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.

>> the first thing i would do is cable tvhe largest the second largest cable tv company.

that is where i would start. my job here on the judiciary , at these hearings, is to raise my concerns. , he seems like a really smart guy and a great guy, i am sure. i can say about him, he earns his way, you know, sort of. ask toughob was to questions. you see, they have 107 lobbyists on capitol hill. they are swarming capitol hill would lobbyists. i have 100,000 people, more than 100,000 people writing me their objections. the first thing i would do is stop this deal. i would not let this go through.

it is not up to me. it is up to the fcc and the doj. >> senator franken weighs in on the proposed comcast time warner cable merger, at 8 p.m. eastern on "c-span2." >> our guest on "newsmakers" this week is virginia's bob goodlatte, the chairman of the house judiciary committee. thank you for joining us. >> it is good to be with you and your viewers. >> john gramlich is the legal affairs reporter, josh gerstein is at national security for politico. >> thank you for taking the time today. i wanted to ask about the appearance before your committee this week. it was very contentious toward the end of the hearing where he was making a personal swipe at your committee. i wonder if you can talk about that and whether you think maybe he crossed the line in terms of the oversight. >> it is always wise for anyone appearing before the committee