have already addressed that. i'm not sure i will make, again -- you know how careful i am. i will make my one firm commitment that there is absolutely nothing in this transaction that will result in the increase in prices for comcast customers. nothing. whatever economic benefits we can derive, whether it's through synergies or whatever marginal additional leverage we might receive for programming negotiations and equipment negotiations, ultimately those are to the benefit of consumers. that is -- that's my response on price. on service -- so service, i'm glad you raised the question. senator franken has talked about this and, you know, senator franken actually appreciates what you have said about service because i want to tell you with our company, we have an incredible focus on this, and it bothers us that we have so much trouble delivering a really high quality service level to our

customers on a consistent basis. it is not something we're ignoring. it is not something that we are not serious about. we have spent billions of dollars over the past five years improving our networks to try to make them more reliable on additional training for technicians and for our call center employees. we have created new call center centers of excellence, one of which is in delaware where you have specially trained call center representatives with a design of trying to enhance the level of customer service. we have focused on a whole host of measure service improvements including creating one and two-hour appointment windows across most of our footprint, which we actually meet now 97% of the time statistically. we're not happy that we don't meet it 3% of the time. this is a place where we're having issues. i can just tell you that as a company we are laser focused on

trying to improve the customer experience and do the very best we can to be the best -- to offer the best customer service and best customer experience in the country. internally and externally, and there are a lot of surveys around, and some of them are very difficult for us to read. i will tell you that over the last three years in jd power and associates, which i think is viewed as the cadillac survey of customer attitudes and customer value, comcast service -- comcast score and jd power has gone up about 100 points in video and about 80 points in broadband, and those are the largest increases for minimum in our industry. so the investments that we're making and the commitment that we have internally to improving the customer experience are beginning to bare fruits, but we are deeply disappointed as to where we are and all i can tell you is that -- that the scores that we receive, the comments

that people like senator franken have made, the conversations that i have had with you, they just spur us to do even better and to really try and enhance the customer experience. in terms of jobs -- >> you're welcome. >> i meant -- i really mean that. >> this is a place where external voices have absolutely had that impact, and we think in the end we're going to be a better company as a result of it. thank you. in terms of jobs, obviously unlike the nbc universal transaction where we could stand up and say this is a vertical transaction and there isn't any overlap and jobs and we're not going to be laying people off -- in fact, we expect to grow jobs. this is a transaction where there is some overlap of jobs, but it's head quarters and shared services jobs.

it's not the basic operations of the cable system. the state of delaware we don't have headquarters or shared services jobs in the state of delaware. we don't have them in the -- we don't have them in the state of connecticut. we don't have them in the state of minnesota. we don't have them in the state of utah. i can comment on that for now. we haven't gotten deeply enough into looking at where the potential overlap is for me to be more specific than that, but cable -- because cable is such a local business, most of our jobs are the customer facing jobs technicians and we don't anticipate any reductions many those jobs. >> thank you. i see i'm about to run out of time. let me ask one more question about sort of terms and conditions.

>> the significant roll-out of the internet essentials program which is a very promising program to provide low cost high speed internet access for low income households to help address the achievement gap to help improve access and deal with the digital divide and there are also commitments made about diversity of programming and i'm interested in both diversity in the work force and diversity in programming and the accessibility of your service platform to a wide variety of content providers. let me focus you as an example on tv one and african-american focused channel. if you would speak briefly in closing to both of those, and then mr. kimmelman, if you might, on whether terms and conditions are really the appropriate way to address concerns that some might have about this merger, so mr. cohen, if you would, on your progress towards delivery of internet essentials, your progress towards meeting commitments made about diversity and programming and then mr. kimmelman. >> so internet essentials at the time we proposed it in 2010 was

an experiment. we had no idea if it would work. we had ray concept for a program based on research, and as we have rolled it out, it is now the most important community investment of comcast corporation and it is a program which i think not only the executives in the company but rank-and-file employees have an enormous amount of pride in. in 30 months we have successfully connected about 300,000 families, 1.2 million low income americans to the internet, most of them for the first time in their lives. 80% of those families are minority, and when we survey those customers and say what do you do with the internet, the number one answer is our kids do homework on it. 94% of the families say that their kids do homework on it, and of those 94% of the families 90% of them say they think their kids are doing better in school as a result of having the

internet at home. it's a program that is an amazing success. we are. we together with thousands of community partners -- it's not just us -- are really making a difference in closing the digital divide, and we are incredibly proud and enthusiastic of being able to extend that program throughout the time warner cable footprint. there have been multiple references to the size of this company being in 19 of the 20 largest cities in america and 37 of 40 in whatever all the numbers are. i look at those numbers, and when i think about internet essentials, i'm excited. we're bringing the largest adoption program to 19 of the 20 largest cities in america, 37 of the 40 largest cities, and i really think we're going to make a difference in moving the needle. in terms of diversity of programming, we're very proud of our record there too. we agreed to launch ten new independent networks, at least

eight of which would be minority owned and controlled on a schedule, consistent with that schedule. we've watched five, including four networks that are minority owned and controlled. tv one, by the way, which you referenced, was a network that we originally helped to launch after the tv one transaction, being an investor and giving it its first carriage deal. we're enormously proud of our record for enhancing minority owned and minority focused networks both in terms of creating wealth creation opportunities for minority entrepreneurs and in terms of making sure we have programming that is being designed by and run by diverse ownership and management teams to be able to provide that type of programming to the particular ethmick communities and diverse communities that are represented. >> thank you, mr. cohen. mr. kimmelman, can you comment

as well? >> i'll only address the competitive kinds of conditions that i think are important here to customers, users, consumers. in the kinds of regulations that have been sited in this hearing and the kinds of benchmarks that have been there and used in the past that some are trying to rely on. the difficulty here is that none of them are absolute. none of them are -- you may absolutely do x and you may absolutely not do y. now i'll have to rely upon reasonable business practices, common practices of the lead companies in the industry, and the difficulty here is with the size of comcast combined with time warner, they could drive what those practices are. it becomes a bit of a circular reasoning of what is reasonable is what they do, what is acceptable in the industry is what they decide. the standards are determined by them. that's the concern. my suggestion, senator, would be that for all conditions in a transaction like this the

oversight agency should go back and review whether they work and have worked in the past and whether they can work given the factors involved in the transaction. >> thank you for your testimony. >> i would like to get back to you to follow-up on a question that senator bloomenthal asked earlier about a regional sports network. how do you respond to this question, this concern that's been expressed about the rsn's that the merged entity may own and the potential for this ownership to be used in an anti-competitive manner? do you see a risk of this? >> to -- i don't for the most part because if, for example, to use the l.a. lakers, right now the fact that time warner -- if previously time warner had owned the l.a. regional sports network

and they're bargaining with other l.a. oriented video providers and that company is now co-owned by comcast, it doesn't really change the bargaining leverage of the l.a. lakers network against any of those other l.a.-based video distributors, and so this is, again, because l.a. programming is only primarily interesting to people in l.a., the fact that it's now co-owned by a person who also owns a regional sports network in philadelphia doesn't really change their bargaining power in the l.a. market. on a broader scale -- >> i suppose you're presup possing that all rsn's would have a regional fan base. >> that is correct. >> that won't always be the case. >> for the most part it is because if they don't, they tend not to -- the programming tends to migrate to the national sports networks as opposed to the regionals and countries have a choice about where they're going to place that programming. on a much broader level, we've been fighting about rsn's before this transaction.

we're going to be fighting about it after this transaction. this is a classic example of a problem that i believe is not merger-specific. we are working on a dispute resolution mechanism as part of the program access provisions that's overseen by the fcc and has been around for a very long time, and that, in fact, is believed to be a reasonably effective means for involving disputes. they've been very high profile. if there is a problem, the real solution lies in fixing that process because then all programmers, all -- regardless of whether they're affected -- whether they're operating in areas governed by time warner cable or comcast will gain the benefit of it because this is a bigger problem that precedes and goes beyond what the merger requires. >> okay. thank you. mr. kimmelman, shifting gears. i want to talk for a minute about the advertising spot market. i understand comcast is saying its acquisition will provide something like a one stop shop for cable advertising. do you have any concerns with

regard to the market for cable advertising and how the merger might impact that market? >> yes. i think it's a very important area to look at because this, after all, is all about eyeballs and all about viewership, and i think it 8 ought to be looked at through anti-trust review as to whether this consolidates it. one-stop shopping is great on one level. on the other level, if it leads to market power and the ability to dominate in the market, it may strip off advertising opportunities for potential competitors to comcast, particularly on the programming side. >> okay. >> i think a lot of the local advertising is -- >> the importance here is that for every -- whether it's regional sports if you are talking local advertise and local cable systems, keep in mind that the kind of competitors we're talking about on some level are satellite

companies that are nationwide competitors. if we're talking about internet provided services, those may also be increasingly marketed nationwide. there are some national implications here, but it would all be drin by the levels of concentration and looking at those specific markets. >> love is of concentration that could lead to fewer options for -- >> right, nor. >> markets relate to cable and the internet have tended change rapidly in recent years as a result of changes in technology, and at the same time i think history has shown that large incumbents will at times take actions that are designed to protect their incumbancy and sometimes when they do that, that thendz to prevent or slow rapid changes in technology that

might otherwise bring about a morrow bust competitive environment. there are those who have expressed concerns that this merger might have that affect and some of those who make this point will point to relatively new offerings such as netflix, roku, amazon fire tv. these are products that compete arguably with comcast cable video offering, and those who have expressed this concern have been concerned that perhaps because some of the service that is i just mentioned can be accessed only through high speed internet. if they're worried about the fact that that market, the market for high speed internet is a market in which the merged company would have a very significant share. does that cause you any concern? >> i want to make one comment

about local advertising. cable represents 7% of the local advertising market. it's a relatively small part, and whether the level of concentration is a material impact. >> 7% of the local -- >> advertising revenue is on cable. if you are a local advertiser are 3% of your money is going elsewhere, and the 7% concentration level under any anti-trust standard is irrelevant. >> okay. got you. >> there is a tendency to think of the internet-based video distribution world as just an extension of the cable world, and we take the intuitions and knowledge from cable and just move them over. it's just not true. in the cable world the kinds of carriage agreements that independent cable networks are trying to get going are trying to cut, well, if they can't come to an agreement with a cable provider, that's it. they don't get covered. that's just not the case with the internet. one of the things -- one of the

realities is every internet provider maintains thousands of connections. there are thousands of ways. comcast itself has 40 settlement free and 8,000 transit arrangements, and if one of those connections doesn't negotiate well on terms, there's actually a multitude of options elsewhere, and the leverage is not yes or no. the leverage is the difference of the price i get through this connection versus my next best connection. when you start to look at it that way the a. leverage they have over providers becomes very, very narrow. the only way they could stop that is by monitoring all -- decide oh, i'm going to hurt this provider, and i'm going to figure out where they are by monitoring 8 thousands of my connections and figuring out which -- with traffic of thousands of different kinds of streams, and i'm going to pick on the this provider's stream out of that stream and discriminate against that. >> you are saying that would not make sense as a business proposition and would be technologically difficult. >> and barred by law under comcast agreement under the nbc

agreement under the merger. yes. absolutely. technically very hard to do. really bad idea from a business sense, and, in fact, many cable companies, cable vision said publicly in the "wall street journal" they may get out of the programming business and just carry people over the top players because the program costs are so high. why should they be squeezed in the middle? why not allow over the top providers to negotiate on a much broader basis? that's part of the dynamic change in the world we're living in. >> thank you. my time is expired. thank you, madam chair. >> senator bloomenthal had one follow-up question, and senator franken and i will leave my questions to the end. >> i much appreciate that, madam chairman, and thanks also to senator franken. just a quick question. you and i agree that the cost of sports programming are rising, in fact. they are rising astronomically and should better reflect consumer demand. really aren't consumers the best

judge of what a fair price for programming should be and wouldn't prices come down if they had more choice, specifically the way to break this cycle of ever increasing costs for sports programming instead of give consumers some more choice through ala carte programming, and i wonder if you could comment on the potential effects of disciplining the market and bringing down the costs of cable as a result of ala carte. >> thank you. i truly believe you are correct. i think that one of the concerns that wasn't addressed earlier was that we have numerous studies that show with vertical integration we end up with higher prices on the regional sports channel that is are integrated than the ones that are independent, and one of the related concerns there is that competitors who want sports programming in that market have had a very difficult time negotiating a reasonable price for that even if the price is

higher than it should be. so it seems to me one of the things to look at, as you have recommended legislatively more broadly is to offer channels ala carte, offer more programs ala carte, give consumers the choice as to whether they really want to prey pay the price that is being passed through. >> thank you, madam chairman. >> thank you very much, senator franken. >> thank you, madam chair, and i have three questions. it'soning if i go over a little bit? >> you would not be alone. >> mr. cohen, i'm worried that this deal simply continues a trend of media consolidation, a trend that's led to increasing prices for consumers that have seen their bill go up more than twice the rate of inflation since the mid 1990s. earlier this week news broke out about a jp morgan report in

which wall street analysts apparently recommended the cable companies continue to raise prices on consumers, and as you have admitted, prices might go up even faster. we've talked about your comment. mr. cohen, don't your investors, people invest in comcast, expect comcast to leverage its market share by getting as much money as it can out of consumers? >> i think our investors want us to have the best multi-channel video and broad bant business in the country, and i think that includes getting whatever prices the market will bare, but it also includes providing an xeerdly high quality video and broad bant experience, and i think we have made -- you can look at our analyst calls. we have made it a point of

significant discussion not only for us, but for the entire cable industry about our need to continue to invest to be able to compete better against national and global competitors who are increasingly coming into this space. where he to your question, but also to be fair, yes to the business reasoning underlying this transaction, which is to provide us with the opportunity to create a better experience for consumers. >> well, my concern is that as comcast continues to get bigger, it will have more power to exercise that leverage, to squeeze consumers, and part of the reason i'm concerned about this is because comcast's own cfo has told wall street that that's what comcast does. during a fall 2012 conference call an analyst from goldman sachs knowing that cable had a big share of the broadband market, and asked comcast cfo

"is there a way to exercise pricing leverage to a greater extent? comcast cfo said, "i think that we have actually exercised some pricing leverage. we've increased the costs of the service by roughly $4 to $5 per customer per month over the last pew years." it's understandable that comcast has responsibility to look out for its investors, but i'm concerned that the bigger and more dominant the company becomes, the less incentive they have to look out for consumers. and the more power they have to squeeze them. mr. kimmelman -- i think this goes to bundling too. i know that in some of those talks right after the talk of

the acquisition there was pledges to push bundling, to up sell your product. mr. kimmelman, won't this give comcast more leverage? >> absolutely, senator franken. they're giving us examples of things that show the market is highly concentrated but not monopolistic. we did use the numbers in our analysis. there's enormous market power that could be leveraged, and on top of that, there is the very popular nbcu programming. that can be leveraged. that, understandably, maximizes profits for comcast to keep it in a big bundle, to charge as much as possible, and the increasing trend for consumers

is to buy at least two services. broadband and video, if not three. so they know that they can drive up prices to competitors and benefit from raising their rival's costs and if some people want to drop those rival services, says most likely going to be business going to them. that is where their financial senate lies, and we would expect them to follow through on that. those are the kinds of concerns that on the public record where in the fcc ruling on nbcu and comcast, and in the doj and i imagine they would be relevant here as well. >> senator franken, can i jump in on that? >> sure. >> thank you. >> understandably, this is a really complicated matter. i think if we boil it down, the folks at home that bills keep going up, are expecting more.

they're not getting more channels and they're not getting more choice, and so, you know, mr. cohen pointed out that, you know, content costs are up 98% while their subsubscription fees are only up 50%. that's extreme pressure on their gross margins. any business owner would know that why -- what's the incentive to add more product when it's your highest gross margin product and it's your number one cost? there has to be effecttivity ways to encourage the marketplace. the marketplace we're going into is $170 billion marketplace. it's larger than all four major sports combined. there are 60 networks that are fighting over that space in the sports area. the golf lifestyle market has

won, and the only channel is that of golf channel, which is owned by mr. cohen. now, a good real world example that i think everybody ought to know of how hard it is for original programmers is that we understood that golf channel was owned by comcast, so we didn't start there. they didn't have a huge incentive to launch us, but what we did is we started with time warner sxabl some other folks. time warner cable from the ceo to the programming people could not have been more constructive in their help to help us get our programming on the air. as soon as this merger was announced, that definitely softened quite a bit. i'm sheer that time warner cable did a wonderful job trying to get more products to the consumer, and since that time when this was announced, it's become a lot more difficult for us. the only thing i can think about is because they own the only competitor in the space. >> thank you for your

indifficulting ens, madam chair. you look surprised, mr. cohen, when i talked about upselling and bundling. neil schmidt, an executive at comcast, went on a phone call with a wall street analyst and said this. "as i said i think the re new synergies are greater than the cost synergies. on the revenue sin erj jis side the fist would be in the residential area where we would seek to bundle more and that is call center training. that's teaching people to sell another rtu on a call, on a service call, fix the billing problem. up sell a third product." so just bundling burt. that's what i was talking about. you look kind of puzzled when i brought it up. >> i wasn't sure what you were referring to. i think obviously for us and for others m cable industry have

been valuable for and yous something consumers like. >> you were told by the fcc to actually stop that and to stop pushing bundles and -- but i got other questions. >> okay. >> i wanted to be very short, and i know sometimes i'm too long. i will say that the fcc did not tell us to stop bundling and pushing bundles. they simply asked us to have a stand-alone broadband offering which we did have and which we continue to have. >> the fcc sent you a letter saying that a consent decree imposes a detailed plan that requires comcast to take numerous and training its customer representatives and retail salesperson nell to reinforce their awareness and familiarity with a performance starter service. >> that's the single -- the deal was we would create a new broadband service which was a stand-alone service, six meg

down, for $49.95 a month, and we did create that tier, and the commission raised concerns about how we were marketing the tier, whether our call center employees knew about it. we quickly resolved the matter. we may have had a difference of opinion. we quickly resolved the matter, extended the commitment for another year so -- >> you paid a fine. >> we did make -- we did pay a fine. all i'm saying is there was no -- >> and you were told -- >> no prohibition. >> tell your call center people to emphasize the stand-alone, not to upsell. >> offer. >> very different to the condition. >> we were offering. nothing in the fcc order to prevent us from bundling. i just want to say that we agreed in addition to our bundling strategy for somebody who called and said i only want to buy broadband to have an option, stand-alone broadband option. >> when you train people to upsell, you are not training them to make people want to go for the stand-alone broadband.

something that you were fine for not doing. >> we are allowed to train people to upsell. all we have to do is when somebody says i want to buy broadband alone, that our call center employees have to be aware of the stand-alone product and sell it to people. >> you seem like a pretty good salesman, and i know people on call centers can emphasize certain things over others, and i think that's my fear here. i want to talk about two other things. i am so sorry, madam chair, but mr. kimmelman, comcast has argued that this deal won't jeopardize the open nature of the internet. in the public interest statement that it filed with the fcc yesterday, comcast promised regulators that it has no incentive to enter fear with internet traffic. if this goes through comcast will control 40% or more of the broadband market, and it won't just own all those pipes.

it will also own a bunch of content because it bought nbc universal a few years ago, and the 20 or so cable networks that came with it. mr. kimmelman, doesn't that give comcast both the power and the incentive to manipulate internet traffic in its favor and didn't we see a preview of that with the recent deal comcast struck with netflix. >> senator franken, if you go back to all the big numbers mr. cohen had and professor yu had about the many myriad interconnections of the internet all around, all accurate in that space, but when you get close to the home, to the customer, the last mile, the ports that have to bring in the video traffic, one player, two players, sometimes more, hardly ever and one of them is comcast combining with time warner.

that part of the market is quite concentrated. there are a lot of changes going on in the internet. there are a lot of different kind of interconnection relationships. what we also see is a lot of proposals for usage-based pricing that wasn't there before. data caps. >> can you explain what those are? >> just that instead of getting a flat fee for eat as much as you want for your internet usage, that above a certain level, your prices go up. or you pay per certain a. usage and -- >> unless it's a comcast product like xfinity. >> there are some products that are dealt differently with by cable companies and under different set of standards and arguably preferential to what a competitor has. there are dangers when the market is concentrated at that point of ways to manipulate, and this is where i go back to my analogy of an octopus that has all these tent cals out there.

there's net neutrality, and then there are the different pricing schemes and then there are the different interconnection and arrangements. there are many ways in which a number of tentacles could be used to favor one product over another if it's financially advantageous to that broadband provider with market power. that would be comcast time warner. >> i have one last question, and it's going to be short, i think. >> you have a section called promises changed and promises kept. you say when we make promises, we keep them. you talk about the conditions that the fcc imposed on comcast when it acquired nbc universal, and here is what i found puzzling. you say out of these conditions, the fcc has only found it necessary to look at one issue, and that was the issue we just talked about on stand-alone broadband.

isn't it that they looked at neighboring -- isn't it the condition that prohibited you from favoring nbc content. when cnbc is neighborhooded, you were neighborhooding it with all the other 24-hour cable news channels with cnbc -- w thbs with msnbc, fox, cnn, but you put bloomberg way out in the nose bleed seats. people couldn't find bloomberg. because they couldn't find bloomberg, they wouldn't go to bloomberg, and bloomberg could charge less for its advertising and nbc would get more eyeballs for people who were interested in 24-hour business news, and you could charge more.

isn't that another condition that -- that they looked at? >> sir, generally speaking, that characterization is just not accurate. what we had in the bloomberg neighborhooding area was -- were interpretive differences between bloomberg and comcast as to what the condition meant. >> the fcc certainly looked at it, didn't it? >> there was a complaint filed, and when we lost at the fcc, we have resolved the matter with bloomberg. we are in compliance with that condition. >> let me ask you, is this true then that out of these conditions, the fcc has only found it necessary to look at one issue. is that still true? >> what is true is that we only had a compliance issue with one condition. that bloomberg issue is not a compliance issue.

it was an interpretive issue. when the interpretation was resolved we were able to resolve our differences and our partnership with bloomberg. we remain bloomberg's largest distributor and we have an excellent -- >> here is the fcc's order. in this memorandum opinion, an order. we affirm media bureau orders that direct comcast that plays bloomberg television in news neighborhoods consistent with the condition of the comcast nbc universal order. that is looking at that. we have right here in your testimony and you're sworn under oath here you say out of these -- brackets conditions. that's what we're referring to. the fcc has found it. only found it necessary to look at one issue, and you're saying they didn't look at this issue? >> i'm saying it was not a compliance issue. it was an interpretation issue.

>> i'll give you an example. the out order of the media bureau was that we had to neighborhood bloomberg where i believe it was either four or more or five or more other news channels. the fcc order didn't have that definitional issue. we didn't know what a news neighborhood was. we tend not to neighborhood our news channels the way you described in your question where all the news channels are together, but what are the interpretive issues that we needed to have resolved was what was a news neighborhood? that's what -- that's what the dispute in front of the commission was. >> madam chair, this is the end. my friend. >> by the way, any of the witnesses have to use the rest room, we really can come back, and i know it's been going on a couple of hours. >> you really undercut my big conclusion.

i was going to say -- >> senator franken, please continue. i really meant that. i was just going to let them know. >> i was going to say that i think the interpretation here is on what the look -- word look means. i think everyone knows what the word look means. >> if i can, i will acknowledge that the word look may not have been the best chosen word. the point i was trying to get at was whether there were compliance issues, and i don't think that was a compliance issu issue. ly acknowledge that we needed a better use of words. i apologize for that. >> accepted. >> thank you. >> i have a few more questions. i wanted to follow-up on what some of the other senators have asked about and the first thing was about what senator graham was asking about, the wireless competition.

i guess i'll start with you. in the anti-subsubcommittee -- anti-trust subcommittee hearing that senator lee and i had about wireless competition, witnesses agreed that a wireless is out there, but it's not yet a substitute for wire line. there is a discussion about you can have these alternatives with wireless. do you think that's really true in a big way? >> i would like that to be the case. i don't see it now. professor yu has indicated that the speeds are increasing. the service is better. the technology is better. when you look at the price for the major wireless providers with their data cap for wireless compared to a comcast price, for example, the price for the same amount is about ten times higher. that's not what i would usually think of as a good consumer -- >> you mean to get that kind of high speed data. >> yes, exactly. >> we're hopeful and maybe that would be the future. again, as professor yu has admonished us to be more careful about what conditions we put in,

transactions with predictions of the future, i'll just say that we have to also be careful about polyanish predictions about levels of competition. 15 years ago we thought there would be video over energy company wires, and we had a few of them. there's rcn out there, but not much. some of the predictions can be wrong going the other way as well, and maybe this is the kind of thing where for wireless to be a real competitor, we ought to wait a few years and see if it really develops that way. >> mr. sher win, you haven't been able to talk very much here. you look like you want to say something. >> i do. first of all, most of the discussion has been about programming, and that's out of my baileywick, but when it comes to wireless, that's in my baileywick, and the technology is such today that if fiber -- or with any kind of fiber or some kind of back haul is brought to a building, especially a multi-family building, then the resident can have speeds of in excess of 100 megabits per second wirelessly.

i think that's an important point. the technical knowledge has caught up. it is not the cellular wireless, as you know it, and that i think is what professor yu is referring to. it is wifi wireless, and that is a big difference. >> though it wouldn't be capable of carrying the -- or it would cost more. i'm trying to figure out here. i understand the difference between wi-fi and cellular, but are you saying it wouldn't have the same capabilities as the cable? >> i'm sorry. i'm asking. are you saying one of the things -- points that mr. kimmelman made was that it's a lot more expensive if are you going to get that kind of data coverage and -- >> that is actually not the case. if the back haul is reasonably priced in a family residential situation, wireless is 30% less expensive than wired.

that's number one. number two, it offers much more capability, much more functionality. not only is it less expensive, it has greater functionality, and there's no need for cap if the back haul is done correctly. >> mr. kimmelman, you want to respond? >> i can't disagree with mr. sher win for a specific set of circumstances he is describing, and he is also describing circumstances where he faces a bottleneck of being able to get the wholesale product so that he can deliver that service at a lower cost. also -- >> only in comcast areas. >> the other interesting issue, if you go down this path with all the increased need for wi-fi downloading because of limit to spectrum, all the wireless carriers also ultimately very much need a wired service to connect get closer to the customer. many of those are owned by comcast and time warner or by some of the phone companies. there are other choke points here that need to be looked at

in terms of cost. >> i agree with that. >> one follow-up on the advertising questions that were asked. professor, you talked about 8%. >> 7. >> 7% of the market was cable, and so there was a wall street journal article quoting an snl kagen, and they said that a small local advertisers are worried about facing higher prices because they would have roughly -- comcast would have roughly half of the ad sales market. what is this about? half paired to %? is it just a different market you're looking at? are you including everything. >> i'm looking at the s.e.c.'s video competition where they do an assessment of different sectors on a national level and local level, and nationwide numbers, what they're looking at is that the total local advertising budget for cable is 7%.

>> thereby district of columbia there's possibly submarkets where they don't have as much choice. >> anyone agree with that? i will get back to you. >> all i would add is, you know, our ad sales business tends to be about one-third local, one-third regional, and one-third national in terms of how we sell, and clearly on the national front there are a number of competitors, and on the local and regional front we've actually been the competitors who have gone in and we've competed against broadcasts stations, et cetera, and there are also with on-line and the ability to target lots of different avenues to reach customers from an advertising perspective. >> okay. mr. kimmelman. >> i'm sorry. >> yeah. >> it makes it difficult when the quasi public utility also has 50% of the ad market space, and also controls the content.

so that will make for higher prices? >> higher prices, less choice. >> one thing that's a little off on this, professor yu, different topic, but in your testimony you talk about how the emergencier doesn't pose competitive concerns because there's no geographic overlap, there's been a lot of discussion about this between the two cable systems. under this theory would consolidating all nonoverlapping cable systems in one or two companies be of concern to you if that happened in the country. >> to be specific, in the testimony cable operators basically serve three purposes. they sign up subscribers to individual households. they contract with cable networks and they sell advertising. the point about the lack of overlap refers to the transactions between cable companies and end users. in that sense mergers do not have an impact -- different areas do not have an impact. you do have to do the separate analysis of the markets in which

you do local advertising, which is the same but with respect to programming, if you didn't merge to monopoly, you would see an adverse competitive xwashgt impact in that market. then you do the anti-trust analysis to look at the various concentration levels. to pick p the conversation before, one of the interesting questions is what is a real competitor to cable broadband? then we've heard this defined different ways. one of the interesting things is mr. kimmelman says we should not worry about -- we shouldn't speculate too much about the future. let's think about facts. one of the interesting facts is 10% of american citizens now rely entirely on their wireless connection for broadband, but you are seeing, in fact, in other countries they now regard wireless and fixed line as the same market for anti-trust purposes because there's so much substitution, and if you look at the directions where all these are going and the bets that companies and countries are making, it's quite likely that there's a real world out there, and that's not in the future. it's today where wireless is for increasing number of americans every year a real substitute for

fixed line broadband. >> i have a few specific questions here. comcast has experimented with data caps and usage-based price aring for its broadband service and is testing new usage based pricing, and for you, time warner cable tried using similar caps, but quickly abandoned them. >> we actually took the approach that it's an unlimited service unless you would like to reduce your bill by $5 a month if you agreed a cap. i think what -- i'll let mr. cohen jump in, but i think the market is very much a test and learn mentality right now. we've had our usage base caps out there for a while. we've seen some uptake in them, but we -- where we have landed is the unlimited tier, giving

people the ability to have an unlimited tier with a right to reduce the bill if they agree to a cap. >> okay. prior to the merger, time warner cable also spoke positively about giving its consumers complete access to their channel line-up without requiring a set top box rental. consumers would then have their choice to watch all the channels using either apple tv, xbox, or any of the other internet connected devices, and it would create a far more competitive system. in contrast, comcast new internet connected x one set top box seems to create a more closed ecosystem where only comcast approved apps and contents are allowed in. i thought it was interesting that you guys were willing to give up that cable box and what moefsh ated it? how does the decision benefit consumers and what's going to happen if the merger is approved? >> sure. i think what are you seeing in

the marketplace is lots of different approaches to delivering the video experience in the home. i think you will always have the set top box experience for that portion of the population who likes totwo-way interactivity of the set top box, and there are certain features like the next generation guides, et cetera, that work best or only work in some instances on the new set top box. >> but you announced you weren't going to require it. >> well, as the home evolves and there are often multiple tv rooms in a home, what we have been comfortable with is allowing our customers to bring their own device, whether it be to your point a roku or a similar device and let them consume their content on that device. what we have found is often what you have is one room of the house has a set top box, two-way interactivity, and then you may have another room where people are fine running the video

experience. for example, off a roku. again, this is a portion of the market that continues to evolve with really new devices coming out. it feels almost monthly at this point. >> senator, if i could, just two sentences. just to be clear, comcast is offering the same experience maybe on different devices. so part of the x1 platform is the ability to watch in the home the content that is available -- the content that is available, all the live channels anywhere in the home on -- >> is it more of a closed system with just the comcast -- >> i think it's the same system, and a lot of this is programming rights issues. >> we'll do some follow-up questions. >> so i think we're actually doing the same thing just on different devices. >> we'll have some follow-up questions on the record later on. comcast and netflix, mr. cohen, reportedly announced a paid pairing agreement earlier this

year where for the first time netflix will pay for a direct connection to comcast network that provides more reliable delivery of netflix content to comcast subscribers. i know netflix called this an be a temporary toll his. was forced to pay. comcast called it a commercially necessary agreement. why charge both netflix and your consumers for this service? and then i want to ask mr. kimmelman about this paid peering. >> your statement is 100% correct. for the first time netflix is paying for connection to our internet backbone directly to us, but netflix has always paid for connection to our internet backbo backbone. all edge providers pay for connection to the backbone. this is not net neutrality. it doesn't deal with a part of our service that goes to the last mile. this is how internet edge providers connect to the internet backbones of isps, and

since the internet was born, those are paid transit relationships, and as professor yoo said, in comcast's case, comcast has agreements with 40 companies for settlement-free peering. they, by the way, go out and sell access to their networks to connect to the internet. so even though they're not paying us anything, they're charging internet edge providers to be able to connect to our isp as well as everyone else's. we have over 8,000 free and -- free peering and paid arrangements, and that market is intensely, intensely competitive. in the netflix case, i hate to say this, this was netflix's idea. netflix is responsible for 32% of the traffic on the internet, and they woke up one day and they said, wait a minute, we have 32% on the traffic on the internet, why do we have to pay a middle man to get access to

comcast, time warner cable, at&t, verizon? why don't we cut out the middle man, have a direct relationship, and potentially save ourselves some money? that's where that agreement came from. that is, the netflix's desire to pay us directly and cut out a middle man. now, as it turns out, that was a smart thing, i think, for netflix to do and for us because having the direct relationship gives us a better ability to work together, to manage the traffic, and make sure that netflix customers who are our customers are getting an optimal viewing experience. so once again the customers are the winner here. you have this intensely competitive backbone market. we talked about price a lot. pricing in that market, which again has existed since the birth of the internet, pricing has dropped 99% in the last 15 years. so this is a market that's working. it is not a market that's dysfunctional.

it's not a market that's impacted by this transaction. and i think consumers end up being the big winners when we let markets like this function the way they were intended to do. >> well, whose ever idea it was, does this kind of paid peering exist in other parts of the world, and how do you think it could impact innovation? >> well, it certainly has -- peering is a form of interconnection and it's a barter exchange, so these are forms of interconnection. some of them paid, some have been just a barter because of traffic arrangements, and the world is changing. as more video streaming is occurring, what happened with netflix was an enormous success for them as they went to original programming. they became increasingly popular. without getting -- they don't seem to be too happy in the way mr. cohen is, but leaving aside the companies, here is the point i think that is important related to the transaction and for the committee to consider longer term. as you have vertically integrated companies with their

own programming and their own desire to bundle the channels and charge as much as possible, as others come in with internet delivered programming that could come pete, what are the ways they may want to advantage their own, drive up their competitor's costs, make it more complicated and reduce quality for their competitors? not saying any one arrangement necessarily does it, but these are the kinds of competitive concerns we think oversight official s should look at. >> you're talking about what i referred to early as the next netflix which is still a dream in a garage and just that we have a structure that works to promote this kind of innovation. >> exactly, senator. >> one last thing, mr. minson, i understand that time warner cable has a business service called ethernet, is that right? for which it offers wholesale access to its competitors. competition like this is critical. i know we have said this many times up here just because we believe it creates a market that provides best prices and best services.

a high quality and competitive internet services are especially important for small businesses in our economy. can you explain why offering wholesale access is good for time warner and good for consumers and i guess i'd ask if comcast has a similar offering and why the combined company continue to offer this? >> sure. our ethernet service is part of our overall business services offering. to date our business services, we get the vast majority of our revenue from small businesses, businesses with less than 25 employees. as we have expanded in the marketplace, we have gone to sort of more midmarket and enterprise market where you will see these ethernet type arrangements happening more in the enterprise space. what it does is it allows competitors and peers to come into the marketplace and have that product offering, and it's

certainly something that we find a return for our investors and something we continue to plan on doing. >> so, senator, actually, if i can, a few sentences just to say it's the first time small and medium-sized businesses have come up in this hearing, and when you talk about the benefits of competition -- or the benefits of this transaction, the scale and the investment, as mr. minson said in his opening statement, the impact on the market for small and medium-sized businesses to get telephone and high speed data services will be substantial as a result of this transaction. it's one of the big pro competitive benefits that i just want to underline and put a yellow highlighting through. in terms of ethernet, we have a product we call metro ethernet which we have also started to roll out. again, it's a product we market to larger medium-sized

businesses. we are -- we also have within that product a managed service which does permit wholesaling of that service, and we've got a few dozen customers in that space. frankly, it's a service that we talked to spot on about about a year ago and never reached an agreement with them to be able to offer that service. so it's a market that we're just beginning to be in. i don't know that we have as fully developed an opinion as time warner cable might have about that, and it's not -- this is not something we discuss during the pendency of the transaction, so i think my answer to your question is that we don't have an answer yet about how extensive we think a managed -- what we would call a managed service under our metro ethernet service would be something that we'd make available on the market. >> okay. mr. sherwin? >> we are a customer of time warner's metro ethernet service as well as their cable service.

we buy a lot of services from time warner and telecom. we buy it wholesale, and we buy almost all of our services from time warner wholesale. i think that may be largely due to the conditions that were placed on the aol/time warner merger by the ftc back when that occurred. our big concern is that that has been very advantageous for us and we think it's been advantageous for time warner. we're hopeful that when this merger occurs, that there's a condition placed that the conditions will continue to be enforced and monitored because it's helpful for us to provide a competitive service in buildings where the bigger providers are. >> thank you. i was thinking when mr. cohen was referring to small businesses, you probably consider yourself not a huge business there, mr. bosworth.

>> no, we're not. >> there's a lot of independent contractors that are the focus of this hearing as well. do you want to respond? >> yes, thank you. we've raised $30 million from individuals, a little bit over that, and one of our only remedies right now is to go out and try to raise another $30 million to litigate, and that just shouldn't be the avenue in order to provide consumers with a choice, and i have heard litigation mentioned a bunch and i have heard a lot -- i'm not an attorney, but that doesn't seem like a fair and competitive marketplace. another thing i wanted to address is in the nbc/universal merger, none of the independent network that is were launched, and we applaud the diversity angle, back nine is bringing many more people into the game, people that have been excluded in the past, so we want to bring them into the game. so we applaud that. however none of the independent channels that were launched were in direct competition with any of the channels that they own. the last point i wanted to make is that the 160 independent

network that is they referenced, if you strip away all the different networks that either have affiliations with distributors, channels, and/or media conglomerates, it's less than 20. so truly -- >> that's simply untrue, senator. >> okay. mr. cohen and mr. minson, if you could have a chance to respond when you're done. >> thank you. >> and then we're going to turn over to senator lee for some closing. >> and the productive meeting that mr. cohen referenced that we had two days ago, we were given nothing with zero promises and the only thing that went on was they said we'd like to keep an eye on you for the next 24 months. now, potentially that's maybe our fault, maybe we didn't do a good job, but the constructive conversations that we've had with other distributors that

gave you specific feedback, when you're a market maker and you own the toll, you give zero feedback as to how to be successful, and then you say let's keep an eye on you. when you know for a fact what was called in the last i guess last hearing a ripple effect. they're essentially market makers. so people look at you to say where the market leaders goes, and so when you're giving zero feedback and perhaps, you know, let's just keep an eye on you, for a small business that's raised independent dollars, it puts you in a very tough spot. >> okay. mr. cohen? >> i think -- all i'd say is the statistic of 160 independent networks is 160 channels that are unaffiliated with any of the broadcasters, major media companies, et cetera. and, again, i'm going to stand by our record of support of independent programmers because i don't think there's a company -- i don't think there's a distributor in the industry that's done more to support the

launch and ultimate growth of independent programmers than comcast has. as i mentioned, we've increased distribution for 120 independent programmers in the last three years alone. and by the way, i'm very proud of our networks, and i have a lot of respect for mr. bosworth, and, frankly, i don't participate in program affiliation negotiations. you'll all be pleased to hear. but my folks are telling me these are productive discussions. this is a network we might end up wanting to launch, might want to be part of our system. they, however, are not in competition with the golf channel. >> i'm going to let you negotiate after -- >> can i just mention -- >> i am going to just finish up here with mr. minson and i really appreciate your testimony and i think that if, in fact, the negotiations are productive or not, we'll see if we can get the channel, right, mr. lee? and i think you two should talk about it later. mr. minson. >> thank you. i just wanted to respond to a

couple comments made by mr. sherman and mr. bosworth. in terms of us providing services to mr. sherwin's company, that is not -- that does not have to do anything with the merger. if it makes business sense to do it, we have done it. provided they are in compliance with our overall terms and conditions as a reseller. one point i just wanted to address, too, is mr. sherwin addressed buying services from time warner telecom. not to overly complicate things, but that's exactly a separate publicly traded company headquartered in denver. >> right. >> as relates to the back nine network, a couple things i just want to address. previously mr. bosworth indicated conversations stalled as a result of the comcast transaction. that couldn't be further from the truth. between signing and ultimate closing of the transaction, we

are obviously acting on our own to make all of those such decisions. it would be inappropriate for us to be consulting at all with comcast. so any decisions we make, we will make on our own and it will be made on a price value relationship for our customers taking into consideration things like overall programming costs and bandwidth constraints that we have. >> all right. i'm going to let senator -- i'm sure we're going to have more questions here for the record, but i'll let senator lee say some closing comments. >> got about 30 or 40 questions that i'd like to ask. but given that the eighth amendment does have some application here, i'm going to forgo those. i want to thank our witnesses for coming today. neither chairwoman klobuchar nor i had any expectations by the end of this hearing we'd have everyone singing on the same page so that part is not surprising, but your testimony

has been helpful and i appreciate your willingness to be here and to endure our questions. thank you very much and thank you, madam chair. >> thank you. and i think as all of the questions and the testimony has shown us, there are a lot of very important issues here. the issue of consumers and how they will be protected going forward. we have the issue clearly of independent programmers and as the merger is considered and if it is considered for approval, what kind of conditions would be placed on that, and i think while this is one specific example, i think both senator lee and i are aware of other examples of people that wouldn't go public but are concerned about that, and it's not just about the independent programmers. it's about what the price then is and what that does to the market whether we're talking about that, whether we're talking about advertising, whether we're talking about the wholesale pricing that mr. sherwin has mentioned. and then, finally, of course, the issue of the internet and making sure that is done in a fair way so it's available to

everyone. we're looking forward to getting more information. i know that mr. cohen, mr. minson, your companies filed their -- what is it, 180-page report yesterday, so we will he -- be reviewing that. the committee has raised a number of letters raising concerns about the merger which i will be placing in the record. the hearing record will remain open for one week for any additional submissions and questions from senators. thank you. you can go get some lunch. the hearing is adjourned. >> thank you.