Attachment Public Interest Sta SES-T/C-20140604-00423

Attachment Public Interest Sta

This document pretains to SES-T/C-20140604-00423 for Transfer of Control on a Satellite Earth Station filing.

IBFS_SESTC2014060400423_1049107

PUBLIC INTEREST STATEMENT

I. INTRODUCTION

When the transaction between Comcast Corporation (“Comcast”) and Time Warner

Cable Inc. (“TWC”) was announced, Comcast stated its intention to reduce the combined

company’s video subscribers by approximately three million so that the number of Comcast’s

managed residential video subscribers would be less than 30 percent of the total U.S.

multichannel video programming distributor (“MVPD”) market. The proposed spin-off of

Comcast cable systems into a new, independent, publicly traded cable company (“SpinCo”) 1 is

one of three related transactions that together exceed that offer by divesting Comcast of almost

four million residential video subscribers.

The newly created SpinCo will serve approximately 2.5 million legacy Comcast video

subscribers in geographically aligned systems located in the Midwest and Southeast.

Immediately following the closing of the spin-off, Charter Communications, Inc. (“Charter”) will

acquire approximately one-third of the equity of SpinCo, with the remainder owned by Comcast

shareholders at the time of closing (including former TWC shareholders). Comcast itself will

have no ownership interest in or management or control of SpinCo after the spin-off is complete

and, for the first eight years thereafter, will be prohibited from owning more than 1 percent of

SpinCo’s shares.

The SpinCo transaction will create substantial public interest benefits. While SpinCo

will be a new company, it will be larger than all but four other cable companies in the United

States and will have a tightly integrated, contiguous service footprint. This scale and geographic

scope will facilitate investment in innovation and high-quality services within SpinCo’s

1 At least initially, SpinCo will be named “Midwest Cable LLC.”

footprint. From the outset, SpinCo will be well positioned to compete aggressively in the highly

competitive markets for high-speed Internet, voice, and video services. Through a services

agreement (“SA”) with Charter, SpinCo will be able to take advantage of Charter’s expertise in

technology and provision of services, further ensuring that SpinCo will be able to provide

excellent products and services to its customers. That arrangement, together with Charter’s

financial investment in SpinCo, also will enable SpinCo to leverage Charter’s scale and scope—

spurring joint investment in innovation, lowering shared input costs, and enhancing each

company’s ability to offer high-quality programming and advanced communications services.

The SpinCo transaction will produce no public interest harms. Because the divestiture to

SpinCo maintains exactly the same number of MVPDs in the regions SpinCo will serve, it will

have no anticompetitive impact. In short, the public interest benefits of the SpinCo transaction

more than justify its approval.

II. DESCRIPTION OF THE TRANSACTION

A. Parties To The Application

1. Comcast

Comcast Corporation is a global media and technology company with two primary

businesses—Comcast Cable and NBCUniversal—and approximately 136,000 employees.

Comcast’s network facilities cover portions of 39 states and the District of Columbia.

Comcast Cable is a leading provider of video, high-speed Internet, digital voice, and

other next-generation services and technologies to millions of residential customers and small

and medium-sized businesses. Comcast currently owns and operates cable systems serving

approximately 22.6 million video customers, including residential and business customers. It

also delivers high-speed Internet service to approximately 21.1 million customers, including

residential and business customers. Using voice over Internet protocol (“VoIP”) technology,

2

Comcast provides facilities-based, digital-quality phone service to approximately 10.9 million

customers, including residential and business customers. Comcast also owns NBCUniversal, a

global media, news, and entertainment company that operates the NBC and Telemundo

broadcast television networks, national and regional cable networks, and local NBC and

Telemundo broadcast stations, in addition to film and television production studios, theme parks,

and online services.

2. SpinCo

As part of this transaction, Comcast will form SpinCo and spin it off to Comcast

shareholders, thereby establishing a new, publicly traded cable company that will have a

seasoned management team, an advantageous footprint, and sufficient scale, enabling it to

compete vigorously to provide voice, Internet, and video services to residential and business

customers. Charter will make available to SpinCo an array of services under a three-year

agreement (with automatic renewals for one-year terms unless terminated by either party). In

conjunction with the SA between SpinCo and Charter, a temporary transition services agreement

between SpinCo and Comcast will ensure that the customers moving from Comcast to SpinCo

experience minimal disruption of service. Charter will acquire an approximate one-third stake in

SpinCo, which it will obtain from Comcast shareholders (including former TWC shareholders)

in exchange for Charter stock representing an approximate 13 percent stake in Charter (as of the

time the SpinCo transaction was announced). The rest of SpinCo’s equity will be held by

Comcast shareholders (including former TWC shareholders) as of the closing of the spin-off.

Comcast itself will not own shares in Charter or SpinCo following the closing of the spin-

off and will be prohibited, for the first eight years thereafter, from owning more than 1 percent of

SpinCo’s shares. In short, SpinCo will be entirely independent of Comcast. It will have a nine-

person board of directors, with six independent directors and three directors designated by
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Charter. Nor will Charter have control of SpinCo. Charter will be prohibited from increasing its

stake in SpinCo for the first two years following the closing of the spin-off and, absent approval

from SpinCo’s non-Charter appointed directors or its non-Charter shareholders, from owning

more than 49 percent of the company for the first four years following the closing of the spin-off.

Charter will have strong incentives to see SpinCo prosper, and SpinCo will enjoy

significant benefits from utilizing Charter’s expertise, technology, and increased scale. In

exchange for the ability to use any and all services set forth in the SA, SpinCo will make

quarterly payments equal to 4.25 percent of SpinCo’s quarterly gross revenues, plus the cost of

the services rendered. SpinCo’s success is thus further supported by the fact that SpinCo has

strong incentives to use Charter’s services, and Charter will be highly motivated to increase

SpinCo’s gross revenues. Finally, as discussed below, SpinCo will be led by a robust and

seasoned team of industry veterans.

3. Charter

Charter Communications, Inc. is a Delaware corporation, headquartered in Stamford,

Connecticut, whose shares are publicly traded on the NASDAQ Global Select Market. Charter

operates in 29 states, employs more than 21,000 people, and provides traditional cable video

services (basic and digital), advanced video services, high-speed Internet services, and voice

services to more than six million residential and business customers.

Charter serves approximately 4.2 million residential video customers—93 percent of

whom subscribe to digital video service. Charter has launched an aggressive all-digital initiative,

which it expects to complete by the end of this year, and it recently began market trials of a new,

cloud-based user interface for its TV platform. Charter also serves approximately 4.5 million

residential Internet customers, offering one of the fastest cable Internet services available, with

download speeds up to 100 Mbps. Charter has invested significantly in its broadband network
4

As part of the SpinCo transaction, Charter will form a holding company (“New Charter”).

At the closing of the SpinCo transaction, a direct, wholly owned subsidiary of New Charter

(“Merger Sub 2”) will merge with SpinCo and then cease to exist as a separate corporate entity.

Contemporaneously with the merger, New Charter will acquire an approximate 33 percent

interest in SpinCo from pro forma Comcast shareholders. Comcast shareholders (including

former TWC shareholders) will hold the remaining approximate 67 percent of SpinCo. Comcast

will thereafter have no debt or equity interest in SpinCo or Charter.

The Parties are also separately seeking approval for Comcast to divest to Charter cable

systems serving approximately 1.5 million former TWC video customers and for an exchange in

which approximately 1.5 million former TWC video customers will be transferred to Charter and

approximately 1.6 million Charter video customers will be transferred to Comcast. As a result of

these transactions, Charter will own, or provide services under contract to, cable systems serving

approximately 8.3 million video customers. These three transactions will (1) make good on, and

in fact exceed, Comcast’s offer to divest cable systems serving approximately three million

customers, (2) create a new company with a rational and geographically well-aligned footprint

and strong leadership and support, and (3) rationalize Comcast’s footprint while allowing

SpinCo and Charter to benefit from their contiguous geography. These benefits, in turn, will

result in greater efficiencies, and ultimately allow all three companies to better compete with

regional telecommunications company (“telco”) video providers, other incumbent local exchange

carriers (“ILECs”), national direct-broadcast satellite (“DBS”) providers, and other providers in

the competitive markets for video, high-speed Internet, and voice services within their respective

territories.

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Because the Transactions are contingent upon Commission approval and the closing of

the Comcast-TWC transaction, the Parties request that the Commission consider and process

these applications contemporaneously with the Comcast-TWC transaction applications in a

single pleading cycle. 3

III. THE COMMISSION’S PUBLIC INTEREST STANDARD

Pursuant to Sections 214(a) and 310(d) of the Communications Act, the Commission will

approve a transfer of control of authorizations and licenses upon a showing that it would not

violate any statute or rule, and that it would serve the “public interest, convenience and

necessity.” 4 In reviewing proposed transfers under this “public interest” standard, the FCC

balances the potential public interest benefits of the transaction against its potential harms and,

3 The Parties note that the Commission has not issued the Public Notice for the Comcast-TWC
transaction in light of an earlier such request. See Letter from Kathryn A. Zachem, Comcast, to Marlene
H. Dortch, FCC, MB Docket No. 14-57, at 1 (Apr. 30, 2014); Letter from Kathryn A. Zachem, Comcast,
to Marlene H. Dortch, FCC, MB Docket No. 14-57, at 3 (May 7, 2014).
4 In re Applications for Consent to the Transfer of Control of Licenses and Section 214 Authorizations
from MediaOne Group, Inc., Transferor, to AT&T Corp., Transferee, Memorandum Opinion and Order,
15 FCC Rcd 9816, 9820 ¶ 8 (2000) (“AT&T-MediaOne Order”); In re Applications of SOFTBANK
CORP., Starburst II, Inc., Sprint Nextel Corp., and Clearwire Corp. for Consent to Transfer Control of
Licenses and Authorizations; Petitions for Reconsideration of Applications of Clearwire Corp. for Pro
Forma Transfer of Control, Memorandum Opinion and Order, Declaratory Ruling, and Order on
Reconsideration, 28 FCC Rcd 9642, 9650–51 ¶ 23 (2013) (“Softbank-Sprint Order”); In re Applications
of AT&T Inc. and Atlantic Tele-Network, Inc. for Consent To Assign or Transfer Control of Licenses and
Authorizations, Memorandum Opinion and Order, 28 FCC Rcd 13670, 13,677–78 ¶ 12 (2013) (“AT&T-
ATN Order”); In re Applications Filed for Transfer of Control of Insight Commc’ns Co. to Time Warner
Cable Inc., Memorandum Opinion and Order, 27 FCC Rcd 497, 499–500 ¶ 7 (2012) (“Insight-TWC
Order”); In re Applications filed by Qwest Commc’ns Int’l Inc. and CenturyTel, Inc. d/b/a CenturyLink
for Consent to Transfer of Control, Memorandum Opinion and Order, 26 FCC Rcd 4194, 4198–99 ¶ 7
(2011) (“CenturyLink-Qwest Order”); In re Applications for Consent to the Assignment and/or Transfer
of Control of Licenses from Adelphia Commc’ns Corp. (and Subsidiaries, Debtors-In-Possession),
Assignors, to Time Warner Cable Inc. (Subsidiaries), Assignees, Adelphia Commc’ns Corp. (and
Subsidiaries, Debtors-In-Possession), Assignors and Transferors, to Comcast Corp. (Subsidiaries),
Assignees and Transferees, Memorandum Opinion and Order, 21 FCC Rcd 8203, 8217–18 ¶ 23 (2006)
(“Adelphia Order”).

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cable horizontal ownership rules 9—following the Comcast-TWC transaction. The SpinCo

transaction and associated SA ensure that divested customers will be well served by a company

with a compact, geographically rational footprint and scale and leadership in its own right that

will enable it to compete aggressively on price, quality, innovation, and service with ILECs,

other telco video providers, DBS providers, and other service providers. These are precisely the

kinds of benefits the Commission has credited in approving other transactions. 10

The systems SpinCo will acquire in the transaction will position SpinCo to be a

significant player in the MVPD market on day one. With approximately 2.5 million video

customers, SpinCo will be one of the top ten MVPDs and one of the five largest cable companies

in the United States—similar in size to Cablevision, which serves 2.8 million customers. SpinCo

will benefit from the advanced network architecture Comcast has deployed throughout its

systems over recent years, including a complete system migration to all-digital and full

deployment of DOCSIS 3.0, enabling Comcast to offer some of the industry’s fastest broadband

9 See Comcast Corp. v. FCC, 579 F.3d 1, 9 (D.C. Cir. 2009); Time Warner Entm’t Co., L.P. v. FCC, 240
F.3d 1126, 1136 (D.C. Cir. 2001).
10 See Insight-TWC Order, 27 FCC Rcd at 509 ¶ 26 (“The combined company’s broader service
footprint, increased operating efficiencies, and greater scale and scope create a potentially stronger
competitor to the incumbent LEC.”); Adelphia Order, 21 FCC Rcd at 8312–13 ¶¶ 256–259; In re General
Motors Corp. & Hughes Elec. Corp., Transferors, and News Corp., Transferee, for Authority to Transfer
Control, Memorandum Opinion and Order, 19 FCC Rcd 473, 620 ¶ 344 (2004) (“News Corp. Hughes
Order”) (“[W]e believe that the transaction is likely to enable the merged entity to achieve certain
economies of scale and scope, particularly in R&D, that absent the transaction the parties individually
could not have achieved.”); In re Applications for Consent to the Transfer of Control of Licenses from
Comcast Corp. and AT&T Corp., Transferors, to AT&T Comcast Corp., Transferee, Memorandum
Opinion and Order, 17 FCC Rcd 23,246, 23,317 ¶ 184 (2002) (“Comcast-AT&T Broadband Order”)
(“We also agree with the Applicants that the greater scale and scope of the merged entity is likely to spur
new investment. The development and deployment of new technologies often entails a significant up-
front, fixed investment. The merged company should have a greater ability to spread those fixed costs
across a larger customer base, which should in turn foster incentives for investment by the merged entity,
as well as other businesses that seek to sell equipment, technology, and services to the merged entity.”),
aff’d, Consumer Fed’n of Am. v. FCC, 348 F.3d 1009 (D.C. Cir. 2003).

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speeds. Many existing, experienced Comcast field personnel who have been operating the

systems will come on board as part of the spin-off and ensure continued high quality operation.

Under the SA with Charter, SpinCo also will enjoy considerable technology resources that will

ensure its ability to provide world-class video, broadband, and voice services to residential and

business customers in its footprint. Consequently, SpinCo will be poised to develop an even

stronger presence in the market going forward.

SpinCo’s leadership team, which will be comprised of industry veterans, will guide this

effort. Michael Willner, a 40-year cable industry veteran and former Insight Communications,

Inc. co-founder and CEO, will serve as President and CEO of SpinCo. Tom Rutledge, President

and CEO of Charter, will serve as Chairman of SpinCo’s Board of Directors, a non-executive

position. Mr. Rutledge will be joined by a team of industry-leading directors, including Rick

D’Avino, Dennis S. Hersch, Wendell F. Holland, Greg Doody, James Chiddix, Gregory Maffei,

and Christopher L. Winfrey (with an additional director to be named). 11 Together, they will

assemble a team of seasoned executives who will shepherd SpinCo’s delivery of high-quality,

advanced services, and establish its reputation for high-return investment and innovation.

1. SpinCo’s Geographically Rationalized Systems And Ability To Use
Charter’s Services Will Bring Significant Benefits For Customers.

The Commission has recognized that geographic rationalization—i.e., the “clustering” of

cable systems to serve geographically aligned communities—creates operational, procurement,

and marketing efficiencies. 12 It also has found that such cable “clustering” can substantially

11 The biographies of the SpinCo Directors are provided in Exhibit A.

12 See Insight-TWC Order, 27 FCC Rcd at 507–08 ¶¶ 23–24; Adelphia Order, 21 FCC Rcd at 8318, 8320
¶¶ 271, 276; In re Annual Assessment of the Status of Competition in the Market for the Delivery of Video
Programming, Thirteenth Annual Report, 24 FCC Rcd 542, 629 ¶ 180 (2009); In re Annual Assessment of
the Status of Competition in the Market for the Delivery of Video Programming, Eighth Annual Report,

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benefit consumers by strengthening cable companies that compete with ILECs, whose much

larger service areas provide them with a competitive advantage not only in offering voice,

Internet, and business services, but also increasingly in offering robust video services. 13 The

Federal Trade Commission has likewise concluded that geographic alignment “enables cable

firms to realize economies of scale associated with providing cable service in contiguous areas”

and to “lower several categories of costs, such as management, administrative and marketing

costs, as well as the expense of providing system upgrades.” 14 Moreover, the Commission has

17 FCC Rcd 1244, 1252 ¶ 14 (2002) (“By clustering their systems, cable operators may be able to achieve
efficiencies that facilitate the provision of cable and other services, such as telephony.”); In re
Implementation of § 11(c) of the Cable Television Consumer Protection and Competition Act of 1992,
Horizontal Ownership Limits, Third Report and Order, 14 FCC Rcd 19,098, 19,124 ¶ 63 (1999); In re
Implementation of Sections 11 and 13 of the Cable Television Consumer Protection and Competition Act
of 1992, Horizontal and Vertical Ownership Limits, Second Report and Order, 8 FCC Rcd 8565, 8573 ¶
17 (1993), aff’d in part, rev’d in part, Time Warner Entm’t Co., L.P. v. FCC, 240 F.3d 1126 (D.C. Cir.
2001).
13 See Insight-TWC Order, 27 FCC Rcd at 508 ¶ 24 (noting that, “in addition to improving marketing
efficiencies and reducing costs, the Commission has found that clustering can result in increased
facilities-based options for customers in geographic areas that are larger than a cable franchise area.
These increased options . . . can make cable operators more effective competitors to LECs, whose local
service areas are usually much larger than a franchise area.” (footnote omitted)); Adelphia Order, 21 FCC
Rcd at 8320 ¶ 276 (reiterating “the Commission’s previous findings that clustering could better position
cable operators as potential providers of [telephony] service,” and finding consumer benefit “to the extent
that the transactions, through clustering or through the proposed upgrades and deployment schedules,
result in the addition of competitive, facilities-based telephony service in” the relevant service areas); In
re Annual Assessment of the Status of Competition in Markets for the Delivery of Video Programming,
Sixth Annual Report, 15 FCC Rcd 978, 1051, ¶¶ 161–162 (2000) (“Sixth Video Programming Report”);
In re Annual Assessment of the Status of Competition in the Market for the Delivery of Video
Programming, Fifth Annual Report, 13 FCC Rcd 24,284, 24,371 ¶ 144 (1998) (“[C]lustering makes cable
providers a more effective competitor to LECs whose service areas are usually larger than a single cable
franchise area.”).
14 Sports Programming and Cable Distribution: The Comcast/Time Warner/Adelphia Transaction
Hearing Before the S. Comm. on the Judiciary, 109th Cong. 4 (2006) (prepared statement of Michael
Salinger, Dir. Bureau of Economics, Federal Trade Commission); see also id. (explaining that geographic
clustering positions cable companies “to compete with local telephone companies and other providers in
the delivery of home and video service”), available at
http://www.ftc.gov/sites/default/files/documents/public_statements/prepared-statement-federal-trade-
commission-sports-programming-and-cable-
distribution/p052103sportsprogrammingandcabledistributiontestimonysenate12062006.pdf.

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noted that divestiture of clustered assets can lead to substantial public interest benefits where the

acquirer is a new market entrant, or a regional, local, or rural provider of the divested services. 15

These benefits are present here. SpinCo will own valuable systems, concentrated

primarily in Alabama, Indiana, Kentucky, Michigan, Minnesota, and Tennessee. It will also

have a strong presence in important Midwestern population centers, including Detroit,

Minneapolis/St. Paul, Indianapolis, and Grand Rapids. The geographic concentration of

SpinCo’s systems, particularly if sharing services with Charter’s systems, will foster operational

and marketing efficiencies, ensuring that SpinCo can deliver high-quality, innovative services to

its new customers at competitive prices. This clustering also will reduce the cost of delivering

services over fixed networks and improve returns on additional investments in physical

infrastructure and associated labor. 16 For example, clustering will minimize driving distances to

and between customers, enabling SpinCo’s workforce (including any functions outsourced to

Charter under the SA) to respond quickly to customer care requests, and it will allow new

facilities with advanced technologies to reach more consumers. It also will reduce the costs of

delivering services in cloud-based IP format, thereby facilitating a transition of services to IP. 17

15 Cellco Order, 23 FCC Rcd at 17,518, ¶ 162 (explaining that divestiture can achieve external public
interest benefits—e.g., where the divestor adopts mechanisms to assist “regional, local, and rural wireless
providers, new entrants, small businesses, and businesses owned by minorities or socially disadvantaged
groups . . . in acquiring the Divestiture Assets” (emphases added)); see also In re Applications of AT&T &
Atl. Tele-Network, Inc. for Consent To Transfer Control of and Assign Licenses and Authorizations,
Memorandum Opinion and Order, 28 FCC Rcd 13,670, 13,689–90 ¶ 41 (2013) (noting with approval the
Department of Justice’s determination that “service providers may benefit from potential efficiencies
from serving a larger geographic area, and are likely to be more competitive when serving contiguous
areas”).
16 See Public Interest Statement of Charter Communications, Inc. and Comcast Corporation, Comcast-to-
Charter Exchange and Sale Transactions, MB Docket No. 14-57 (“Comcast-to-Charter Sale/Exchange
Public Interest Statement”), Ex. A ¶ 9 (Declaration of Richard R. Dykhouse) (“Dykhouse Decl.”).
17 See id.

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2. SpinCo Will Have Sufficient Scale to Compete.

SpinCo’s scale, within the confines of its geographic footprint, also will be an important

driver of public interest benefits. Economies of scale allow cable companies to invest in their

systems and services and to improve customer service. 18 Standing alone, SpinCo will serve

nearly 2.5 million video customers, placing it among the largest cable providers and the top 10

MVPDs in the country and providing the scale necessary to ensure delivery of competitive video,

broadband Internet, and voice services. This scale in itself is enough to enable SpinCo to

compete and provide the incentive to invest in service improvements, new technologies, and

high-quality customer care. 19 While the divestiture from Comcast necessarily means losing

Comcast’s larger scale, SpinCo will have enough presence and reach in the regions it serves—

either independently, or in connection with Charter under the SA—to foster innovation and fuel

competition.

B. SpinCo Customers Will Benefit As A Result.

The economic efficiencies SpinCo will realize from its geographic rationalization and

scale, as well as the significant support it may receive through its SA with Charter, will in turn

yield substantial benefits for residential and business customers.

First, as a result of the SA, SpinCo customers will have the opportunity to benefit from

Charter’s industry-leading broadband products and services. SpinCo will have the ability to

adopt the strategies and technologies Charter has been finding successful in, or developing for,

18 Applications and Public Interest Statement of Comcast Corporation and Time Warner Cable Inc., MB
Docket No. 14-57 (Apr. 8, 2014) (“Comcast-TWC Statement”), Ex. 5 ¶ 10 (Declaration of Dr. Gregory L.
Rosston & Dr. Michael D. Topper) (“Rosston/Topper Decl.”) (noting that “[s]cale can make the
difference between investing in a new product or service and not investing, and scale can accelerate the
introduction of products, services, and network and equipment enhancements.”).
19
See Insight-TWC Order, 27 FCC Rcd at 507–08 ¶ 23.

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its markets. For example, Charter consistently ranks among the top ISPs for the speeds it

delivers, 20 and, by the end of 2014, it will have increased its base residential broadband

downstream speed offering from 30 Mbps to either 60 Mbps or 100 Mbps for 94 percent of

homes passed, for no additional fee. 21 Similarly, Charter Business already has increased its

“Essentials30” and “Pro50” customers to 60 Mbps and 80 Mbps, respectively, also at no extra

cost. 22 Charter recently received recognition for offering the fastest in-home Wi-Fi service

among its competitors, and it is now extending this capability by launching a next-generation

802.11AC-based router this month. 23

Second, with geographically aligned cable systems serving a large customer base, and

with opportunities to leverage Charter’s scope and scale, SpinCo can compete aggressively on

price and quality in the highly competitive market for advanced video services. Charter

continuously invests in improving its video services, today offering consumers over ten thousand

VOD content options, hundreds of HD channels (including the most HD in many markets), the

20 See Ookla, Charter Communications Broadband performance, http://www.speedtest.net/isp/charter-
communications#chart=download (last visited June 3, 2014); FCC, Office of Eng’g & Tech. &
Consumer & Governmental Affairs Bureau, A Report on Consumer Wireline Broadband Performance in
the U.S. (Feb. 2013), available at http://www.fcc.gov/measuring-broadband-america/2013/February; see
also Netflix, USA ISP Speed Index Results Graph, November 2012–April 2014,
http://ispspeedindex.netflix.com/results/usa/graph?field_date_value%5Bmin%5D%5Byear%5D=2013&fi
eld_date_value%5Bmin%5D%5Bmonth%5D=1&field_date_value%5Bmax%5D%5Byear%5D=2014&fi
eld_date_value%5Bmax%5D%5Bmonth%5D=5&=Apply (last visited June 3, 2014).
21 Dykhouse Decl. ¶ 18.
22 Id.; Press Release, Charter Communications, Charter Begins Kicking Up Speeds to Kick Off 2014
(Jan. 6, 2014), available at http://phx.corporate-ir.net/phoenix.zhtml?c=112298&p=irol-
newsArticle&ID=1888126&highlight=.
23 Dykhouse Decl. ¶ 19; Press Release, Charter Communications, Charter Announces Launch of
802.11ac WiFi router - Capable of Providing the Fastest WiFi (Apr. 17, 2014) available at
http://phx.corporate-ir.net/phoenix.zhtml?c=112298&p=irol-newsArticle&ID=1919748&highlight=.

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company’s unique HD Auto Tune function, 24 and the free Charter TV App, which allows

customers to watch over 130 live TV channels on their mobile devices. 25 Additionally, Charter

recently began market trials on a new cloud-based user interface (“Sky UI”), which uses state-of-

the-art technology to create a two-way interactive, customizable user experience. 26 Charter

expects to make these same features, innovations, and products available to SpinCo for

deployment to its customers.

Third, SpinCo’s footprint and scale will also make it a strong competitor to regional

ILECs, which have long dominated the market for voice services. SpinCo will provide voice

services using VoIP technology within its service areas, stepping into the shoes of Comcast as a

key competitor in those markets. SpinCo also will have the ability to leverage Charter’s high-

quality, advanced voice service offerings.

Fourth, business customers in SpinCo’s footprint, including Metro Ethernet customers

and wireless carriers seeking competitive backhaul alternatives, will benefit from SpinCo’s and

Charter’s strategically aligned regional scope and scale. Lack of scale and geographic scope

have traditionally complicated efforts by cable providers to compete with incumbents for small

to mid-sized businesses, as well as regional and super-regional businesses. 27 To serve larger

24 HD Auto Tune automatically tunes customers with HD receivers to the HD version of the channel
requested. See Dykhouse Decl. ¶ 14; see also Charter Communications, HD Auto Tune,
http://www.myaccount.charter.com/customers/support.aspx?supportarticleid=3342.
25 See Dykhouse Decl. ¶ 14; Press Release, Charter Communications, Charter Announces Launch of
Charter TV App (Apr. 8, 2014); Charter Communications, Inc., Annual Report (Form 10-K), at 5 (Feb.
21, 2014).
26 See Dykhouse Decl. ¶ 15.
27 See Insight-TWC Order, 27 FCC Rcd at 508 ¶ 24; see also id. at 507–08 (“In particular, the proposed
transaction likely will provide benefits to residential and business customers through the combined
companies’ increased ability to compete with the incumbent LEC in the provision of voice service and
service bundles . . . . We agree that TWC’s scale and scope suggests that it could be a stronger

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business customers with multiple sites across a given geographic region effectively, business

service providers typically must have a correspondingly broad regional footprint, and one

without significant gaps in coverage areas. 28 The SpinCo transaction addresses this particular

issue by carving out a sufficiently contiguous footprint and including within it areas in and/or

around the major Midwestern business hubs of Detroit, Minneapolis/St. Paul, Indianapolis, and

Grand Rapids. Furthermore, because SpinCo’s systems will largely be adjacent to Charter’s, the

two companies will have the ability and incentive to work together in offering high-quality

services to regional and super-regional businesses and wireless carriers across a broader

geographic footprint, thereby positioning them to compete with ILECs.

The company’s scale and scope also will facilitate infrastructure investment by SpinCo to

bring more locations on network with fiber connections, increasing the attractiveness of these

business services offerings, especially to regional and super-regional companies with multiple

business sites and to wireless carriers with backhaul needs across a broad geographic area. Such

investment in business solutions for larger, regional businesses will benefit smaller local

businesses, as well as residential customers, in the form of improved overall network

performance and product innovations. 29

competitor to the incumbent telephone provider in Insight’s service territory, thereby resulting in benefits
for consumers.”); Adelphia Order, 21 FCC Rcd at 8320 ¶ 276 (“As for the deployment of telephony
service, we reiterate the Commission’s previous findings that clustering could better position cable
operators as potential providers of the service . . . . [T]o the extent that the transactions, through
clustering or through the proposed upgrades and deployment schedules, result in the addition of
competitive, facilities-based telephony service in Adelphia service areas or to unserved areas where
Applicants currently operate cable systems, we find that consumers could benefit.”).
28 See Comcast-TWC Statement at 91; id. at Ex. 4 ¶¶ 35–36 (Decl. of Michael J. Angelakis).
29 See Comcast-TWC Statement at 99.

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Finally, advertisers will benefit. SpinCo will have opportunities to adopt Charter’s next-

generation advertising technology and take advantage of Charter’s extensive local advertising

experience. SpinCo’s and Charter’s geographically aligned footprints will create opportunities

for advertising customers to address broader regional audiences on multiple screens, including

mobile devices, 30 and across multiple platforms, including video on demand and online. 31

Greater scale and a larger, rationalized footprint also will improve the business case for SpinCo’s

investment in developing more advanced advertising services, such as addressable advertising

and dynamic ad insertion for VOD, providing advertisers with more cost-effective methods of

reaching targeted audiences. And, as Comcast and TWC explain, greater investment in and

development of these advanced advertising technologies will also benefit consumers, who will

receive advertisements and offers more relevant to them. 32

* * *

Cable companies have attempted for years to partner in delivering services to residents

and businesses with only marginal success, given the inherent difficulties in managing

partnerships, aligning incentives, coordinating investment and delivery, and overcoming

geographic and technological hurdles. 33 By contrast, the SpinCo transaction is structured to

substantially mitigate these “transactional frictions.” A substantial equity investment in SpinCo

and an SA tying Charter’s compensation from that agreement directly to SpinCo’s revenues

create strong financial incentives for Charter to work for SpinCo’s success and for SpinCo to use

30 See Charter Media, Advertising Platforms, http://www.chartermedia.com/advertising-platforms (last
visited June 3, 2014) (presenting mobile marketing opportunities).
31 See id. (presenting advertising opportunities through Charter OnDemand and on Charter.net).
32 See Comcast-TWC Statement at 105–06.
33 See Rosston/Topper Decl. ¶¶ 73, 74, 79.

18

Charter’s services. Their regional proximity also aligns many incentives and makes joint efforts

easier and more productive. These factors will facilitate the kind of cooperation that proves

challenging for wholly unrelated or geographically disparate companies. As discussed above,

the resulting relationship contributes to SpinCo’s ability to provide significant benefits to

customers.

V. THE SPINCO TRANSACTION IS PRO-COMPETITIVE AND WILL CREATE
NO PUBLIC INTEREST HARMS.

Nothing about the transaction will reduce competition or create new competitive harms.

A. There Is No Threat Of Competitive Harm Arising From Any Horizontal
Elements Of The Transaction.

The SpinCo transaction will create no horizontal harms. As an initial matter, the SpinCo

transaction is a divestiture 34 that involves no horizontal concentration. 35 Indeed, as a new,

34 The Commission has recognized the generally pro-competitive effects of divestiture and, indeed, has
frequently required divestiture to remedy any anticompetitive effects of a proposed transaction. See, e.g.,
In re Implementation of Section 6002(B) of the Omnibus Budget Reconciliation Act of 1993, Annual
Report and Analysis of Competitive Market Conditions with Respect to Mobile Wireless, Including
Commercial Mobile Services, Sixteenth Report, 28 FCC Rcd 3700, 3762, ¶ 69 (2013) (“In markets where
the entities [facilities-based providers] were significant competitors, the Commission may have required
divestitures in specified markets as conditions of the transaction in order to prevent competitive harm”);
In re Applications of Cricket License Co., LLC et al., Leap Wireless Int’l, Inc., and AT&T Inc. for
Consent To Transfer Control of Authorizations Application of Cricket License Co., LLC and Leap
Licenseco Inc. for Consent to Assignment of Authorization, WT Docket No. 13-193, DA 14-349, ¶ 159
(FCC Mar. 13, 2014) (noting that “the commitments providing for spectrum divestitures . . . will
ameliorate the potential harms and ensure public interest benefits in those markets”); id. ¶ 163
(concluding that voluntary spectrum divestitures “will mitigate competitive harm”); Cellco Order, 23
FCC Rcd at 17,518 ¶ 162 (declining to impose conditions regarding potential acquirer of divested assets
and noting that, “to provide greater assurance that the buyer will be an effective competitor, DOJ is
requiring that certain groups of CMAs be divested to a single purchaser”).
35 Neither the SA nor Charter’s financial interest in SpinCo creates a horizontal concentration issue since
Charter does not control SpinCo and the two companies have minimal geographic overlap. The overlap
for residential and business customers on a zip+4 basis will be only approximately 0.05 percent following
the SpinCo transaction, and it is quite possible that Charter and SpinCo will not even provide overlapping
services (as opposed to just operating facilities within the same zip+4 area). The Commission has
previously concluded that such de minimis overlap does not present any competitive concerns. See
Insight-TWC Order, 27 FCC Rcd at 504–05 ¶ 17 (“Because the area in which [the parties] currently

19

SpinCo’s footprint, with OVDs offering still other video options. Therefore, competition for

video programming will remain equally robust within regional markets as well.

B. The SpinCo Transaction Entails No Additional Vertical Integration.

While the SpinCo divestiture is designed to mitigate any theoretical vertical integration

concerns raised in connection with the Comcast-TWC transaction, it also does not create any

new vertical integration concerns. SpinCo will not own any national video programming

services and, while a limited amount of programming may become attributable to SpinCo 36 (and

SpinCo will own two small local cable networks operated by the systems spun off from

Comcast), the net effect of the transaction will be to substantially decrease vertical programming

integration in the marketplace, since Comcast will not control or have an attributable interest in

SpinCo. 37

VI. THE SPINCO TRANSACTION IS FULLY CONSISTENT WITH THE
COMMUNICATIONS ACT AND THE COMMISSION’S RULES.

The SpinCo transaction will not implicate the Commission’s radio/television cross-

ownership rule, the local TV duopoly rule, the national TV broadcast audience cap, or the

newspaper/broadcast cross-ownership prohibition. Nor will these transactions implicate the

cable/BRS or cable/SMATV cross-ownership restrictions, or the LEC buyout restriction.

SpinCo will comply with the channel occupancy rules and with all other Commission rules.

36 See, e.g., 47 C.F.R. 76.100 (identifying cognizable attributable interests).

37 See Adelphia Order, 21 FCC Rcd at 8256 ¶ 116 (finding that competitive “harms are not likely to arise
with respect to affiliated national or non-sports regional programming, or unaffiliated programming”); id.
at 8279 ¶¶ 167–169 (addressing national and non-sports regional programming); id. at 8281–84 ¶¶ 173–
179 (addressing access to unaffiliated programming).

21

VII. PROCEDURAL MATTERS

The Parties request that the Commission review the Comcast-TWC transaction and the

divestiture transactions contemporaneously by, among other things, establishing a single

pleading cycle for these transactions and granting its approvals for all of the transactions

simultaneously.

Given the ongoing regulatory activity of the Parties and their subsidiaries, including the

possible need for those entities to file license applications with the Commission during the

pendency of the Commission’s review of the proposed transactions, the Parties request that the

Commission’s grant of approval of the transactions include, as appropriate: (1) any licenses

and/or authorizations issued to the Parties or any of their subsidiaries or affiliates during the

Commission’s review of the instant applications and the period required for the consummation of

the proposed transactions following approval; and (2) applications filed by the Parties or their

subsidiaries or affiliates that are pending at the time of the consummation of the proposed

transactions. Such action would be fully consistent with prior decisions of the Commission.38

VIII. CONCLUSION

For the foregoing reasons, the Commission should grant these applications, which serve

the public interest.

June 4, 2014

38 See, e.g., Comcast-NBCUniversal Order, 26 FCC Rcd at 4354 ¶ 291; Adelphia Order, 21 FCC Rcd at
8332 ¶ 312; AT&T-MediaOne Order, 15 FCC Rcd at 9896 ¶ 185; Comcast-AT&T Broadband Order, 17
FCC Rcd at 23,330–31 ¶ 224.

22

EXHIBIT A

Executive Biographies for Named Members of SpinCo’s Board of Directors 1

• Rick D’Avino joined General Atlantic in 2014 and works closely with the Resources Group,
investment teams and portfolio companies on all matters related to taxes. Mr. D’Avino
served as Vice President and Senior Tax Counsel of the General Electric Company from
1991 through 2013. He was on the Boards of Directors of GE Capital Corporation and GE
Capital Services, and of GE SeaCo, a joint venture between GE and Sea Containers Ltd.
Prior to GE, Mr. D’Avino was a tax partner at King & Spalding, and served as an Attorney-
Advisor and the Deputy Tax Legislative Counsel in the U.S. Treasury Department.

• James Chiddix has spent a career of 35 years in the cable industry, including senior roles at
both major service providers and equipment suppliers. He was the Chairman and Chief
Executive Officer of OpenTV Corporation prior to his retirement in 2007, having served in
this position from March 2004 until April 2007. From 2007 to 2009, he served as the Vice-
Chairman of the Board of OpenTV. Prior to 2004, his previous roles included President at
MystroTV (a division of Time Warner) and Chief Technology Officer and Senior Vice
President, Engineering and Technology at Time Warner Cable. Mr. Chiddix has served as a
director of Arris Group, Inc. since July 2009, and of Magnum Semiconductor Inc. since
October 2010. Mr. Chiddix previously served on the boards of Virgin Media Inc.,
Symmetricom Inc., Dycom Industries Inc., and Vyyo Inc. Mr. Chiddix attended the School
of Electrical Engineering at Cornell University.

• Gregory L. Doody became Senior Vice President, Business Affairs for Vineyard Brands in
January 2014. He previously served as Executive Vice President, Programming and Legal
Affairs for Charter Communications, a position to which he was appointed in January 2011
after having previously served as Executive Vice President and General Counsel since
December 1, 2009. He also served as Charter’s Chief Restructuring Officer and Senior
Counsel in connection with its Chapter 11 proceedings after being appointed on March 25,
2009. Prior to coming to work for Charter, Mr. Doody served as Executive Vice President,
General Counsel, and Secretary of Calpine Corporation from July 2006 through August
2008. From July 2003 through July 2006, Mr. Doody held various positions at HealthSouth
Corporation, including Executive Vice President, General Counsel, and Secretary. Mr.
Doody served as an executive officer of Charter during the pendency of its Chapter 11 cases
in 2009. Mr. Doody earned a J.D. degree from Emory University School of Law and
received a bachelor’s degree in management from Tulane University. Mr. Doody is a
certified public accountant.

• Dennis S. Hersch is President of N.A. Property, Inc., through which he acts as a business
advisor to Mr. and Mrs. Wexner, and has done so since February 2008. He also serves as a
trustee of several trusts established by Mr. and Mrs. Wexner. He was a Managing Director
of J.P. Morgan Securities Inc., an investment bank, from December 2005 through January
2008, where he served as the Global Chairman of its Mergers & Acquisitions Department.
Mr. Hersch was a partner of Davis Polk & Wardwell LLP, a New York law firm, from 1978
until December 2005. Mr. Hersch has served as a director at Sprout Foods, Inc., a producer
of organic baby food, since 2009. Mr. Hersch also served as a director of NBCUniversal

1
One additional director to the SpinCo board will be named at a later date.

Enterprise, Inc., a subsidiary of Comcast Corporation from 2013 to May 2014, and Clearwire
Corporation, a wireless, high-speed Internet service provider, from November 2008 to 2013.

• Wendell F. Holland served as Chairman of the Pennsylvania Public Utilities Commission
and as Treasurer of the National Association of Regulatory Utility Commissioners
(NARUC), in addition to serving on NARUC’s Executive Committee, its Board of Directors,
and as Chairman of its Audit and Investment committees. He is an attorney in private
practice. Mr. Holland has organized and participated in several international programs
relating to regulatory reform and energy sustainability. He has represented clients and
advised governments on utility matters in more than 25 countries. Between his terms as PUC
Chairman, Mr. Holland was Of Counsel at Obermayer Rebmann Maxwell & Hippel LLP
from 1999 to 2003; Vice President of American Water Works Company from 1996 to 1999,
and a Partner at Leboeuf Lamb Greene and Macrae LLP from 1993 to 1995, and at Saul
Ewing LLP from 2009 to 2013. Mr. Holland holds a B.S. from Fordham University and a
J.D. from the Rutgers University School of Law, Camden.

• Gregory Maffei is the President and CEO and a director of Liberty Media Corporation and
Liberty Interactive Corporation. Liberty Media owns interests in a broad range of media,
communications and entertainment businesses, including SiriusXM, Charter
Communications, Live Nation Entertainment and the Atlanta Braves. Liberty Interactive has
interests in digital commerce businesses, including TripAdvisor, QVC, Provide Commerce,
Backcountry.com, Bodybuilding.com, CommerceHub, BuySeasons, Evite, Expedia,
Tree.com, Interval Leisure Group, and HSN. Liberty’s stocks have significantly
outperformed the major stock indices and comparable companies under his tenure. Mr.
Maffei also serves as Chairman of the Liberty-related companies Live Nation Entertainment,
SiriusXM, Starz and TripAdvisor, and as a director of Charter Communications and Zillow.
Prior to his joining Liberty in 2005, Mr. Maffei served as President and CFO of Oracle,
Chairman, President and CEO of 360networks, CFO of Microsoft and Chairman of the Board
of Expedia. Additionally, he has served as a director of Barnes & Noble, Citrix, DIRECTV,
Dorling Kindersley, Electronic Arts and Starbucks Coffee. He has an MBA from Harvard
Business School, where he was a Baker Scholar, and an AB from Dartmouth College.

• Thomas M. Rutledge was appointed as a director and President and Chief Executive Officer
of Charter Communications effective on February 13, 2012. A 34 year cable industry
veteran, Mr. Rutledge served as Chief Operating Officer of Cablevision from April 2004
until December 2011 and previously served as president of Time Warner Cable. He began
his career in 1977 at American Television and Communications (“ATC”), a predecessor
company of Time Warner Cable. Mr. Rutledge currently serves on the board of the National
Cable and Telecommunications Association (“NCTA”). He served as Chairman of the
NCTA from 2008 to 2010 and currently serves on the boards of CableLabs, C-SPAN, and the
Cable & Telecommunications Association for Marketing (“CTAM”) Educational
Foundation. In 2011, Mr. Rutledge received NCTA’s Vanguard Award for Distinguished
Leadership, the cable industry’s highest honor. He is a member of the Cable Hall of Fame
and was inducted into the Broadcasting and Cable Hall of Fame in 2011. He received a B.A.
in economics from California University in California, Pennsylvania in 1977.

2

• Christopher L. Winfrey joined Charter Communications as Executive Vice President and
Chief Financial Officer on November 1, 2010. Mr. Winfrey is responsible for all of
Charter’s financial functions, including accounting, financial planning and analysis, tax and
treasury, mergers and acquisitions, capital structure activities, and investor relations. He also
directs Charter’s supply chain management, facilities, revenue assurance, and business
intelligence teams. Prior to joining Charter, Mr. Winfrey served as Chief Financial Officer
and Managing Director of Unitymedia GmbH, Germany’s second-largest provider of media
and communications services via broadband cable, from March 2006 through October 2010.
Mr. Winfrey was also appointed Managing Director of Unitymedia Management GmbH,
Unitymedia Hessen Verwaltung GmbH, and Unitymedia NRW GmbH in March 2006 and
arena Sport Rechte und Marketing GmbH in April 2008. He has held leadership and finance
positions with Cablecom and NTL Europe, assuming a key role in the operational
turnaround, triple-play services rollout, and capital markets development at these companies
over the last decade. Mr. Winfrey graduated from the University of Florida, with a B.S.
degree in Accounting. He also received his M.B.A. from the University of Florida.

3

Document Created: 2014-06-04 21:42:13
Document Modified: 2014-06-04 21:42:13

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