Attachment Public Interest Stat SES-T/C-20140605-00412

Attachment Public Interest Stat

This document pretains to SES-T/C-20140605-00412 for Transfer of Control on a Satellite Earth Station filing.

IBFS_SESTC2014060500412_1049080

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 divestiture of

cable systems serving former TWC subscribers from Comcast to Charter Communications, Inc.

(“Charter”) in an asset sale and exchange are two of three related transactions that together

exceed that offer by divesting Comcast of almost 4 million residential video subscribers.

In the “Asset Sale,” Comcast will divest to Charter cable systems serving approximately

1.5 million former TWC video subscribers. Comcast and Charter will also exchange cable

systems currently serving approximately 1.5 million former TWC video subscribers and

approximately 1.6 million Charter video subscribers (the “Exchange Transaction,” and, together

with the Asset Sale, the “Transactions”). As a result of these Transactions and the proposed

spin-off of systems serving approximately 2.5 million legacy Comcast video subscribers into a

new, independent, publicly traded cable provider, Charter will own, or provide services under

contract to, cable systems serving approximately 8.3 million video customers. 1

By increasing Charter’s scale and rationalizing its footprint, the Transactions will deliver

a number of public interest benefits. Charter will be better positioned to compete with regional

1 This public interest statement focuses on the benefits from the Asset Sale and the portion of the
Exchange Transaction involving systems being transferred to Charter, while separate public interest
statements address the portion of the Exchange involving systems being transferred to Comcast and the
SpinCo transaction, respectively.

telecommunications company (“telco”) video providers, national direct-broadcast satellite

(“DBS”) providers, incumbent local exchange carriers (“ILECs”), and other service providers,

while bringing its class-leading services and products to former TWC customers. Furthermore,

Charter’s rationalized footprint and increased scale will create operational and marketing

efficiencies and facilitate greater investment in innovative products and technology to the benefit

of customers.

The Transactions will produce no public interest harms. Because Charter and TWC serve

distinct geographic areas today and will do so following the Comcast-TWC transaction,

Charter’s acquisition of former TWC assets will not reduce the number of MVPD competitors in

those areas. In short, the public interest benefits of the Transactions more than justify their

approval. 2

II. DESCRIPTION OF THE TRANSACTIONS

A. The Applicants

1. 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,

2 The Transactions are contingent upon the Commission’s approval of the Comcast-TWC transaction.

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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

and offerings by, for instance, deploying DOCSIS 3.0 wideband technology across

approximately 94 percent of its footprint. In addition, Charter provides advanced voice services

to approximately 2.3 million residential customers, primarily using voice over Internet (“VoIP”)

technology. Voice service typically includes unlimited local and long distance calling in the

United States, Canada, Puerto Rico, the U.S. Virgin Islands, and Guam, as well as various

advanced features such as voicemail, call waiting/forwarding, anonymous caller rejection, 3-way

calling, and caller ID.

Charter Business, which has approximately 581,000 commercial primary service units,

provides scalable, tailored communications solutions, including advanced video services,

broadband Internet access, business voice services, data networking, and “last-mile” fiber

connectivity to cellular towers and office buildings. Through its advertising sales division,

Charter Media, the company also provides local, regional, and national businesses with the

opportunity to advertise on cable television networks in individual markets.

2. 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
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operational and other efficiencies and enabling Charter to compete more effectively with national

and regional providers of voice, video, and high-speed Internet services.

In a third transaction, which is the subject of a separate filing with the Commission,

Comcast will spin-off geographically aligned cable systems serving approximately 2.5 million

legacy Comcast video customers in the Midwest and Southeast to Comcast shareholders after

Comcast acquires TWC, thereby establishing “SpinCo” as a new, independent, publicly traded

cable company. 4 Charter will acquire an approximate 33 percent interest in, and make certain

services available to, SpinCo, and Comcast shareholders (including former TWC shareholders)

will hold the remaining approximate 67 percent interest in SpinCo. Comcast will have no

ownership interest in, and will not be involved in the management of, SpinCo.

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

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

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

single pleading cycle. 5

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

4 SpinCo will serve legacy Comcast video customers in Alabama, Georgia, Illinois, Indiana, Kentucky,
Ohio, Michigan, Minnesota, Tennessee, Virginia, and Wisconsin. SpinCo also will acquire two Comcast
local programming networks as part of this third transaction: the Comcast Television Network
(Michigan) and Hoosier TV (Indiana).
5 Applicants 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).

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necessity.” 6 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,

where potential harms appear less likely or less substantial, a lesser showing of public interest

benefits suffices. 7

The Commission has repeatedly emphasized that a specific license-transfer proceeding

must be focused on transaction-specific harms and benefits and is not a forum for parties to air

pre-existing disputes or industry-wide policy concerns. 8 Thus, in the absence of market overlap

6 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 13,670, 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”).
7 In re Applications of AT&T Inc. & Cellular S., Inc. for Consent To Assign Licenses Covering Parts of
Alabama, Georgia, and Tennessee, Memorandum Opinion and Order, 28 FCC Rcd 12,328, 12,335, ¶ 16
(2013); In re Applications of AC BIDCO, LLC, GOGO Inc., & LIVETV, LLC for Consent To Assign
Commercial Aviation Air-Ground Radiotelephone (800 MHz band) License, Call Sign WQFX729,
Memorandum Opinion and Order, 28 FCC Rcd 3362, 3370, ¶ 23 (2013) (“AC BIDCO Order”).
8 E.g., In re Applications of Comcast Corp., General Elec. Co. & NBCUniversal, Inc. for Consent to
Assign Licenses and Transfer Control of Licenses, Memorandum Opinion and Order, 26 FCC Rcd 4238,
4313, ¶ 180 & n.471 (2011) (“Comcast-NBCU Order”).

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rationalization—i.e., the “clustering” of cable systems to serve geographically aligned

communities—creates operational, procurement, and marketing efficiencies. 11 It also has found

that such cable “clustering” can substantially 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 service. 12 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

11 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,
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).
12 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.”).

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costs, such as management, administrative and marketing costs, as well as the expense of

providing system upgrades.” 13

These well-recognized public interest benefits are equally present here. Charter’s

enhanced regional footprint will create opportunities to realize substantial operational and

marketing efficiencies, reduce key input costs, attract more advertising revenue, and pursue

greater investment in advanced services and associated network upgrades. For example, Charter

will be able to market across a wider, more contiguous geographic region, allowing it to compete

more effectively with DBS providers, ILECs, other telco video providers, and wireless providers,

which all market on a national or regional scale. A mass media campaign within a defined mass

media market (whether television, radio, or newspaper) is cost-effective only if there is a

sufficient number of potential subscribers within that market. Because the geographic dispersion

of Charter’s current cable systems limits the number of potential subscribers within many

markets, Charter can efficiently use mass media for marketing in approximately 50 percent of its

footprint. As a result of the Transactions, and because of the geographic proximity of SpinCo’s

systems to Charter’s systems and the financial incentives for the two companies to work

together, Charter anticipates that it and SpinCo will be able to cooperate to use mass media in

over 95 percent of their footprints. The improved marketing and coordination will make the

company a stronger competitor, facilitating greater investment in products and services.

13 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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A denser footprint will also improve the efficiency of Charter’s workforce. Filling in

gaps in Charter’s current footprint will allow Charter to centralize and better deploy its service

personnel and equipment. This will provide cost efficiencies and also reduce response times to

locations for installations, service calls, disconnects and plant maintenance.

Charter’s rationalized footprint will also improve its network by reducing the cost of

delivering services over fixed networks, facilitating additional investment in physical

infrastructure and associated labor. 14 For example, a denser footprint (combined with greater

scale, as discussed below) reduces the per household cost of ingesting and encoding local

content, thereby reducing the cost of delivering services in cloud-based IP format and facilitating

Charter’s ongoing transition of services to IP. 15

2. The Transactions Bring Public Interest Benefits By Enhancing
Charter’s Scale.

In addition to rationalizing Charter’s footprint, the Transactions will increase Charter’s

scale by a net of 1.4 million video customers. Though a divestiture inevitably requires losing

access to Comcast’s scale, the Transactions will make Charter the second largest cable company

in the country. This increased scale, in turn, will lower per-customer costs for fixed investments

by spreading the investment over a larger customer base and increasing efficiencies, thus

benefitting customers via increased investments in advanced services. As economists Drs.

Rosston and Topper explain with regard to the Comcast-TWC transaction, “[s]cale can make the

difference between investing in a new product or service and not investing, and scale can

14 See Declaration of Richard R. Dykhouse ¶ 9 (“Dykhouse Decl.”), attached hereto as Exhibit A.
15 See id.

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accelerate the introduction of products, services, and network and equipment enhancements.” 16

The point applies with equal force to the ability of smaller, more regional market participants—

like Charter—to compete in highly competitive markets for video, Internet, and voice services. 17

Cable companies “increasingly need to compete for customers with satellite companies, telcos,

and other distributors by making investments in the development of new platforms and services

and upgrading their networks, all of which have large fixed costs.” 18 Increased scale will enable

Charter to spread those fixed costs over more customers, enhancing Charter’s ability and

incentive to invest in the development and deployment of innovative new technologies. As

discussed below, Charter’s increased scale will bring substantial benefits to consumers. 19

3. Geographic Rationalization And Enhanced Scale Will Benefit Charter
Customers.

The geographic rationalization and enhanced scale resulting from the Transactions will

result in the delivery of new and advanced services and enhanced performance to Charter’s

residential and business customers, ensuring that they benefit from the Transactions as other

customers benefit from their acquisition by Comcast. These are precisely the kind of benefits the

Commission has credited in other transactions. 20

16 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 (Decl. of Dr. Gregory L.
Rosston & Dr. Michael D. Topper) (“Rosston/Topper Decl.”).
17 See Insight-TWC Order, 27 FCC Rcd at 507–08, ¶ 23.
18 Rosston/Topper Decl. ¶ 45.
19 Id. ¶ 56; see Dykhouse Decl. ¶¶ 10–11.
20 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

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First, the Transactions will spread Charter’s advanced video services to more customers

and increase its ability to deliver new innovative services. Charter has invested over $3 billion

since early 2012 on infrastructure and technology and is on track to upgrade its existing facilities

to all-digital by the end of this year. Charter continuously invests in improving its video

offering, today offering consumers over ten thousand VOD content options, hundreds of HD

channels (including the most HD in many markets), the company’s unique HD Auto Tune

function, 21 and the free Charter TV App, which allows customers to watch over 130 live TV

channels on their mobile devices. 22 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. 23

Post-transaction, Charter anticipates investing substantially in the TWC infrastructure to

bring many of these benefits to the acquired TWC systems. Among other things, Charter expects

Order”) (“Based on the evidence presented by Applicants, we 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).
21 HD Auto Tune automatically tunes customers with HD receivers to the HD version of the channel
requested. See Dykhouse Decl. ¶¶ 13–14; see also Charter Communications, HD Auto Tune,
http://www.myaccount.charter.com/customers/support.aspx?supportarticleid=3342.
22 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) (“Charter Form 10-K”).
23 See Dykhouse Decl. ¶ 15.

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to upgrade the acquired TWC systems to all-digital within two years of closing. By contrast,

TWC’s all-digital migration currently is complete in only about 17 percent of its footprint, and

TWC expects to have completed the migration in only 75 percent of its footprint by the end of

2016. 24 Charter’s increased scale will also reduce the cost of new set-top boxes, supporting

Charter’s effort to deploy fully functional two-way digital set-top boxes on every residential

outlet. And reduced content encoding costs due to clustering, coupled with improved scale, will

facilitate increasingly providing cable services in IP format. 25

Second, Charter will be able to deliver improved broadband Internet services to new

customers. Charter has invested significantly in its network in order to provide best-in-class

broadband to its customers. It soon will have deployed DOCSIS 3.0 to its entire broadband

footprint, 26 and Charter consistently ranks among the top ISPs for the speeds it delivers to its

customers. 27 By the end of 2014, Charter 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. 28 By contrast, TWC’s most popular downstream speed

offering is 15 Mbps and its highest residential broadband downstream speed offering in all but

24 See Comcast-TWC Statement at 14.
25 See Dykhouse Decl. ¶ 9.
26 Charter Form 10-K at 6; Dykhouse Decl. ¶ 18.
27 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).
28 Dykhouse Decl. ¶ 18.

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certain select markets is 50 Mbps. 29 Similarly, Charter Business already has increased its

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

cost. 30 TWC small and medium business customers in the acquired systems only have access to

speeds of up to 50 Mbps. 31 And 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. 32 Charter will extend these and other

popular broadband offerings to former TWC customers, investing in those networks (including

by transitioning them to all-digital service) in order to increase broadband speeds.

Third, the Transactions will increase Charter’s ability to compete with larger regional

ILECs, which have long dominated the market for telephony services. Charter already provides

advanced voice services to approximately 2.3 million residential customers and 152,000

commercial voice customers. 33 Nonetheless, like other cable companies, Charter faces

challenging competition from more entrenched ILECs such as CenturyLink, AT&T, and

Verizon, which benefit from (among other things) a much broader and clustered geographic

reach.

The Transactions will help overcome these disadvantages. The Commission has

recognized that larger, more rational systems can “make cable operators more effective

29 Comcast-TWC Statement at 32.
30 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=.
31 Comcast-TWC Statement at 14.
32 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=.
33 See Dykhouse Decl. ¶ 20.

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competitors to LECs, whose local service areas are usually much larger than a franchise area.” 34

Indeed, it has cited these benefits in approving acquisitions by larger cable companies of smaller

in-region cable systems. 35

Fourth, business customers in Charter’s new footprint will benefit from Charter’s

strategically aligned scope and scale. As Comcast and TWC explain,36 and as the Commission

has acknowledged, 37 limited geographic scope and scale have complicated efforts by cable

companies to compete with incumbents in the market for business customers. To serve larger

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. Given Charter’s widely dispersed footprint, the

34 See Insight-TWC Order, 27 FCC Rcd at 508 ¶ 24; see also id. at 507–08 ¶ 23 (“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. For example, Applicants explain that the combination of their networks will
create operating efficiencies and scale and scope advantages in procuring key inputs . . . . We anticipate
that this will allow the merged entity to offer new services to a broader range of customers . . . . We agree
that TWC’s scale and scope suggests that it could be a stronger 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.”).
35 See Insight-TWC Order, 27 FCC Rcd at 507–08 ¶¶ 23–24; Adelphia Order, 21 FCC Rcd at 8320 ¶
276.
36 See Comcast-TWC Statement at 90–92.
37 See Insight-TWC Order, 27 FCC Rcd at 507–09 ¶¶ 23, 26.

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company has found it challenging to make inroads with larger, regional business customers to

date. 38

The expansion and rationalization of Charter’s systems will make it easier to meet the

demands of regional and super-regional business customers. By strengthening Charter’s

presence in the Midwest and Southeast, the Transactions will position Charter to compete more

vigorously with incumbent service providers, including CenturyLink, AT&T, and Verizon, for

larger businesses with multiple sites across its expanded service region. Charter’s greater scale

also will facilitate increased investment in enterprise capabilities, including investment to bring

more locations on network with deeper fiber connections and to develop and deploy the

advanced platforms needed to manage vast amounts of data. 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. 39

Finally, Charter’s post-transaction scale and rationalized geographic scope will benefit its

advertising customers. Charter’s geographically aligned footprint will create opportunities for

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

mobile devices, 40 and across multiple platforms, including video on demand and online. 41

Greater scale and a larger, more rationalized footprint will enable advertisers to reach more

38 Commercial services revenue—primarily derived from small and mid-sized businesses (as well as
carrier wholesale service)—accounted for only about 10 percent of Charter’s revenue in 2013. See
Charter Form 10-K, at 6.
39 See Comcast-TWC Statement at 99.
40 See Charter Media, Advertising Platforms, http://www.chartermedia.com/advertising-platforms
(presenting mobile marketing opportunities).
41 See id. (presenting advertising opportunities through Charter OnDemand and on Charter.net).

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customers and improve the business case for 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. 42

B. Charter Could Not Accomplish The Same Benefits Without The
Transactions.

The public interest benefits described above would be difficult for Charter to deliver

without the geographic rationalization and scale provided by the Transactions. As Comcast and

TWC point out, cable companies have attempted for years to partner to deliver many of the same

benefits that flow from the Transactions, but with marginal success. These efforts often fail as a

result of inherent difficulties in managing partnerships, aligning incentives, coordinating

investment and delivery, and overcoming geographic and technological hurdles. 43 By acquiring

former TWC systems, Charter can achieve the scale partnerships aspire to achieve, while

avoiding the many pitfalls of partnering with unaffiliated companies. 44

V. THE TRANSACTIONS WILL CREATE NO PUBLIC INTEREST HARMS.

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

42 See Rosston/Topper Decl. ¶¶ 73–79, 145.
43 See id. For example, as Drs. Rosston and Topper explain in connection with the Comcast-TWC
transaction, “[c]able operators may be hesitant to invest in new facilities or technologies in their regions if
the return on such investment is dependent on other cable operators making complementary investments
in other regions at the same time.” Id. ¶ 75.
44 See, e.g., Comcast-NBCU Order, 26 FCC Rcd at 4355 ¶ 237.

17

preferred programming—competition for video programming will remain equally robust within

regional markets as well. 47

Advertising competition will also suffer no harm. The lack of geographic overlap

between local and regional markets in which Charter and TWC currently operate means they do

not compete for advertisers seeking to reach any given cable household. Therefore, the

Transactions will not reduce the number of competitive choices for advertisers within those

markets. 48

B. The Transactions Entail No Additional Vertical Integration.

While mitigating any theoretical vertical integration concerns raised in connection with

the Comcast-TWC transaction, the Transactions also do not meaningfully increase vertical

integration for Charter. Charter will not acquire any national video programming services, and

the transfer of three local news and weather channels does not affect the analysis. 49 Charter’s

acquisition of four regional sports networks (“RSNs”) 50 will not increase its ability or incentive

to discriminate against non-affiliated RSNs because, as Drs. Rosston and Topper explain, the

company would lose MVPD subscribers if it failed to carry their preferred programming. 51 Nor

will these acquisitions give Charter the ability or incentive to withhold access to its RSN

47 In addition to the two DBS providers, AT&T and CenturyLink, for example, compete as video
providers in various areas throughout Charter’s footprint, and OVDs offer still other video options.
48 Cf. Comcast-NBCUniversal Order, 26 FCC Rcd at 4303 ¶ 153; see id. at 4302–03 ¶ 152.
49 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).
50 Charter will acquire the following RSNs as part of the Transactions: TWC SportsChannel
(Cincinnati/Dayton), TWC SportsChannel (Cleveland/Akron), TWC SportsChannel (Columbus/Toledo),
and TWC SportsChannel (Milwaukee, Green Bay).
51 See Rosston/Topper Decl. ¶¶ 202–205.

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programming, which would deprive Charter of valuable programming revenue, or to impose

uniform price increases, which could provoke other MVPDs simply to drop the Charter-affiliated

channels from their lineups, resulting in a similar loss of revenue. And the Commission’s

program access rules adequately address any possible competitive concerns that may remain.

VI. THE TRANSACTIONS ARE FULLY CONSISTENT WITH THE
COMMUNICATIONS ACT AND THE COMMISSION’S RULES.

The Divestiture transactions 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.

Charter will ensure its compliance with the channel occupancy rule and other Commission rules

following the Transactions.

VII. PROCEDURAL MATTERS

Applicants request that the Commission review the Comcast-TWC transaction and the

divestiture transactions together 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 Applicants 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 Applicants request that

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

and/or authorizations issued to the Applicants 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 Applicants or

20

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

transaction. Such action would be fully consistent with prior decisions of the Commission. 52

VIII. CONCLUSION

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

the public interest.

June 4, 2014

52 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.

21

EXHIBIT A

DECLARATION OF RICHARD R. DYKHOUSE

1. My name is Richard R. Dykhouse. I am the Executive Vice President, General

Counsel, and Corporate Secretary of Charter Communications, Inc. (“Charter”). I have held

these positions since February 2013, having previously served as Senior Vice President, General

Counsel, and Corporate Secretary since 2011 and as Vice President from 2006 to 2011. I was

deeply involved in the discussions among Charter executive management regarding the decision

to enter the arrangements with Comcast Corporation (“Comcast”) described below, as well as the

negotiations with Comcast executive management regarding the structure of these arrangements.

2. The purpose of this declaration is to describe the many opportunities presented to

Charter by the proposed divestiture of cable systems serving former Time Warner Cable Inc.

(“TWC”) subscribers in an asset sale and exchange. In the “Asset Sale,” Comcast will divest to

Charter cable systems serving approximately 1.5 million former TWC video subscribers.

Comcast and Charter will also exchange cable systems currently serving approximately 1.5

million former TWC video subscribers and approximately 1.6 million Charter video subscribers

(the “Exchange Transaction,” and, together with the Asset Sale, the “Transactions”).

3. Specifically, the Transactions present opportunities for Charter to realize

operational and marketing efficiencies, reduce key input costs, attract more advertising revenue,

and pursue greater investment in advanced services and associated network upgrades. As

described below, by increasing our scale and rationalizing our footprint, the Transactions will

better position Charter to compete with regional telecommunications company (“telco”) video

providers, national direct-broadcast satellite (“DBS”) providers, incumbent local exchange

carriers (“ILECs”), and other service providers, while bringing class-leading services and

products to former TWC customers.

4. Charter today is one of the leading cable companies in the country. We operate in

29 states, employ more than 21,000 people, and provide traditional cable video services,

advanced video services, high-speed Internet services, and voice services to more than 6 million

residential and business customers. We serve approximately 4.2 million residential video

customers, 93 percent of which subscribe to digital video service; approximately 4.5 million

residential Internet customers, to whom we offer one of the fastest cable Internet services on the

market, with download speeds up to 100 Mbps; approximately 2.3 million residential voice

customers, primarily using voice over Internet (“VoIP”) technology; and approximately 581,000

commercial primary service units, providing scalable, tailored communications solutions through

our Charter Business division. Lastly, Charter’s advertising sales division, Charter Media,

provides local, regional, and national businesses with the opportunity to advertise on cable

television networks in individual markets.

5. Charter competes aggressively to provide advanced voice, video, and broadband

services to customers. As discussed below, the Transactions will make Charter an even stronger

competitor by geographically rationalizing our footprint and enhancing our scale, which will

provide significant benefits to Charter’s customers.

A. The Transactions Will Geographically Rationalize Charter’s Footprint And
Enhance Charter’s Scale.

6. The Transactions will rationalize Charter’s footprint by filling geographic gaps

and adding cable systems that are adjacent to our existing systems. The Transactions will give

Charter a stronger presence in the Midwest and Southeast, which will make us a more effective

competitor to regional and national competitors in those regions. Our enhanced regional

footprint post-transaction will create opportunities to realize substantial efficiencies, reduce key

2

input costs over time, attract more advertising revenue, and pursue greater investment in

upgrades and advanced services.

7. Post-transaction, Charter will be able to market across a wider, more contiguous

geographic region, allowing us to compete more effectively with DBS providers, telco video

providers, ILECs, and wireless providers. A mass media campaign within a defined mass media

market (whether television, radio, or newspaper) is cost-effective only if there is a sufficient

number of potential subscribers located within that market. The geographic dispersion of

Charter’s current cable systems limits the number of potential subscribers within many mass

media markets, and we are today able to efficiently use mass media in only approximately 50

percent of our footprint. As a result of the Transactions, and because of the geographic

proximity of SpinCo’s systems to Charter’s systems and the financial incentives for the two

companies to work together, Charter anticipates that it and SpinCo will be able to cooperate to

use mass media in over 95 percent of their footprints. This improved marketing will make the

company a stronger competitor, which will facilitate greater investment in products and services.

8. A denser footprint will also improve the efficiency of Charter’s workforce.

Filling in gaps in our current footprint increases our density in local markets, allowing us to

centralize and better deploy service personnel and equipment. This increased geographic

density, in turn, will bring cost efficiencies and also reduce response times to locations for

installations, service calls, disconnects, and plant maintenance.

9. Charter’s rationalized footprint will also improve our network by reducing the

cost of delivering services over fixed networks, which will facilitate additional investment in the

physical infrastructure and associated labor necessary to deliver increasingly advanced

technologies. For example, a denser footprint (combined with greater scale) will reduce the per

3

household cost of ingesting and encoding local content, thereby reducing the cost of delivering

services in cloud-based IP format. This will facilitate our ongoing transition of services to IP.

10. The Transactions will also increase Charter’s scale. After the Asset Sale and

Exchange, Charter’s size will increase by approximately 30 percent; the number of video

customers Charter serves will grow from approximately 4.4 million to approximately 5.8 million.

This increased scale, in turn, will enable Charter to spread those fixed costs over more

customers, enhancing Charter’s ability and incentive to invest in the development and

deployment of innovative new technologies.

B. Benefits to Residential Customers

11. The geographic rationalization and enhanced scale of Charter’s systems resulting

from the Transactions will enable Charter to improve performance and deliver innovative new

video, broadband Internet, and voice services to our residential customers.

12. Video Services. Residential video subscribers will benefit from Charter’s

increased ability to undertake large fixed-cost investments in innovative new video technologies

and the necessary infrastructure to support those technologies. Charter has already demonstrated

a strong commitment to such investment, and we will leverage our enhanced scale and expanded

scope to build upon our current endeavors.

13. Since early 2012, Charter has invested over $3 billion in infrastructure and

technology. As a result, we are on track to upgrade our existing facilities to all-digital by the end

of 2014. Charter plans to upgrade the former TWC systems we will acquire from Comcast to all-

digital within two years following the Transactions’ closing. We anticipate investing

substantially in the TWC infrastructure to bring many other Charter benefits to the acquired

TWC systems as well.

4

14. Charter continuously invests in improving its video offering, today offering

consumers over ten thousand VOD content options, hundreds of HD channels (including the

most HD in many markets), the company’s unique HD Auto Tune function, which automatically

tunes customers with HD receivers to the HD version of the channel requested, and the free

Charter TV App, which allows customers to watch over 130 live TV channels on their mobile

devices.

15. Additionally, we recently began market trials on a new cloud-based user interface

for our TV platform (“Sky UI”), which uses state-of-the-art technology to create a two-way

interactive, customizable user experience.

16. Charter is also currently engaged in an effort to deploy fully functional two-way

digital set-top boxes on every residential outlet. The economies of scale resulting from the

Transactions should significantly reduce the cost of deploying these boxes.

17. Broadband Internet Services. Charter subscribers and legacy TWC subscribers

alike will benefit from Charter’s industry-leading broadband Internet services, as well as our

increased ability to invest in network improvements.

18. Thanks to our prior investments in network infrastructure, Charter offers

residential customers industry-leading broadband Internet services and consistently ranks among

the top ISPs for broadband speeds. Soon Charter will have deployed DOCSIS 3.0 throughout

our entire broadband footprint. By the end of 2014, we will have increased our 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. Charter also recently increased broadband

Internet speeds for Charter Business “Essentials30” and “Pro50” customers to 60 Mbps and 80

Mbps, respectively, also for no additional charge.

5

19. Charter has received recognition for offering the fastest in-home Wi-Fi service

among its competitors, and we are now launching a next-generation 802.11AC-based wireless

router. Charter’s increased scale and greater geographic density resulting from the Transactions

will strengthen Charter’s ability to invest in these and other next-generation products going

forward, and reduce the costs of deploying new products throughout our customer base.

20. Voice Services. Charter currently provides advanced voice services to

approximately 2.3 million residential customers (and 152,000 commercial customers), primarily

using VoIP. Charter’s advanced voice services include, among other things, unlimited local and

long distance calling to the United States, Canada, Puerto Rico, the U.S. Virgin Islands, and

Guam, as well as call waiting, call forwarding, and caller ID services.

21. Notwithstanding Charter’s highly attractive voice offerings, Charter faces

significant competition from ILECs such as CenturyLink, AT&T, and Verizon, which benefit

from their much broader and denser geographic footprints. The increased scale and geographic

density of Charter’s systems resulting from the Transactions will substantially enhance Charter’s

ability to compete with these entrenched ILECs.

C. Benefits to Business Customers

22. Charter’s increased scale and geographic rationalization will particularly benefit

business customers. To effectively serve business customers with multiple sites across a

geographic region, business service providers typically must have a correspondingly broad and

contiguous regional footprint, and one without significant gaps in coverage areas.

23. The Transactions’ expansion and rationalization of Charter’s systems will make it

easier for us to meet the demands of regional and super-regional business customers. By

strengthening Charter’s presence in the Midwest and Southeast, the Transactions will position

Charter to compete more vigorously with incumbent service providers, including CenturyLink,
6

AT&T, and Verizon, for larger businesses with multiple sites across our expanded service

region. Charter’s greater scale also will facilitate increased investment in enterprise capabilities,

including investment to bring more locations “on net” with deeper fiber connections and to

develop and deploy the advanced platforms needed to manage vast amounts of data. Increased

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

businesses, as well as residents, in the form of improved overall network performance and

increased product innovations.

24. Furthermore, because SpinCo’s systems will largely be adjacent to ours, the two

companies will have the ability and incentive to work together through the services agreement

between SpinCo and Charter (“SA”) to offer high-quality services to regional and super-regional

businesses across a broader geographic footprint.

D. Benefits to Advertisers

25. Charter’s geographically aligned footprint will create opportunities for advertising

customers to address broader regional audiences on multiple screens, including mobile devices,

and across multiple platforms, including video on demand and online. Greater scale and a larger,

more rationalized footprint will enable advertisers to reach more customers and improve the

business case for 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.

E. Charter Could Not Achieve the Same Benefits Without The Transactions.

26. 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. By acquiring former TWC systems, Charter can achieve

7

the scale partnerships aspire to achieve, while avoiding the many pitfalls of partnering with

unaffiliated companies.

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Document Created: 2014-06-04 20:01:51
Document Modified: 2014-06-04 20:01:51

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