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32–153 PDF 2007

S. HRG. 109–758

VERTICALLY INTEGRATED SPORTS PROGRAMMING: ARE CABLE COMPANIES EXCLUDING

COMPETITION?

HEARING

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

DECEMBER 7, 2006

Serial No. J–109–124

Printed for the use of the Committee on the Judiciary

(

(II)

COMMITTEE ON THE JUDICIARY 

ARLEN SPECTER, Pennsylvania, Chairman 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

SAM BROWNBACK, Kansas 

TOM COBURN, Oklahoma 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERBERT KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

MICHAEL O’NEILL, Chief Counsel and Staff Director 

BRUCE A. COHEN, Democratic Chief Counsel and Staff Director 

(III)

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page

Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ................. 1

WITNESSES 

Baller, James, Senior Principal, The Baller Herbst Law Group, PC, Washington, D.C. ........................................................................................................... 8

Cohen, David L., Executive Vice President, Comcast Corporation, Philadelphia, Pennsylvania ............................................................................................... 4

Cooper, Mark, Director of Research, Consumer Federation of America, Washington, D.C. ........................................................................................................... 6

Goodman, John, President, Coalition for Competitive Access to Content, 

Washington, D.C. ................................................................................................. 2

Salinger, Michael, Director, Bureau of Economics, Federal Trade Commission, 

Washington, D.C. ................................................................................................. 9

SUBMISSIONS FOR THE RECORD 

Baller, James, Senior Principal, The Baller Herbst Law Group, PC, Washington, D.C., prepared statement ....................................................................... 30

Cohen, David L., Executive Vice President, Comcast Corporation, Philadelphia, Pennsylvania, prepared statement ............................................................ 34

Cooper, Mark, Director of Research, Consumer Federation of America, Washington, D.C., prepared statement ....................................................................... 56

Goodman, John, President, Coalition for Competitive Access to Content, 

Washington, D.C., prepared statement .............................................................. 72

Salinger, Michael, Director, Bureau of Economics, Federal Trade Commission, 

Washington, D.C., prepared statement .............................................................. 76

(1)

VERTICALLY INTEGRATED SPORTS PROGRAMMING: ARE CABLE COMPANIES EXCLUDING COMPETITION? 

THURSDAY, DECEMBER 7, 2006 

UNITED STATES SENATE, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:03 a.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Arlen Specter, 

Chairman of the Committee, presiding. 

Present: Senator Specter. 

OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. 

SENATOR FROM THE STATE OF PENNSYLVANIA 

Chairman SPECTER. Good morning, ladies and gentlemen. The 

Judiciary Committee will now proceed with a hearing on the subject of whether consumers are being fairly treated by owners of 

sports franchises and cable and satellite companies with the overriding question as to whether activities now being undertaken violate the antitrust laws or whether the antitrust laws ought to be 

amended to provide fairness to the consumers. 

The backdrop is America’s love affair, America’s infatuation with 

sports, a national addiction to which I include myself, and we witness a rising cost of people watching pay television on cable television. 

We had a hearing earlier on the implications of the activities of 

the National Football League on their practices, and today we take 

up the question as to vertical integrated sports programming, 

whether the consumers are being unfairly treated. 

When we talk about integration, there are quite a number of situations where the cable companies own sports franchises—Cablevision with the Knicks and the Rangers and Cox with the Padres 

and Time Warner with the Braves and Comcast with the Flyers 

and ’76ers and Charter with the Seattle Seahawks and the Portland Trail Blazers. And the issue is whether the failure to provide 

programming to competitors is a violation of the antitrust laws, 

with the Seventh Circuit decision in MCI Communications v. 

AT&T holding that Section 2 of the Sherman Act is violated if the 

so-called four-part test is met under essential facilities. 

The Congress legislated in 1992 to prohibit vertically integrated 

companies, those that have ownership in programming, sports programming specifically our hearing today, from refusing to make 

their cable contact available to competitive multi-channel video 

2

programming. And the Congress applied this only to programming 

delivered via satellite. It is questionable whether it ought to be applied to programming delivered by cable, terrestrial transmission 

as well. 

The Commerce Committee considered a change in that law, and 

at least as of this time, Congress has not moved in that direction 

but perhaps we should. There are some strong arguments for moving in that direction. 

In July of this year, the FCC required Time Warner and Comcast 

to provide competitors with access to their sports programming as 

a condition to their acquisition of the assets of Adelphia. But the 

FCC did not impose this requirement on Comcast SportsNet Philadelphia, and one of our points of interest would be why the distinction there. 

We do not have anybody from Cablevision with us today, which 

I think is unfortunate. We gave Cablevision a lot of notice, and no 

reason was advanced why Cablevision could not cooperate with this 

Committee. And when we review the matter, seek any further explanation at our next hearing, people should know that the Committee does have the subpoena power. I do not want to lecture to 

the choir here, preach to the choir. All of you have come in on our 

invitation. But we do expect cooperation from companies who are 

programming and who are undertaking activities which affect consumers, affect the laws of the United States within the jurisdiction 

of the Judiciary Committee. We ought to have the cooperation from 

those folks coming forward. 

We have a very distinguished panel this morning, and our lead 

witness is Mr. John Goodman, who is President of the Coalition for 

Competitive Access to Content. He was Executive Director of the 

Broadband Service Providers Association. He had operating roles in 

Astound Broadband and also served with Motorola, holds an MBA 

from Northwestern University and a bachelor’s degree from Bethel 

College in psychology. 

Thank you for joining us, Mr. Goodman, and we look forward to 

your testimony. 

STATEMENT OF JOHN GOODMAN, PRESIDENT, COALITION 

FOR COMPETITIVE ACCESS TO CONTENT, WASHINGTON, D.C. 

Mr. GOODMAN. Good morning. I want to express my appreciation 

to you and other members of the Judiciary Committee for the opportunity to participate today. I am pleased to represent the Coalition for Competitive Access to Content. It is a very diverse group 

of companies, including DBSs, BSPs, telco entrants, trade associations, and consumer groups that are all committed to expanded 

competition. These member organizations disagree on many public 

policy issues, but, nonetheless, they have come to the same conclusion regarding program access reform: assured access to content, 

particularly regional sports programming, is essential to the development of high-capacity networks that provide not only video but 

broadband competition. 

Congress has long recognized the direct linkage between access 

to programming and additional video competition. In 1992, Congress did promulgate the original program access rules that reVerDate 0ct 09 2002 12:43 Feb 26, 2007 Jkt 032154 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\32153.TXT SJUD1 PsN: CMORC
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quired that video content owned by cable operators be made available to new entrants on fair and nondiscriminatory terms. 

Access to content today is every bit as important as it was then. 

The FCC reviewed the application of certain program access rules 

in 2002 and concluded they were still essential, and they extended 

them for 5 years. More recently, Senators Kohl and DeWine have 

sponsored several valuable GAO studies that document both the 

need for more wireline competition and the relationship between 

access to content and the ability to compete. Regulators reviewing 

media mergers, as you referenced, also came to the same conclusion. Proceedings for DirecTV/NewsCorp and for Comcast, Time 

Warner, and Adelphia transactions were both approved with program access conditions both related to sports and other programming. While we applaud the FCC’s vigilance in this area, the CA2C 

believes that a statutory mechanism—not piecemeal adjudication—

is necessary and justified to assure access to content. 

The current level of vertical integration continues to be significant and expanding. Incumbent cable operator ownership of professional sports franchises and sports programming has actually expanded since 1992. In addition, a substantial portion of current 

vertical integration is concentrated in programming that has the 

highest viewership and, therefore, value. The CA2C has attempted 

to document the current level of vertical integration. As we submit 

some summary profiles today, we ask the Committee to feel free to 

share this information with all parties involved so that this information can be validated, corrected, and expanded as may be appropriate. And I have these here if you want to see them. 

Unfortunately, Congress’s program access provisions, written in 

1992, have not kept pace with today’s technology and market structure. Cable operators can control exclusive rights to programming 

delivered over their headends by fiber as opposed to satellite. This 

is called the ‘‘terrestrial loophole.’’ That is why a DBS subscriber 

in Philadelphia cannot receive Comcast’s Sports Network with Flyers, Phillies, and ’76ers games. It is why a DBS subscriber in San 

Diego cannot receive Cox’s sports network for Padres games. The 

FCC has looked at this issue several times and concluded it has no 

authority to deal with terrestrially delivered content unless there 

are changes to the current law. 

Accordingly, the CA2C provided input for the ‘‘Sports Freedom’’ 

provisions in the telecommunications legislation introduced by Senators Stevens and Inouye. These provisions closed the terrestrial 

loophole and enhanced the framework related to sports programming by, among other things, applying binding arbitration proceedings to certain disputes. These provisions were similar to the 

conditions created in the DirecTV/NewsCorp merger. 

We supported new legislation because it will have equal applications to all MVPDs, and it will sustain the right market structures 

to promote competition. We should not rely on mergers, acquisitions, or other market events to address these industry-wide matters. Moreover, the FTC and the FCC should be directed and empowered to deal with anticompetitive issues. In short, we do not 

seek for Congress to establish an entirely new legal framework of 

economic regulation or price controls, nor should particular players 

4

in the market be singled out. Rather, a rational and measured updating and extension of the rules is in order. 

Opponents to program access legislation have publicly acknowledged that the existing rules have been effective within their current application. However, they now oppose program access rules. 

They claim these rules are not needed because current markets are 

fully competitive and that there are limited examples of abuse or 

denied access. But the market reality of key programming, especially local and regional sports, is that it is concentrated in the 

hands of a few cable operators, and that undermines this view. 

Even incumbent cable operators have asked for conditions guaranteeing access to content. The DirecTV/NewsCorp merger was the 

first time that an incumbent video provider faced a potential threat 

of some other network operator having control of essential content. 

Suddenly, they were asking for merger conditions that sounded a 

lot like the standards CA2C members have promoted to bring video 

competition to the market. 

I want to again thank you for this opportunity to be with you 

this morning, and I look forward to your questions. 

[The prepared statement of Mr. Goodman appears as a submission for the record.] 

Chairman SPECTER. Thank you very much, Mr. Goodman. We 

now turn to Mr. David Cohen, Executive Vice President of Comcast 

Corporation; had been a partner and Chairman of the firm of 

Ballard Spahr Andrews & Ingersoll, one of the largest law firms in 

the country; served with great distinction as chief of staff to Mayor 

Ed Rendell of Philadelphia; bachelor’s degree from Swarthmore and 

University of Pennsylvania Law School graduate summa cum 

laude. 

Thank you for coming in today, Mr. Cohen, and the floor is 

yours. 

STATEMENT OF DAVID L. COHEN, EXECUTIVE VICE PRESIDENT, COMCAST CORPORATION, PHILADELPHIA, PENNSYLVANIA 

Mr. COHEN. Thank you very much, Mr. Chairman, and thank 

you for the opportunity to testify today on vertical integration in 

sports programming. I would like to highlight three main points 

from my written testimony, which I understand will be made a 

part of the record: first, vertical integration is commonplace in commerce and can have real consumer benefits; second, there has been 

a dramatic decrease in vertical integration in cable; and, third, 

competitors to cable are getting access to all the programming they 

need, so there is no longer a need for special Government rules on 

program access. Let me briefly expand. 

When Congress passed the 1992 Cable Act, it was concerned that 

cable operators that owned programming networks would have the 

ability and incentive to withhold that programming from competing 

distributors, particularly the then-fledgling satellite operators. So 

Congress told the FCC to adopt special program access rules to ban 

exclusivity and ensure that all satellite-delivered, vertically integrated cable networks are made available to all competitors. 

Back then, many cable operators were vertically integrated. They 

had an attributable financial interest in almost 60 percent of the 

5

68 or so national cable networks then in existence. But as our industry grew and as we built more and more channel capacity the 

market for programming has exploded. Today, of the more than 

530 national cable networks, the FCC reports that cable operators 

have an interest in approximately 20 percent of them, although our 

data shows that number is closer to 12 percent. By any measure, 

though, vertical integration today is substantially less than what 

it was in 1992. 

I would also like to stress that Comcast is among the least 

vertically integrated companies in the entertainment industry. We 

have an interest in a total of only 22 networks. Half of those carry 

sports, and eight of those would be considered regional sports networks. On a typical cable system, we are affiliated with only about 

7 percent of the full-time networks that we carry. In comparison, 

our biggest competitor today, DirecTV, is owned by NewsCorp, 

which has a financial interest in over 30 of the networks that it 

carries—26 of those are sports networks, including 21 regional 

sports networks. The number of affiliated networks that DirecTV 

carries is, therefore, almost twice as many as Comcast carries. 

In today’s marketplace, as I explain in my written testimony, 

there is simply no justification for the FCC’s current program access rules. Those rules were an unusual exception to a well-established principle of law and economics: that vertical integration can 

have very positive pro-consumer effects. Vertical integration allowed cable to create innovative programming when others would 

not. This led to valuable networks like CNN, the Discovery Channel, TV One, and C–SPAN, among others. Those investments 

helped to make cable the preferred choice of American viewers. 

Let me give you another specific example that I know is near and 

dear to the Chairman’s heart and that is near and dear to my 

heart. Sports fans in our hometown of Philadelphia had to settle 

for 2 second-rate regional sports networks until Comcast acquired 

the Flyers and ’76ers and bought out those two networks in the 

mid-1990’s. We then created Comcast SportsNet Philadelphia, 

which is exempt from the program access rules because it is terrestrially delivered. Congress permitted this limited exclusivity for a 

reason—not to prevent competition but because it did not want to 

deter investment in high-quality local programming. In fact, Congress wanted to make sure that it would continue to encourage 

such investments. In specific reliance on this exemption, Comcast 

has since invested over $450 million to build up SportsNet to the 

network that it is today. And although we make Comcast 

SportsNet Philadelphia available to every one of our terrestrial 

competitors, including Verizon and RCN, we do not make it available to our DBS competitors. However, in the seven other markets 

where Comcast has subsequently created regional sports networks, 

we make them available to all of our terrestrial and satellite competitors. 

We think that some exclusivity of programming can be a good 

thing, because it permits competitors to distinguish themselves 

from one another. And I realize that the satellite providers are unhappy that they cannot provide SportsNet Philadelphia to their 

customers. But I will admit to you that we are a little unhappy 

6

that DirecTV has exclusive rights to the NFL Sunday Ticket and 

that we cannot provide this service to our cable customers. 

The simple fact is that exclusivity can’t simultaneously be a good 

thing when our competitors have it but a bad thing when we have 

it. It is one or the other. 

So thank you for the opportunity to testify today. I want to conclude by saying that it is past time to repeal the program access 

rules, especially the ban on exclusivity that is set to expire next 

year. Congress can reasonably rely upon the antitrust laws to 

guard against any problems here, and I will be happy to expand 

upon that in the question-and-answer session. 

Thank you. 

[The prepared statement of Mr. Cohen appears as a submission 

for the record.] 

Chairman SPECTER. Thank you, Mr. Cohen. 

Our next witness is Dr. Mark Cooper, Director of Research for 

the Consumer Federation of America, also President of Citizens Research, and a fellow at the Stanford Center on Internet and Society; the author of four books; undergraduate degree from CCNY, 

master’s from University of Maryland, and a Ph.D. in sociology 

from Yale. 

We appreciate your coming in today, Dr. Cooper, and look forward to your testimony. 

STATEMENT OF MARK COOPER, DIRECTOR OF RESEARCH, 

CONSUMER FEDERATION OF AMERICA, WASHINGTON, D.C. 

Mr. COOPER. Thank you, Mr. Chairman, and I appreciate the opportunity to appear today to testify on one of the key aspects of the 

continuing failure of competition to protect the consumer in the 

cable industry. This continuing market failure is evident in rising 

prices for monthly service, discrimination in carriage of programming by cable operators, refusal to offer critical marquee programming to competing delivery systems, and anticonsumer and anticompetitive bundling. 

Entry into the industry remains extremely difficult from both the 

content and distribution sides. Satellite has been unable to discipline cable market power, and it appears that the entry of telephone companies is equally ineffective. Monthly prices for basic 

and expanded service have just about doubled since the passage of 

the Telecommunications Act of 1996. Just last week, the two largest theoretical competitors in the Northeast each upped their rates 

dramatically, by 4 to 5 times the rate of inflation. 

Intermodal competition and a cozy duopoly is not enough to discipline the abuse of market power in this sector. Every traditional 

measure of market structure—concentration ratios, the Lerner 

index, Tobin’s q ratios—indicates the existence of market power in 

the cable industry. This market power stems primarily from a lack 

of competition at the point of sale. The market exhibits not only the 

classic barriers of entry, such as high capital costs, specialized inputs, and economies of scale, but cable operators have built barriers to entry with their regional concentration, vertical integration, and bundling strategies. 

The topic of this hearing, the withholding of vital geographically 

specific marquee programming from alternative distribution platVerDate 0ct 09 2002 12:43 Feb 26, 2007 Jkt 032154 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\32153.TXT SJUD1 PsN: CMORC
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forms, is one of the elements in a tightly woven web of business 

practices that have dampened competition in the sector. 

The incessant reduction in number of cable operators and their 

increasing size has led to the aggregation of cable systems into 

large regional clusters. Market power at the point of sale to the 

public and monopsony power at the point of purchase from programmers combine to undermine competition. Large MSOs have 

come to dominate specific regions of the country. They have moved 

into regionally specific sports programming that is itself a monopoly. They embed this programming in huge bundles, forcing consumers to pay for it all. They then deny access to this programming to competing distributors or make it available on anticompetitive and unfriendly terms and conditions. 

Their monopsony power is grounded in their market power at the 

point of sale, and the huge regional clusters and concentrated national market created over the past decade gives them the ability 

to secure control over this regionally specific programming. Since 

the programming is regional, it is rarely distributed through terrestrial means, subject to the so-called terrestrial loophole. Therefore, 

the programming can be withheld from competing distribution. 

As cable operators gain control of large contiguous geographic 

areas, they also are more able to obtain exclusive rights to programming they do not own. Restricting the flow of programming to 

alternative distribution platforms blunts competition at the point of 

sale. If the Congress intends to rely on market forces to discipline 

the market power of cable operators, it will have to break the 

stranglehold that the handful of vertically integrated, horizontally 

concentrated firms use to dominate the sector. 

Antitrust-type structural remedies that apply to the supply side 

and are very much in the tradition of antitrust and were not well 

crafted in the 1992 and 1996 Acts including the following: Congress 

should impose a strict horizontal limit on cable ownership to diminish cable’s monopsony power in the programming market; Congress 

should ban the abuse of vertical leverage, both by closing the terrestrial loophole and adopting an effective policy to prevent discrimination in carriage; Congress should prohibit contractual anticompetitive tying arrangements by dominant media programmers 

that force distributors to carry all of a network’s or all parent owner’s cable channels just to receive the small number that the consumers want. 

We also think Congress should require cable operators to make 

available to consumers on an unbundled basis all programming 

that they choose to bundle. This will enable the demand side of the 

market to discipline the cost of programming and the size of their 

cable bill. 

I appreciate the opportunity to testify and look forward to any 

questions. Thank you. 

[The prepared statement of Mr. Cooper appears as a submission 

for the record.] 

Chairman SPECTER. Thank you very much, Dr. Cooper. Without 

objection, we will admit into the record the statement of Senator 

Herb Kohl, who is Ranking Member of the Antitrust Subcommittee. 

Our next witness is Mr. James Baller, Senior Principal of Baller 

Herbst Law Group, a firm specializing in telecommunications; led 

8

the successful challenge to Virginia’s and Missouri’s barriers to municipal entry into the telecommunications field; graduate of Dartmouth and Cornell Law School. 

We appreciate your being with us today, Mr. Baller, and the floor 

is yours. 

STATEMENT OF JAMES BALLER, SENIOR PRINCIPAL, THE 

BALLER HERBST LAW GROUP, PC, WASHINGTON, D.C. 

Mr. BALLER. Thank you very much, Chairman Specter. I appreciate your invitation to testify, and I am honored to be here today. 

Since 1992, I have provided legal services to dozens of public and 

private providers of competitive communications services, and I 

have assisted several national and State associations that support 

such endeavors. 

Over the years, I have seen at first hand a wide range of practices through which established cable operators have sought to 

thwart competition from my clients and similarly situated new entrants. At a hearing in this room in February of 2004, we presented 

documentation of dozens of such practices. Many are still occurring, 

and they need to be curbed once and for all. I applaud you, Chairman Specter, for focusing on programming access issues at this 

hearing, and I hope that the Committee will focus on some of the 

other practices in the year ahead. 

In my testimony, I would like to focus on three points. First, I 

believe it is critically important not to treat programming access 

just as a cable entertainment issue, but to also see it as an infrastructure development issue that is essential to America’s local, regional, and global competitiveness. 

As the Committee knows, America’s international ranking in 

broadband deployment has fallen precipitously over the last decade, from first in the world in the mid-1990’s to as low as 21st 

today in some studies. The U.S. is also falling increasingly behind 

the leading nations in access to high- capacity Next Generation 

Networks and in cost-per-unit of bandwidth, where we are now 

ranked sixth, according to the International Telecommunications 

Union. These are alarming trends because virtually everything that 

we do at home, at the office, and at play will increasingly be done 

over broadband platforms in the future. As a result, the nations 

that lead the way in developing Next Generation Networks will be 

the ones that are most successful in the emerging informationbased global economy ahead. I have given the Committee a handout that documents this point in greater detail. 

A century ago, when electricity was the must-have technology of 

the day, the private sector alone could not electrify America quickly 

enough to meet demand, particularly in rural areas. Recognizing 

that electrification would significantly enhance economic development and quality of life, thousands of communities in underserved 

or unserved areas stepped forward to form their own electric utilities. Most that did thrived, while many that waited for the private 

sector to get around to them, in some cases up to 50 years, did not. 

Today the history of electrification is repeating itself in the communications area, and many communities across the United States 

are ready, willing, and able to do their part to help America develop high-bandwidth Next Generation Networks as rapidly as posVerDate 0ct 09 2002 12:43 Feb 26, 2007 Jkt 032154 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\32153.TXT SJUD1 PsN: CMORC
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sible. In this, they want to stay abreast of the most progressive 

municipalities abroad, and in my second handout, I have presented 

information about what is happening in some of the other leading 

cities in the world. 

If we are to succeed as a Nation in developing Next Generation 

Networks, these networks must be economically viable. To do that, 

they must be able to provide all services that they are capable of 

providing, including video programming. And to deny access to key 

video programming has implications not just in the entertainment 

field but in the development of these systems. 

Second, my second point is that the FCC has over the years supported the safeguards in the 1992 Cable Act. I completely agree 

with Mr. Goodman’s testimony that it is essential that these safeguards be preserved and extended. If Congress wants to retain a 

competitive environment in the cable communications field, it is essential that all entities have access to critical programming. I can 

cite many examples where that need still exists today and, in any 

event, it is important to prevent such things from happening in the 

future. We cannot allow established cable operators to create or remove access to programming at their discretion. 

My last point is that when we look at antitrust remedies, it is 

important to recognize that for small to medium-sized entities, 

antitrust remedies are illusory. The time, cost, burdens, and risks 

involved make antitrust remedies essentially worthless to small operators. What we need are clear, unambiguous, enforceable standards that supply and provide sufficiently onerous multiple damages, penalties, and attorneys’ fees to deter noncompliance. Also, 

we need help from the major agencies to step in and provide service to provide protection that small providers cannot provide for 

themselves. 

Thank you very much, and I look forward to answering questions 

that you may have. 

[The prepared statement of Mr. Baller appears as a submission 

for the record.] 

Chairman SPECTER. Thank you, Mr. Baller. 

Our final witness on the panel is Mr. Michael Salinger, Director 

of the FTC’s Bureau of Economics, currently on leave from Boston 

University’s School of Management, where he is a professor of economics. He previously taught at MIT, Columbia, and served as an 

economist with the FTC’s Antitrust Division; a magna cum laude 

graduate of Yale and a Ph.D. from MIT in economics. 

Thank you, Mr. Salinger, for your contribution here, and we look 

forward to your testimony. 

STATEMENT OF MICHAEL SALINGER, DIRECTOR, BUREAU OF 

ECONOMICS, FEDERAL TRADE COMMISSION, WASHINGTON, 

D.C. 

Mr. SALINGER. Mr. Chairman, my name is Michael Salinger. I 

am, as you said, Director of the Bureau of Economics at the Federal Trade Commission. I am pleased to appear before you to 

present the Commission’s testimony on the FTC investigation earlier this year into the acquisition by Comcast and Time Warner 

Cable of Adelphia’s cable assets and into related transactions in 

which Comcast and Time Warner Cable swapped various cable sysVerDate 0ct 09 2002 12:43 Feb 26, 2007 Jkt 032154 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\32153.TXT SJUD1 PsN: CMORC
10

tems. After a thorough investigation, the Commission closed the 

matter without taking any action. The Commission’s decision not 

to file an antitrust case was explained in a statement by Chairman 

Majoras and Commissioners Kovacic and Rosch and in a second 

statement, concurring in part and dissenting in part, by Commissioners Harbour and Leibowitz. I have submitted a written statement which represents the testimony of the Commission. My oral 

presentation and answers to questions represent my views and not 

necessarily the views of the Commission or any of the individual 

Commissioners. 

Neither the acquisition of the Adelphia assets by Time Warner 

Cable and Comcast nor the system swaps between Time Warner 

and Comcast represented the acquisition of a direct competitor. In 

other words, this was not the kind of transaction that gives rise to 

most of the merger challenges under the antitrust laws. Moreover, 

several aspects of the transaction were likely to be beneficial to 

competition and to increase economic efficiency. Cable systems 

within a metropolitan area can be complementary to each other, as 

consolidation can make it possible to achieve economies of scale in 

creating a second wireline communications network that competes 

with the network of the incumbent local exchange company. 

To be sure, the transaction did raise some competitive concerns, 

which the staff spent 7 months investigating. The most important 

of these was that a cable operator with a sufficiently large share 

of a metropolitan area might enter into an exclusive contract with 

a regional sports network, or RSN, that would make the RSN unavailable over competing media. Using economic analysis, the staff 

concluded that the transaction did not create an incentive to enter 

into such an exclusive agreement. 

Of course, economics is an inherently imprecise discipline, so one 

must consider the possibility that developments could run counter 

to the staff’s prediction. If that were to happen, however—that is, 

if Comcast or Time Warner Cable do enter into exclusive agreements with RSNs—those agreements would themselves be subject 

to antitrust review. 

Exclusive agreements are not per se violations of the antitrust 

laws. Even if we knew with certainty that exclusives would be a 

likely result of the merger, the Commission would have to evaluate 

whether they are harmful to competition. Such a finding would require a showing of net harm to consumers, not just harm to competitors. That is a very hard determination to make without knowing the details of the agreement to be considered. In my opinion, 

the opportunity to revisit the issue if it does, in fact, arise was an 

important consideration in the Commission’s decision. 

Thank you for your attention. I would be pleased to respond to 

any questions. 

[The prepared statement of Mr. Salinger appears as a submission 

for the record.] 

Chairman SPECTER. Thank you, Mr. Salinger. 

We have a vote, which was just started a few minutes ago, and 

I am going to recess the hearing for a short time to go vote and 

come back, and we will then begin the questions and answers. 

Thank you. We stand in recess. 

[Recess 10:35 a.m. to 11:05 a.m.] 

11

Chairman SPECTER. The hearing will resume. 

Mr. Baller, you say that the antitrust laws are worthless as remedies. Would you amplify your view on that a bit? 

Mr. BALLER. Yes, I would be glad to, Chairman Specter. For a 

small company encountering anticompetitive activity, the cost involved—hiring expert testimony, engaging in time-consuming and 

expensive discovery, the burden involved, the— 

Chairman SPECTER. You are talking now about private right of 

action and private litigation— 

Mr. BALLER. That is correct. 

Chairman SPECTER. Seeking treble damages or injunctive relief? 

Mr. BALLER. That is correct. If— 

Chairman SPECTER. But how about if Mr. Salinger and the FTC 

comes swooping in and provides these fancy economists with their 

extraordinary pedigrees and high- priced lawyers to bring justice to 

clients. 

Mr. BALLER. We would love for that to occur. 

Chairman SPECTER. Then the antitrust laws would be effective, 

wouldn’t they? 

Mr. BALLER. Yes, they would. They would be more effective but 

not entirely effective because, as Mr. Salinger said, the demonstration— 

Chairman SPECTER. Why not entirely effective? They get equitable relief. They get court orders prohibiting the inappropriate 

conduct. They bring you lots of money in treble damages. What 

more do you want? 

Mr. BALLER. The showing of harm to competition as distinguished to competitors makes the antitrust showings very difficult 

and very complex and time-consuming, even if a major— 

Chairman SPECTER. To prove the case. 

Mr. BALLER. Correct. 

Chairman SPECTER. But the cases can be proved. 

Mr. BALLER. But over what period of time? Assuming that a 

small competitor— 

Chairman SPECTER. What would you suggest as a preferable 

remedy? 

Mr. BALLER. Well, I suggest, No. 1, strengthening the antitrust 

laws. I am not suggesting that that alternative not occur. 

Chairman SPECTER. Move to No. 2. You have already told us all 

the reasons the antitrust laws are not sufficient. 

Mr. BALLER. I believe that, in addition to strengthening the antitrust laws, we should also have specific standards that are easy to 

understand. For example, closing the terrestrial loophole is very 

easy to understand. That can be effectuated. We can remove exceptions that make it difficult to apply and make the criteria more absolute, clear, give the Federal Trade Commission, the Department 

of Justice, or the Federal Communications Commission clear mandate and a sense of the Congress that it seeks to protect the interests of small competitors as well as the very large competitors. 

Chairman SPECTER. Mr. Salinger, the 1992 legislation enacted by 

Congress dealt only with satellite transmission and not with cable, 

and the proposal was made earlier this year, taken up by the Commerce Committee, which would have primary jurisdiction on that 

issue, they did not pursue that, or at least not at the present time. 

12

What reason would there be for not including cable terrestrial 

transmission under the prohibitions of the 1992 Cable Act? 

Mr. SALINGER. Senator, you are referring to a provision that relates primarily to FCC regulations, so in general, we would defer 

to our sister agency for their opinion on that. But the specific answer to your question I do not know. 

Chairman SPECTER. Well, the FTC has considerable expertise. 

You have blue-ribbon credentials: a Ph.D. in economics from MIT, 

magna cum laude from Yale. This is an antitrust issue. It involves 

a provision that Congress prohibited vertically integrated cable 

companies from refusing to make their contact available to competitors. And it applied only to satellite transmission and not to 

cable or terrestrial transmission. 

What is the rational basis for that distinction? 

Mr. SALINGER. As a matter of economics, it is hard to understand 

why there is any rational basis for distinguishing between terrestrial distribution and satellite distribution. 

Chairman SPECTER. Well, would you recommend that Congress 

change it to include cable and terrestrial distribution? 

Mr. SALINGER. Well, I think they should be treated consistently. 

As to whether the prohibition on exclusivity is appropriate raises 

more general antitrust issues, which are not so clear-cut. 

Chairman SPECTER. So you are raising a question about whether 

the prohibition really ought to be continued. But if you did continue the prohibition, you say there is no distinction as far as your 

economics training would say between satellite and terrestrial. 

Mr. SALINGER. Yes, that is right. 

Chairman SPECTER. Mr. Cohen, I notice you having some body 

language in opposition. 

[Laughter.] 

Chairman SPECTER. You can expand on that. 

Mr. COHEN. I was even going to volunteer to comment on that, 

although I— 

Chairman SPECTER. I was coming to you in any event. 

Mr. COHEN. I figured I was not going to escape here unscathed. 

Chairman SPECTER. Because you already said there is good reason for it, so tell us the reason. 

Mr. COHEN. First of all, I would say this: I want to second at 

least the implication of Mr. Salinger’s comment that if we are going 

to look at this, I actually think the fresh look should be whether 

there should be any prohibition of satellite or terrestrial delivery. 

I believe that a rigorous economic analysis of the competitive situation today would lead to the conclusion that the prohibition on exclusive arrangements with respect to satellite-delivered programs 

should disappear, in which case you would have your uniform 

treatment between the two. 

I do not want to compare my economics credentials to Mr. Salinger’s. I only majored in economics at Swarthmore College. 

Chairman SPECTER. Wait, I do not understand that. You were 

summa. He was only magna. 

[Laughter.] 

Mr. COHEN. He actually has a degree in economics. I do not. 

Chairman SPECTER. I thought ‘‘summa’’ covered everything. 

13

Mr. COHEN. Well, I will not say that. And, of course, he has Yale 

on his resume, and I am missing that on mine, as you have frequently observed in the past. 

Chairman SPECTER. Having frequented both Yale and Penn, you 

do not have to take second place in any respect. 

Mr. COHEN. Well, I appreciate that, and so will Andy Gutman. 

But there was a rational justification for the distinction between 

satellite-delivered programming and terrestrially delivered programming in 1992, and that is that terrestrially delivered programming was viewed by the Congress as being a more limited mode 

of distribution, a mode of distribution that would be primarily used 

for local programming. And there was a considerable legislative 

record on this distinction and a considerable record, by the way, 

supported by economists at the time that there would be a risk of 

anticompetitive, anticonsumer, I guess I should say, activity if you 

were to discourage investments in high-quality local programming. 

And it, therefore, is a very conscious decision to say we recognize 

that we are going to come in as the Government and interfere with 

the market here. And so, in interfering with the market, let’s interfere with the market at the level where we have the greatest concern, which is the creation of national cable programming that 

needs to be available to this fledgling industry that we are trying 

to stimulate and we are trying to develop and we are trying to encourage the development of. But let’s not get in the way of investments that cable companies might be prepared to make in locally 

delivered content, which would presumably be delivered over a terrestrial network. 

I would say that Congress’s judgment here proved not to be terribly mistaken. This is not an exemption— 

Chairman SPECTER. Congress’s judgment was not terribly mistaken? 

Mr. COHEN. That is right. 

[Laughter.] 

Mr. COHEN. Well, I might quibble with the need to have had 

the— 

Chairman SPECTER. Do you know that that is the nicest thing 

that has been said about Congress all week? 

[Laughter.] 

Chairman SPECTER. Go ahead. 

Mr. COHEN. In fact, if we were sitting here today and there were 

67 terrestrially delivered networks that were being provided exclusively on cable, and all around the country satellite or wireline 

overbuilders were having difficulty gaining access to all of this content, then I think there would be a legitimate question about this. 

But the examples of where terrestrially delivered programming is 

not available to competitors are so few and so far between that it 

is hard for me to accept that a credible, independent economist 

could make the case that there is any significant impairment to 

competition that is taking place as a result of the terrestrial exemption today. 

Chairman SPECTER. Mr. Cooper, I will come to you in just a 

minute because I know you want to comment. But I want to follow 

up in a couple of regards with Mr. Cohen before moving on. 

14

Comcast has made available to Verizon Philadelphia SportsNet, 

correct? 

Mr. COHEN. That is correct. 

Chairman SPECTER. Why did you do that on a voluntary basis? 

Mr. COHEN. I think it is a question of looking at our business 

and looking at the business model, and we have consistently said 

in testimony before this Congress— 

Chairman SPECTER. I commend you for doing it. I think it is very 

good because it helps the consumers. They do not have to make a 

choice based on Philadelphia SportsNet. But there is a competitive 

disadvantage to you to give that to Verizon, a competitor. 

Mr. COHEN. That is correct. 

Chairman SPECTER. And that obviously prompts the question as 

to why you did it. 

Mr. COHEN. We made an assessment based on the overall balance of the expected size and scope of that competitor for reasons 

that we can discuss in another hearing. We do not believe Verizon 

is, for example, going to be providing service in the city of Philadelphia anytime in the near future because their business model is 

not to roll out their service in the city. 

Chairman SPECTER. Do you think there are really not going to 

be real competitors to Comcast? 

Mr. COHEN. No, they are going to be a competitor in the Philadelphia suburbs and in South Jersey and in wealthier communities 

surrounding the city of Philadelphia, but not in the city of Philadelphia per se. But, more importantly, we— 

Chairman SPECTER. But Comcast relies upon the areas beyond 

the city of Philadelphia very heavily. 

Mr. COHEN. That is correct. We have a number of ways in which 

we competitively differentiate ourselves from our competitors. 

Comcast SportsNet in Philadelphia is one of those methods. It is 

not the exclusive method. The bottom line here is that we have 

consistently represented in Congress and in front of the FCC that 

it is not our intention to abuse the terrestrial exemption—by the 

way, it is an exemption, not a loophole, that we would make the 

content available to wireline, facilities-based competitors, and that 

we do so in all of our markets. And giving access to Comcast 

SportsNet to Verizon was consistent with that position that we 

have taken. 

What we say is that we have not made it available to our satellite competitors because they aggressively distinguish themselves 

competitively from us with their exclusive content. And what is 

sauce for the goose is sauce for the gander. If exclusive content on 

DirecTV, and in particular, the NFL Sunday Ticket, which is the 

single most valuable piece of exclusive sports content in the United 

States of America today—and if that is permissible, if that is acceptable, if that is not a problem for the United States Congress, 

for the Federal Communications Commission, with all due respect 

for everyone on this panel, then it should also be acceptable that 

in one market in this country we have the right to competitively 

differentiate ourselves with a network that we invested over $450 

million in building in reliance on an exemption created by this Congress. And I would ask: What is the investment that DirecTV has 

made in sports programming around the country? What is the inVerDate 0ct 09 2002 12:43 Feb 26, 2007 Jkt 032154 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\32153.TXT SJUD1 PsN: CMORC
15

vestment that DirecTV or EchoStar has made in any kind of programming around this country? What is the investment that they 

have made in jobs in Philadelphia? What is the investment that 

they have made in the community in Philadelphia? The investments that Comcast has made in programming, in jobs, in community development, are the pro-competitive, pro-consumer benefits 

that you get from the terrestrial exemption and from the structure 

of the program access rules under the status quo. 

Chairman SPECTER. Do you feel strongly about that? 

[Laughter.] 

Mr. COHEN. I feel passionately about it. 

Chairman SPECTER. That is a big subject, and I intend to come 

back to it because that involves the first hearing we had on NFL, 

and I want to move through the subject of integration and cable, 

but that is very much on the agenda for today. But it comes in 

Phase 2. 

As to Comcast making your sports programming available to 

other cable companies, do you do that? 

Mr. COHEN. We do. 

Chairman SPECTER. No exceptions? 

Mr. COHEN. There are no exceptions other than Comcast 

SportsNet Philadelphia and there are no exceptions for wireline, facilities-based competitors anywhere in the country. There are no 

exceptions for satellite anywhere else in the country other than 

Comcast SportsNet Philadelphia. 

Chairman SPECTER. Okay. Dr. Cooper, you had a comment? 

Mr. COOPER. Well, with respect to the terrestrial loophole and 

what Congress did in 1991, let us be clear that in 1992 regional 

clusters were a very small part of this industry. They have increased many times over since then. 

Second of all, the capacity to distribute content through high 

broadband networks has increased dramatically, so what you now 

have today on a regional basis is exactly the condition that was 

perceived to be the problem for the Nation in terms of satellite-delivered programming. So that these clusters have grown to such an 

extent—we have gone from maybe 20 percent to well over 50 percent, 60 percent of systems being clustered, and those are clustered 

in major metropolitan areas—each of which, by the way, has a monopoly sports franchise in each of the major leagues. 

So the problem that is identified here, in fact, has grown to be 

a regional problem, and so if Congress were to revisit this issue 

today, they might well look at that situation and conclude that it 

is exactly the difficulty of distributing content in an integrated network that they addressed with satellite for the Nation, they now 

need to address with terrestrial distribution for these massive regional clusters that have grown in the past 15 years. 

Chairman SPECTER. Mr. Goodman, at your request we will put 

into the record, without objection, the documents which you have 

presented captioned, ‘‘Coalition for Competitive Access to Content: 

Vertical Integration relevant to Program Access Legislation Draft 

1990–1994–2006 Comparison.’’ That will be made part of the 

record. 

Mr. Goodman, the Court of Appeals for the Seventh Circuit in 

MCI Communications v. AT&T dealt with the doctrine of essential 

16

facilities and developed a four-part test to determine whether there 

would be a violation of Section 2 of the antitrust laws. And it would 

require first the control of the essential facility by the monopolist; 

second, the competitor’s inability practically or reasonably to duplicate the essential facility; third, the denial of the use of the facility 

to a competitor; and, fourth, the feasibility of providing the facility. 

Is that essential facilities—and the Supreme Court of the United 

States in Turner Broadcasting v. FCC implicitly endorsed the application of that standard, and in a concurrence, Justice Stevens 

makes a specific reference to it. The question with that introduction so that there is an understanding of what it is: Does the 

vertical integration sports programming arguably run afoul of that 

doctrine? 

Mr. GOODMAN. That is not a question I am prepared to answer 

in the context of that. I am not an attorney per se. The vertical integration in sports is clearly a condition that can be used as leverage to deny access, and sports programming has been declared by 

most of the consumers that are trying to make a decision about 

when to buy a service that it can be essential. 

Chairman SPECTER. Mr. Baller, what is your legal judgment on 

that? Is the integration we are talking about here today, the 

vertically integrated sports programming arguably a violation of 

the essential facilities doctrine? 

Mr. BALLER. I would argue it is arguably a violation, but the essential facilities doctrine is not recognized by all circuits, and as 

you say, the Supreme Court has not explicitly adopted it as well. 

Chairman SPECTER. So you do not think that this integration 

runs afoul of that doctrine? 

Mr. BALLER. I would personally say I believe it is, but that does 

not mean that the courts necessarily have recognized the doctrine 

at all. 

Chairman SPECTER. Well, okay. But you are a lawyer in this 

field. You are a specialist in antitrust laws. 

Mr. BALLER. I have had experience, but I would not call myself 

an expert in antitrust law. 

Chairman SPECTER. What is your view of it, Dr. Cooper? 

Mr. COOPER. If you look at the four tests, it clearly qualifies in 

the sense that they control it, they have an exclusive, it is irreplaceable. There is, you know, only one baseball team in Philadelphia. And we looked—actually in my testimony, I look around and 

you will discover that if you look across all the major leagues, certainly in the top 25 markets in which Comcast and Time Warner 

are now highly concentrated and clustered, there are very few exceptions where you have more than one team in each of those 

sports. So it does have those characteristics that you mentioned: 

they control it on an exclusive basis, it is irreplaceable, there is 

only one team there, and if they deny the access to it, then, in fact, 

it meets those four tests. 

Chairman SPECTER. Mr. Salinger, what is your view? I am coming to you, Mr. Cohen. I know you have a view on this. 

Mr. SALINGER. I am no doubt going to get in trouble with the 

lawyers at the Commission for opining on the essential facilities 

doctrine, but— 

17

Chairman SPECTER. Well, there is one lawyer here you will not 

get in trouble with. 

Mr. SALINGER. Thank you, Senator. 

I do not think it applies to all sports programming. 

It might apply to some sports programming. 

Chairman SPECTER. What is your view—Mr. Cohen, you have 

given a pretty good exculpatory statement already in addressing 

this because you are making it available to your competitors, except for DirecTV, for which you have a very strong economic reason, strong factual basis. And I am sorry that we do not have a 

broader panel to take a look at the other integrated operations, the 

Padres, et cetera, the Braves. But would this doctrine apply anywhere on the integrated line? 

Mr. COHEN. I have two comments. 

First of all, let’s remember that under the essential facilities doctrine, you ultimately have to have an umbrella of competitive 

harm—harm to competition. It is not a per se violation. And I 

think that for anyone to—I think you have to look, and I was nodding when Mr. Salinger was talking—I think it depends on the 

sport and the market to be able to answer your question in an appropriate way because of the required and appropriate analysis of 

the impact on competition. 

No. 2, I think sports is a very interesting case, and this will get 

me in a little bit of trouble in Philadelphia, but not anywhere else, 

which is that the true integration here is not the integration between the control of the network and the distribution mechanism. 

The true integration here would be an integration that runs from 

the control of the rights to the network and the distribution mechanism. 

So Dr. Cooper, for example, makes reference to one baseball team 

being in Philadelphia. We do not own the baseball team in Philadelphia. We do not own the baseball rights in Philadelphia. And 

the Philadelphia Phillies, who are completely separately owned, 

have their own rights and their own ability to make their own programming deal. And, in fact, to require, as teams like the Chicago 

Cubs in the Chicago sports market—in making the deal require 

that that distribution be made available to all competitors, all 

multi-channel video competitors in the marketplace. So in the absence of what I would call full integration from ownership of the 

rights down to the distribution mechanism, I actually think that 

you probably do not qualify under the Seventh Circuit’s test as an 

essential facility. 

Chairman SPECTER. Your response, then, suggests that before 

you can make an evaluation of, say, Cablevision with the Knicks 

and the Rangers or Cox with the Padres, Time Warner with the 

Braves, and Charter with the Seattle Seahawks and the Portland 

Trail Blazers, you would have to have a market analysis, but the 

essential facilities doctrine might apply in those areas? 

Mr. COHEN. I think it could apply, depending on the market, but 

it is interesting. You have ticked off a bunch of markets with a 

bunch of different characteristics. Take the New York market and 

Cablevision and its control of the MSG regional sports network. 

MSG used to have rights to televise the Knicks, the Mets, the Yankees, the Devils and the Rangers—had the rights to control all of 

18

those teams. It goes to my point that to have full vertical integration, you actually have to own the teams, too, because what is happening in the New York market is that the owners of the Yankees, 

the Mets, the Devils, and the Rangers have all taken their sports 

rights elsewhere. They no longer have carriage agreements with 

MSG. Each of them—the Yankees, Mets, and Devils have a deal 

with YES, which is a non-vertically integrated regional sports network, and the Mets created their own regional sports network, 

which is partially owned by Time Warner, Comcast, et cetera. So 

that would be a vertically integrated regional sports network. 

So Cablevision, which used to own the rights for all of these 

teams, or used to control the rights for all of these teams through 

contract, has now lost the rights for all the teams other than the 

Knicks and the Rangers, who remain on MSG. 

So it is a perfect example of the fact that the controller of the 

rights ultimately has the ability to dictate the distribution. 

Chairman SPECTER. Dr. Cooper, in your written statement, you 

indicate that during the dispute between Cablevision and the Yankees Entertainment Sports, known as YES Network, which owns 

the television rights to the Yankees, Cablevision demanded an equity stake in the Yankees Network. Could you elaborate upon what 

happened there? 

Mr. COOPER. Well, it is interesting that he raises the point of 

YES because, in fact, that was a fairly ugly— 

Chairman SPECTER. I am not raising the point of YES. You 

raised the point of YES. 

Mr. COOPER. I mean Mr. Cohen did. As I understand it- -and 

that is just a recounting of the allegations in the lawsuit that was 

filed, and ultimately it went to arbitration. It was a lawsuit over 

carriage on a cable operator who has substantial market power in 

that market. And so as I understand it, I am not entirely—you 

know, those were the allegations that that had been demanded as 

part of the negotiation for carriage. And in the end, I believe YES 

was substantially vindicated in its court case and got carriage 

under terms that were favorable to it. 

The suggestion here is that maybe the Congress needs to look at 

the exclusivity of the rights, which is something we would encourage. In either event, Comcast would lose its power to pick and 

choose which competitors through its distribution network would 

have access to the programming it controls. He has argued that, 

well, I do not own the team and, therefore, I have made a deal with 

the team to carry its programming; they did not require me to do 

it on a non- exclusive basis; therefore, I cannot impose exclusivity. 

And then he will pick and choose which competitors have access to 

this vital marquee programming. 

If you want to solve the problem by banning exclusive rights in 

sports programming, that would do the job, too, because then he 

could not make that anticompetitive choice. He would be required 

by law to make that programming available to the competing systems. 

Chairman SPECTER. Well, would it be desirable as a matter of 

public policy to prohibit exclusivity of rights? 

Mr. COOPER. Where you have an underlying monopoly, it may 

well be, absolutely. 

19

Chairman SPECTER. What do you think, Mr. Cohen? 

Mr. COHEN. I think that is the right question, and not whether 

the terrestrial exemption should be continued or eliminated. 

Chairman SPECTER. Well, I am glad we got to the right question. 

Mr. COHEN. I think we have to be careful in answering the question because there are clearly pro-competitive benefits to exclusive 

arrangements. They do enable competitors to differentiate themselves from each other. And I think that is the balance of giving 

up the pro-competitive benefits of competitor differentiation in the 

market as opposed to the clear consumer benefits from an open access to what I think—if there is anything that is an essential facility, by the way, I would think that it would be the rights themselves, not the carriage of those rights. And to open those rights 

up to all competitors, I think, has a procompetitive benefit. And it 

is the balance between those two elements that makes the policy 

judgment difficult. 

Chairman SPECTER. Mr. Cooper, coming back to your written testimony, where you raise the issue of Cablevision demanding an equity stake in the Yankees Network, can you amplify the circumstances? What are the underlying factors of the relationship 

and market power and distribution, et cetera, which would enable 

a cable transmitter to make that kind of a demand? 

Mr. COOPER. Well, the general proposition I can address. It was 

the details of what was asked, and you ought to get the people 

from YES. But it is the experience in the video industry that distributors, both on the cable side, which is why we had the 1992 

Act, and on the broadcast side, distributors control a vital vertical 

lever here. And one of the things that distinguishes this particular 

industry, and the telecommunications industry as well, is that that 

lever is a live-or-die situation for a local team to reach its local 

market. Where you have a substantial market penetration of that 

distribution mechanism, denial of access to the public gives you tremendous market power over the team. If the Yankees cannot get 

to the households that subscribe to cable, they have a severe problem. 

So the market power inherent in that bottleneck facility is extremely strong, and it gives the owner of that facility—and it has 

occurred in programming both broadcast and cable, to demand unacceptable terms and conditions. 

Chairman SPECTER. Okay. If Cablevision had the power to make 

that demand on a realistic or reasonable basis, then you are saying 

that the Yankees had no place else to go to have their team shown? 

Mr. COOPER. Well, that was one of the four tests. Cable is the 

dominant medium for distributing video content in America today. 

Chairman SPECTER. Well, factually, did the Yankees have nowhere else to go but Cablevision? 

Mr. COOPER. In some of the market segments, they had that 

problem. You know, the cable companies are franchises. At the 

time there was no overbuilder. You have heard the proposition here 

that one of the economic bases on which Comcast gave Verizon the 

right to distribute their programming in certain suburbs was the 

assumption that there would not be a competitor in Philadelphia. 

That was the statement you heard today. It is a wonderful statement. I am going to quote it and get the record frequently, right? 

20

Because that has been our complaint. So that was a business judgment, is that they gave them the rights because they do not expect 

them to be a competing multi-channel video delivery system in 

Philadelphia. 

Chairman SPECTER. But Verizon could be a competitor in Philadelphia if it chose to do so. 

Mr. COHEN. Absolutely. 

Chairman SPECTER. Do you want to adopt Mr. Cohen’s answer, 

Dr. Cooper? 

Mr. COOPER. Frankly, we have been making this point. Actually, 

in the other Committee that deals with this, we call it redlining, 

you see? So, in fact, it is an interesting observation. Our complaint—and, of course, Comcast was required to build out throughout its service territory as an obligation of its franchise. And 

Verizon has been trying to get out of that. I was the expert witness 

in Montgomery County where they recently agreed to very favorable terms from my point— 

Chairman SPECTER. You referred to a lawsuit. Would you amplify that? 

Mr. COOPER. The lawsuit in— 

Chairman SPECTER. You just said you were going to utilize 

what— 

Mr. COOPER. Verizon sued Montgomery County claiming that its 

cable ordinance violated the First Amendment, and the judge ordered them— 

Chairman SPECTER. Well, how are you going to use Mr. Cohen’s 

statement in your lawsuit? 

Mr. COOPER. One of the conditions that was being argued over 

was the build-out provision. Who are they going to serve? And the 

local franchising authority—and Mr. Cohen has been subject to this 

in his franchise agreements. The local franchising authority requires the complete build- out across the entire area of that franchise as part of his agreement. Verizon is taking the position that 

they do not want to have to serve everybody in the local franchising area. In the settlement, we got almost 100 percent of that 

build-out requirement, which is very important in the Commerce 

Committee. 

Chairman SPECTER. I am advised that more than 3 million subscribers had Cablevision as their only choice for cable service, and 

in those areas, Cablevision had a 90- percent market share. I am 

sorry that Cablevision did not send a witness here. They were 

given a lot of notice, and they had no understandable explanation 

as to why they did not, and we may have to continue this hearing 

with a subpoena for Cablevision so that we can find out what is 

going on here. 

But the ramifications and tentacles of the market share and the 

dominance so that Cablevision, the cable company, can make a demand for an equity share in the Yankees to get a preferred position 

as an ownership interest is surprising, to say the least. 

Mr. Cohen, you have your hand up. 

Mr. COHEN. If I can, Mr. Chairman, I do not want to attempt to 

speak for Cablevision, but I know a little bit about the subject in 

general, so it might be a little helpful to make some comments. 

Chairman SPECTER. Please do. 

21

Mr. COHEN. First of all, I do not believe that even the allegation 

was that Cablevision was making a demand for equity in the Yankees. I think what may have been under discussion was whether 

Cablevision should get an equity interest in the network itself on 

the theory that it was Cablevision’s distribution that was going to 

be bringing the value to the network—not the team itself, but to 

the network. 

I would note that recent press reports suggest that the owners 

of Yankees Entertainment Sports, which are the Yankees, the 

Nets, and principally Goldman Sachs and private equity investors, 

are thinking about putting the network on the market, and the 

asking price is on the order of $3 billion. That is billion with a B. 

That would make the network worth approximately three times 

what the Yankees are worth as a franchise. And with all due respect, the value of that network, although it comes in part from the 

value of the Yankees as a franchise and the Yankees as something 

that people want to watch, it also comes from the distribution that 

was required to the YES Network from Cablevision, from Time 

Warner, from Comcast, from DirecTV—and I forget whether 

EchoStar distributes the YES Network or not. So there is some justification from the distribution side of saying that it is the distribution that is giving value to these networks in addition to the franchises themselves. 

Number two—and this is particularly important—if you look at 

the whole YES Network area, when you have a statistic like Cablevision had 3 million customers, I think Yankees Entertainment 

Sports is in a metropolitan area with something like 8 or 9 million 

customers. You have Cablevision, Comcast, Time Warner all in 

that territory. So when you look at 3 million customers, you are 

looking at a sub-segment of the YES Network’s market, not the entire market. 

With all due respect to that statistic, in virtually every place 

where Cablevision was providing service, there were at least two 

other competitors that were available for carriage of the YES Network—DirecTV and YES. And I know that DirecTV—I do not know 

about— 

Chairman SPECTER. Carrying the YES Network, too? 

Mr. COHEN. They were. 

Chairman SPECTER. DirecTV and who? 

Mr. COHEN. Well, EchoStar, the Dish network. I don’t know 

whether Dish was carrying YES. I know DirecTV was. 

Chairman SPECTER. The consumers are going to have to go to— 

Mr. COHEN. They would go to a satellite. 

Chairman SPECTER. To a satellite. 

Mr. COHEN. Correct. 

Chairman SPECTER. They would have to buy a whole new system. 

Mr. COHEN. Well, they did not have to buy a whole new system 

because the YES Network and DirecTV ran a massive and major 

promotion during the course of this dispute where they offered a 

free dish and free multi-television set-top boxes for any Cablevision 

customer who would switch to DirecTV; in addition, offering discounted service for an entire year for that switch. And— 

22

Chairman SPECTER. Do you ever have any concerns about the 

free offers and the discounted service for a time as to how it is 

going to be made up later? Is there such a thing as— 

Mr. COHEN. I think it— 

Chairman SPECTER. Wait a minute. Is there such a thing as a 

free lunch here? 

Mr. COHEN. There probably— 

Chairman SPECTER. Don’t they have a plan to collect later? 

Mr. COHEN. In the long run, that would definitely be the case, 

but in DirecTV’s case, in cable’s case, there is something called subscriber—it is called SAC charges. They are the charges, the marketing costs you expend to get new subscribers. All I can tell you 

is that YES publicly said that they had switched somewhere between 25,000 and 30,000 Cablevision customers to become DirecTV 

customers, and that YES has said that the ultimate resolution of 

this dispute, which by the way, was not through the litigation because there was never a decision in this litigation, was because of 

the pressure that was put on Cablevision through the market, that 

is, customers leaving and threatening to leave the DirecTV if Cablevision did not pick up the YES Network. 

So I believe that the bottom line here is the market worked in 

the YES situation. That is why YES now has ubiquitous distribution. That is why YES is now worth $3 billion. 

Chairman SPECTER. Ubiquitous distribution? 

Mr. COHEN. That is correct. 

Chairman SPECTER. What is ubiquitous distribution? 

Mr. COHEN. They are available on Cablevision, Time Warner, 

Comcast, and at least DirecTV. They also have a deal with Verizon, 

and, by the way, Verizon is an active competitor of Cablevision’s, 

and Cablevision’s territory as well. So you have now got at least 

five and maybe six multi-channel video distributors that are carrying the YES Network. 

Chairman SPECTER. Well, wait a minute. The question in my 

mind is: Where does all this leave the consumer? Where does this 

leave the consumer now? And where does this leave the consumer 

down the road? These are only partial steps in what is being undertaken. We are going to come to that in just a minute going to 

the NFL issue. But I am trying to understand what is happening 

here. A chart has been provided which shows at the top George 

Steinbrenner, principal owner, and minority partners, and that 

leads down into the Yankee Global Enterprises. And that branches 

off into two lines. One is the New York Yankees, and the other is 

the YES Network. 

Now, it has been public knowledge for a long time that the YES 

Network was more valuable than the New York Yankees, and you 

say, Mr. Cohen, that they are going to rearrange with the conglomerate, it is going to be worth $3 billion, which is three times the 

value of the Yankees. 

This is an extraordinarily complex structuring which I am concerned places the consumer at considerable risk. 

You had a comment, Dr. Cooper. Then I want to move on. 

Mr. COOPER. Of the six entities that Mr. Cohen mentioned, at 

least three of them do not compete with each other because the 

cable operators have chosen never to overbuild and compete. And 

23

so you are left with the satellite, which involves significant switching costs, short-term promotion, as he pointed out, as part of this 

commercial dispute. And, of course, those are the competitors who 

he denies his programming to. And he knows that the other major 

cable operators are not going to overbuild him. So that list of 

places, what YES did was they secured distribution throughout the 

region because that region is splintered between a number of cable 

systems. Many of Comcast’s regions are not. They are the dominant 

provider throughout the region, and, again, he has chosen not to 

allow that key marquee programming to be available to the one entity that actually could compete throughout the service territory. 

Chairman SPECTER. Mr. Cohen, you testified earlier with considerable fervor about the Sunday Ticket. Do you believe that that arrangement between the NFL and DirecTV is a violation of the antitrust laws? 

Mr. COHEN. Building on Mr. Salinger’s comment about the need 

to look at particular sports programming in particular markets, I 

think if there is any sports programming about which you could 

make a case that it is an essential facility, it would be NFL programming. And so I am not prepared to say that I think the NFL 

Sunday Ticket is an antitrust violation. You are aware of the Shaw 

litigation in the Third Circuit, which, again, the litigation never 

reached the ultimate question whether the NFL Sunday Ticket was 

an antitrust violation, the Third Circuit only finding that the Sunday Ticket was not entitled to the antitrust immunity that was provided under the Sports Broadcasting Act. I would note, though, 

that before that case went to trial, it was settled. So there was at 

least some risk perceived by the NFL and presumably DirecTV 

that the Sunday Ticket could be found to be an antitrust violation. 

Chairman SPECTER. Well, I know that it has not been resolved, 

but I was asking one astute lawyer’s opinion as to whether he 

thought it was an antitrust violation. But I will accept your answer. 

The activities of the NFL are very extensive and definitely ongoing in what they are undertaking to do. And a big question is posed 

by what they have done as to whether it is a violation of the antitrust laws and what is coming next. We now have the NFL Channel, and we have this year, last month, the expansion to the Thursday-Saturday Ticket, and we can expect more. 

We have had the change from Monday Night Football from ABCTV to ESPN, which is an interesting transaction, raises a lot of 

questions, especially since ESPN is owned by ABC- TV. And on inquiry, we find that ESPN can pay the NFL more money because 

ESPN has two revenue streams: one, the advertising, which is 

somewhat less—how much less I do not know, but I am advised not 

appreciably less—than over-the- air transmission by ABC; but 

ESPN also has the revenue stream from subscriptions from the 

subscribers. I am advised that it is $500 million more a year, and 

what it appears to be is that the NFL makes an evaluation as to 

how much they can extract, how much can they extract from 

ESPN, a subsidiary of ABC, to carry the Monday night games on 

ESPN. And ABC-TV on Monday night games, an enormous demand. You would think if anybody could survive and afford the 

24

programming, ABC-TV could. But they could not when the NFL decided to raise the prices. 

Now, the NFL enjoys all of this maneuvering room because they 

have the antitrust exemption. The teams are not guilty of conspiracy and restraint of trade because they got the antitrust exemption. But if they did not have the antitrust exemption, then the 

San Diego Chargers could negotiate, and if you could not get them, 

you could get the Seattle Seahawks, or you might get some other 

team. But the variety of distribution chains are not free to negotiate because the NFL has it all. 

What good reason, Mr. Salinger, is there for leaving that antitrust exemption in place? 

Mr. SALINGER. Senator, as a general principle, I think that special antitrust laws for particular industries are a mistake, that we 

should use the same antitrust principles across different industries. 

As to whether it should be illegal for the NFL to negotiate television rights, as a single entity— 

Chairman SPECTER. Well, wouldn’t the consumer be better off if 

the sports teams were negotiating on their own so that there would 

be competition as to what football team would be shown on what 

network and what channel as opposed to having all the bargaining 

rights in the NFL, which they can have because they have an exemption under the antitrust laws? There is no doubt that it is collusion if it is an agreement of two or more parties, which has the 

impact of restraining trade. What is the justification for that in 

this day and age with what the NFL is doing? 

Mr. SALINGER. Well, it is two or more parties that are engaged 

in a joint venture, and so that complicates the analysis substantially. 

Chairman SPECTER. Well, it is a joint venture. 

Mr. SALINGER. I don’t know whether legally the NFL is a joint 

venture, but the product that they are providing requires the existence of the league. One team cannot provide that product. 

Chairman SPECTER. Well, they cannot provide the entire product, 

but one team can provide rights to televise their games. 

Mr. SALINGER. That is correct. But the league needs to make 

joint decisions and joint investments, and that— 

Chairman SPECTER. I know, and that stops individual cable companies or individual distributors from negotiating with teams. 

Mr. Goodman, any reason to keep that antitrust exemption in 

place? 

Mr. GOODMAN. I am going to defer to the lawyers. 

Chairman SPECTER. Why are you doing that? You represent the 

consumers. I am not going to put you on the next panel, Mr. Goodman. You represent the consumers. 

Mr. GOODMAN. The NFL and the process of those negotiations 

gets to prices that a lot of consumers do not want to bear, and I 

think that is more the consumer issue than the antitrust issue. You 

have in the current carriage deals today a structure— 

Chairman SPECTER. Is your microphone on? 

Mr. GOODMAN. I am sorry. You have in the current structure 

today bundling and carriage deals that cause professional sports, 

NFL, et cetera, to be packaged in with what is called the Expanded 

Basic. In that Expanded Basic, you have someplace between 40 to 

25

60 percent of the customers paying for that that do not want that 

particular content, they do not particularly want to pay for it. You 

have— 

Chairman SPECTER. That is the whole basis of the controversy 

that Comcast is having now with the NFL. 

Mr. GOODMAN. Correct. 

Chairman SPECTER. NFL wants it on the basic line. Comcast 

wants to put it on the sports line for the people who want it who 

can see it. 

Mr. GOODMAN. Correct. 

Chairman SPECTER. And this is the NFL exerting its power right 

down to the last nub, right down to the last nickel. Go ahead. 

Mr. GOODMAN. Correct. I mean, it is interesting that they are 

taking that position on that particular set of content when they are 

involved in all sorts of other bundling arrangements. 

One of the things I would encourage everybody to look at long 

term is what happens to these kinds of contracts and structures as 

we move to digital carriage. When we move to digital carriage, then 

a lot of the technical and business issues that have led to the bundling and packaging that we have got today are not going to be as 

relevant. And hopefully we will get to a different structure. 

Chairman SPECTER. Dr. Cooper, I noticed you would like recognition. On what issue? 

Mr. COOPER. On this issue. 

Chairman SPECTER. Good. Proceed. 

Mr. COOPER. I mean, two of my four recommendations address 

this fundamental problem. Disney maximizes the extraction of rent 

because of two practices we think are anticompetitive and 

anticonsumer in this case—that is, ABC ties its programming together in big bundles, demanding carriage for a set of programs, 

not negotiating individually for each, and then the cable operators 

bundle those together and do not give the consumer the choice. 

If you break those two links, the study we saw is that 75 percent of the people would not pay the $2 a month or plus that ESPN gets 

to be put into the Expanded Basic bundle. That is why we believe 

breaking these ties would, in fact, begin to exert consumer demand 

genuinely at the point of sale. 

Chairman SPECTER. Breaking what ties? 

Mr. COOPER. The ability of ABC to insist that their bundle of 

programs be carried using the leverage of their must-carry and retransmission rights. Remember, Congress gave them rights to carriage. And, two, that cable operators be required to offer consumers 

a choice to buy the individual programs that they also offer in the 

bundle. 

Imagine if consumers could choose not to pay for ESPN, just as 

Comcast is saying maybe they should be allowed to choose not to 

pay for MASN, right? The consumer would then be sovereign, 

which is the objective here. In this current environment, consumer 

elasticity of demand has been dulled dramatically by these massive 

bundles— 

Chairman SPECTER. How about the antitrust exemption? Should 

that remain? 

Mr. COOPER. The antitrust exemption would be one way to diminish the market power of the league. 

26

Chairman SPECTER. Should we eliminate the antitrust exemption? 

Mr. COOPER. I believe CFA has supported the elimination of 

those antitrust exemptions across the major league sports. 

Chairman SPECTER. Mr. Baller, should we eliminate the- -revise 

the 1961 antitrust exemption for the NFL? 

Mr. BALLER. For all major sports. We have had problems with 

Major League Baseball as well, and I think that it would be in the 

consumers’ interest to eliminate the exemption across the board, if 

possible. 

Chairman SPECTER. Well, is baseball engaging in the same kinds 

of practices that the NFL is? 

Mr. BALLER. I cannot say for sure. My experience is limited to 

a town named Bristol, Virginia, on the border of Tennessee, not— 

Chairman SPECTER. Is hockey doing what the NFL is doing? 

Mr. BALLER. I don’t— 

Chairman SPECTER. Is the NBA doing what the NFL is doing? 

Mr. BALLER. I have no experience. 

Chairman SPECTER. Well, I would be reluctant to use too broad 

a swath here unless we see what they are doing, unless we see that 

they are anticonsumer. But what we are getting with the NFL, the 

raising of pay television through the add-ons and extracting—not 

allowing the sports channel to carry it where they could get a substantial amount of money. 

Mr. Cohen, should we legislatively change the antitrust exemption that the NFL has? 

Mr. COHEN. I noticed you changed the form of the question for 

me, which I appreciate, because I think the answer to that question 

is yes. I think the answer to the question you asked everyone else, 

which is should we eliminate the antitrust exemption for—it is in 

the Sports Broadcasting Act of 1961 for the NFL. I think that answer is no, and I think it goes in part, again, to what Mr. Salinger 

said. 

I do think that there is a proconsumer justification for leagues 

negotiating certain television rights on behalf of all of the teams. 

I think, however, in granting that type of an exemption from antitrust scrutiny, it would be appropriate for Congress in the NFL’s 

case, which, unlike all the other sports, negotiates 100 percent of 

the television rights in the league on behalf of all of the teams. In 

all the other sports, there are national rights, but there is a substantial chunk of rights that are retained by the individual teams 

to be able to market and negotiate over. So the NFL is a distinct 

case because, No. 1, it controls all of the rights of its teams, and, 

No. 2, because of the market power that I believe the NFL has in 

television rights, sports television rights, as compared to the rest 

of the teams. And I believe it would be appropriate for this Committee and this Congress to look at appropriate conditions to be put 

on a continuing exemption—on a continuing immunity from the 

antitrust laws as opposed to the blanket immunity that exists in 

the current legislation 

Chairman SPECTER. Well, Mr. Cohen, this Committee and this 

Senator has considered conditioning the antitrust exemption on a 

variety of factors. It is very difficult for the Congress to anticipate 

and understand all the potential ramifications as to when we start 

27

to deal with part of it and not all of it. If we take away the antitrust exemption for the NFL to deal jointly, then the market comes 

in. And there are very powerful reasons to allow the market to govern, which we do not anticipate. Nobody since Adam Smith has 

been as smart as the market. So if we take away the antitrust exemption, you have the market coming in. 

I introduced legislation in the 1980’s to condition the antitrust 

exemption of the NFL on limitations of franchise moves. When they 

wanted to move the Philadelphia Eagles to Phoenix, I introduced 

that legislation. We had a very spirited debate at that table in 

about 1982 between Pete Rozelle, the Commissioner of Football, 

and Al Davis when they moved the Oakland Raiders to Los Angeles, and they had antitrust litigation that Mr. Davis won. And then 

the NFL has permitted franchise moves with the Colts, in the middle of the night Irsay going to Indianapolis, the Browns coming 

from Cleveland, disrupting fan loyalties in a major way. 

Of course, baseball is not immune either, taking the Dodgers 

from Brooklyn in 1958 because Walter O’Malley got a lot of prime 

real estate in Los Angeles, and the Giants joined. The fans be 

damned. And now it is the consumers be damned with what is happening. 

But as I look at what the NFL is doing today, with the NFL 

Channel, with the DirecTV, which you spoke about passionately 

and eloquently, in terms of limiting—a lot of people, including myself, would like to be able to have that ticket. But I have got to 

have a dual system. I have got to go to satellite. And what is coming next? 

When you look at ESPN taking over Monday Night Football, the 

NFL decides how much they can extract. And then the structure 

is reworked between ABC-TV and ESPN. 

I am going to introduce legislation in the next session to take 

away the antitrust exemption from the NFL, and I think that they 

are building a very, very strong case—the NFL is building a very, 

very strong case to have Congress take away the exemption that 

was granted in the 1961 legislation. If someone is wise enough to 

tell us how to condition it, we would certainly be interested in considering that. But the market is—you do not have to be very smart 

to be smarter than the Congress. But the market has demonstrated 

its wisdom, and that is where my inclination is. 

But as I take a look at what is happening here, I like the competition that is coming in with Verizon and the competition that is 

coming in, and satellite competition is good. But I am not sure we 

do not have to make some changes legislatively on integration, but 

before we do, we have to understand it. We are a good ways away 

from that. I know there are a lot of charts a lot more complicated 

than this one in the offing. 

I will give each of you a chance to make a closing statement. Mr. 

Baller, you have your hand up. You are first. 

Mr. BALLER. Okay. Thank you very much. As I heard you say 

that you are considering introducing legislation, I had— 

Chairman SPECTER. I am not considering it. I am going to do it. 

Mr. BALLER. All right. I had a flashback to the hearing that I 

mentioned at the outset of my testimony that occurred in this room 

in February of 2004. At that hearing Senators Kohl and DeWine 

28

announced that they were going to introduce legislation to eliminate the terrestrial loophole. And after that hearing, Comcast announced that it was going to fix this problem everywhere. It was 

only then that some of our clients, including the Borough of 

Kutztown, Pennsylvania, were able to get Comcast programming—

sports programs in that case. 

Now, Kutztown could not have brought an antitrust action. It 

has a population of only 5,000. That kind of litigation would have 

been impractical. And it seems to me that having rights of that 

kind cannot be left to coming to the Senate and having a Senator 

or two Senators say they are going to introduce legislation. If it is 

a good idea—and I believe it is—it ought to be put into a statute 

so that everyone understands it and everyone can live by it. And 

I think that it is solutions of that kind that we need and not solely 

reliance on antitrust remedies. That may work for Verizon, but it 

does not work for the small to medium-sized competitors who we 

want to succeed. 

Chairman SPECTER. Mr. Salinger, do you have a closing statement you would like to make? 

Mr. SALINGER. Senator, no, I do not. 

Chairman SPECTER. Dr. Cooper? 

Mr. COOPER. I think you have heard a number of reasons why 

consumers continue to be very upset about their cable bills. There 

are sources of market power in this industry in both distribution, 

in carriage rights, and I honestly believe that the NFL would not 

be able to extract those rents if this structure were not set up the 

way it is. 

You have identified the antitrust exemption underlying the franchises and the leagues. We also have a terrible problem of market 

power in the distribution and the rules that were set up about the 

bargaining power that programmers and cable operators have, all 

of which is being used and has been used for a couple decades to 

the detriment of the consumer. And the competition we see is not 

sufficient to alleviate the problem. 

Chairman SPECTER. Mr. Goodman, a concluding statement? 

No, Mr. Goodman, I am the Chairman. Mr. Goodman, a concluding statement? Senator Kennedy made that mistake. 

Mr. GOODMAN. I think that Mr. Cohen has put the context of 

what is going on, on the table. Their specific goal is to get the current laws repealed. The goal of the group that I represent is to 

highlight the fact that the current vertical integration, as we submitted, is actually more powerful and has the ability to affect the 

market as much today as it did in 1992. 

The access that we have has only come through very constant 

confrontation, and as Jim Baller mentioned, we can give you a list 

of specific moments in time related to mergers and acquisitions or 

hearings here or other activities that resulted in our finally getting 

access to content. It has not come because of just willing give it to 

us. 

When we look forward and we look at the new structure and we 

look at the level of vertical integration, we believe that you just are 

going to have to maintain these rules of access to content with 

some expansion and clarification, or you are not going to have the 

competition you want. 

29

Chairman SPECTER. Mr. Cohen? 

Mr. COHEN. Thank you very much, Mr. Chairman. Three quick 

points. 

Number one, the market is working. The video distribution market is vigorously competitive. I controlled myself until the very end, 

but I hold up today’s Wall Street Journal with the headline, ‘‘Cable 

rate increases are smallest in years,’’ and making the case that 

consumers have more choice today than they have had at any time 

in the— 

Chairman SPECTER. Is 3.2 percent that I saw in the Philadelphia 

headlines for Comcast the smallest in recent years? 

Mr. COHEN. It is the smallest in that market. But in many of our 

markets, the increases are even lower. And, in fairness, Mr. Chairman, you have to look at our entire package of services. For the 

fifth consecutive year, we are not raising the price on our highspeed data service. We are all around the country offering a tripleplay bundle of telephone, high-speed data, and digital cable service 

for $99 a month. This market is vigorously competitive and working. 

Number two, the current program access regulations are based 

on a 1992 model of the world. That model has changed. Notwithstanding any general statements that can be made here today, the 

indisputable statistical evidence is that vertical integration in our 

space is dramatically reduced today—57 percent in 1992 to less 

than 20 percent in the world today. 

And, No. 3, trust the antitrust laws. There is no reason why this 

particular industry needs special regulation. Any abuses that could 

arise can be handled through the antitrust laws, and if they cannot 

be handled by individual plaintiffs, the FTC and the Department 

of Justice and this Committee and the House Judiciary Committee 

have plenty of capacity to be able to influence behavior in the market where it is necessary to do so. 

Chairman SPECTER. So let the market govern without the antitrust exemption. 

Mr. COHEN. There is no antitrust exemption that applies to us, 

so I think I gave my view on the antitrust exemption. 

Chairman SPECTER. Mr. Cohen, staff has just handed me a listing from Bernstein Research dated November 30, 2006, which has 

a listing of Comcast in about a dozen markets, showing an average 

of 5.4 percent. I would like you to take a look at that and see if 

that is accurate. 

Mr. COHEN. I have seen the Bernstein report, but I will note that 

that report references our basic cable rate increases. It does not 

reference what happens with our digital packages, with our premium services, with our set-top boxes, with our high-speed data, or 

with our Comcast Digital Voice product. 

The overall rate of increase that an average Comcast customer 

will pay this year will be approximately 3 percent. 

Chairman SPECTER. Gentlemen, thank you very much. It has 

been a very illuminating hearing. 

That concludes our hearing. 

[Whereupon, at 12:15 p.m., the Committee was adjourned.] 

[Questions and answers and submissions for the record follow.]

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