Transcripts For CSPAN The Communicators 20150530 : vimarsana

Host what is the potential of it being approved . Gene this is part of a rationalize asian the cable industry. We have seen of the rationalize ation of the cable industry. It is a Broader Market that includes other broadband providers and other content dividers. Host same question to you. Gene i think this is the cutting edge of our economy today, this is the Digital Economy driven by broadband. Cable companies are the largest providers of highspeed internet service. Here you would have a company doubling in size, time warner. Approximately the size of the largest company, comcast. I think it will be seriously reviewed by Law Enforcement officials. You are going to have 30 of broadband customers combined in one company. I dont believe this has the same problems of the comcast proposed merger that time warner had. I think it has some that will be carefully looked at. The big question is what happens to my cable bill . What happens to my prices . Do i get new services . Will netflix and amazon products, the google products, the new online delivered video products be more available . Or will this combined entity try to cut off my options . That will be the big question. Host we could dive into the previous planned merger for time warner. On the list of problems, what is on the top of your list for this deal . Harold i think it is the overthetop internet delivered video service. We would love to have more competition. Hardly anybody has two broadband providers. Wireless providers are available but they cannot provide the video streaming that you get from a telephone delivered service. The question is where did you get more competition . The competition is coming over that very same wire. It is the same Company Controlling two parts of the Service People one is your tv package, the other is your broadband service. A lot of Companies Want to provide both. They want to provide new services. The Cable Company has an incentive to favor its own favorite product, it bundled service. I think Law Enforcement is going to have to make sure there is no on their benefit to cable through this consolidation. Host do you see those concerns . Got something harold not at all. Most American Consumers have wires coming into their home. It is not that they are getting Video Services all Video Services over all three but they have the option of Getting Services over at least two which is the cable and telephone company. They still exist, they are not doing very well. In addition there are wireless options and wireless speeds are increasing. Lots of americans, particularly young americans, have cut the wire. They dont have a cable subscription and they dont have a telephone wire subscription. They are purely wireless. And they get the broadband they want. These are not broadband illiterate people. They are quite broadband sophisticated. And you have new companies coming online to compete with wireless broadband offerings. The idea that there is any sort of market power or monopoly power in this industry right now is very difficult to understand. It is certainly not consistent with the information that the fcc and other government information government organizations have acquired. Gautham the cable tv industry is a monopoly depending on how you provided. There is usually one given provider in any given area. Do you think the tv portion is going to be a concern for regulators . Or is the review going to be focused heavily on the broadband market . Gene i think it is the broadband market. It is not that consumers are unsophisticated, the question is what can you get from your wireless device and can you get enough that competes with cable . The question is whether that market is going to naturally grow and expand without interference, i think that is where the regulators are going to look. I tend to disagree with harold, the government has found market power in the broadband side of the business and cable side of the business. That was the review of the comcastnbc transaction and a number of others. That is not where the enforcement agencies are today. I do think this will be different than comcast. This is a combination of companies that do not own content, they dont own nbc universal, which is extremely important for other cable and broadband Delivery Systems to get content from. They are a pure transmission plate. It will be a very different transaction under review. I think the entire focus will be on the National Broadband market. Harold i agree with jean that the focus will be primarily on the broadband side, because neither of these companies has much of a content portfolio. Where i wouldnt disagree with what he just said is a lot of the analysis will be on the local Geographic Market by market basis. These are geographically Distinct Companies that are merging. Im not convinced that they have any greater market power collectively than they do individually, because they do not have overlapping market areas. Im sure that the regulators spoke to the department of justice and the federal Communications Commission will look carefully at this deal. At least initially from the outside it is very difficult to see there will be any substantial problems. Gautham one of the moves sec has taken is defining broadband as a speed above 20 megabits. How will that affect this transaction review . We saw a play in the comcast review and many of the phone Company Offerings that harold spoke to often do not meet that definition. Gene i think what matters is what delivers the service. Whether it is 25 or something below, where do the consumers have choice . If phone Companies Really do offer that, files certainly does fios certainly does, then you have some competition. It is not a precise number, it is real choice in the marketplace by evidence what the consumers take. I think that will drive the analysis. I think it is indicative of the fact that consumer demand is for more video. That requires higherspeed. Harold i agree with what he said. If you look back 15 years ago the fcc defined broadband has 600 k. Over time the definition has increased. 20 years from now it will probably be something more. If we look at and. Studies look at empirical studies, you see consumers switching. They say can they get a Certain Service with this offering . What we have seen is a rapidly evolving and rapidly changing market in terms of technology and in terms of competitors that are in the market and providing competition at the edges. Also if you look at the national company, they tend to have a national offering. For marketing purposes and a lot of reasons the prices are disciplined at a simple rate. How big of a role do you think the antitrust portion of this will be . Doj did have concerns about the deal. They did have to work closely with the fcc, who has a broader mandate. Gene i think they tend to see the market the same way. You can see that with comcast, nbc you nbcu. Questions of whether the larger Cable Companies could have squelched developing competition from internet delivered video providers. I think you will see the exact same analysis. I dont think you see all the elements of concern that were presented in the proposed comcasttime warner merger. I suspect there will be a serious antitrust review. I also suspect the Public Interest analysis will grow in importance at the fcc. The burden is on the emerging partings on the merging parties to show it is in the Public Interest. That burden difference will create a greater focus on the fcc and what the Companies Say they can deliver through this transaction. Gautham harold, you used to be at the fcc. Depending on your point of view, some people call chairman tom wheeler the most proregulatory chairman. Given that he is going to be the key person in the review of this transaction, how do you think the fcc review will play out and how chairman wheeler has acted so far . Harold thats a lot of questions. Let me build off what gene said. I agree with his description of the regulatory review process. There will be a regulatory review at the department of justice and federal Communications Commission. If im just if i just may provide my personal view, the statutory for the commission to have a separate antitrust review and the Good Government position of having duplicative reviews in the exact same transaction is very troubling. And yet the fcc can insists it will the fcc insists it will do this. They have a public record. Everything is supposed to be visible to the public. It is supposed to be a transparent organization. Department of justice is different. They collect information knowing it is confidential. The public cant go to the department of justice and say i want to see everything there is about chartertime warner. I am very troubled about the coordination that goes on, specifically i think chairman wheeler is a great kind. I think he is a wonderful public servant. He is in a very difficult situation. Hes in a very ethical situation with very difficult situation with at least the appearance of suggestions from other parts of the administration. Whether he is the greatest regular tear greatest regulator, i think he is in a difficult position in an administration that is know if the do. Host they call the Cable Companies to say we are not antithis, we just have to go this way. Harold it is completely inappropriate for a Government Official to call the ceo and say its as if a judge called the parties and say come into my court. Its just awful. Gene i dont know about the appearance. I think the fcc is on a firing line in the publics eye. When ceos come out and say i dont think we can do anything i think it is fine for the agency to respond and say do your business, do what legal, do what appropriate. I am not worried about Jenna Communications and how to think about a marketplace. If it involved the liberation on actual adjudication, that would be different. My perception is he is someone who comes from industry and comes with an orientation of doing as little intervention, as little regulation as necessary to achieve his goals. His goals are competition in the marketplace. I think he is constantly looking for ways to push the market and push for nonintervention by his agency. Sometimes he has found that is not the case and has surprised people. I dont think he is on one side or the other. He seems to be an incrementalist that slowly tries to push the market as far as he is able to. Host when this deal was announced there were stories of charter coming out and saying specifically they wont impose caps on data. Talk a little bit about, is he saying what they want to in terms of a potential deal being made here . Gene i think that is a public analysis of how companies tend to describe their Business Plans Going Forward as a merged entity. A lot of this would happen confidentially in business documents that are not open to the public. The fcc hasnt has an open process and it invites them to say how is your deal good for the american people. For charter to say we dont impose data caps and we charge a 40 price for standalone broadband products and we intend to do this with a company that is twice the size of time warner, that looks like it is offering some potential benefits to consumers. There may be a back story or counter story to this. Those are important bits of information that are really good for the regulators to review. Harold i think as he just said, all of this information would be discoverable in a trust review. Im a little troubled that businesses have to posture or make promises to the Government Agency in order to get a business deal done. Also the pricing of services the offering of services, these are Business Decisions. And Business Decisions in 2015 may be different than 2016 or 2017. I dont think you would want to lock business into making the promise that they are going to continue to do a Certain Service or certain offering or certain pricing indefinitely into the future. Gautham what would lock a company is a condition expect did expected by regulators. Do you think that will be part of this process and what conditions do we see regulators asking for, or perhaps commitments to Service Offerings or prices that they already discussed . Gene i think there are certain conditions that are dangerous. You dont want to lock in a Business Model in 2015 that will apply in 2020, because we dont know how the market will evolve. There are precise prices that are dangerous longterm. I would expect to see structural conditions, as what the agencies will look at. Do you have incentives and opportunities to discriminate against anyone in the market . If so what kind of limits need to be in place to prevent unreasonable discrimination . I think it will be those things, most likely focused on broadband delivered services. Do you have incentives to pay for your own cable product over broadband . If so, some conditions could be imposed to make sure there is nothing unreasonable about the Business Practices on the cable side that affect the broadband. Harold i agree, i think that is how it will play out. Having looked at every merger the fcc passed in the past 20 years, there will be conditions. What we have also seen in the past 20 years is the department of justice is usually letting the fcc putting the conditions on, because it is really easy for the fcc to put conditions on. They dont have to court dont have to go to court, they can say merger or new merger or no merger, here is how it is. Gautham one of the things that came up repeatedly is the fact that the broadband market is at a crucial point. We see broadband subscribers exceeding cable subscribers, and at the same time we have seen a number of regulatory actions by the fcc. What will the open internet rules play in this review or behaviors that would be imposed on these companies . Would the fact that companies are tied to common carriers have any impact on what they can do post merger . Gene we dont know what the final disposition will be, but we know what the orientation of the Regulatory Agency is to impose that kind of nondiscrimination requirement on a cable broadband provider. I assume that will be the logic they will apply in reviewing the transaction. Whether their rules take care of it or they would look at alternative conditions, i dont really know. Certainly that would be there orientation in reviewing the transaction. Harold i think that is right. There are two types of things to look at in the courts. One is whether the commission has the authority to designate a title to broadband. The second is an equally if not more troubling issue, the extent of the Forbearance Authority the commission has. The Commission Designated title ii with one hand and with the other hand they said we will forbear all the worst of the regulations. If you look at the analysis that is fair, it is not there. It is a wave of the hand. If the commission has the Legal Authority to simply forbear based on what they think at some point in time without any clear documentation, i think that is a very troubled situations for some of trouble situation. I dont think you are going to have the final Court Decision on any of this. Gene i dont think it matters in the context of this transaction. It is the logic of what the commission is doing. They said there is an opportunity at incentive to discriminate if you have this broadband service. This is a merger transaction they wont be applying that part of the law, they will be applying departure applying a Public Interest. I think it is the logic that will be consistent and not one part of the law that matters. Gautham analysts are reading the tea leaves. They have concluded that the direction the regulators are moving is very proregulatory and negative for people in the kbit of in the cable industry. Do you think this puts the merger on more tenuous ground . Gene certainly some entrepreneurs are guessing that the Regulatory Environment is very right for the business they want to run. I dont see any one particular reaction on wall street that is reflective of a mindset about the government. Some are cautious and some are extremely anxious to dive in and spend their money. Harold i think you are right, i think the wall street analysts assessed this very accurately. There is the sense that the government is involved in a very regulatory activity involving investment. What we are seeing is charter purchasing new equipment to go out and compete with time warner. That is the better solution here. There are other troubling reports about declining investment declining equipment. But declining investment. Gene i would love it if a company like charter did what you just said, never in their history have they ever invested in over building and competing headtohead competing headtohead with Cable Companies. Theres nothing about this particular about this particular environment. Maybe wireless, someday we will get there. At this moment in time it is delivering everything that files that fios is providing. Harold the fcc has statistics going back many years. 90 of American Consumers have access to two or more wired broadband providers and the old definition. A lot of consumers are pretty happy with it. There is a lot of robust competition. Host i read something saying netflix percentage is up netflix usage is up 36 . If we have marked this content the ability to get it on the end . Gene hopefully you have mergers that dont interfere with that. That is the critical things. You have copies like amazon, netflix, google, sony, delivering services over broadband. If the desire is there from consumers the investment will come to build out. A lot of it will be demand driven, because a lot of people want the video product. As much talked about competition, the consumers see their cable bill go up every month, every be year every year. Prices havent been coming down like they do in a lot of consumer electronic markets. I think we are missing something on the competitive side. Harold consumers are going to the lower prices. The things you can do with your ipad or smartphone, it leaves a lot of consumers to completely abandon having wires in their home. I think the point you make initially, there is an enormous amount of investment going on in the content side. A lot of the broadband world is Companies Like google and facebook and twitter. Ofthose are areas where for whatever reason the American Economy dominates broadband globally. These wires, thats a local market. Fortunately americas doing well with this. Gautham the harold explained we do see mobile devices as the majority of traffic. Young people tend to spend more time looking at their ipad or iphone then they do on traditional television. Is it all misguided . Is it strange we are focused on a cable tv or wire merger when we seem like wireless when it seems like wireless is the place where most consumers are gravitating towards . Gene apple is investing more on the video side. You are seeing from quality online providers, all of the wireless device makers and content distributors, they still need a lot of the video product that is on traditional cable in order to drive more demand in order to the best in order to invest more. We are going to see more convergence across the to create across the two. You cannot disregard axis power in that transmission system. Harold i would just say that if one were to look at the market today and contrasted with where the market was five years ago 10 years ago, 15 years ago, this is a very rapidly changing market, rapidly changing technologies. I have a lot of confidence in the department of justice to get these things right. There is a certain amount of humility that is required in assessing mergers in a rapidly changing ecological environment. I think that is what we have here. Host one of the names that came up is john malone. Why is he important to this discussion . Harold john malone is one of the great giants in an industry filled with giant. He is\ has been a giant in the cable Media Industry for 30 years or more. First Major Company was tci the largest Cable Company in the 1980s and 1990s. He sold it to at t in 1998. Gene hes a character. He has been a leader in the cable industry, and sometimes to access. Some of his earlier exploits led to the regulation of the cable industry with driving prices very high and preventing Satellite Companies with getting content. I hope he has learned his lesson and is functioning in a purely competitive marketplace. Im sure the enforcement agencies will look at the facts