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fcc chairman tom wheeler commented . joining us on "the communicators" this week to discuss this, craig aaron, who is president and ceo of free press, and former fcc commissioner rocket mcdowell -- robert mcdowell. commissioner mcdowell, can the fcc put the kibosh on comcast/time warner cable mergersome. >> guest: oh, it could, absolutely. and the department of justice could try to do so as well. sometime in the past when mergers have been proposed not necessarily at the announcement stage we've heard words such as unthinkable. they haven't put the kibosh on it just yet, and the application, i don't think, has even been filed at the fcc. but, sure, as a matter of law, its ability, it could deny the merger if it wanted to. >> host: from what you've read about this, do you think the fcc should stop this merrier? >> guest: well, so, actually, i think the better question is

will it. and i don't think it will. and, you know, i'm in a think tank now, the hudson institute, so i have in dog in the fight. so trying to look at objectively, not as a commissioner in my past role, and you don't have to keep calling me commissioner anyway, it's not like the house of lords where we carry on these titles photographer. anyway, it could be viewed as an opportunity to view public policy that the fcc might not be able to do as quickly or in the same way. and this happens frequently with big mergers of this type. so you've got the largest cable company buying the second largest cable company, and comcast is already the largest internet service provider, one of the largest content companies. the big hurdle really for them was the vertical integration with the nbc universal, legal big hurdle, antitrust review, things of that nature. and comcast agreed to a lot of

stringent conditions there for net neutrality, the sharing of content that they own, the carriage of content from others that today -- that they don't own, pricing buildout and all the rest. so if you, if you're sitting at the fcc and we're in the wake of last month's net neutrality decision by the court -- and, of course, the fcc just made a big announcement on that yesterday which i'm sure we'll talk about -- and there are other public policy objectives that you have, and i'm not saying this is the way i would do it at all, but transactions are frequently used as a way to shape markets. so there are a lot of conditions that could be placed on the country's largest internet service provider, be it net neutrality, low cost offering, being perhaps a buildout to schools for the president's connect ed initiative to upgrade internet access to 99% of america's schools. there are a whole host of things that are similar to conditions

that come tsa a-- comcast agreed to a little over three years ago when it bought nbc universe universal. so it could see it being considered as something they would approve with a lot of conditions. >> host: craig aaron, what do you think of this merger proposal? >> guest: well, i think it's absolutely a disaster for consumers. i think it's going to go straight to their wallets. comcast has admitted as much in all the touting of the supposed consumer benefits, you never hear prices going down. they're going to go up, and i think they're probably going to go up rapidly. i hi this is simply way too much media power to put in one company's hands. they're already the biggest internet service provider, they'll be even bigger, the biggest cable company. if this deal is completed, i think it puts comcast at the nexus, the center of every major media policy debate we're going to have. i don't think the fcc -- i don't see it being in the public interest, i think the fcc should block this merger. i think it's why we have

antitrust laws, to prevent these kinds of deals, and i think for most americans a deal like this seems unthinkable and that it's gotten this far, it's being debated, i think, really says a lot. but for me there's really no conditions that's good enough to let a deal like this go through. >> host: well, 33 million customers if this deal goes through divesting of 3 million comcast has said, so they'll be below the 30% level. so that'd be about 30 million customers or so. netflix has 31 million customers. isn't there competition out there? >> guest: well, the problem is that if you want to get netflix, you need a connection to the internet. and for comcast, they're going to be that connection for probably about half of americans. comcast, a new giant comcast if this deal is done, they'll be the only really viable option for high-speed broadband. most americans don't face a choice. in a few places in some of the big cities, maybe you can get verizonfy cross, although your -- fios, but it's few and

far between. and i think this would give comcast so much power including power over companies like netflix that otherwise do at least compete with them in some of the video space. this makes comcast the gatekeeper over everything, for netflix, they're the gatekeeper if you would hope to get a cable channel, a few years from now when those old conditions expire over, you know, who can thriver on the -- thrive on the internet, which web sites will work and which won't. that is so much power. and once this deal is done, there'll really be nothing standing in their way. >> guest: so, actually, you know, i know and understand and appreciate free press being absolutely opposed to this, and i'm not taking sides on the transaction itself. but a lot of what craig outlined could be resolved through merger conditions. now, it's no secret, it's out in the press that the fcc originally wanted a ten-year term on the conditions for the comcast/nbc universal merger conditions. comcast said five, so the

compromise, i guess, was seven. comcast has done pretty well in the past three years since that merger, so i would look for similar merger conditions to be imposed and maybe for a longer period of time including maybe some price controls. keep in mind also from an antitrust perspective, comcast is not taking out a rival, right? so time warner cable doesn't compete in the same territory as comcast. they're going to divest maybe three million subs, i understand, to try to stay under that philosophical -- it's not legal, but a philosophical -- cap of 30% cable customers. but i think what's really interesting, what's threatening cable companies in general right now is over-the-top video. and craig is right, you have to get that through a broadband pipe. but from a programming perspective, you know, we see "house of cards" as being the hot topic of the past few days through netflix, but youtube and amazon and other stuff that's user generated is quickly being looked at not just through

a cable screen, but through a mobile screen. and actually, that's quickly becoming the number one screen. some of that's through licensed wireless, some of it's through unlicensed wireless. but there are a lot of interesting dynamics in this marketplace right now. so it will be very interesting to see what kind of antitrust scrutiny there is. craig talked about buying power for content, there's also the argument that does this give comcast more of a balance of power with other broadcasters for retransmission consent in those areas where it doesn't have broadcast property? what about cable-only outfits like viacom, does it give them more bargaining power for that, will that actually keep, you know, those prices in check? so there are a lot of questions to be asked. this will take the better part of the year if not more than a year to resolve. >> guest: and i think that's right, already a lot of questions to be asked, but i'm having trouble seeing the benefits of merger like this. and i think because it will comcast so much power the many so many places, you know,

they're going to be able to -- right now time warner cable is a local monopoly. i don't think that's a good reason to create an even bigger monopoly, the fact that we've carved out a cable cartel all across the country, but in their own way, time warner cable isn't a programmer anymore, so they had some reason to rye to keep down the cost of -- try to keep down the cost of programming. comcast doesn't. if the cost goes up, they just move it from one pocket to the other. so i think there are so many -- and i see why comcast wants to do this deal. there's amazing economies of scale for them. but from the public perspective for what we're already paying for, i pay, you know, in my case verizon a lot of money because i want to watch netflix. that's what my $80, $90 goes to. and that's where all of this is going, into an on-demand world. i think from a consumer's perspective, what you don't want to see happen is a world in which in order to get this content, i've also got to pay for my cable sup subscription.

i understand that, that's comcast's model, but from a consumer end, there's no real advantage there. give me what i want. i'm happy to pay for it, and if there's actually choice in competition, if you're not doing it, i can go somewhere else. what comcast and time warner for that matter have already done is really limited those choices, so i think allowing a merger like this to go through just makes things that much worse for the average american. >> host: does the department of justice have a role in this potential merger? >> guest: i mean, certainly. i think they're, obviously, going to have to review it. it's all going to be about what -- how are they going to draw these markets. there's ways they can draw them that says these guys don't compete head to head, let's just move them along. but certainly in the broadband market how dominant they will be. in about half the country, this new, giant company would be the only game in town. i think that's a problem. i think they need to look at the triple play market, so voice,

video, internet together. this combined company would be about 52% of that market. that's very concentrated. i think those are the kinds of issues that justice really needs to scrutinize and look closely x. there's some signs. the obama administration did stop the at&t/t-mobile merger. at first glance, those might have been more obvious, but i think we need to look out five years ahead, where do we want to be in five years when all these merger conditions go away from the deal and look at what that market is likely to look at in weighing this decision. so i think there's a role for justice, absolutely, and i think, obviously, there's a role for the fcc which, as commissioner mcdowell knows, has a different standard. their standard is, is this deal in the public interest. i don't see how they're going to make the case that it is in the public interest, but i think that is a very important measure before approving a deal leak this. >> host: -- like this. >> host: two questions from your former fcc perspective, in a case like this, how would you work or interact with the

department of justice from the fcc? and how much lobbying would be done by different groups, perhaps free press or perhaps comcast at the fcc? >> guest: excellent questions. so the fcc has a dedicated team of career public servants, lawyers, economists, engineers and other professionals who work on merger transactions just like this. and they integrate very closely with the department of justice or the federal trade commission depending on who's getting the review. and so hay work very well -- they work very well together. sometimes they're meeting or talking to each other throughout the day for the duration of the review of the transaction. some of those can go beyond a year. and they are look at all sorts of issues, some of which we flagged earlier. economic issues, competition issues, consumer protection issues, sometimes integration of technology types of issues. and so it's rare, i get asked

frequently, so what if doj went one way and fcc went the other? i've been in this business for about a quart or century, and i don't know when that's happened, craig, feel free to -- i don't remember that happening, and that's because the teams are integrated, and they tend to arrive at the same destination. also, you know, politically, so the department of justice antitrust division there's an assistant attorney general in charge of that, that's a presidential appointment. it's a political appointment. antitrust division has some great career people there, but it is a political appointment. and, of course, the fcc commissioners are political appointees. so you're going to see probably the same philosophy given whoever the president is at doj and the fcc to work through these things. but come at it from different perspectives, the whole antitrust body of laws is different from the public interest body of law that, as craig pointed out, public interest is sort of ill-defined and broad and all the rest, antitrust has, you know, well

over a century of precedent there. but i can't think of when the two agencies have diverged, and so i'm sure they will reach the same conclusion at roughly the same time, not necessarily exactly at the same time. but it's a very interesting process to watch from the outside. >> host: craig aaron, will congress play a role in this? >> guest: absolutely. i mean, i think the signals coming from the hill are really going to matter in this merger. also, you know, senator klobuchar's already called for hearings. i think hearings on a deal like this are one of the few places where the public really gets that window into what's being discussed. hopefully, the fcc will do their own set of hearings. justice, of course, there's not a lot of ways percent public to engage in their process. so i think that's key for congress, and that's probably the way that people who are, perhaps, dissatisfied with their cable service and both these companies regularly rank among the worst companies in america when it comes to customer service, where they're going to have their chance to weigh in. i think they have a really

important role to play here in elevating this is and letting people know just how big a deal this merger is. >> host: what is free press? >> guest: what is free press? sure, thanks. we should have started there. no -- [inaudible conversations] free press is a national, nonprofit, nonpartisan organization. we advocate on behalf of the public on media and technology issues. we try to give the public a voice in these debates that they've traditionally been excluded from. >> host: if you could make the decision, how would you see comcast structured? how would you see comcast as part of telecommunications world? >> guest: well, you know, i think consumers benefit when there is lots of competition. so, you know, i think we've already let these companies get too big. i think anything that the agencies can do to encourage choice, more competition, give people ability to vote with their feet if they can when they're dissatisfied with their service, i think that's very important and very valuable. i think in cases where there is

something of a natural monopoly where it's very expensive certainly at this point to build up with these guys, then we need the fcc to step in and protect internet users, protect cable users, make sure they're not being abused by these companies to play that watchdog role. comcast has gotten too big already. we were staunch opponents of the previous merger with nbc. you know, in my fantasy fcc, there's -- and you're on that, by the way, commissioner. [laughter] there's, the fcc is doing their part to, you know, rein in this incredible concentrated power, begin to break it up, encourage competition in local markets and not allow this kind of runaway consolidation to continue. >> host: robert mcdowell, is there competition in the telecommunications world today? >> guest: so, you know, there is. and it's interesting, there's the video distribution market, there's the mobile markets. it depends on how you're defining telecommunications.

you know, for the most part americans have a choice of three pay of tv providers we call them mvpds in the business. sometimes with a fio to s or an overbuilder and some others. so there is competition there. and there is a growing trend which is interesting. it is dependent upon a broadband pipe or a wiewrless broadband access and, by the way, wireless broadband's the fastest growing segment of the broadband market, and has folks who are kind of shaving or relying on over the top only. they're not buying a video package, they are just buying a broadband pipe, relying on over-the-air broadcast and also downloading whatever they can find from hulu or from netflix, amenson prime, youtube or -- amazon prime or whatever it is they're looking at. and for years some of the estimates hovered at around 1% of households were in that sort of experimentation. and i've started seeing some

data recently it could be 5%, it could be more. it's hard to quantify. but i i think that's going to be an interesting trend to watch, and as you see a lot of content companies, programmers and cable companies themselves are very concerned about this as a competitive threat. where does it go especially as the mobile screen becomes more and more the first screen? you know, my best focus group are my kids, 14, 12 and 6, and by far their first screen is the mobile screen, and by far what they're watching is over the top and/or user-generated content. and that tells me a lot, but also when i start reading more empirical studies, we see similar trends bearing out there too. >> host: craig aaron, what about the wireless world? it's not part of this regulation in many ways. >> guest: well, i think that what we're looking at here is, you know, a couple of big companies have really divided up the market. they're operating, frankly, like a cartel where you've got the wire line side. they've split up the country.

they're not competing. now we're hearing, oh, that's why this deal doesn't matter, but we allowed that to happen. and on wireless side, we have a handful of dominant providers. fortunately, the obama administration did step this to make sure there are at least four major competitors. i think wireless is absolutely growing. we all want it. right now that is not a substitute for the line going into your home in terms of speed, in terms of, you know, what you can do with that connection. i don't think it's going to be a substitute anytime soon, and i think most of these companies see that they're hoping to get -- realizing that most of their customers are going to want both. if they have to choose, you're right, they'll probably go with mobile. but for those that can do both, they're getting a connection into their home, they're getting that mobile connection. as we get into the spectrum debates and things like that, there's interesting things that could happen, and comcast when this deal is done is going to have, potentially, a very big wi-fi network running off people's boxes. i think it remains to be seen how exactly that's going to shake out, but i don't see it as

right now a competitive substitute. what i worry about is really having so few choices in both arenas that customers are really tied together. >> host: so comcast would control a lot of the last mile, in other words. >> guest: absolutely. and we see these guys already working together. i mean, in the spectrum proceeding that went on at the fcc, they've essentially said, well, hey, in the places verizon hasn't built yet, why don't we just market together? we see that because people's prices aren't going down. their monthly bills are not going down. they just go up and up and up some more, and i think that is the really all the evidence we need that this market is very, very broken. >> guest: a couple of quick points. so with spectrum co, that was a wireless company owned by cable companies that they then sold, a lot of cable companies have. some are also involved with clearwire which they got out of

that as well and, of course, soft bank bought sprint clearwire out of japan, so it's interesting to see cable step out of the licensed wireless business more into the unlicensed business to try to hold on to their customers through wi-fi. so if you walk around the washington area, you can see cox and comcast have a lot of wi-fi hot spots in order to try to hold on to those customers, because they do see the mobile screen as becoming the first screen. so also keep in mind that back to at&t/t-mobile, that that was viewed as two competitors combining. so number two taking out competitor number four at the time. that is different, and craig has the same passion, i'm sure, either way. but that is different from what's going on here. comcast is not taking out a competitor. these are geographic markets. time warner cable didn't compete against comcast. >> guest: only because that's how we split things up and it's so broken. the companies essentially agreed, hey, we're going to carve out our different

territories. now number one wants to take number two, and the way most people are going to experience that, in their wallets, that's not a good outcome. >> guest: and, again, i mean, if i think the fcc does approve it, there'll be price controls there. craig can argue about how long the terms should be, maybe forever in your view, but it could be for a very long time in terms of price controls. so look for that should it be approved as being part of the deal. and by the way, the swapping for verizon and spectrum co. back in the day, the cross-marketing dissolved because it didn't work. so they backed out of it. >> host: i'm trying to recall, did yo vote on the -- you vote on the at&t/t-mobile merger, and how did you vote? >> guest: excellent question. it didn't come to a vote at the fcc. so the doj -- >> host: doj. >> guest: at&t tried to take that to court, then the fcc a few weeks later came out -- at least the staff came out with a staff report that was voluminous and rather damning of the whole

idea of the combination, and at that point after a brief deliberation, at&t withdrew. >> host: if you had come to a vote, do you know how you would have voted? >> guest: i don't, and here's why. i'm not just dodging the question, although i am dodging the question, but here's why. i was not presented with, essentially, the case file. as commissioners you don't get those files until the staff is done with its review. then they send it up to what we call the eighth floor where the commissioners' offices are. so the other commissioners all commented on the staff report. i felt as if it wasn't appropriate, sort of like a panel of judges saying i'm going to comment on this case even though the plaintiffs withdrew. but i just didn't feel it was appropriate to do that because i never reviewed the case file. >> host: well, we've got at piece of -- another piece of news that we need to discuss before we run out of time, and that's tom wheeler's statements on the net neutrality, verizon v. the fcc decision. this is how i interpreted reading his statement. they want to strengthen the net

neutrality rules, and they're leaving title ii on the table potentially to make broadband a common carrier. is that, is that a good interpretation? >> guest: well, i think that's how they're describing it, for sure. i do think this is a discuss appointing move from the -- a disappointing move from the administration. i don't think it's actually going to strengthen net neutrality, and i think it ignores in some ways what the court did. i think they're trying to salvage a victory out of a defeat. they're trying to paste together the shreds of authority that the court left them, but it's not enough the what your concern is, is net neutrality. if you want to stop blocking on the internet, if you want to stop discrimination, interfering with web services, then i think your only option is title ii reclassification. and i think the court made that very clear in their decision. they told the fcc, they've now come to them twice saying, well, no, we think we can do it this

way, ancillary authority, no, no, no, we have other theory, and the court rejected it out of hand. they told them this is not the way to do it. we're not saying net neutrality is a bad policy, we're saying you can't do it this way. and yet here comes the fcc again saying, well, maybe might work on a case-by-case basis, we're not sure. i don't think that's what the millions and millions of internet users who have contacted them are requesting for. -- asking for. they're asking for decisive action from the fcc, and that's not what they got this week. >> host: well, tom wheeler left title ii on the table. >> guest: he certainly did. that's the only notice of proposed rulemaking i flat out dissented on because the idea was counterproductive that we have, basically, a form of of regulation that was formed in the 17th century with canal regulation and then 19th century railroad regulation, foisting that on the internet which operates in a completely different way. so let's rethink this. that's why we need a communications act update that

looks at all of this through the lens of consumer protection and competition law rather than legacy regulation based on what you used to do in terms of how you used to have your technology. but, you know, i agree -- this is a news flash -- i agree with craig and part of what he said in terms of i think the fcc's going forward it's going to be risky on appeal going forward if, indeed, they try to enact another nondiscrimination regulation. which is what was in the chairman's outline yesterday. that, the court said, looks like common carriage regulation. and under 706 or title i and all these other lawyer buzzwords is just not going to stand up on appeal. but what also might happen if they have a complete tally different panel of judges, the 706 theory might also be blown up. judge silverman wrote a remembering think and thoughtful d lengthy and thoughtful dissent, i thought, on why the majority was wrong on the 706

authority argument. and it could be a different panel of judges follows that dissent to say the last court got it wrong, really the fcc doesn't have authority here. and we have a whole other program where we could talk about that. but there's some risk there as well. one other point, too, on title ii, title ii's not a guarantee -- if that were to happen -- to win on appeal either for a variety of reasons, you know? change in law, changing factor, there are a lot there that could be attacked on appeal, and it could be blown up -- >> guest: i mean, anything the fcc does is going to find them back in court, but they're on much stronger footing with title ii. you have to go back and look at how you're classifying broadband before we can consider, you know, any of these protections which are crucial, important protections. and i think there's been this real effort to demonize common carrier regulation when that's absolutely what worked to help build so much of amazing internet we have. it's absolutely what's working elsewhere this the world where you can get a lot faster internet and pay a lot less for

it. and i think that really common carrier at its core is about free speech. it's about, you know, not just being able to stand up on that soap box, but actually have what you're talking about, your words reach that audience they're going to do. and i think it's very dangerous for the fcc to continue to try to conflate the wires, the pathways that come into our homes and bring us this great, amazing content and the content itself. those are not the same thing. they shouldn't be treated the same under the law, and i think the approach that started during the bush administration and has been furthered by the obama administration has been a failure. that's why they continue to lose in court and put all these protections in jeopardy, this murky legal limbo whereas going back under the law, looking at the '96 act as it was written and, you know, so great that they've left it on the table. good, it's the law of the land. it should be on the table. that's what the fcc needs to do, and i think, you know, most outside observers really see that, and the judges themselves made it very clear to the fcc if

you want to protect internet users, you have to look at title ii. to pretend otherwise doesn't actually give them the authority they need. >> guest: i disagree with the last part that the judges were inviting the fcc to reclassify. computer-to-computer communications reviewed by the fcc starting in the 1970s is, actually, not being regulated under common carriage. under the computer inquiries roman numeral one, two and three, under both republican and democrat-controlled fccs, they operated differently from phone networks in the ma bell monopoly. it actually was under chairman bill kinard in the second clinton term where the path was made to permanently insulate the internet and computer-to-computer communications from common carriage. and so those types of communication were never regulated under title ii, they didn't grow up out of title ii at all. they've always been out of title ii's reach. and that's, actually, that's

actually what has helped grow the internet that we have today. and same with, you know, wireless broadband. wireless broadband has proliferated precisely because it has not been burdened by these old sort of command and control style regulations. >> host: last word. >> guest: well, you know, obviously to, i disagree. have to save some of that for a longer time, but i think it's very clear that what we're talking about is a telecommunications or transmission service. and if we're going to protect internet users, if we're going to make sure they can't be abused, can't be discriminated, web sites can't be blocked, the only viable way is through broadband reclassification, and that's what the pcc should do. >> host: -- fcc should do. >> host: very quickly, do you agree with robert mcdowell that it's time to rewrite the telecommunications laws in this country wholesale? >> guest: i think the explorations make sense, but i think we should go back and look at that 996 act. what it actually says and start not trying to whittle it away, but actually enforce at