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32–152 PDF 2007

S. HRG. 109–762

COMPETITION IN SPORTS PROGRAMMING AND

DISTRIBUTION: ARE CONSUMERS WINNING?

HEARING

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

NOVEMBER 14, 2006

Serial No. J–109–119

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

Feinstein, Hon. Dianne, a U.S. Senator from the State of California ................. 2

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, prepared 

statement .............................................................................................................. 57

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

WITNESSES 

Fawcett, Daniel M., Executive Vice President, Business and Legal Affairs 

and Programming Acquisition, DIRECTV, Inc., Washington, D.C. ................. 9

Hobbs, Landel C., Chief Operating Officer, Time Warner Cable, New York, 

New York .............................................................................................................. 13

Noll, Roger, Senior Fellow, Stanford Institute for Economic Policy Research, 

Stanford, California ............................................................................................. 16

Pash, Jeffrey, Executive Vice President and General Counsel, National Football League, New York, New York ..................................................................... 5

QUESTIONS AND ANSWERS 

Responses of Landel C. Hobbs to questions submitted by Senator Specter ....... 25

Responses of Daniel M. Fawcett to questions submitted by Senator Specter .... 27

Responses of Jeffrey Pash to questions submitted by Senators Leahy and 

Specter .................................................................................................................. 30

SUBMISSIONS FOR THE RECORD 

Fawcett, Daniel M., Executive Vice President, Business and Legal Affairs 

and Programming Acquisition, DIRECTV, Inc., Washington, D.C. ................. 40

Hobbs, Landel C., Chief Operating Officer, Time Warner Cable, New York, 

New York .............................................................................................................. 50

Pash, Jeffrey, Executive Vice President and General Counsel, National Football League, New York, New York ..................................................................... 59

(1)

COMPETITION IN SPORTS PROGRAMMING 

AND DISTRIBUTION: ARE CONSUMERS WINNING? 

TUESDAY, NOVEMBER 14, 2006 

UNITED STATES SENATE, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Committee met, pursuant to notice, at 9:01 a.m., in room 

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

Chairman of the Committee, presiding. 

Present: Senators Specter and Feinstein. 

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 our hearing on the National Football League and its practices on pay television. Nine 

days from today, on Thanksgiving Day, the NFL on its own network, the NFL Network, will begin showing what is called the 

Thursday-Saturday package, and this will doubtless have the effect 

of raising subscription rates for consumers who watch football very 

materially. This hearing will examine whether the so-called Sunday Ticket is a violation of the antitrust laws, whether the new 

Thursday- Saturday package is a violation of the antitrust laws, or 

whether the two in combination violate the antitrust laws, and 

whether or not additional legislation is necessary. 

Professional sports in America has a unique position. Other businesses—and it is acknowledged that professional sports does constitute a business, but other businesses are subject to the antitrust 

laws. But by virtue of a special exemption under legislation enacted 

in 1961, professional sports may combine and deal with the networks in a way which other businesses cannot. We will be examining today the question as to whether there is any exemption from 

that statute, but it appears to me on the face that there is not. 

There is no doubt that America has a love affair with professional sports. Perhaps it could be more accurately called an addiction, maybe even a drug addiction. But there is no doubt that people are attracted to the televising of sports, especially the National 

Football League, where the Super Bowl has consistently been the 

highest-drawing television program that is on the air. 

In 1999, the Court of Appeals for the Third Circuit handed down 

a decision saying that DIRECTV’s Sunday Ticket was not exempt 

under the 1961 statute, that the 1961 statute covered broadcast 

2

television where there were sponsors and did not cover pay television. And, in fact, Pete Rozelle testified at the hearings when 

that legislation was enacted that it did not cover pay television, 

and those were the findings of the House Judiciary Committee as 

well. 

A key issue of the entire arrangement turns on which of the subscribers are required to pay for the additional coverage. Comcast, 

illustratively, has three tiers of coverage: one is what is called analog, where you have about 24 million subscribers; another is digital, 

with about 11 million subscribers; and a sports tier, which has less 

than 1 million. Efforts are being made by cable companies to carry 

the new Thursday-Saturday package on their sports tier, but that 

is being resisted by the NFL. 

The result is that if it is covered on the basic package, many 

more people have to pay the fare, whether they want the NFL or 

not, if they already get the cable coverage. One question which will 

be pursued here is: Why has the Sunday Ticket not been available 

for competitive bidding? The Committee is advised—and we will be 

pursuing this more specifically—that the NFL told Comcast they 

wouldn’t entertain a bid from Comcast. And the question obviously 

arises: Why isn’t the bidding open? And why isn’t the bidding competitive? 

We will be pursuing another hearing on this overall subject on 

December 7th on the question of vertical integration, which poses 

some different issues with the Yankees and their television station, 

where it is reported that their TV station is now worth more than 

the baseball team, and the vertical integration which involves the 

Braves and the vertical integration which involves Comcast with 

the Philadelphia sports teams. 

Let me yield at this time to the Senator from California. 

STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR 

FROM THE STATE OF CALIFORNIA 

Senator FEINSTEIN. Thank you very much, Mr. Chairman, and 

let me thank you for holding these hearings. And I gather from 

what you say there will be a series of them, and I think that is 

good. I would like to urge that they be widened somewhat, and I 

am very concerned. I happen to be a big NFL fan. You know I was 

mayor for 9 years. I had the privilege of going to the Super Bowl 

several times. The San Francisco 49ers have become a treasured 

value in San Francisco. And I have been very disturbed to learn 

that the 49ers are countenancing a move outside of the city. And 

I began to take a look at what has happened, and what I find is 

that with Major League Baseball you had one move during this period of time, and with the major league football there have been 

seven moves during a period of time: the Oakland Raiders to Los 

Angeles in 1982, the Baltimore Colts to Indianapolis in 1984, St. 

Louis Cardinals to Tempe in 1988, Los Angeles Rams to St. Louis 

in 1994, the Raiders to Oakland again in 1994, the Cleveland 

Browns to Baltimore in 1996—and in that case they did not take 

the name essentially with them—and the Houston Oilers to Nashville in 1997. 

Major league football is a very important factor to big cities of 

America. It is the great leveler in a diverse city. People come toVerDate 0ct 09 2002 11:29 Jan 29, 2007 Jkt 032152 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\32152.TXT SJUD4 PsN: CMORC
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gether. They mourn the losses. They share the pride of the wins. 

Once in a while they go to the Super Bowl, and there is a tremendous investment of the cities of America in their teams. And when 

a team just announces that it may pull out and go to another community and take the name of the city and the name in this case 

of the heritage of the city with them, it causes great consternation. 

I have my staff, Mr. Chairman, looking at the law. It is my view 

that the league should approve all moves. It is my view that these 

constant moves are not healthy for the communities. And I have 

deep concern over the taking of the name of a team—in this case, 

the San Francisco 49ers. 49er is the tradition of the city. San Francisco is the city of the Gold Rush. This has been with us for more 

than a hundred years. You cannot move to Santa Clara and call 

yourself a 49er. You are not. And you certainly can’t call yourself 

the San Francisco 49ers. You are not. 

So it seems to me that we ought to look at legislation which 

would prohibit the taking of a city’s name outside of its jurisdiction 

without the approval of that city. I have always contended that 

major league sports isn’t like Post Toasties. It isn’t a commodity. 

It is a very ethereal, general concept that so deeply enriches a city. 

I was passionate about this when I was mayor, and I am passionate about it as a U.S. Senator. 

I pulled together the owner of the 49ers, whom I respect very 

much, John York—I have known the family for a very long time—

and the mayor, Gavin Newsom, this past Friday to try to see if negotiations couldn’t resume, and I believe they will resume. I understand the mayor may be meeting with Mr. York again Wednesday. 

And I am very hopeful that something can be worked out. 

But this U.S. Senator intends to fight every way I possibly can 

to keep the San Francisco 49ers in San Francisco and to see that 

this kind of move of just picking up and leaving a city can really 

be modified to the point where, if the name is going to go, the city 

provide some approval. 

So I wanted you, because we have worked closely together on a 

number of other issues, to know that and to know my deep concern, 

to thank you for holding these hearings, and I hope they can be expanded. 

Chairman SPECTER. Well, thank you, Senator Feinstein. You 

have raised some important issues. And this Committee held hearings in the early 1980s on the subject you referred to, and at the 

same table, we had Pete Rozelle and Al Davis when they came in 

to testify about the move of the Oakland Raiders—I think the table 

is the same; the witnesses are just different—and when there was 

a threat to move the Philadelphia Eagles. And I share your passion 

and I share your concern for the hometown team. When there was 

a move to take the Eagles to Phoenix in the early 1980s, I introduced legislation to take away the antitrust exemption unless 

major league football, the NFL, respected the hometown teams. 

I believe that sports franchises are—I put it in the terms, perhaps unduly legalistic, as opposed to Post Toasties, ‘‘affected with 

the public interest.’’ And I still recall, as do many people, the move 

of the Brooklyn Dodgers to Los Angeles. Walter O’Malley got a lot 

of real estate, and Brooklyn lost their baseball team. And the Giants followed suit. And I am sure you opposed the move of the New 

4

York Giants to San Francisco at that time. And then the Colts left 

in the middle of the night with Irsay to go to Indianapolis. And 

then we had the rash of stadium building where we spent $1 billion in Pennsylvania and a lot of it has come out of the taxpayers. 

I introduced legislation when that wave started to condition the 

antitrust exemption on Major League Baseball and the NFL paying 

three-quarters of the stadium costs. The NFL has a multiyear, $24 

billion television contract, and they can afford to build their own 

stadiums, and they can afford to leave teams in place. I agree with 

you totally. 

The more imminent problem is the problem as to what is going 

to happen to cable subscribers all around the country. People are 

going to want to see this Thursday-Saturday package, and the NFL 

has sued Comcast involving this matter. We are soon going to explore that. And I cannot find out what that lawsuit is about. It is 

under seal. They have docket entries so you can see that there is 

a lawsuit, but it is under seal. So the public has a really major interest, and there has been a concern that the attitude of professional sports is that the public be damned. And that is highly questionable in a context where you have this unique status of an antitrust exemption. 

Well, we are going to talk— 

Senator FEINSTEIN. If I may? 

Chairman SPECTER. Sure, you may. 

Senator FEINSTEIN. Thank you very much. I would just say that 

I agree with everything you have said. I would really like to work 

with you in this regard. You clearly have the background, the history, and have done much more in the arena than I. 

As you know, our side of the aisle has the organizing meeting at 

9:30 this morning, so I look forward to speaking with you in the 

coming days and seeing what we might be able to put together for 

the new Congress. And I thank you very much. 

Chairman SPECTER. Well, thank you, Senator Feinstein. We had 

set this hearing thinking that the organizing meetings were going 

to be on Wednesday and not on Tuesday. And as it works out, as 

usual, there is a disagreement between the parties as to when to 

organize. We can disagree on almost everything. The Democrats 

are organizing on Tuesday and Republicans on Wednesday. But 

your organization meeting may not take too long, and if you have 

the time and inclination, come back. These men will be here for a 

while. 

Senator FEINSTEIN. Thank you. Thank you very much. 

Chairman SPECTER. We now turn to our first witness, Mr. Jeffrey 

Pash, Executive Vice President and General Counsel of the National Football League. Prior to coming to the NFL, he was Senior 

Vice President and General Counsel to the National Hockey 

League, had been a partner at Covington & Burling, graduated 

from Harvard College and Harvard Law School. 

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

testimony. 

5

STATEMENT OF JEFFREY PASH, EXECUTIVE VICE PRESIDENT 

AND GENERAL COUNSEL, NATIONAL FOOTBALL LEAGUE, 

NEW YORK, NEW YORK 

Mr. PASH. Thank you, Mr. Chairman, and good morning. I appreciate the opportunity to talk about our television policies today. 

They have been, as you indicated, reviewed over many years in 

many different forms, and the conclusion I think has been that 

these policies are consistent with the public interest, they are responsive to consumer demand, and they provide NFL fans with exceptional access to television at little or no cost. 

We are, like any sports league, a unique business entity. Our 

teams jointly produce a product that no team could produce on its 

own. And, in turn, we compete in a broad entertainment marketplace that includes other sports products and all kinds of entertainment products. 

Let me touch on three points before we get to the questioning: 

first, just an overview of NFL TV policy; second, the Sunday Ticket 

package; and, third, our new NFL Network. 

The centerpiece of NFL television policy is the free, over-the-air 

broadcasting of NFL games. Every NFL regular season game and 

every post-season game is televised on free, over-the-air television. 

As a general matter, a fan in a particular city will have available 

90 or more games on free television during the course of the year. 

That will include all of that local team’s away games, all of the 

home games if they are sold out, a wide range of other NFL games, 

and all playoff games. Thus far this year, every game has been sold 

out and has been televised locally in the home city. 

This is true even of games that are shown on ESPN or on the 

NFL Network. Those games are simultaneously broadcast over the 

air in the home cities of the participating teams. So the game last 

night between Tampa Bay and Carolina was shown nationally on 

ESPN and also on over-the-air television in those two communities. 

That is a unique requirement. It is not imposed by any other 

league. It is not imposed, to my knowledge, in the context of any 

other sports television product. 

Second, with respect to NFL Sunday Ticket, that is, as the 

Chairman knows, a satellite package that allows fans to view outof-market games that would not otherwise be available in their 

home community. So a fan in Washington, for example, would ordinarily on Sunday see the Redskins and one or two other games. If 

that fan purchases Sunday Ticket, he can see any NFL game being 

played on that day. 

NFL Sunday Ticket is structured to supplement but not displace 

the broadcast packages. No fan has to purchase Sunday Ticket in 

order to see the local teams’ games, the prime-time contests, any 

of the post-season games, or a wide range of other games. Those 

90 games I referred to are available without regard to whether a 

fan purchases Sunday Ticket or not. It does not displace the primary role of broadcast networks or local affiliates. It expands output and enhances consumer choice, which is precisely what the 

antitrust laws encourage firms to do. And as DIRECTV’s testimony 

makes clear, it has also promoted broader competition in a broader 

television marketplace. 

6

Finally, with respect to the NFL Network, the NFL Network was 

started 3 years ago. It is a year-round channel devoted to football. 

It is currently available in approximately 40 million homes, both 

on cable as well as DIRECTV and EchoStar. Interestingly, 

DIRECTV and EchoStar, for example, as is also true of the telephone companies that carry the NFL Network, have included it on 

their basic tier at no additional cost to consumers, no up-charge 

whatsoever for any of those homes. 

While we have allowed cable companies to launch the network on 

widely distributed digital tiers, we have not been willing to do so 

on the sports tiers. We do not believe the pricing of those sports 

tiers or the very narrow distribution of those sports tiers is consistent with the interests of our fans or, frankly, with our own interests. We have always tried to have broad-based distribution of 

our product, and those sports tiers are not broadly based. 

Later this month, we will begin live telecasts of a package of 

eight regular-season games. Those games will also be shown on 

over-the-air broadcast in the home cities of the competing teams. 

We are in the midst, as you know, of some difficult negotiations 

with cable systems over carriage of the network. Those are tough 

commercial negotiations. They are not unusual or unprecedented in 

the context of sports or television. There have been similar disputes 

in the past between cable systems and other rights holders. As a 

general matter, they get resolved when one party or another reassesses and modifies its positions. But they do not raise antitrust 

issues and do not get resolved by reference to the antitrust laws. 

They are commercial disputes that get resolved in the ordinary 

course. 

We believe that our use of the NFL Network, Sunday Ticket, and 

our broadcast package, which is where the overwhelming amount 

of our television product is placed, is consistent with the public interest and with the antitrust laws as they have developed over the 

past 45 years. 

Thank you. 

[The prepared statement of Mr. Pash appears as a submission for 

the record.] 

Chairman SPECTER. Mr. Pash, why do you say or fundamentally 

how can you say that not offering the Thursday-Saturday package 

to a sports tier is consistent with the fans’ interest? By way of definition, if you have it in the basic package, everybody has to pay 

for it whether they want to watch the games or not, whether they 

are a football fan or not. If they could select their menu a la carte, 

it would be the channels they wanted. So how can you say it is consistent with the fans’ interest when, if you put it on a sports tier, 

only the fans who wanted to watch the games would be paying for 

them and not everybody have to pay for them to get the basic coverage? 

Mr. PASH. Well, the interest of fans, I think, Senator, is best 

served by broad distribution. That is why so many cable channels 

are carried on a basic tier. We do not have an a la carte model. 

This is not about a la carte. This is not selecting the NFL Network. 

Chairman SPECTER. Well, why not? Why is it in the fans’ interest 

to have to pay for the Thursday-Saturday package when they do 

not have any interest in professional football? Why not let the peoVerDate 0ct 09 2002 11:29 Jan 29, 2007 Jkt 032152 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\32152.TXT SJUD4 PsN: CMORC
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ple who want it—we are not talking about going a la carte all the 

way. We are talking about two different tiers: the basic package everybody has to pay for, and a sports tier, where you have those who 

are identifiable as wanting the sports would pay for what they see. 

Mr. PASH. Well, they do not have to pay for it. If you look at 

DIRECTV and you look at EchoStar, the NFL Network and these 

eight games are available on the basic tier. When EchoStar added 

the NFL Network earlier this year, there was no increase in charge 

to the consumers. There was no increase in charge to the subscribers for DIRECTV. The telephone companies that are carrying 

this on their basic tier, they do not charge the consumers anything 

extra for it. That is a false dichotomy. That is not how it has to 

work out. It can be part of the basic cable charge, or it can be part 

of the basic digital tier charge. There is no reason why there has 

to be a separate package, and four of the five largest distributors 

in the country carry the NFL Network without imposing a separate 

charge. It is a false dichotomy. 

Chairman SPECTER. Which cable companies carry it without any 

additional charge? 

Mr. PASH. There is no additional per subscriber fee passed 

through on Cox, on Comcast; there was not on Adelphia before 

Time Warner took over the Adelphia systems and dropped the NFL 

Network; and there is not on DIRECTV; and there is not on 

EchoStar. 

Chairman SPECTER. Well, you mentioned Comcast. Is it true that 

the NFL has sued Comcast? 

Mr. PASH. Yes, we are in litigation with Comcast. 

Chairman SPECTER. And what is the thrust of that litigation? 

Mr. PASH. It is a contract dispute involving whether Comcast has 

the right to tier the NFL Network starting next year. 

Chairman SPECTER. Well, that is precisely the point I am making. Comcast does not want to have it in a tier where people pay 

for it where the people are not interested in the sporting event. 

Mr. PASH. Well, we think that the contract that we signed with 

Comcast does not permit that, and we have asked a judge to make 

a ruling on that issue. We think we have already negotiated that 

issue with Comcast, and there is a dispute about what the contract 

permits. 

Chairman SPECTER. Mr. Pash, do you know if the NFL, through 

its former Commissioner, Mr. Tagliabue, declined to entertain any 

bid by Comcast for the Sunday Ticket? 

Mr. PASH. I do not believe that we declined to enter a bid. I know 

there were conversations with Comcast and other cable systems 

about Sunday Ticket. I do know that we have been quite reluctant, 

as have our broadcast partners, to have Sunday Ticket go on to 

cable because we are very concerned that it would really undermine the broadcast television model, including the role the local affiliates play— 

Chairman SPECTER. Well, before you give your explanation, let’s 

come back. You used the word ‘‘reluctant.’’ Was the reluctance carried to the extent of Commissioner Tagliabue telling Comcast he 

would not entertain a bid? 

Mr. PASH. I cannot say. I was not party to a discussion, whatever 

discussion Mr. Tagliabue may have had with people at Comcast. 

8

Chairman SPECTER. Well, would you find out about that and let 

the Committee know, please? 

Mr. PASH. Yes, I will. 

Chairman SPECTER. And you were starting to describe why you 

don’t want to have it over cable. 

Mr. PASH. Right. As I said, Senator, the primary means of our 

telecast is over free, over-the-air television. That has been the case 

going back to the 1960s. And we do not want to have Sunday Ticket undermine or substitute for that. We want to preserve the 

health of the broadcast television model. We want to maintain the 

local affiliates as the principal means for viewing NFL television. 

And there is concern on our part, and I think on the part of the 

broadcast networks, that if Sunday Ticket were to be available on 

80 or 90 million cable households, it would seriously cannibalize 

and undermine the viability of broadcast television. We think our 

primary responsibility, Mr. Chairman, is to deliver NFL Football to 

a broad audience through broadcast television. 

Chairman SPECTER. Well, how about on 24 million, which is 

what Comcast has on its basic, or even less than that, 11 million 

on its digital line, or even less than that, a million on its sports 

tier? 

Mr. PASH. To put Sunday Ticket on the sports tier? 

Chairman SPECTER. Well, it is not going to undermine your 

broadcast television. We are not talking about 80 million. We are 

talking about a much smaller number. How many subscribers does 

DIRECTV have? 

Mr. PASH. Well, we currently have on DIRECTV about 1.8 million subscribers to Sunday Ticket, and I do not know the total universe that DIRECTV has off the top of my head. I am sure Mr. 

Fawcett knows. But our Sunday Ticket has about 1.8 million subscribers on DIRECTV. 

Chairman SPECTER. 1.8 million? 

Mr. PASH. Yes, sir. 

Chairman SPECTER. Is that on the basic coverage of DIRECTV? 

Mr. PASH. Yes. Well, you have to purchase it. It is a separate 

package that you purchase. 

Chairman SPECTER. So you have DIRECTV on a tiered basis. 

Mr. PASH. We have a package of games that can be purchased 

on DIRECTV, yes. 

Chairman SPECTER. Because I have DIRECTV, and I do not have 

the Thursday-Saturday package. 

Mr. PASH. Well, the Thursday-Saturday package, Mr. Chairman, 

you do not have to buy separately on DIRECTV. Those are on the 

NFL Network. The NFL Network is on the basic tier of DIRECTV 

and EchoStar. You do not have to pay anything extra to get the 

Thursday-Saturday games on DIRECTV. 

Chairman SPECTER. Well, what is the basis of the litigation with 

Comcast? Comcast has the NFL Network, and there is a contention 

that Comcast wants to put it on the sports tier, and the NFL wants 

to put it on the broader base, either analog or basic coverage. Isn’t 

that right? 

Mr. PASH. Comcast has informed us that they want to put it on 

the sports tier beginning next year. We want to keep it where it 

is now. We believe that the contract that we negotiated with 

9

Comcast does not give Comcast the right to move the NFL Network 

to the sports tier, and that is the question that we have asked the 

judge to resolve. 

Chairman SPECTER. But with DIRECTV, you do permit it to go 

on just the sports tier. 

Mr. PASH. No, Mr. Chairman, that is not correct. 

Chairman SPECTER. Everybody on DIRECTV gets the ThursdaySaturday package. 

Mr. PASH. That is correct. Yes, sir. The Thursday- Saturday 

games are available on the basic tier on both DIRECTV and 

EchoStar. 

Chairman SPECTER. Is it true that Cox has it on just the sports 

tier? 

Mr. PASH. No, that is not correct. 

Chairman SPECTER. Well, we will take up the Time Warner situation with the Time Warner witness. 

We turn now to Mr. Daniel Fawcett, Executive Vice President for 

Business and Legal Affairs for DIRECTV, Incorporated. Previously, 

he had been Executive Vice President for Legal and Business Affairs for FOX, served in several positions at FOX, including Senior 

Vice President for Business and Legal Affairs; a bachelor’s degree 

from Tufts, an MBA from Carnegie Mellon, and a law degree from 

the University of Pittsburgh. 

Thank you for joining us, Mr. Fawcett, and the floor is yours. 

STATEMENT OF DANIEL M. FAWCETT, EXECUTIVE VICE PRESIDENT, BUSINESS AND LEGAL AFFAIRS AND PROGRAMMING 

ACQUISITION, DIRECTV, INC., WASHINGTON, D.C. 

Mr. FAWCETT. Thank you, Chairman Specter. My name is Dan 

Fawcett, as you said, and I am also the head of Programming Acquisition at DIRECTV, and I am happy to be here today to testify 

on the role of NFL Sunday Ticket in fulfilling the goals of the program access statute and in fostering competition to the incumbent 

cable providers. 

Over the last decade, Congress has helped develop the competitive video marketplace that exists today. In a little over 10 years, 

DBS—that is DIRECTV and dish, EchoStar—has grown to more 

than 28 million subscribers. Increased Competition means consumers have more choice; customer service and pricing are more 

responsive; and technological innovation is flourishing. Because of 

this competitive marketplace, all Americans, not just DIRECTV 

customers—are enjoying a better television experience, no matter 

who their provider. 

Congress helped make this possible by enacting the program access provisions in the 1992 Cable Act. The point of the Act was to 

ensure that new entrants had access to programming that cable operators would otherwise withhold. Congress, therefore, required 

that programming owned by cable be made available to all competitors on nondiscriminatory terms. 

Yet when adopting the program access provisions, Congress 

treaded carefully, and rightfully so. It did not prohibit all exclusive 

arrangements. It instead sought to encourage the development of 

unique product offerings, such as local news. And because it was 

principally concerned about the abuse of market power, it only proVerDate 0ct 09 2002 11:29 Jan 29, 2007 Jkt 032152 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\32152.TXT SJUD4 PsN: CMORC
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hibited exclusive contracts by dominant cable operators for programming owned by cable. 

On the other hand, Congress recognized that exclusive contracts 

could enhance the competitive viability of new entrants, like 

DIRECTV. 

Perhaps the best example of an exclusive arrangement helping, 

and not harming, competition is the NFL Sunday Ticket. DIRECTV 

was able to get a foot in the door of this highly concentrated industry by offering unique content like Sunday Ticket. The introduction 

of competition from DBS in turn has forced cable to innovate and 

become more responsive to customers’ concerns. This is exactly 

what Congress had in mind when it enacted the program access 

provisions. 

DIRECTV believes that Sunday Ticket raises no meaningful antitrust concerns. To the contrary, it has served the purpose of the 

antitrust laws by contributing to a competitive marketplace for 

video services. 

The same cannot be said for cable. Cable has found ways to 

evade the law and harm competition. They have used the terrestrial loophole to deny programming they own to DBS providers in 

places like Philadelphia and San Diego. They have also imposed 

substantial and arbitrary price increases for home team sports 

events in places like Chicago. 

A comparison of the differences between Sunday Ticket and these 

kinds of anti-competitive arrangements by cable exemplifies this 

point. One key difference is that DIRECTV has less than 15 percent market share. By contrast, in Philadelphia, where Comcast 

has given itself exclusive rights to the Phillies, the Flyers, and the 

76ers, Comcast has a 70-percent market share. It owns the programming. It even owns a controlling interest in two of the three 

teams. This was clearly not an arm’s-length negotiation. 

Another key difference is that Sunday Ticket is a premium package of out-of-market games that historically did not exist and, as 

Mr. Pash said, complements and supplements the NFL’s basic 

broadcast packages. It allows football fans to see games that are 

not broadcast in the regions where they live. As a native of Pittsburgh and a diehard Steelers fan, Sunday Ticket allows me to 

watch the Steelers from my house in Los Angeles. But in all markets, every football fan can still enjoy watching his home team play 

on free, over-the-air television. My father in Pittsburgh watched 

the Steelers on free, over-the-air television through Comcast Cable 

until last year when I forced him to switch to DIRECTV. 

By contrast, in Philadelphia and elsewhere, incumbent cable operators deny local fans the right to see their home team unless 

they subscribe to cable. So in Philadelphia, the only way you can 

watch the 76ers and the Phillies and the Flyers is by subscribing 

to Comcast. 

You have called this hearing today to look at whether consumers 

are the winners when it comes to competition in sports programming and broadcasting. The answer is simple. When programming 

is available in a fair and open bidding process, consumers clearly 

benefit. As Congress envisioned, competition thrives and consumers 

have more choice as each competitor strives to provide innovative 

content programming and service. When the incumbent provider, 

11

however, uses its entrenched market power to deny certain musthave programming to competitors, consumers only lose. 

Congress should act steadfastly to ensure that providers don’t 

use their market power to artificially limit choice and raise prices, 

and DIRECTV is eager to work with Congress to ensure that the 

vision of the program access rules is fulfilled by closing the terrestrial loophole. And DIRECTV urges this Committee to consider examining any antitrust concerns raised by the cable industry’s 

abuses of its market power. 

Thank you, Senator. I am happy to answer questions. 

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

for the record.] 

Chairman SPECTER. Well, thank you, Mr. Fawcett. You say that 

Congress should act to see to it that prices are not raised. Isn’t 

what is happening now with the Thursday- Saturday package on 

the NFL Network going to result in prices being raised as the NFL 

insists, as Mr. Pash has just testified, on putting that program on 

a broad base on basic coverage and not permitting you to go on a 

limited sports tier so the fans, the people that want it pay for it, 

but the others don’t have to? 

Mr. FAWCETT. Well, I think, first of all, our packages at 

DIRECTV will not increase as a result of the Thursday- Saturday 

package, which is eight games that are included on the NFL Network, which you as a DIRECTV customer— 

Chairman SPECTER. Well, okay, yours may not be, but right now 

Time Warner is refusing to carry the Thursday- Saturday package 

because it is going to raise prices. And Comcast is in litigation, 

started by the NFL, because they want to carry it on a sports tier 

so the only people who pay for it are the ones who want it. So if 

the NFL has its way, won’t prices be raised? 

Mr. FAWCETT. Well, first of all, Senator, I believe that it is somewhat ironic that Comcast and Time Warner are wanting to put the 

NFL Network in a sports tier when they with their own sports networks require that distributors carry it on basic cable. Comcast, for 

example, in all of its regional sports network—its Outdoor Life Network, which is now called Versus, its Golf Channel—they require 

carriage on basic cable, not on a sports tier. 

Chairman SPECTER. Okay. Aside from the irony—and we will 

come back to that. 

[Laughter.] 

Chairman SPECTER. Aside from the irony, aren’t prices going to 

be raised? I mean, I liked your line where you said Congress ought 

to act if prices are going to be raised. It looks to me like prices are 

going to be raised. It looks to me like Congress ought to act. It is 

your idea, Mr. Fawcett, not mine. 

Mr. FAWCETT. Yes, Senator. I think that certainly our costs increase, but we do not pass along costs of programming in our basic 

tier to consumers. If it is in a sports tier, the price that we would 

charge would be very— first of all, the networks wouldn’t allow it 

or wouldn’t want us to do it. And the prices that they would charge 

for that service on an a la carte basis would be very high and they 

wouldn’t have their advertising revenues to make it a viable business model. 

12

So virtually every sports network with live professional games of 

a major league are carried on basic cable. The Sunday Ticket package is an ancillary product of out-of-market games, not games of 

the local professional teams. In Chicago, for example, where I am 

talking about prices increasing is where Comcast takes over the regional sports network in Chicago and doubles the price to people 

like DIRECTV, which it can afford to do because it has 60 or 70 

percent of the Chicago market, and requires—you know, arbitrarily 

increases the price for that must-have local programming, that is, 

the games of the Black Hawks, the Cubs, the White Sox, and the 

Bulls. 

That is certainly must-have programming, and in those types of 

situations, yes, prices are increasing, and that is because of the terrestrial loophole and the dominance of cable and local markets 

which, after the Adelphia transaction, are staggering. 

Chairman SPECTER. Okay. Let’s come back to the irony now—the 

irony of Comcast raising prices. Do you think Comcast is violating 

the antitrust laws? 

Mr. FAWCETT. No. I am not suggesting that. The irony is that 

when it doesn’t—MASN, for example, the Mid-Atlantic Sports Network, which is carrying the Washington Nationals and the Baltimore Orioles, Comcast refused to launch that on its cable systems 

in this area and then ultimately, as part of the Adelphia transaction, agreed to launch it, but then it passed on a $2 price increase to its customers. 

Chairman SPECTER. Well, you are talking about Comcast having 

a regional sports network, and you referred to Chicago, you referred to Philadelphia. And you say that they are raising the 

prices. It is vertical integration, and as I said earlier, we are going 

to take that up on December 7th. But since you brought it up, I 

would like to pursue it a little further now. And that is, since, as 

you say, Comcast is raising the prices, but you say the antitrust 

laws are not being violated, do you think Congress should modify 

the antitrust laws to deal with that kind of vertical integration 

which results in increased prices? 

Mr. FAWCETT. I am not an expert in the antitrust area, Senator, 

so I am not suggesting that. 

Chairman SPECTER. You are not an expert in the antitrust area? 

You have a law degree from the University of Pittsburgh. 

Mr. FAWCETT. I do. 

Chairman SPECTER. You are the Executive Vice President for 

Legal Affairs at DIRECTV. Aren’t they dodging the antitrust issue 

all the time at DIRECTV? 

Mr. FAWCETT. Again, I have some knowledge of the antitrust 

laws, but I am not an antitrust expert, and obviously we have a 

number of issues— 

Chairman SPECTER. Well, let me ask you to study that issue, do 

a crash course—we have had crash courses around here before—

on antitrust law and follow up the testimony which you have offered with respect to—you are defending your conduct by bringing 

up the conduct of Comcast, so I would like to get your view on that. 

We turn now to Mr. Landel Hobbs, Chief Operating Officer of 

Time Warner Cable, had been Vice President in the Financial 

Analysis Operation with AOL Time Warner, had been Chief AcVerDate 0ct 09 2002 11:29 Jan 29, 2007 Jkt 032152 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\32152.TXT SJUD4 PsN: CMORC
13

counting Officer for Turner Broadcasting Systems; bachelor’s degree in business administration from Angelo State University in 

Texas. 

Thank you for coming in today, Mr. Hobbs, and we look forward 

to your testimony. 

STATEMENT OF LANDEL C. HOBBS, CHIEF OPERATING 

OFFICER, TIME WARNER CABLE, NEW YORK, NEW YORK 

Mr. HOBBS. Thank you, Mr. Chairman. My name is Landel 

Hobbs, as you said, and I am Chief Operating Officer at Time Warner Cable, the Nation’s second largest cable operator. I want to 

thank you for inviting me to appear here today to discuss the question of how consumers are faring in the current marketplace for 

sports programming. 

From Time Warner Cable’s perspective, the answer to the question of whether consumers are winning is yes and no. 

On the one hand, consumers who enjoy sports programming 

clearly are winning in that there is a staggering amount and variety of sports programming available to them on broadcast television, cable, satellite networks, and increasingly through the 

Internet. On the other hand, over the past few years, Time Warner 

Cable has been monitoring and trying to deal with two troubling 

trends relating to sports programming that are less than ideal for 

consumers. 

The first is the spiraling rise in costs that affects every level of 

the sports food chain and which ultimately must be paid by consumers. 

The second trend is the ever increasing fragmentation of television sports rights that has undoubtedly added to the increases in 

costs that consumers are being asked to bear. 

An example of both of these trends is the decision by the NFL 

to take eight games that were previously available on broadcast or 

other programming services and put them on the league-owned 

NFL Network while simultaneously demanding that distributors 

pay a significantly higher price for the network and refusing to 

allow the network to be carried on any tier other than the one 

reaching virtually all customers. 

There is also another disturbing element to this situation. The 

NFL is preventing individual teams that want to do deals for nongame content from entering into any agreements with cable operators unless they also carry the league’s NFL Network. 

In the setting of a Congressional hearing, the question, of course, 

is: What, if anything, should Government regulators do about these 

problems? We believe that the best thing that Government can do 

is to leave the solutions to the marketplace. Government favoritism 

can serve only to deprive consumers of the full benefits of today’s 

vigorously and highly competitive video distribution marketplace. 

Thus, Government should not only refrain from additional regulation, but also should re-examine existing rules to make sure they 

are not contributing to any problems or tilting the playing field in 

favor of some participants against others? 

In particular, while I am not an expert in antitrust law, it seems 

important to make sure that certain exemptions granted to sports 

leagues are not reducing competition and contributing to the escaVerDate 0ct 09 2002 11:29 Jan 29, 2007 Jkt 032152 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\32152.TXT SJUD4 PsN: CMORC
14

lation in prices to consumers or reducing their viewing options. In 

addition, Government should examine whether the imposition of 

access obligations and anti-exclusivity rules on some video distributors but not others is warranted and how it contributes to problems 

in the sports and video marketplaces. 

We recognize that the marketplace is not always perfect. We are 

not always able to obtain the carriage terms that would allow us 

to give our customers everything we would like to while keeping 

down our costs. But whatever the shortcomings of the marketplace, 

they pale in comparison to the shortcomings that result from attempts by Government to impose outcomes by regulatory intervention. 

In closing, let me add one final thought. Government should be 

especially wary of the claims of some companies that rush into advocate Government intervention when it would restrict their competitors, but vehemently oppose such regulation when it would 

apply to them. In particular, it is simply disingenuous for 

DIRECTV, which is larger than Time Warner Cable, and every 

other video distributor but one, to claim here and elsewhere that 

it is in need of special Government protection against exclusivity 

while continuing to enter into exclusive agreements itself and demanding that it be left free from any similar restrictions. 

Indeed, DIRECTV’s exclusivity with the NFL applies not only 

against cable operators that are generally a fraction of its size, but 

also against the Nation’s other smaller DBS provider. And it is 

competitively far more significant than any exclusivity about which 

it complains. 

It is now well past the time for DIRECTV to recognize that it can 

no longer credibly play the new entrant card. Time Warner Cable 

has never acted in such a disingenuous manner but, rather, has 

consistently been of the view that the marketplace is generally the 

best regulator, and the marketplace functions the best when any 

truly necessary Government intervention, absent any special circumstances, applies equally to all players. 

Thank you. 

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

for the record.] 

Chairman SPECTER. Mr. Hobbs, what are the core considerations 

that Time Warner has in declining to take on the Thursday-Saturday package? 

Mr. HOBBS. The programming is too expensive. 

Chairman SPECTER. Too what? 

Mr. HOBBS. Expensive. 

Chairman SPECTER. Too expensive. 

Mr. HOBBS. The value equation is out of whack. So for our customers for the eight games, eight out-of-market games that they 

will see in their own local hometowns, it is just too expensive. And 

I have heard a lot today about other people not raising prices. Anytime your costs continue to escalate at increasingly rising rates, 

like sports programming, especially targeted sports programming, 

it causes you eventually to raise rates. Some people may not do it 

through a sports package, but I would suggest that people do raise 

their prices, and that is because their costs are growing. 

15

So that is what happens when you have programming that is too 

expensive. 

Chairman SPECTER. Well, isn’t it true that Time Warner has 

sought to have the Thursday-Saturday package but on a sports 

tier? 

Mr. HOBBS. We think that by placing this type of sports programming, that is very targeted, in a sports package benefits all of our 

customers because it allows those who actually want to see the programming to pay for it if they would like it, and those that don’t 

have to bear the burden of the cost. 

Chairman SPECTER. Well, where you have the NFL in effect raising prices and limiting distribution without any countervailing reasons for it, don’t you have a violation of the Sherman Act rule of 

reason? That may be beyond your own training, but you have been 

in this field a long time. The Sherman Act does not—we do not 

deal here with what we call a per se violation, that is, an automatic 

violation. But isn’t that really subjected to the rule of reason? And 

don’t you have at least a prima facie showing of a violation there 

when prices are raised and distribution is limited without any 

countervailing business purpose? 

Mr. HOBBS. You are right, you are outside of my expertise—I am 

not an attorney, but what I would say is that from our perspective, 

let’s let the marketplace handle that question. Let’s let our consumers handle that question. We balance those things every day, 

so when we have this type of programming that is so expensive and 

NFL would like it on a broadly distributed basis, so many people 

who don’t watch the programming have to pay for it, our view is 

no, let’s give the consumers what they want. The people who want 

the programming should be able to get this in a sports programming package, and that would take care of it. The marketplace 

would deal with the issue. 

Chairman SPECTER. Did Time Warner have an opportunity to bid 

on the Sunday Ticket, which went to DIRECTV? 

Mr. HOBBS. I am sure we did. We did not bid on that package. 

Again, we look at economics, and we look at the impact on our customers. 

Chairman SPECTER. The Wall Street Journal today reports that the NFL left on the table as much as $400 million during its last 

round of television right negotiations to reserve for its fledgling 

cable network the eight season games. Do you think that that is 

accurate? 

Mr. HOBBS. That is what has been reported. What I do know is 

that based on our negotiations, what they want out of us, this 

would make this particular programming in the top five in terms 

of how expensive it would be. Compared to everything else we 

carry, this would be in the top five in terms of expense. And yet 

the ratings at this point are not even in the top 30. 

Chairman SPECTER. Well, you have taken a resolute position 

here, and the NFL may have a little different view as to how it is 

going to work out. The Times quotes two of the owners of the NFL 

teams saying that there may be some short-run holdouts but in the 

long run they have a real plan. And they cite Marc Ganis, a sports 

marketing consultant, saying that, ‘‘The cable companies won’t be 

shooting themselves in the foot. The cable companies will be shootVerDate 0ct 09 2002 11:29 Jan 29, 2007 Jkt 032152 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\32152.TXT SJUD4 PsN: CMORC
16

ing themselves in the chest.’’ And this is in the context of the NFL 

speculating—they use the words ‘‘can hope’’—that the fans will cry, 

‘‘I want my football,’’ pressure their cable companies to make a 

deal, or threaten to switch to another provider. 

How do you evaluate the aspect of your customers switching to 

another provider to get from another provider what they cannot get 

from you? 

Mr. HOBBS. We have to evaluate those trade-offs every day, and, 

again, it comes back to analyzing the type of programming, the 

cost, and the impact on all of our customers, not just the ones who 

like football. 

For example, there are a lot of our subscribers who love football, 

which everyone here acknowledges. But from our research, there 

may be 75 to 80 percent who aren’t as enamored with football. So 

we have to keep those customers in mind as well. So that is the 

reason we made the decision we have. 

Chairman SPECTER. Do you think the quotation by Marc Ganis 

as it appears in the Wall Street Journal that the cable companies 

won’t be shooting themselves in the foot but shooting themselves 

in the chest is inaccurate? 

Mr. HOBBS. It is inaccurate, in my view. 

Chairman SPECTER. Shooting yourselves anywhere? 

Mr. HOBBS. It would be painful. But, no, we are comfortable with 

our decision. 

Chairman SPECTER. We now turn to our final witness, Professor 

Roger Noll, professor emeritus at Stanford University, where he 

taught for 22 years, Senior Fellow at the Stanford Institute for Economic Policy Research, and one of the Nation’s foremost experts in 

sports economics and regulatory policy, has authored 11 books in 

these areas; a bachelor’s degree in mathematics from the California 

Institute of Technology, and a Ph.D. in economics from Harvard. 

Thank you for being with us today, Professor Noll, and we look 

forward to some real expert guidance here. It is up to you. 

STATEMENT OF ROGER NOLL, SENIOR FELLOW, STANFORD 

INSTITUTE FOR ECONOMIC POLICY RESEARCH, STANFORD, 

CALIFORNIA 

Mr. NOLL. Thank you very much. I appreciate the opportunity to 

speak on this issue. I have been here many times talking about 

antitrust issues in professional sports, and, indeed, my interest in 

professional sports was created by Sam Ervin when he was considering the proposed merger of the two basketball leagues 35 years 

ago. That is what got me into this interesting area. 

I have been teaching the Sports Broadcasting Act for 40 years to 

my undergraduates because it illustrates everything that can possibly go wrong with legislative antitrust exemptions. And what I 

want to do today is put the current disputes that are going on in 

professional football in a much larger context. I think these disputes are useful in causing a re-examination of policy, but the reality is this is all within the context of some much bigger issues, 

and that is what I want to focus on. 

When the Sports Broadcasting Act was passed, there were many 

fewer teams. There were two competing football leagues. There 

were no significant multichannel video distribution systems. The 

17

only ones that existed at the time were systems that did nothing 

other than retransmit over-the-air television. There were no cableonly channels, and there was no satellite broadcasting. 

All of these are important because they get to the point about 

what did Congress do in 1961 and what is the implication of that 

today. Congress did pass a law that reduced competition, but there 

were still two competing football leagues. And, indeed, there were 

two competing basketball leagues. And as we know, in the 1960s 

and 1970s, there were entries of other competing leagues. 

When leagues compete to sell their broadcasting rights, the implication of an antitrust exemption is much less significant. That 

is to say, two isn’t as good as four or five, but it is better than one. 

Likewise, at the time the Act was passed, there was no conception of what the world would look like when cable and satellite 

companies were competing for viewers, which, if you remember, 

has only been going on for less than a decade. It has only been in 

the current millennium that the satellite companies began to retransmit local broadcasts and to offer a realistic competitive alternative to cable television. And now I think it would be an overstatement to say this is a competitive industry, but it is three, and 

that is a lot better than one. 

So the world has changed in dramatic ways. The bargaining 

strength of existing sports leagues relative to broadcasters has increased dramatically because each sports league is a monopoly, but 

the broadcasting environment is much more competitive than it 

was at the time the Act was passed. 

One could make something of an argument to say a world of 

three networks and two leagues was similar to bilateral bargaining. But that isn’t the right way to think of it today when we 

have four networks instead of three, many more strong, independent over-the-air channels, and in every major metropolitan 

area in the United States three competing multichannel video distribution systems. Hence, the validity of the Sports Broadcasting 

Act has changed. Whatever it was to begin with, it requires re-examination. 

The right template that we economists use for deciding whether 

an action such as the creation of the NFL Network is pro- or anticompetitive is whether there is a profit-enhancing reduction in output. It seems to me, without having done the analysis—I would ask 

you to collect the data—that the NFL Network is a profit-enhancing reduction in output in the sense that the eight games that are 

on NFL Network, will be available to fewer people than had those 

games been offered on broadcast television. Now, that, I think, is 

the right template to think about this issue. 

One last point. It seems to me, because of the equities involved 

in the Sports Broadcasting Act and the reliance for over 40 years 

of both broadcasters and the leagues on this Act is great, I would 

suggest that the appropriate mechanism is sunset—that is to say, 

Congress should enact a law saying the Act will expire in 5 years, 

which will force Congress to re-evaluate the Act from ground up 

over the next few years and see if all the changes I described say 

that, no, this thing really should be put to bed. 

[The prepared statement of Mr. Noll appears as a submission for 

the record.] 

18

Chairman SPECTER. Mr. Noll, thank you very much for those insights. Do you have any suggestions as to which way Congress 

ought to go on revising the 1961 Act? 

Mr. NOLL. Yes. My personal belief is that it was a mistake to 

begin with because it did have the profit-enhancing quantity reduction. The passage of the Sports Broadcasting Act led to an elimination of the then common way to sell broadcasting rights, which 

was consortiums of teams. 

The but-for would is either professional sports prior to 1962 or 

current collegiate sports because of the NCAA case. In these cases 

consortiums of teams, in order to get a reasonable broadcast schedule available, sell collectively their broadcast rights, but they still 

compete because the number of consortia is large enough to create 

a competitive market. 

In the NCAA, for example, each major conference sells television 

rights. And in professional sports, prior to the passage of the 

Sports Broadcasting Act, there were four consortia of professional 

sports teams that sold national broadcasting rights. 

That would be the world we would have, and it seems to me that 

in a world of many channels and many competing MVDS operators, 

the whole issue of exclusivity, for example, would go away. If 

DIRECTV had exclusivity to 20 percent of the NFL and Dish-TV 

has another 20 percent and then three television networks had 20 

percent more each, the whole issue of exclusivity would be much 

less important if there were competition in the selling of the national broadcasting rights. 

Chairman SPECTER. Well, if we just repeal the 1961 Act, the 

antitrust laws would then be violated by the joint action of the 

NFL teams, NFL members, which is what the United States District Court for the Eastern District of Pennsylvania found back in 

1961, which led to the adoption of the statute. 

Mr. NOLL. In order for it to be an antitrust violation for the NFL 

to negotiate as a league for broadcasting rights, one has to prove 

that televised professional football games are a separate relevant 

market. Every time that issue has been litigated, it has been determined to be a separate relevant market. And in that case, without 

the antitrust exemption, not only the NFL but Major League Baseball and the NBA all would be in violation of the antitrust laws if 

they sold their broadcasting rights nationally as a league-wide consortium. 

Chairman SPECTER. Professor Noll, would you think that it 

would make sense or be appropriate to condition the antitrust exemption on, say, the franchise move limitation, which Senator 

Feinstein suggested earlier? 

Mr. NOLL. No, I do not believe that is appropriate, and that is 

because it is making mistake number two to deal with mistake 

number one. The antitrust exemption in broadcasting is more 

harmful, as I said before, because of the antitrust exemption that 

was granted to the AFL and NFL to permit them to merge. 

One reason people care a great deal about losing a team, as Senator Feinstein said, is the issue of naming. The Cleveland Browns 

name is a good example. But the main issue is the inability of a 

city to find a replacement. Many cities that are viable locations for 

major league professional sports teams do not have one because 

19

monopoly leagues create scarcity in teams to give each individual 

team more bargaining power over a locality to get a stadium subsidy. 

The presence of Los Angeles as an area without an NFL team 

is the universal golden threat point for every NFL team in the 

country: Give me my stadium or I go to LA, which is obviously an 

attractive option. So I don’t think to use one antitrust exemption 

to deal with a problem created by the other is the right way to go. 

I think the right way to go is more competition. 

Chairman SPECTER. How about conditioning the antitrust exemption on the teams or the NFL paying for their own stadiums as opposed to imposing a tax burden, as four sporting teams did—two 

in Pittsburgh and two in Philadelphia—on the taxpayers of the 

Commonwealth of Pennsylvania? 

Mr. NOLL. That would have been a great idea in 1990. Unfortunately, almost all teams in all sports have gotten their nice new 

subsidized stadium. Actually, some NFL teams did not get a subsidy, but most of them did. In all the major professional sports, 

nearly one hundred new arenas and stadiums have been built in 

the past twenty years. Eighty percent of the teams are already 

playing in their subsidized arenas. So, unfortunately, those horses 

have left the barn. 

Chairman SPECTER. Well, they may come back. The Vet in Philadelphia was opened in 1971, and we have already torn it down and 

built two new stadiums. 

Mr. NOLL. That is exactly right. There— 

Chairman SPECTER. So we may be looking at building two new 

stadiums 25 years from now. 

Mr. NOLL. Yes, the useful life of a stadium is about 25 to 30 

years, and sometimes it has been even shorter than that. And you 

are right, eventually teams will be back at the well. But that is a 

very slow process. One of the problems that Philadelphia and San 

Francisco find themselves in is that by being the last cities to replace an old stadium, an obsolete stadium, their teams are at a 

competitive disadvantage. And it is not obvious that preventing the 

last two or three cities from having new stadiums is pro-competitive. 

It would have been pro-competitive to do something about the 

subsidies right at the beginning, but now that almost all the teams 

have them, the few that do not are disadvantaged relative to their 

subsidized brethren. 

Chairman SPECTER. Mr. Pash, is the Wall Street Journal accurate today that the NFL left $400 million on the bargaining table 

during this last round of television rights negotiations to reserve 

for its fledgling cable network the eight Thursday night/Saturday 

night package? 

Mr. PASH. I have not seen the articles. I do not know the source 

of the— 

Chairman SPECTER. I had not seen it until a few moments ago. 

It is just in today’s paper. It was not even in my briefing materials. 

The Wall Street Journal did not let me know in advance. 

Mr. PASH. As I say, I have not— 

20

Chairman SPECTER. Aside from what the Wall Street Journal 

knows, you know more about what the NFL left on the table than 

the Wall Street Journal does, presumably. 

Mr. PASH. Well, I know we could have sold those eight games to 

other carriers. We could have sold them to cable carriers. There 

were a number of reasons why we did not want to do so, including 

the fact that the cable carriers, some of the ones we were talking 

to about them, did not want to simultaneously broadcast them on 

over-the-air the way we do with ESPN and the way we do with the 

NFL Network. 

Chairman SPECTER. They did not want to broadcast them simultaneously? What did they want to do? 

Mr. PASH. They wanted to have them exclusively on cable so that 

the only way you could watch those eight games is if they were on 

cable. There would not be a simultaneous over-the-air broadcast in 

the competing cities. That was one consideration for us. 

Another consideration was we are trying to develop the NFL Network. We are trying to build that as a new entrant into the television world. We think it has got a lot of high-quality programming. It is growing. It is getting better in terms of the quality of 

the programming and the quality of the offerings. We think by having the games on the NFL Network it is a good value proposition. 

We obviously have disagreements with some cable carriers, with 

other cable carriers, and with satellite carriers we don’t have those 

disagreements. But we do think there is a good value proposition 

there. 

Chairman SPECTER. Well, your last answer raises the question as 

to where the NFL Network is heading. We already see the NFL 

Network on this Thursday-Saturday package raising prices. What 

is next? What does the NFL Network have in store which will pose 

problems for Time Warner and other cable companies to have to 

raise their prices and pass them on to the consumer? Is the NFL 

Network heading for more programming, which will cost the consumers more money? 

Mr. PASH. Well, as I say, Mr. Chairman, I don’t think that the 

NFL Network and price increases automatically go hand in hand, 

and the experience of many other cable companies demonstrates 

that, and the experience of the satellite companies demonstrates 

that. And that is the current state of the record. 

Chairman SPECTER. Well, how can you say that in the face of 

what Mr. Hobbs testified to, which is perfectly obvious, that when 

you have increased costs, you have to pass them on? How can you 

say it is not going to cost the consumer more money? 

Mr. PASH. Well, because I— 

Chairman SPECTER. May the record show that Professor Noll 

thought that was very funny, and I am going to come back to you, 

Professor Noll, to explain your smile. 

Go ahead, Mr. Pash. 

Mr. PASH. Because I look at the experience of four other large 

distributors that have put the NFL Network on a broad distribution tier and have not raised their prices to consumers. 

Chairman SPECTER. Can you give me a few examples of that? 

Mr. PASH. Yes, sir: DIRECTV, EchoStar, Cox, Comcast— four of 

the five largest distributors. 

21

Chairman SPECTER. Isn’t Comcast demonstrably different in the 

current contest you have with them as to whether it is going to go 

on the sports tier or some broader coverage tier? 

Mr. PASH. Well, I don’t know how that litigation will end up. I 

accept that. But as we— 

Chairman SPECTER. Well, wait a minute. How the litigation is 

going to end up is what the judge says, but Comcast thinks they 

are going to have to raise their prices, or they would not be defending that lawsuit. 

Mr. PASH. Well, I don’t know. They may feel as though they can 

raise their prices more by putting it on a sports tier. They may feel 

that an underutilized sports tier that has relatively unattractive 

programming on it today will become much more attractive and 

bought at a much higher rate for much more money if all of a sudden it includes NFL programming, which is the most attractive 

programming out there in the sports world. 

Last week, the highest rated broadcast television program was 

an NFL game, and the highest rated cable television program was 

an NFL game. And if those are forced onto a sports tier, it may 

well be that you will see consumers paying more money for it. But 

to date, the carriers that have put the NFL Network on a basic tier 

have not done that, and so I do not think it is inevitable that one 

leads to the other. 

Chairman SPECTER. Professor Noll, you have heard the conflicting testimony of Mr. Hobbs and Mr. Pash. What is your view? 

Mr. NOLL. Senator, you get an A in my course. You are the good 

economist. 

Here is what is happening in multichannel video distribution: We 

have gone from one to three in urban areas. That has reduced the 

profit margins of incumbent cable companies. Companies like Time 

Warner and Comcast are subject to much more competition than 

they were 10 years ago. Because their profit margins have gone 

down, not all of the increase in programming costs have been 

passed on to subscribers due to increased competition between 

cable and satellite services. 

Nevertheless, holding the extent of competition constant, when a 

pay-TV service adds another channel, its costs go up on a per viewer basis. All else equal, that causes the pay-TV service to raise 

price. Indeed, economics research has shown that higher programming costs, all else equal, cause higher subscription prices. 

A final complication arises when a pay-TV service obtains a

highly popular type of program on an exclusive basis. For example, 

if DIRECTV succeeded in having the NFL Network exclusively in 

Philadelphia, DIRECTV’s market share in Philadelphia would go 

up while Comcast’s and Dish-Tv’s shares would go down. In this 

case DIRECTV could earn its current markup on a larger number 

of customers, and so it could be the case that its profits would not 

be undermined by taking on an expensive channel and not raising 

its price. 

But in the long run, Time Warner or Comcast have to respond 

with something in kind to attract those viewers back. The nature 

of the competitive process is to drive prices to costs. if programming generally becomes more expensive, prices will go up. 

22

Chairman SPECTER. Mr. Pash, do you disagree with the conclusion of the Court of Appeals for the Third Circuit, Federal Court 

of Appeals, that the DIRECTV arrangement is not cleared by the 

1961 antitrust exemption? 

Mr. PASH. Well, we certainly accept that conclusion as the law 

in the Third Circuit. We did not seek further review of that opinion, and as I am sure you know, Mr. Chairman, we ultimately settled that litigation so there were no further appeals or further review. So we accept that decision. 

Chairman SPECTER. Well, it is obvious that you accepted it when 

you did not apply for certiorari, correct? 

Mr. PASH. CORRECT. 

Chairman SPECTER. You did not ask the Supreme Court of the 

United States to review it. 

Mr. PASH. That is correct. 

Chairman SPECTER. Well, when you say in that jurisdiction, that 

is the prevailing law in the country generally, isn’t it? 

Mr. PASH. This is the only court of appeals opinion that addresses that issue; that is correct, Mr. Chairman. 

Chairman SPECTER. Well, if you do not ask the Supreme Court 

to review it and if you accept it, that is that nationwide, isn’t it? 

Mr. PASH. Well, that is where we are right now. As you know, 

of course, Mr. Chairman, sometimes appellate courts in different 

parts of the country see issues differently. 

Chairman SPECTER. But if there is a disagreement with the court 

of appeals, you ask the Supreme Court to review it. They may not, 

but at least you asked them, which you did not do in this case. 

Mr. PASH. Which we did not do in this case. As I say, we settled 

the litigation so there was no need to ask for any further review. 

Chairman SPECTER. The specific language of the 1961 Act grants 

the exemption for sponsored telecasting where there are commercials, and the House Antitrust Subcommittee found flatly, ‘‘The bill 

does not apply to closed circuit or subscription television.’’ And 

Commissioner Rozelle conceded on the record that the bill ‘‘covered 

only the free telecasting of professional sports contests and does 

not cover pay TV.’’ So all of that leads to the conclusion that the 

Sunday Ticket is not covered by the exemption. 

That then leads you to considerations as to the rule of reason. 

The Sherman Act prohibits any contract, combination, or conspiracy that unreasonably restrains trade, and the Sunday Ticket 

would not be, as I referred to earlier, a per se violation, which 

means automatic on its face. It would be subjected to the rule of 

reason. And that turns on whether there is reduced output and 

fixed prices without any corresponding justification. 

Doesn’t that pretty much indicate that the Sunday Ticket is a 

violation of the Sherman Act? 

Mr. PASH. I would say precisely to the contrary, Mr. Chairman. 

Sunday Ticket is as clear a pro-competitive act as could be imagined. It increased output. It enhanced consumer choice. It delivered 

a new product that did not previously exist. It allowed consumers, 

particularly commercial establishments, to legally obtain a product 

that the only way they had been able to obtain it before was by 

violating the copyright laws, and the FCC has repeated looked at 

this question and identified Sunday Ticket as a pro-competitive, 

23

output-enhancing step. They have identified it as a key point in allowing satellite to grow and become an effective competitor to cable 

and restrained pricing in the way that Professor Noll has talked 

about on several occasions. I think it frankly would be difficult to 

think of something that is more pro-competitive than creating this 

new package. 

Chairman SPECTER. Would your answer be different if it were established as a conclusive fact that Commissioner Tagliabue told 

Comcast they could not bid on Sunday Ticket? 

Mr. PASH. No, Mr. Chairman, it would not. It would not. 

Exclusivities are perfectly acceptable. That was reviewed as recently as 2 years ago by the FCC, and the FCC specifically commented that it was perfectly lawful for DIRECTV to purchase Sunday Ticket on an exclusive basis. 

Chairman SPECTER. Did the FCC have before it the fact that the 

NFL through its Commissioner said Comcast could not bid? 

Mr. PASH. I don’t know if they had that particular statement before them or not, but it is true—irrespective of whether that was 

said or not, or when it was said, it is true that exclusive arrangements in the television industry have been in existence for decades 

and are well respected and considered lawful and pro-competitive. 

Chairman SPECTER. Professor Noll, how would you apply the 

Sherman Act’s rule of reason to Sunday Ticket, realizing that the 

NFL litigated, lost in the court of appeals, then settled the case? 

Mr. NOLL. The relevant benchmark for whether an action is proor anti-competitive is the circumstance that would prevail in a competitive world. The argument that NFL Sunday Ticket increased 

output is correct, but it increased output in a monopolized market. 

The issue is what is the alternative in the absence of monopolization, and in the absence of monopolization, the market for televised 

NFL games would be like other pro sports were or like college 

sports are today. For example, if all broadcasting of college football 

games were put together into a single package priced at $150 a 

month and shown exclusively through DIRECTV, the effort would 

be a profit-enhancing reduction on output. 

From my perspective, if one adopts the right counterfactual, the 

right but-for world in the competitive environment, it is obvious 

that NFL Sunday Ticket is a palliative compared to the output and 

prices that would exist in a competitive environment. 

Chairman SPECTER. Mr. Hobbs, you are satisfied to leave it all 

to the market. Do you think in light of the Third Circuit’s opinion 

that the 1961 Act does not apply to Sunday Ticket and a class action brought and settled by the NFL that there is any basis for concern about an antitrust violation here? 

Mr. HOBBS. Our view is that we are fine with exclusivities, as 

long as everyone has the same approach and rules. So we are fine 

with people having exclusive programming. Again, as long as every 

party is treated the same way, then we are fine. 

Chairman SPECTER. Well, would that require that the NFL entertain bids from other than DIRECTV? 

Mr. HOBBS. Yes. 

Chairman SPECTER. And if they do not? 

Mr. HOBBS. Then I think it does continue to cause problems. 

24

Chairman SPECTER. Well, anybody else have any additional comment you would care to make? 

[No response.] 

Chairman SPECTER. Thank you very much for coming in, gentlemen. The Judiciary Committee is going to be looking at the vertical 

integration issue, and we are going to be studying the ramifications 

of the Thursday-Saturday package and DIRECTV, and we are intrigued, to put it mildly, by what the NFL has in mind. The Wall 

Street Journal quotes Mr. Jones and Mr. Kraft, the owners of the 

Dallas Cowboys and the New England Patriots, as saying they are 

willing to take some short-term losses for some long-term gains. So 

we will see what happens next. And the Judiciary Committee will 

continue to be vigilant on this important subject. 

Thank you all very much. That concludes our hearing. 

[Whereupon, at 10:26 a.m., the Committee was adjourned.] 

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

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