fact there's really no ability for us to do it. it would hurt our business. >> there's no incentive.
could those incentives change over time, couldn't those incentives result down the road in you taking a different path? >> no, senator, i can't see a case. and i'd invite anybody here to try to propose one where that would make sense at all. >> mr. kimmelman is shaking his head. you want to add to that, sir? >> i understand mr. bewkes' point and description of his business and exactly what nbc said before when they came before you and before being combined with comcast. the anti-trust division did not find when the companies merged the incentives were the same and there were opportunities. while time warner cable was what 15 million subscribers and certainly made no sense to limit time warner content to just 15 million, here you have 25 million plus from at&t satellite and video, and you've got more than 130 million now wireless, with that customer base, you
have to look at the real combined incentives. this isn't time warner entertainment. time warner's incentive as a content company. this is the merged at&t with content, and i just think the anti-trust officials are going to need to look carefully at those. >> okay, i see my time's expired. we want to stay on the clock here. we'll go next to senator klobuchar. >> thank you very much mr. chairman. mr. stephenson, i'll start with your initial question about the prices for consumers, and i know you focused on the last deal with directv and what it come out of that. just to be clear, this acquisition, do you believe that it's going to lower prices for customers for directv, broadband services and mobile services, you want to take each one. >> i can and intend to represent to you by virtue of innovation with time warner and going head to head against the cable providers, with new products and new capabilities that we will bring the consumer better priced
options than what they have today. to take each one of those apart, i find difficult, because the consumer has gotten to a place where they're not pro curing each one of those independently. that's the reason why we're pricing at&t right now. think of what we're trying to do, we're going against a cable provider to compete. you buy tv service from a cable provider today, you spend $50 to $100 per month regardless of how much you watch, it does not change what you pay. if you sleep with the tv on all night long it doesn't change what you pay. to compete against a cable provider, we have to bring a mobile service, we're competing with a mobile service that has the same characteristic, can you make it where the consumer does not think about how much they're leaving the content on? as we work with time warner and begin to think about new forms of content, cloud-based dvrs, getting the rights and putting those capabilities into our product offering, bringing more value to the consumer, giving
them the ability to use video over their mobile device just like they do when they're watching cable tv, we think that's a huge value to the consumer. >> mr. kimmelman, you have your new report coming out today, what, 46 a month you say that cable providers, subscribers are paying that they shouldn't pay. mr. stephenson is arguing this say new kind of offering that could help bring those prices down. >> it is a new kind of offering, extremely welcome to see directv offering and challenging cable which no one has gone out of their historical telephone region or cable region to challenge each other, all good. that's all premerger. i applaud that. the question is what happens when you combine all of these assets, and that's the fear, and again, it may be a wonderful product. mr. stephenson says pay once, sounds great to the consumer, but if it's, what happens to others who want to get on that service?
if it's zero rated, are they all going to get on? what happens to others who want to offer a different product, are they all going to be able to get time warner content under the same terms and conditions or unbundled. >> right. >> so there are a variety of competitive harms that have to be looked at in comparison to what they want to offer. >> i want to end with that but before i get there, i want to talk about the issue mr. cuban raised, with the competition, with potentially the new environment with facebook and google and i'm hoping we're going to have a hearing on some of these broader communications issues next year. that was my little -- okay. so, but on this generally, how do you see this one? mr. cuban says they need this to be able to compete in this new world but you point out that they're not paying money for google or facebook apps, right? >> senator klobuchar i would urge the committee to look at every place there is market power in the sector. there could easily be that in the online distribution on the
platform, among the platform companies. when i was at the department of justice, we looked at transaction involving google and a company called ita and we were prepared to challenge it, it was airline services online software that we thought would foreclose competition in that market. and consent decree was worked out. there can be legitimate issues in many places. the fact those companies are prosperous and may be doing things that are harmful does not take away from the fact we have very few ways for the consumer to get to their apps, their other services and at&t is one of the dominant gatekeepers to get there. >> mr. cuban? >> i would disagree with that just on its surface, the directv now is an example, if apple decided they didn't want to distribute it, they have nothing. if google decided they didn't want to distribute it or either decided to give it such placement that people would have a hard time finding it, they had no business there, and so they
really can't even control their own destiny and i think it's an issue that's out of their hands, despite what mr. kimmelman is saying. >> okay, i want to just end here on the content side here with you, mrs. ziman. you described this practice you referred to as pay-to-play and talked about how it harms independent programmers. could you explain that more and do larger networks have to pay to play? >> yes. independents now barely can get on at all. if they do get proposals it's usually free for a period of time, or otherwise pay-for-play, which means they have to pay to access the subscribers, which means that they cannot survive -- >> because they're not part of the bundled package? >> but not just that, because they're not given the band width to be able to access and if they are, they're sent to siberia. and the reality is that the mvpds are concerned any of the
independents will become must have content because then they'll have negotiating power. my friend, mr. cuban, has negotiating power because he owns a sports team. the reality is one of the highest executive at directv said to me point blank, the male sports business. you are dealing with so much other content that the public wants and is interested in, and they're not getting access to the public, and that's wrong. it's wrong for democracy. >> all right. speaking of sports, mr. stephenson, in your testimony you say that programming is more valuable when distributed to as many eyes as possible. however nfl sunday ticket is only available through directv. during the comcast/nbcu universal merger, the fcc
decided the merged company would have incentive to limit the distribution of content and discriminate against independent content providers. are you saying mergers were a content distributor acquires a content producer can never raise anti-trust concerns or is that in this particular situation, there's not an issue, and how do you answer this fact that there's a lot of concern here about with at&t owning content at the same time as distribution that there would be discrimination? >> i'll try to take the question apart and make sure i answer it fully. the nfl is probably a classic example of a content owner who pretty much determines and dictates how content is distributed and they're very strong. they have a great product and they parse the content up significantly and we pay them for whatever rights we can get from them. so they kind of, not kind of, they determine how the content is distributed. we don't. we distribute it to our
customers for what we pay. it's not something that we just exclusionarily put it out there. it's what the nfl contracted with us to do. in terms of, i want to make sure i understood the second part of your question as to a vertical merger. >> right. >> do i think that's just a cookie cutter -- >> right. >> no, i don't think there's such a thing particularly in the world of anti-trust. i believe this particular merger when you put it together you see that before the merger and after the merger the competitive market looks identical. the distribution market looks identical. the content creation market looks identical. there are no overlaps, and so it is a classic vertical merger but the department of justice will look at this and to the extent there are concerns we do believe they could be remedied with conditions. as it relates to the comment about independent programmers, though, i'd like to quickly respond. if there is concern about access of independent programmers to the consumer, the one model that
does not work and we're demonstrating that is the present model. the present model needs disruption. it needs a different model. that's what we're trying to do with both this transaction and the prior transaction we did, but the reality is, when we acquire content from content owners, there is a medium by which we if we want the top content they own they say take that plus the other five or six channels that you possess. that is what's filling up this program guide. it's not anybody trying to be exclusionary. it's filling up the program guide with peripheral stuff that you have to take if you want to get the primary content that a content owner wants. directv now is step one, acquiring time warner is step two but directv now is how we're skinnying down a lot of the peripheral stuff getting a smaller bundle that the consumer wants, that's how you get to a $35 price point rather than an $80 price point, where we have the opportunity to keep doing more and more of this in the future. >> just last, response quickly, could you foresee there would be some the bundles that wouldn't involve sports? >> oh, of course.
in fact, there is a huge segment of our market that wants a bundle that does not include sports. sports is probably the biggest driver of the content cost in the bundle today, and to the extent we want to meet a certain price point for the certain segment of our customers, getting sports out is the way you drop the content cost and get a lower price in the market. it's important. >> except for the nba/dallas games. all right, okay, thank you. >> senator hatch? >> -- here today and helping to host so i'm thanking you very much for allowing me to go ahead here and my colleagues as well. this is an important hearing and an important subject we're considering today. i'd like to begin by quoting
briefly from an op-ed published in "forbes" that i believe frames how we should approach the subject of today's hearing. the central question in any merger review is how the transaction will impact consumer welfare, because at&t and time warner are not competitors, concerns about increased market power, or a loss of competition, the sorts of concerns we often see in large mergers apparently do not apply. rather the pertinent inquiry is whether at&t ownership of time warner content will lead to exclusive dealing, improper favoritism or other acts that narrow consumer choice and reduce service quality. at the same time, we should carefully evaluate the party's claims that the merger will benefit subscribers by, for example, expanding the amount of available content that doesn't count against monthly data caps, unquote. now i hope these principles can guide our discussion today and i
ask unanimous consent of the copy of the op-ed i wrote be entered into the record. >> without objection. >> mr. stephenson, you've pushed back pretty strongly on claims that at&t will have an incentive to favor time warner content over non-affiliated content, or to withhold or threaten to withhold time warner content from competing broadband providers. i'd like you to spell out your argument for me. why wouldn't it make economic sense for at&t to use its ownership of time warner content to raise prices or attempt to freeze out competitors, and why wouldn't it make economic sense for at&t to degrade service speeds for non-affiliated content? >> i'll start with why we would have no incentive to preference, if i could paraphrase your question, i think i understood it correctly, time warner content over others, and i think it's important to understand,
and i've thought a lot about this, we're paying including the debt over $100 billion for time warner, investing a lot of our shareholder money to acquire this content. it's very, very unique content, and you heard mr. bewkes earlier explain the business model and how he built a business that is worth $100 billion, which is quite a feat in and of itself. the business model's fundamental premise for attracting talent, for attracting investors into content, the funneled mental premise of that is wide and broad distribution of their content into every home, particularly in the united states of america. while one could argue, and i'm sure the justice department will look at this closely, while one could argue it might advantage our distribution business to somehow give proprietary access to time warner t would make no sense to $100 billion business we're acquiring to do that. it would impair the value of that business dramatically and i've received a big education from jeff on this.
the clint eastwoods, the steven spielbergs will not bring their talent and their capabilities to a company like this that is limiting the distribution of that content. it is a fundamental basis of the value of the company. so i just don't see first of all the economic rationale nor do i see from our standpoint the customer rationale, because at at&t, if you go back to the distribution side, we have built our franchise on a very open model. if there is content that the consumers demand and want, we want it out there. we have little value, if we start limiting access to content. we are what we call an open source company. we're not smart enough to know everything the consumer wants, whether it be an app, whether it be a smartphone device, whether it be content, so we try to open our network up to all and accommodate all who want to come in and let the customer choose what they want. so limiting the content of what the customers can get in this day and age is candidly not a smart business move. >> thank you. let me ask this questions to
messers, stephenson and bewkes. on the benefit to consumer, how specifically will this merger benefit consumers and i'd like to you share specifics, not generalities and to give an example, mr. stephenson in your testimony you talk about directv now. how will this merger help you employ directv now and how will that service benefit consumers? >> thank you. directv now, it took direct of it acquisition to make that reality, to get a relationship with content players and the ability to gain the content rights to distribute their content to mobile devices. that's how directv became a reality. what we essentially acquired from the could be tent content owners was only the ability to distribute their content, to the extent we want our customers to
store their content, once they've paid for it we'd like to call it, we call it a cloud-based dvr, to the extent our customers would like to take that content and interact with their friends on social media with that content, they'd like that. we gained none of those rights in these negotiations to bring directv now to market. with ownership you can begin to do those kinds of things. we can give our customers the ability to store time warner content, to interact socialley on "game of thrones" that they cannot do today. we are convinced once we got certain content players to come on board, others began to come on board. i am convinced that model will play out again as we innovate with time warner content giving
our customers unique and different capabilities, other content creators will follow. >> mr. bewkes, just to finish with you and your testimony. let me just ask this question of you. in your testimony you say that the tv everywhere initiative you launched in 2009 hasn't grown the way you hoped it would. how will this merger help you deliver more content to more consumers directly and to both of you, how will this merger affect the prices consumers pay? you've somewhat answered that but if you could spend a little more time on it, i'd appreciate it. >> thank you. i think the way that it would advance that effort which is to put video on demand capability on our networks, and we hope that would drive competition to have every network that you have on your television dial be on demand, so you could watch whatever network you want whenever you want. you don't pay again to do it. you have increasing numbers of
shows so if you find a show in the middle of the season, you can go back and watch the first one and you should be able to watch it on your ipad or mobile device without any further charge. we instituted that change and offered it for no charge whatsoever seven years ago. we announced it with comcast back in that day, and we hoped that all the distributors, cable, telcos, would pick that up and offer to consumers full vod across every channel on the dial, just the way hbo had done again for no extra charge in the '90s, and is the way netflix or youtube works today. here we are seven years later, a great, in many parts of the country, if people were listening to this, they would say i don't have this in my home. i'm not used to going to channel 4 and looking at nbc or watching fx on demand. we've, because we, i think, if you look at the directv now
offering, we've been saying very publicly for five years, we think that consumers need interfaces that work the way netflix, xfinity and the way the at&t one works, where it's easy to find shows. it's easy to search across networks. it's easy to do all of that again at no extra charge, and we think by putting this competitive offering into the market, where you have full vod on all these networks that are in your directv package, and at a price that's basically, either half or less than half the prevailing price on average in the country, that's going to force competition both at the distributor level, all the other cable and telephone and satellite companies and it's going to force competition at the network level, where other networks that have held it back looking to get price increases out of it realize they ought to just grant it and give people a better deal. >> thank you, thank you, mr. chairman. >> senator franken?
>> thank you, mr. chairman. i'm a little confused about something, this basic premise that hbo, for example, attracts its talent because, because it has the widest possible distribution. no, i don't think that's why talent went to hbo. i think talent went to hbo, as i remember, because it was a very high quality and it was exclusive. so it's the opposite. in other words, that when "the sopranos" was on you had to pay to get "the sopranos" and everybody wanted to see "the sopranos," so this idea, which is this basic premise that everybody went to hbo because we guaranteed everybody would see you ain't true. so i just don't get that. now, mr. bewkes, you were recently quoted in the "new york
times" articling to my concerns how a combined at&t/time warner could prioritize its own content and restrict other distributors access to it, you quickly dismissed those fears saying, engaging in such behavior would not be in the company's best interests and "it would be like selling toothpaste and not putting it in duane reed." doesn't make any sense. that's your quote. i'm not sure it's your analogy that makes any sense. it's not like selling toothpaste and not putting it in duane reed. hbo isn't a toothpaste. it's like cvs or could be cvs manufacturing the greatest toothpaste in the world, and not letting duane reed sell it, or more to the point it's like selling "game of thrones" and
not letting comcast subscribers watch it or very likely, you'll get to answer the question after i ask it. >> i'm sorry. >> okay. making comcast pay more for the privilege of having "game of thrones" or "veep" or the rest of the line-up. i want to be clear what we're talking about here. should this deal be approved? nothing is preventing a combined at&t/time warner from going to any of its competitors in the pay tv market and charging double for access to "game of thrones" and "veep" et cetera, or the combined company could simply restrict access to the programming entirely and wait for competitors, customers to flock to directv or hbo streaming services.
i don't think these hypotheticals are outlandish at all. you'd have every reason to do this, if you could. if that would make more money, and this is also to mr. stephenson, you'd have, you could make more money for at&t in the long run. this is the incentive that's created by the merger. so mr. bewkes? i know you're eager to answer this. do you agree that a combined at&t/time warner will have greater leverage when negotiating program carriage with other content distributors as a result of this deal, and do you agree that a combined at&t/time warner would have a financial incentive to use this leverage for its benefit?
>> may i? okay. i was -- >> there was a long pause there. >> sorry i was so eager to answer. no, i don't agree. it would not have the incentive nor would it have the ability to do that. it may require a back and forth but let me try to answer the first part. all networks, whether it is nbc putting on the show "blind spot." the show is on nbc. it's exclusive to nbc, where you watch it. >> you didn't have to pay to get nbc. >> yes you did, sir. you had to subscribe to $80 to $120 of network fees so that nbc could get paid that way. if you're talking in the case of hbo, netflix, showtime, those are a little different -- >> no, wait a minute. there's a distinction between hbo and nbc. >> yes. >> right? >> yes. >> and hbo costs you money, you had to pay for that.
nbc came with free, with the package, whatever package you have. in fact you used to be able to watch every tv show for free. >> right, we all remember that term pay tv. that was hbo, showtime, netflix, et cetera, where you have as a viewer the choice to either pay to have it in your home or not pay to have it in your home, and when you decide to buy that network for the month, you then get the shows on that network, "house of cards" on netflix, billions on showtime, "game of thrones" on hbo, those are premium services, there's no advertising. if you don't like the content because of its nature, you don't have to have it in your house. it's quite a different business, but what i was saying in the analogy is right on the toothpaste is, it would make no sense and in fact we could go into it to not sell hbo on the comcast cable system, on the verizon cable system. make no sense not to offer it.
>> would it make sense for at&t to use its leverage to charge comcast more? >> no, because we don't have the market power to do something like that, either at at&t or at hbo. the market's way too competitive for that sort of thing, and remember also -- >> i really think mr. kimmelman might disagree with you. >> well there's no history of anyone pulling off something like that, and this company is certainly not big enough at either end to do that. >> mr. kimmelman, do you have any thoughts? >> well, it's this very concern that again nbc, you know, these are wonderful businessmen. i understand their goal as to what they're doing with their business. nbc said the exact same thing. i'll just say the enforcers found that there were these incentives, they imposed limitations or would have blocked the transaction there. this is even larger. >> and did they live up to the conditions?
>> some, but there have been a lot of problems, i think companies like mrs. ziman's company would not have the resources to take even advantage of those tools. i think there are significant difficulties with conditions which we could get into later, but there has clearly been a history of this kind of favoritism and discrimination. i'll just remind you the bipartisan congress in 1992 stepped in and required cable to sell its products, tv networks, they were vertically integrated to satellite in order to allow satellite to get access to the product. you could have made the same argument, why wouldn't we want to have more people getting it, because it was a competitor to cable. i'm not worried about comcast not getting time warner content in this instance. i'm worried about the online distribution that would compete with at&t, that is growing right now, not being able to get exactly what it needs to be a real competitor. >> i'm hoping there will be a second round of questions. will there be mr. chairman? thank you very much.
i'm over my time. i just want to say i remember that people flocked, talent flocked to hbo because it was a premium channel, and that you people had to pay to go there. >> may i respond to mr. franken? >> to the chairman. >> senator i just want to make a point that anybody, though, any household in america and today any person with a mobile device can subscribe to hbo. i think that was the point we were trying to make. it's not exclusive to anyone. it's broad distribution. >> i'm not talking about now. i'm talking about what built the franchise of hbo and it was a completely different premise than what mr. bewkes was presenting in his opening, and i just wanted to make that point, that it was not what attracted great talent to hbo. it was in a different model, and
what built that franchise was a completely different model. i want to get to some other questions later. >> senator perdue? >> thank you, mr. chairman. you know, in my business career, it seems to me that this economic miracle that we've enjoyed here over the last several 70 years, 75 years was bit on innovation, capital formation and the rule of law, and this concept that we're talking about today, this vertical integration is not a consolidation. it's plain and we need to remember that in the committee but this economic miracle was built on transactions like this in other industries. vertical integration is nothing new. i personally participated in it, in order to compete. not to dominate. size today doesn't necessarily correlate to dominance. when you talk about innovation and technology changes like we're talking about today in this industry particularly the consumer has benefited from the aggregation of the ability to deliver as mr. stephenson said in his opening comment, they want to provide the most content
to the most people at the lowest cost. that's called capitalism. if they don't do that, they won't be able to compete. mr. cuban, you said something earlier that really resonated with me, commented to watching tv and watching young kids today and how they consume input is totally different than when we all grew up but i think sometimes being in the senate is like watching tv, too, you think you're doing something but you're really not doing much, so i hope today will be a little different. i want to get your perspective because you're in a unique position to have a unique perspective on this transaction. i would have thought you would have been a witness for an anti-position against this deal, and i want to talk about your hd net experience and the road blocks you had to innovation in getting your content out there, and are you concerned about the combination and the size of this deal harming your ability to be creative and innovate? >> lets me give you some background. i own access tv and hd net movies.
access started off as hd net, the first all high definition tv network, and it was absolutely independent, and we continue to be independent. and let me also add something senator klobuchar suggested that because i own the dallas mavericks, that improved my ability to get carriage for access tv and hd, time warner cable is the incumbent cable network in dallas and i have not been able to get carriage there so i've faced the challenges. i own magnolia pictures, which is a movie distribution company, landmark theaters which has 300 screens and geared towards independent movies, and have produced movies through a company called 2929 distribution. some of the movies were "enron: the smartest guys in the room" nominated for an academy award and "good night and good luck." and as an example, we weren't big enough to distribute it so we worked through warner brothers to get full distribution. we have to compete. as an independent network, i
feel the pain that ms. ziman feels. at access tv we gear ourselves as a music network geared toward the 45-plus. we don't like to tell our advertisers that but that's who watches more tv and it's a challenge for us to get distribution, but with the new methods of distribution like directv now, and others, sling in particular in a has opened the door. in the past, the distribution was constrained, as miss ziman mentioned because of band width. you couldn't put on another high definition network particularly with standard definition which took up even more band width. now new methods of distribution, there's new hope. there's more hope for independent networks like ours, and i think this merger opens up doors. as an example on directv now, access tv is distributed in their $35 bundle. hd net movies is not.
we've got to do a better job at hd net movies to convince them to carry us. that onus is on me. to your point earlier, it's very competitive. it's a free market still in a lot of respects and i think this combination opens doors. i think they recognize now that band width is more available through online offerings. they can support more independent networks, more minority-owned networks and we've seen that start to happen. i think the combination of them owning content, there's a lot of things looking at online content and particularly television distributed content and we say why don't they do that, it just makes perfect sense for us to have remote dvrs or other features and as a content owner, i'd love to offer the features as a smaller content owner but until the big guys start doing it and set the precedent, us little guys don't get to offer it. the new precedents that are set i think will really push the way for better services and more consumer friendly services, and
really expand the ability for independent networks to compete. >> thank you. mr. bewkes, could you talk about what factors today add friction to your ability, this is pre-deal, before the deal, as you exist today, what causes friction to your ability to innovate and how would this merger with at&t help your content developers provide better and quicker and cheaper content for at&t consumers? >> thank you, senator. the main friction now is that we have to put our networks through the existing cable satellite distribution plant, which had a certain technological ability to it. only recently did it have the ability to do video on demand. increasingly we're competing against video being delivered over broadband only that has full two-way video on demand and where the broadband services have the direct retail data of
what you're watching, who you are, where you're buying your stuff, so it implicates advertising and subscription. what we've been trying to do is to, and we did it with hbo first and then with turner second, but we really haven't opinion been successful in the broad 100 channels we have in our homes. we tried to make our channels all video on demand in a way you could go as a viewer and search back and forth, watch full seasons, really get the same -- because there's there's more and more networks and content available but you need to be able to search the way do you on it netflix or apple tv, that kind of thing. most of the distribution companies particularly cable companies, have not uniformly offered that, and the way that american consumers get a change
in their habit about something as important as television is it has to be consistent across all the channels, and it has to be national. and we think if we can get this going, competition with lower prices, better smaller bundles, more effective advertising, can bring more competition in all of these areas, we don't obviously and we can't determine what all the other media companies do. we don't have that big of a market share, but if we can put a competitive innovation in the hands of consumers, we think consumers liking it can get those changes to be universal adopted. that would give us a chance against these giant technology companies that by their own definition have massive global scale. >> thank you, mr. chairman. i have other questions i'd like to submit to the witnesses in writing. >> without objection, they'll be admitted, thank you. senator blumenthal? >> thanks mr. chairman for having this hearing and thank you all for being here. i have serious concerns about this transaction. i have yet to be convinced that the benefits outweigh the harms to competition, and possibly to
consumers. it is a vertical merger. it doesn't take out a competitor, but it potentially has seriously negative impacts on competition and on consumers, and it is different from the nbc/comcast merger which as mr. kimmelman points out has had problems itself and had to be modified by regulators. it involves wireless. it's a national platform, and it involves more than one platform, but speaking very bluntly, what i think, what any of my colleagues think may make no difference whatsoever, because donald trump has said he's going to block this merger, and i take him at his word. >> why? >> we operate as an act here.
i know that mr. stephenson you've met with the trump transition team. have you met with the trump transition team? >> no, senator, i have not. >> well then what remains on the record is that the president of the united states or i should say the future president of the united states has said he's going to block this merger and he said it emphatically and unequivocally and he has said it because, and i quote, "it's too much concentration of power in the hands of too few." a classic anti-trust analysis from the president-elect. i'm a strong supporter of antitrust enforcement and i may
well agree with donald trump. what concerns me is the reason that he gave -- an additional reason -- which is that he is very unhappy with the cnn news coverage. and for a public official to use the blunt, heavy instrument of law enforcement to try to silent or change coverage by a news department of any company is for me absolutely abhorrent. would you agree? >> are you referring to me? i'm sorry. >> i'm asking both you, mr. stephenson and mr. bewkes. >> senator, i'm a novice in the world of politics so i would struggle to engage at that level. my expectation was when we announced this deal and is today that the department of justice will be the one reviewing this transaction and making the determination whether it's competitive or not and is it
competitive under the law, so our expectation is to present our facts. we believe the facts will be compelling and good that this is pro-competitive and pro-consumer so i'll leave it at that. >> mr. bewkes? >> yes. and i entirely agree with what mr. stevenson just said. in terms of the independence of our journalism and i hope all the journalistic outlets, we have defended that for decades whether we've had time. and we intend to continue defending and being an independent journalistic voice, everyone that watches us may have their own opinion about whether we succeed in being objective. we try hard every day, we'll continue to do that. >> you understand what troubles me is that the president elect has said that his justice department will enforce a different standard of law
depending on what kind of coverage is his administration receives. will you commit that your news coverage will in no way be influenced or impacted by what the president of the united states says about this transaction? >> yes. >> mr. stevenson? >> yes, sir, of course, yeah. >> and wouldn't you agree with me that for anyone in the department of justice or any law enforcement agency to threaten or use more vigorous or aggressive law enforcement in effect in retaliation for news coverage that doesn't please that public official would be an abusive power. >> if you're asking me now. >> i'm asking you and i'll turn to other members of the panel as well. but you're the ones who will be
making decisions about cnn. >> well, i think -- >> by the way, the president has made similar kind of remarks about nbc and about the washington post in terms of the enforcement of laws potentially against them, the president elect. >> may i make a comment. >> please do. i don't think that we should be selective about retweeting -- restating the various comments that -- the various elected officials or those running for office made upon the announcement of this merger because there were comments made by candidates on all sides, including mr. sanders, mr. kaine saying they were against the merger, again, before any of them had the information and what randall and i are saying is that we're confident that once everyone, including the
questions you've raised today, hears the facts and has the appropriate competitive analysis on this, that it will be seen and concluded by everyone, even with the concerns you've stated that it will have procompetitive effects that will benefit both competitive structures and consumer price alternatives. we believe it and we think we can prove it. >> and i just want that -- i want to make clear that my point here is not that other candidates may have commented or not about this merger it is perfect for a public official to comment on the merits of antitrust enforcement, but to threaten more vigorous or adverse enforcement against a particular company because he doesn't like the news coverage
is a threat to the first amendment. that's the fundamental point here. i'm a believer in strong antitrust enforcement, i welcome president elect trump's interest in this area. i find absolutely the threat against a news organization based on its content of more vigorous or adverse enforcement against it, simply because of a dislike of that coverage and i welcome your commitment that his statements will have absolutely no impact on the content of cnn's coverage. i hope the same will be true of nbc and washington post because this kind of potential abuse of power is a threat to fundamentalal liberties way larger than the issues we're discussing right here.
i would like to start if you can briefly explain to me how this direct tv now that you're offering, how you may enter into other relationships with other wireless providers to accomplish the same thing and how would those transactions look. >> thank you, senator. actu actually we stole the concept of direct tv now with free data included from prior deals we have done. this premise of predata, if you
will, that goes back decades, the first instance of it was 1,800 service, you dialled 1-8 hundred picked up the tab. that actually drove long distance prices down over time. everybody started using to get people to start using that. what happened in 2008, amazon launched a ground breaking product called the kindle, we did a deal with am von where they -- when you delivered a book to the kindle you paid $10 for your book direct tv is paying the charge. by the way that is our lowest wholesale rate available in the marketplace today. to direct tv, to any big, small, medium size company that wants to do this same approach. we're convinced just like 800
service drove long distance prices down. this will drive video prices down as people begin to leverage the same capability. >> you were talking about -- i saw you shake your head on a couple of occasions. your comments suggested you're trying to escape where the puck is going to be. a lot of this discussion is where the puck is today, if we don't look ahead some will be ham strung against other disruptive forces that can create con sol decision. >> there's consolidation that we don't see going on all the
primary content they offered came through accusations, their biggest plays were acquisitions. what's happening now, though, they're not acquiring big companies like time warner, they're acquiring disruptive companies that are choosing to not go public. and that's how they're competing. i'll give you a perfect example of how the nature of content is changing. i wanted to test facebook live just to see what kind of audience i could get, no lie, i took my breakfast, empty plate, one pepper on it put up facebook live. within a minute i had 1,500 live viewers. within 30 minutes, i had 10,000 live viewers. i said maybe that's just facebook live it's new. i went to new platform, lively, i try to be a geek.
my kids were going down slide into the lake. i put it on them, within 20 minutes i had 35,000 live viewers. for independent network, 35 live viewers is huge. that's changing the nature. cnn, a great program is 2.5 million viewers watching it at a given point in time, that's nothing on facebook live compared to other platforms. it's changing whether we want to admit or not and that's having significant impact. really the biggest challenge getting people to watch tv. that's going to be, you know with all these things you're hoping to find new ways, okay, i want to try watching tv again and that will increase. . if i take a look at hbohbo
became a premier channel, they have extraordinarily good content people are willing to pay a premium for. . when i'm looking, i'm going through these channels and going why am i going through all of these and am i paying for them. nbc is not free. abc is not free. they're all negotiating some baseline clause that go into your baseline cable bill and i would like to reach a point in time where i have the freedom to have options, a sports list -- a sports list option seems like a sad place to me, some option that i don't extraneous based on my viewing habits. and then from time to time i will pay a premium, if i want to
go and access content that may be on a channel that i would not regularly want to pay for because i don't have a need or desire to have that. that's the model that we're getting to. i think if we don't -- i'll leave it to the antitrust division, department of justice to ask you the right questions to make sure you're not waiting in any antitrust areas. . if we focus on content delivery and this industry ten years from now. then i think we'll disadvantage some real invnovatorinnovators. we need to be very very careful or we're going to cause some of the leading inknow vanovators i world using old world models to assess where the new horizons are for content delivery.
thank you. >> thank you. i'm trying to view this all through the lens of my own kids. i have married kids who would no more sign up for direct tv or dish or broadcast than they would to get a land line in their home. that's just not something they would consider. they might try to crib off of my direct tv, find out the password and use it. but they would never -- they would never think of that. when i hear zimmerman talk about this the competitive angle it seems like an excellent argument that you're giving that would have been more appropriate 10 years ago or 15 years ago, but it doesn't seem to be where the puck is or certainly where the puck is going.
i think we have to consider more who the competition really is, that this isn't traditional antitrust competition among broadcast media, but among the edge providers. mr. cuban you talked in your statement, the real competition, about who the real competitors are, i mean. >> every apps compete for our time, now. as i mentioned, when we look for something to do a way to kill time, we look at our phone. all you have to do is look at the lively, the rise of instagram. that's what consumes our attention. kids don't go to tv any more. i have a seven-year-old and i went to help coach baseball like
we grew up doing. they didn't know the rules for football. i mean, i can't even bribe my son to go to a cowboy game, that's not how it is. if i take away his mind craft videos he throws a fit. our consumption habits change as we age, and i'm sure they will for all my kids. but at the same time on demand in hand viewing randall mentioned 5 g coming along. there are going to be people cutting the broad band cord. your kids never would have thought, i tend to believe there will be a point in time we won't think about wired broad band as being commonplace that's going to create a whole new list of challenges for them.
technology marches on whether we like it it or not. we can't look backwards and look at historical norms in order to predict the value of this merger. >> how does the size of the mer merged company, how does the size compare. >> it's $350 billion. the companies that mark has referenced whether it be google, facebook, apple, these companies have market caps that are about two times that size. as we talk about size and the significance of size in a deal like this, i think we have to
recalibrate what size means in this new world. we're about half the size of most of these companies that are providing the -- to our core businesses today. >> do you have any responses -- are we discussing what the market is or what it was a few years ago. >> senator, i concur in your assessment, my kids did the same thing as yours, i think we should skate to where the puck is. >> what we use to do on phones they're doing on phones, snap chat. it's not that tv has disappeared
or video doesn't matter, it's people are doing it in new forms. i'm all for looking at who the other players are, but none of them charge me $200 a month to get access to that online content. that's where your kids get it. if they're mooching off of your direct tv, that's probably they don't want to pay $200 a month. so somebody is paying, i just want to make sure it's a fair price. there's no question the online platform are going to be platforms here, they don't control that wireless. we want the enforcers to look at. >> is that who is paying for is
that relevant to the competitive nature of these mergers. >> if you weren't paying for the content, tur content. you're being sold and advertising is paying for it. and i would also say, like my ten-year-old daughter doesn't have a cell phone account but she has a phone. she gets access through wireless at various distribution points and she knows where they are and she goes i'm talking outside the home. so the notion that a wireless provider is the only way to access this content isn't necessarily the case any more and those options are expanding rapidly. i will also say to respond jean. more than two hours per day, nontv like content on their phones.
the world is changing and how we consume it is changing and it's not driven by pure mobile. >> thank you, mr. chairman. section five of the ftc act as you're aware permits the ftc -- to cover aspects of at&t and its activities that are noncarrier activities. is it your position that time warners business will be come
exempt of section five if this transaction is approved and kicks in. >> i am not a lawyer -- there's this confusion and the ftc, a common carrier, per se, is under the purview of the fcc, it is confusing. i would suggest that this is an area, perhaps, where congress really should consider taking up bringing some clarity.
>> there were conditions put in place to guarantee that bloomberg would not have access. it ended up taking three years of litigation to bring that abo about. shouldn't we be concerned about the poenlt -- to your network. . it it's requiring three elite years of litigation, time consuming litigation, occurred in the wake of this other merger. >> i've been asked a lot about
conditions imposed on other companies and in this regard and i'm not knowledgeable about the ability of those companies to comply with those conditions. i will tell you we've had several mergers where conditions have been imposed on us. i would also suggest that the department of justice is not seem to have any lack of resources in pursuing areas where they believe we were out of compliance with tradition. i fully expect that any apply to this, comply with those just as we have every other transaction. >> i think the same is true in the history of time warner where some agreements on carriage of other networks were made and they were followed with no incident. then in the time warner merger, we had conditions, which also were followed without incident,
so our record there is no instance which we did not comply we had in our various mergers. >> of course, i'm not talking about your company in particular, but your companies in particular are the ones that want to become one company right now and you can understand why some people would express this concern, you do own some news entities that express concerns. do you understand why people might have that concern? >> yes, sir, i do. and i don't -- i don't think those are terribly unique to other concerns people have expressed in past mergers people have been a party to.
i do belief those have been addressable with concessions and conditions and i, again, i'll repeat, i think both companies have a stellar flawless contract in compliance with those traditions. >> you state that over the top distribution is, i believe you put it, a one way ticket to bankruptcy. can you explain why this is not what you would consider a viable business model for independent networks. >> well, right now, the market doesn't have the amount of subscribers that make it a business. number one it's a maize of confusion, as i said before, to search it for a lot of people that mr. cuban's children that are much more use to it. but at the same time in order to
get number one license fees, that's impossible and in order to get advertisers to advertise with you, it's such a small market, it wouldn't work, plus you need to be able to use the leanier service in order to get your brand known to the public, at the same time you need to be able to show the public that you're delivering they also want some market. we are distributing of the market. but the reality is it's a very fragmented market right now and confused market. and therefore if we relied on it solely, it would be a one way ticket to bankruptcy because you can't survive. you have the obligation, we're
all gate keepers to the communication. content that's quality oriented that they deserve. that means you have to spend money in either licensing content or original productions. i disagree with some of the people that think that hbo is there because of distribution. hbo is there because of quality. many people, many staff come to us as small company and we still have to spend money and convince advertisers to go along with some of this. that's impossible. in order to get advertiser
interested, you have to have a distribution of 55 million subscribers, that's almost impossible right now because they're shutting the doors i mean mr. cuban is partners with cbs, it's a different story, and he couldn't get on time warner. it's an impossible marketplace right now and we need to improve it. and if we really look at what is happening here, it will -- we're moving towards -- if you look at taiwan, for instance, with six conglomerates own all the media, when they want different content, they simply trade at the cost of the public, which is rising and rising and at the cost of free speech.
>> thank you very much. senator was giving her closing speech and then we were -- had a big event on cuba and i carried the bill to lift the embargo. as opposed with mr. cuban, i was with the cubans. i wanted to go back to some of the cost issues, the money the typical american household spends on these services, 2,700 per year continues to trouble me and i'm concerned that this transaction won't reduce that burden and i think you argue there could be a chance that it would increase it. is this a legitimate concern and why? >> i think that that's the baseline and it is the result, if you look at a 20-year period, of consolidation have enabled prices to be inflated.
there's competition on the margin, there's new competition coming from new sources, but it's hard to squeeze that out. i will say that with what is being offered now in the market that includes what time warner is offering and at&t, there is hope the online platform is opening up some and they're offering new products. the real fear is whether the combined company, once it gets -- looks at its over all interest, will favor itself. and essentially harm. so that's where it comes on the prices. they might offer a better price and they might offer it for some time, but in the long run, will the competitive process be benefited, that's where i think the enforcers need to look at it. >> there is a chance that it could be another model rather than just the monthly cable? >> oh, a absolutely. in some ways i think that's our only hope.
for all the reasons everyone here has stated. >> your concern about a few things, one is that the prices may be, initially, i think whatever it is, six bucks or something and i think it goes up and that it would be $35 for 100 channels and you're worried about that and you're also worried that there would be less competition for say content and things like that and eventually and you think you could build some conditions into that. >> part of the reason for the longer term concern is comcast is integrated and has all the nbc, here you have and
professional content and tend to get locked into that and that's why the bill is so high. >> and mr. stevens, $35 for 100 channels is a good deal, isn't that introductory price and it's going to go up to 60 bucks or something like that. >> these two go together, but i think it's important to understand why we put a 35 to
>> and -- discriminate. you will lose customers if you do not. >> i think we pointed out an interesting delima here, we want the broad wide-range of content brought in and everybody wants to be paid for their content whether it gets broad viewer ship or not, at the same time, we're being challenged. can you get prices down, get prices down. the two are inconsistent, all right. we have to figure out what content do the customers -- not what do we want, not what does
the government want but do the customers want. >> how do we determine whether at&t has lived up to that? >> in your testimony you explain, that time warner's goal has always been to distribute our content broadly across all distributors and platforms, so my understanding this correctly, that after the acquisition time warner will not limit the availability of time warner content to content distributors that compete with at&t.
conditions were in preventing in terms of what conditions we think would be appropriate. >> i think it's a mixed bag. >> i think the fact that are the most positive, companies have been able to take advantage of that. i think smaller companies have come up short, even bloomberg went through three-year dispute over that. i mean, the problem with are the prices the same, here it's even more complicated than with comcast because it's nationwide distribution. it's wireless, which has some inherent latent si problems and issues where the band width, there's some legitimate reasons why you're not getting the quality you want, but then there
could be some i will say as much i would expect it, i know they do not have the engineers and the thooz are very dirvegt areas to thoroughly. >> all right. thank you all. >> thank you, mr. chairman. >> if you match the immortal words that will pass it on to the world through his son to where the puck is going, that's where it's been.
so congratulations to several of us the most over used corporate cliche. >> i must have missed something. >> you did. >> you were. no doubt about it. i want to i'll tell you where the puck is going, it's going to wireless. okay. mr. stevenson i want to talk briefly about data free tv, which allows at&t customers to stream direct tv without incurring any data charges. at&t light paper on the topic suggest that this offering is not discriminatory against other programmers or over the top competitors they can pay the exact same rate direct tv pays at&t for the privilege.
however, as i understand it, the fcc has done the math and estimates that it would cost an unaffiliated mobile service provider like netflix or hulu far more to participate in the program than the $35 a month of direct tv currently charges the fcc argues then that participation in the program would make it difficult if not infeasible for a direct tv now competitor to offer its customers how does direct tv
make payments to at&t mobility for this service do the respective entities record such payments. >> i think it would be good that you did know it. >> the results reflect -- i don't know if we actually do a wire transfer or journal entry to record the transfer, but at the end of the day, the results of direct tv there a cost incurred by delivering mobility.
how do we know that you can't be favoring something that you own direct tv as opposed to some entity that would like to have their data delivered free to the consumer. >> we are charging everybody the exact same -- the lowest wholesale price for data transport that we have, everybody gets the same, big companies, small companies. >> i'm not sure about that assurance, how do we know that. >> we can provide the data.
>> how do -- in other words, if some other provider paralleled to direct tv wanted to get free data -- or wanted that service on delivered by at&t to stream them how do we know that you're not given direct tv a deal -- because you own it. >> this is a mechanism that's been used in our industry for decades. there is a pricing mechanism, same terms and conditions, we will not discriminate against other who is want to provide the same source. it's been going on for decades. >> can you speak to mr. steven son's characterization of at&t's track record on complying with
commitments as spotless. >> senator, all i can say -- i think it's a great company and i think they are a very agres zi competitor. sometimes aggressive competitors can step over the line. there have been varieties of complaints of different points in time, i don't think it's worth going into it in great detail. these will be reviewed by the agency. everybody is who is competing hard, sometimes competes a little too hard and that's nothing new in the marketplace. the issue is -- >> a year ago at&t was slapped $25 million fine for failing to protect subscriber's personal information. mr. stevenson, about a year ago he and i discussed how his company lobbied to prevent municipalities from building their own broad band networks to meet their community's needs. this is using your competitive advantage. and i would love to see that
data. and i think that by the way, i would like to see the fcc involved in this. when bloomberg -- in the bloomberg dispute, wasn't that -- that was the fcc dealing with that. that was not -- you said doj has all these resources, that was the fcc dealing with bloomberg, right? >> that's correct, sir. >> yeah. >> but the consent decrees in these things are with the department of justice. >> a number of these cases, senator, there have been parallel commitments of the fcc with an understanding the fcc would do the enforcement because they are the regulator of the industry with expertise, so i will say there were, for example x, on access to the programming and comcast nbcu there were restrictions put in place, the department of justice decided not to impose that is because the fcc was putting those in place. there were parallels for trying
to block online innovation and video and the department of justice consent decree said they would defer to fcc for enforcement action for most or nearly all instances, so each one of those, at least, involved dual agency action with a reliance on the fcc for the deep industry expertise there is a gap here, that i think mr. steven son missed. which is if a purchased time warner and they have content, the fcc can only regulate their common carriage business, regardless of how the court wanted to look at it. they're restricted by congress to only looking at common carriage assets, which i do not believe these assets would be and many other value added services or any of its online
service. there is a gap there that i think is significant. >> i would not -- i'm not smart enough -- knowledgeable enough of that particular area because it relates to content to refute that. i think it points out, though, there is a need to get clarity around the regulations over these issues. >> yeah. >> we're going to go to a third round or can i complete my questioning. >> mr. stevenson, i want to turn, now, to something you said at "wall street journal" live event. you shrugged off the comparison of your deal to comcast, nbc saying the biggest concern around that deal is largely been resolved, now that event happened prior to november eighth, so i'm going to give you another chance to address the comparison. mr. stevenson, you still think the concern over ensuring it has
been resolved. are you going to urge president elect trump to enforce the open internet border and ask republicans of congress to halt their plan in legislation repealing the order in order to get the deal approved? >> i would like to, first, suggest i am not a strong opponent of net neutrality. we have, i have, 2010, been an advocate of the net neutrality principles, no blocking, no paid organizations. we helped craft those rules that we hope to become law. >> didn't you go to court -- >> i just -- we went to court against title i, characterization, that's not synonymous with net neutrality. net knew trnew tralty has been
by this body and historically by the fcc, no blocking. the fcc chose to take a much broader approach and put all wireless and broad band services under title ii regulations, 1939 based regulation for these services that are moving and transitions fast. i do -- >> you went to court before they did that. you went to court which base i can -- >> we did not, sir, we did not. no, we did not. the 2010 rules that were imposed, they were imposed in court. we did not. we supported them and we helped craft them. >> okay. then i stand corrected, i guess. it's not the first time. so thank you. i just wanted to -- i guess i'm done. i would like to see the fcc, by the way, have jurisdiction here.
would you? >> yes, senator. again, i think there's a -- there's a question of exactly how that jurisdiction is divided and what assets is involved in the transaction is for the companies and the fcc to work out. at least as compared to previous transactions that are similar, i think it would be beneficial to the public policy process. >> but mr. you have not committed to submitting your deal as viewed by the fcc, that's correct? >> we're working through the process right now, senator. the trigger is whether we assume any licenses from time warner. we're going through -- they accessed over 100 licenses m we're going through license by license discerning which license do we need to transfer, until we get through that review, we can't state whether it will be an application with the fcc or not. i will suggest to you, that the
doj, looks at the fcc on a lot of the matters for expertise. i have no doubt they'll continue to work with the fcc as they go through this review. we'll keep the fcc posted on the process, whether we do a formal filing or not. >> there's a different level that you have to meet, whether it's fcc or doj. and fcc, their merger review requires that any proposed actually benefits consumers, so i would think that the message you're sending to us and the current and potentially gte consumers, if -- at&t consumers if you can't assert that this deal benefits the american public, it's not -- it's not a great message. do you think the fcc should review this deal? >> yes, i agree.
if it's within their jurisdiction at all i believe they should. i think it will add a benefit to the overall public policy analysis. >> thank you. >> i want to thank all of you for coming and for participating today and providing your testimony. we've received the statement from mr. patrick, that will be admitted into the record. the record will remain open for a week for additional questions and submissions. this hearing will be adjourned.
we'll have live coverage from the national competitive forum at 8:30 a.m. eastern time here on cspan 3. >> often when you look at a project, you look afterwards to see what objectives at what cost. i wanted to see through this last half century of military interventions partisan politics aside and morality aside, what happens after the party is over, what are the war and whatever financial cost on both sides. >> sunday night on q and a, media entrepreneur, which chronicles his travel experience through countries effected by u.s. involved conflicts.
>> i went to all these places. we all come with some form of bias, but i went to all of these places with an open mind, again, trying -- not so much to understand what a partisan point of view might be or be validated, but to look at was the mission accomplished and what will the cost on both ends. >> sunday night at 8:00 eastern on cspan's q and a.
>> we thought it would take some time to reflect on america's leadership in the world as new congress and new president prepare to take office. we've invited two special guest, one of whom i have mentioned already, who have been at the forefront of ideas. ideas that focus on what it means for america to lead, what it means for america to be exceptional and they, themselves, have been extraordinary leaders and continue to be. we would like them to share their thoughts on the challenges that lie ahead for. three wonderful friends of the family, and i would like to