tv Washington This Week CSPAN June 29, 2014 5:00am-7:01am EDT
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companies and hear a variety of viewpoints on the proposed transaction. the record created by today's ouring will provide -- nation's antitrust laws. of at&t and merger directv comes at a time when the structure of the telecommunications industry could be -- or rather, is undergoing a rapid transformation in a relatively short. . the proposed merger between comcast and time warner has already been announced. of othere been reports potential mergers and acquisitions. the business of telecommunications increasingly requires significant investment to update infrastructure and provide innovative products and services to consumers. merged companies may be able to achieve economies of scale and --e better accessibility
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better ability to access large amounts of cash needed. however, this raises issues of market power and the possibility for abuse of a firms dominant competitive position. these are issues that are appropriate for consideration in a hearing like this. for the most part, the companies before us today engage in very different businesses. at&t is primarily a provider of services.internet directv is exclusively a video service provider. begun to offerly a video service which is referred to as universe, which is a competitor in various parts of the country. in addition to its video service company, it has a few sports networks in the pittsburgh, denver, and seattle areas. today's hearing will examine how the proposed merger may impact
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the future of universe and its ability provoke to provide services to consumers during the merger. -- ill also examine submittedirectv have a paper arguing the merger will allow the combined company to offer a bundled product that will and hence consumer choice i increasing competition in the market for bundled products and services. in addition, they contend the cost saving would allow additional resources to be applied to expanding broadband access, articulately in rural communities. ofhave the chairman ceo directv and at&t here to answer any questions arising from the public interest filing. forward to theok
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testimony on these and other proposed mergers. member,rn to my ranking mr. johnson, for his statement. concerns thearing proposed merger of at&t, a global telecommunications company with approximately 11 million broadband subscribers, 5.6 million video subscribers, and 246,700 employees. the nation's second-largest video providers serving in approximately 50 million customers. the core question of the heart of this merger as whether creating an integrated bundle of at&t's broadband services and infrastructure with direct tvs popular video programming would serve the public interest without substantially lessening to atition. according
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survey conducted by consumer reports lester, consumers are overwhelmingly one-stop shoppers phone,ferred to bundle video, and broadband internet into one package. only does bundling multiple services often save money consumers -- save many consumers money at a time of increasing cable costs, but it also affords the problems associated with multiple installation visits, service calls, and phone calls to resolve disputes. entrant in the video marketplace with only 5.6 million subscribers, there is little to suggest at&t offers serious direct competition with direct tvs video services. the bulk of the evidence demonstrates that each company primarily serves different markets with different services.
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although the proposed merger represents a concerning trend towards industry consolidation, there is ample evidence that this transaction would create considerable public interest benefits. improvedes that the bundle and cost savings generated by the merger will "fundamentally and permanently improve the economics of at&t's investment in broadband." tocifically, at&t plans deploy its network with speeds up to one gigabyte per second, and deployed high-speed broadband internet over a fixed wireless local loop to 13 million homes in largely were speedsas, with average between 15 and 20 megabits per second. or millions of homes, this
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internet service would be the fastest ever. improving high-speed access for millions while indirectly benefiting other competitors by bringing these homes online. as a strong advocate of digital dash of digital inclusion, i commend this commitment to close the digital divide by bringing us measurably closer to the universal adoption of affordable high-speed internet. it is critical that people of color remain competitive in the internet economy which starts with a fast and affordable internet connection. additionally, this merger would benefit by the public by expanding at&t's industry-leading standards for labor and corporate diversity to employers and suppliers. given the company's infamous organized labor,
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this would have transformed -- this will have , ansformational -- i asked the department of justice to view this merger in light of these proposed benefits and to strongly hold this company to the commitments. -- deployment of its ultrafast fiber network, i call on at&t to deploy this advanced service in atlanta, georgia, which encompasses much of the district i represent. is swiftly becoming an ,nnovation-driven economy driven to innovate, tinker, and design. to employ an all-fiber network in atlanta would benefit many
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local startups as well as untold entrepreneurs, app developers, and other innovators still emerging. as a former county commissioner who understands the power of big ideas, i stand ready to work with both at&t and local government to make this happen. i think the chair for holding this important oversight hearing, and i look forward to today's testimony. with that, i yield back. mr.hank you very much, johnson. at this time i recognize the chairman, mr. mydland of virginia. >> thank you, mr. chairman. >> robert depending on the action of the antitrust agencies and the federal communications theission, telecommunications community may experience significant change over the next year. as the committee and the relevant government agencies
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examine the potential issues associated with the multiple proposed telecommunications mergers, we should be mindful that assuring the best interest of consumers is the goal. it has been demonstrated repeatedly that a free and competitive marketplace yields lower prices, greater innovation, increase investment and better services. we should strive to ensure that her post transactions result in enhanced competitive marketplaces so that the attendant benefits continue to run to consumers. today's hearing allows a public forum to discuss the competitive impact between a merger between at&t and directtv. the directors are before us today to explain how the benefit merger would consumers. we also have witnesses who will raise potential concerns about the merger through a fair and objective inquiry about the
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merger. a record will be produced that will provide transparency and thoughtfulness to the review of this merger. i look forward to today's witnesses. thank you mr. chairman, i yield back. >> thank you. at this time i recognize the ranking member and former chairman of our committee, the gentleman from michigan, mr. connors. >> top of the morning, mr. chairman and my follies and our witnesses. and our visitors that are here this potential transaction. last month, inmate, we had a that covered time warner and comcast. now this month, we are looking at directtv and at&t.
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month, depending upon what happens in the intervening time, we may be looking at sprint and t-mobile. question, where does this end? and, i am looking at a transaction that highlights the concern that there may be too ach and too rapid consolidation in .elecommunications especially when viewed in the dealsof a flurry of either announced or rumored. one rationale in favor of the merger is that it would create a strong competitor to a large
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cable company. it may in fact spur further consolidation in the telecommunications industry as part of what might be viewed as a race to the bottom. resultger proposed may in reduced competition for paid television services in many of our nations largest markets. the sheer size of the combined at&t-directtv entity could raise content prices for smaller video providers, potential he driving some of them may be out of business. toally, there is a need focus on whether behavioral remedies are in practice effective.
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so, while neither we nor the competition and enforcement agencies should prejudge this deal, there are several concerns that i wanted the witnesses to address as well as the feelings that i have already expressed. there is the fact that we are concerned that there may be too much and too rapid consolidation in the telecommunications industry. appreciate it the antitrust laws to protect competition and not competitors per se, this ongoing wave of consolidation will, without question, result in fewer firms and may harm consumers by
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alsoing choices and raising prices. after all, it is the very threat of losing business and the face low-qualityes or products and services that to drive competitive practices. rationale in favor of the merger is that it would create a stronger competitor to large cable companies. that's may, in fact, spur consolidation in the telecommunications industry. i do not doubt that the merged entity that is under consideration could be large enough to effectively compete against large cable companies, but what is to stop competitors from using the same argument to justify even further
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consolidation? so, i will be looking and to make sure that we are not moving in the wrong direction. to put my feelings out in front of you so that any of give me any free to consolation that you want about the concerns that i have and i will put the rest of my statement and the record and thank the chairman. you, mr. connors. at this time i would like to introduce our witnesses. a very esteemed and qualified panel of witnesses and we start by introducing mr. mike white who is president,
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chairman, and ceo -- that pretty much covers everyone doesn't it of theirecttv, one world's leading providers of entertainment services with more than 21 million customers in the united states and more than 15 million customers in latin america. i am not sure that we realize there are that many customers also in latin america. joins directtv in 2010 and also serves as the chairman on the company's board of directors. in hit -- in addition to his at directtv he also serves on --'s board of directors. ofwas also the chairman pepsico international from 2003 through 2009.
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prior to that, he served as president and ceo of frito-lay's european, african, and asian division. -- middle east division. before joining pepsico, he was the senior vice president and general manager for avon products. he worked as a management consultant before that. he holds a masters degree from johns hopkins university and a bachelors degree from boston college. we also have mr. lieberman is a graduate of johns hopkins. mr. white is also a ford foundation fellow at leningrad state university in st. petersburg, russia. many of my constituents are very loyal customers. our next witness, we are glad to have you, mr. randall
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stephenson, the chairman, president of at&t. let me say this. at&t is one of the world's largest telecommunication companies. i note that over the past six years, at&t has invested more capital into the united states economy than any other public company and more than $140 billion invested in wireless operations combined. that is erected to be proud of.
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-- a record to be proud of. i commend you for that. prior to becoming ceo, he served as the chief financial officer at at&t from 2001 through 2004 and then as the chief operating officer from 2004 through 2007. he was appointed to the board of directors in 2005. he began his long career in telecommunications in 1982 with southwestern bell telephone in oklahoma. in addition to his leadership at at&t, he is chairman of the business roundtable, an association of leading u.s. companies' ceos. he is a member of the pga tour policy board and a national executive order member of the -- boy scouts of america. we welcome you. you are obviously plugged into rural consumers, too. your background there in oklahoma. mr. john burgmeyer, we welcome
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you. he advocates for public interests before courts and policy makers and works to make sure that all stakeholders, including citizens, artists, and innovators, have a say in shaping and merging digital policies. he received his ba in english lit from colorado state university and his jd from the university of colorado law school. our final witness is mr. ross lieberman. he is the senior vice president of governmental affairs at the american cable association, which represents 850 independent cable and broadband operators serving smaller market central areas.
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he manages the formulation and implementation of the group's strategic initiative on capitol hill and with federal agencies, including the fcc. prior to that, he handled government relations for echostar communications corporation, where he oversaw their filings with the fcc. he received his ba in political science from johns hopkins university and his jd from american university, washington college of law. we welcome you. each of the witness's written statements will be entered into
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the record in their entirety. at this time, we will ask each of their witnesses -- are witnesses to summarize his testimony in five minutes. with that, we proceed to hear from our witnesses. mr. white, you go first. >> good morning. thank you. my name is mike white. i am ceo of directv. thank you for inviting me to testify on the proposed acquisition of directv. for any business to succeed in the long term, it must satisfy its customers needs better than the competition, day in and day out. this transaction will help directv and at&t do exactly that.
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by combining complementary assets and products, we'll be able to offer new services to customers at a better value. we will help consumers watch the video they want, when they wanted, where they want it, and on the devices of their choice and we will be well-positioned to compete well into the future. i would like to briefly describe the perspective on the transaction. historically, direct tv is a remarkable american success story. we have competed aggressively by delivering more high-definition channels, clearer picture, and better customer service than cable. congress has also had a lot to do with our success.
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making sure we could acquire the programming our subscribers demanded. in recent years, broadband is changing everything. if we want to continue to compete effectively in the internet driven economy, we too must adapt. we must provide an integrated bundle of services. consumers aren't demanding better bundles of video and broadband -- are demanding better bundles of video and broadband. young subscribers in particular want services like youtube, netflix, and hulu. we need a broadband platform to meet their need. third, as technology changes, we must continue to optimize our own video service. cable's to wait -- two way services allow cloud-based features. available -- cable operators are leveraging the cloud to improve services quickly and easily. we will need to do all of that if we want to be able to keep up and continue to compete successfully. we will have to continue to manage content cost increases. writing content cost challenges all video providers. yet bundle competitors can handle this somewhat better because they are never knew from multiple sources. historically, directv has remitted -- tried to remain
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competitive by group -- presenting synthetic bundles. but they make for a bad customer experience. they have to pay to separate bills and make two calls every time have a problem. they also tend to be more expensive for consumers because each company seeks its own margin on its contribution to the bundle service.
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this transaction will help us meet all of those challenges head on. it provides directv's assets and at&t's assets. it will mean better bundles, more internet, particularly in rural areas, better video, lower content cost, and it means more and better broadband to 15 million new locations, predominantly in rural areas. it will mean more innovation, particularly combining our expertise in video with expertise from at&t in wireless. if you put it all together, you put a transaction that lets us better serve our customers, unlocks incremental job growth opportunities, and sustains long-term competitiveness. it opens up a new world of possibilities for directv subscribers.
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thank you for inviting me to speak today. i look forward to your questions. >> i'm randall stephenson. chairman and ceo of at&t. i appreciate the opportunity to visit with you. this transaction is unlike most mergers. it primarily confined -- joins companies with complementary services. the rationale for us coming together is simple. it is about meeting consumer demand. it is something that consumers can get from the cable providers -- directv has the premier pay service, but it does not have a broadband product. to compete, at&t offers bundles of services, most importantly broadband and tv. less than 2% of our customers purchase tv on a standalone basis we don't actively marketed because we don't make money on it. we can only offer video and a small portion of the country. we don't even cover all of our broadband footprint with video.
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that is due to technology and economic limitations. there is no significant competitive overlap between at&t and direct tv. the consumer benefits of this transaction are significant. being able to offer directv nationwide is a game changer in terms of the economics for deploying broadband. it will allow us to expand and enhance broadband service to at least 15 million locations across 48 different states and those are mostly in underserved, rural areas. this directly results from the synergies created by the transactions. this commitment includes 13 million locations, 85% of which are outside our traditional footprint. we think this is big news for rural america. we estimate that 20% of these customers have no access to broadband. another 27% are hostage to only one provider.
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broadband. this also allows us to expand our one gigabit service. we will now be able to serve 70 million customer locations with broadband. this will allow us to price more competitively and provide consumers a more high-quality experience. consumers will receive greater convenience from a single point of contact, as you heard mike described. we will be able to accelerate the deployment of our new over-the-top video services offered by at&t, as well as those offered by netflix, amazon, and hulu. we will be able to deliver them to any screen.
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we operate in a competitive environment which is only becoming more competitive. the cable companies are ready dominate broadband and video today. ever faster wireless services are transforming competition daily. this will allow us to be a more effective competitor to cable. i want to are sure you and our customers that we will do all of these things well meeting or exceeding the fcc net neutrality standards and exceeding our labor practices to employees and providers of the companies. thank you for the opportunity. >> thank you. >> good morning. thank you for the opportunity to participate in today's hearing. i will describe how the merger can harm the public. the legal standard is clear. antitrust authorities cannot allow this merger to succeed if it may reduce competition in any
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market. the fcc cannot allow this to proceed unless at&t can show that it would benefit the public. based on the record so far, at&t has not met its burden. additionally, policymakers should be aware of other dangers. at&t may leave rural americans behind. at&t may plan to use the acquisition of directv to jumpstart an online video service. at&t must offer any service in a nondiscriminatory way. it would reduce competition in the pay tv market. they compete head-to-head in the pay tv marketplace in more than 60 local marketplaces. tv viewers will lose a competitive choice. the level of market concentration would exceed department of justice guidelines. that means higher prices and worse service for many viewers. this does not address the
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structural problem that at&t would cause to remove the competitor from the marketplace. at&t's public interests are less than meets the eye. at&t has a spotty record with regard to past merger commitments. at&t now claims that their footprint -- if committed in 2006 to serve 100 percent of residences with in its services with broadband. why are people still unserved? at&t also has a history of using already planned buildout as a merger promise. when you strip away previously announced plans, even at&t's best case is less than it appears. it is simply stating that it will upgrade portions of its network. that is not much. adding a new kind of home wireless service to an existing wireless coverage area is not a significant investment. there are for the public interest charms.
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concerned. at&t plans to create a new online video service. they should be free to enter this market. it cannot take advantage to favor its own services at the expense of competition. while it has agreed to abide by the terms of the fcc, those rules provide a lesser degree of protection for wireless users. thank you. >> thank you. an unprecedented wave of consolidation is occurring within the video programming and distribution industries that will transform the competitive market and consumer experience. this is cause for concern. congress and regulators must not only review the pending deal, it must almost examine and address the underlying market problems feeling it. focusing on at&t's deal, it is important to realize that direct tv is not only a nationwide provider of pay tv service, it is also a programmer with interests in three regional
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sports networks and national programming. this gives directtv and economic incentive and ability to charge its rivals higher fees for its programming, especially its regional sports networks. this could lead programmers to hold up for higher rates. at&t and directv combined will command better programming deals. this means higher video profits for both services. regulators have accepted that as a per video subscriber process of a vertically integrated pay-tv rise, so does its interest in boosting its rivals costs for its programming. pay-tv providers will feel the pinch when negotiating and their customers will pay. regulators should not approve
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the merger without addressing this measure. there is no longer an arbitration commission. however, this is not enough. this left smaller cable operators under protected. congress must also look at the bigger picture, by reviewing existing roles to ensure that industrywide problems are addressed. this will ensure that consumers continue to benefit from a competitive pay-tv market that includes smaller operators. aca members have long raised alarms. the programming costs were smaller providers significantly higher than for larger providers. the spread, around 30% come up with my members at a substantial disadvantage to bigger competitors, like directv, dish network, and comcast. at&t's desire to acquire directv does not surprise smaller operators. even though the subscriber base nearly exceeds that of all smaller cable operators combined, its motives for buying
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directv .2 it facing similar market problems. -- point to it facing similar market problems. while at&t can lower programming costs and better compete, smaller operators cannot because they lack the financial resources. and scale. unable to spend their way out of trouble, these video providers struggle increasingly to remain viable. some critics of at&t's deal raise concern about the number of pay-tv providers reducing from four to three. some smaller cable operators of closed systems, leaving consumers with only two satellite providers. though the slow competition has
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not generated much concern from washington, it should. it is harmful to rural america and signals wider market problems. these trends are not a reversible. congress and regulators can take action to prevent my members and their customers from simply being unreasonably disadvantaged compared to their larger competitors. in conclusion, there are three areas were oversight and action would be meaningful. first, by examining and addressing programmers discriminatory pricing practices against smaller pay-tv providers. second, by modernizing program access rules by updating pay-tv categories so that everyone pays their fair share. thank you and i look forward to your questions. >> thank you. at this time, i recognize chairman of the committee for five minutes. >> thank you. thank you all for your testimony. mr. stevenson, i noticed you
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are there one or two points you want to make in response to the criticisms of the merger? >> it was not a criticism of the merger, he was citing a blogger that said we had not fulfilled merger conditions and i would like to make sure that the committee hears that that blogger was patently inaccurate, the data was false, we totally complied with every single condition imposed in that merger. in fact, what the merger required was that we provide 100% of broadband coverage, 85% of fixed broadband services. at that time -- >> we have a limited amount of time. i get your response. let me go onto my main -- >> we have all been blogged before. >> we understand that.
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let me go in to my main point. this is all about what happens to the consumer. let me talk about my consumers in my district, in my hometown of roanoke number virginia, the bundle package that you refer to right now is available for verizon customers with directv. i and others can get that package that you refer to. what will happen to that package that i have or someone else might have with verizon and directv because of this merger? >> my expectation is nothing should change. >> what about at&t? do you offer those packages as well? >> yes, we do. mike referred to those as synthetic bundles.
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>> why is it necessary to acquire directv to continue the bundle? >> i would like mike to address that, if that's ok. >> we measure customer satisfaction on everything we do. when we measure the satisfaction of a bundle experience versus someone who is just buying directv solo, it is dramatically poorer. two installations, two bills. >> how does verizon solve the problem? do they acquire dish? i'm not sure what i have available to me with at&t. i know what is available with verizon and that does not solve the complaint you just outlined with regard to verizon. though i'm not familiar with the complaint. we like the service we get. >> the only way for us to get a seamless, integrated bundle -- we have tried to find a way to get better value for the customers -- when you have two separate companies tracing
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margin as to one integrated company that can spread the cost over that one install. every time we send up a new customer, we spend $850, we can probably reduce up to 20%. >> is that savings going to get on to the consumer? >> we have had an economist study it. the bundles would be a better value for consumers. >> let me ask you about another issue related to this. directv does not provide local harrisonburg, virginia despite being legally able to do so. directv beams in content from
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washington dc, which is many hours away from my district. can you explain why directv has opted to not provide this valuable local content to my constituents and can you commit to resolving this situation so that my constituents can receive local content rather than washington, d.c. content? >> my folks back home live in a different world. they want to watch that world on tv. we have been working on our system for many years. we now serve 99.4 percent of american households with local channels. we still have a few gaps and you have pointed out one of them. >> there are more. >> that is correct.
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there are. we are continuing to build out as we get satellite capacity. we have two more satellites getting up in the next few months. the others will be on the list as well. there are orphan counties. we would be happy to work with you on coverage in some of the orphan counties, provided we don't have to pay retransmission fees twice. it comes back to the rules we have to abide by. >> thank you. i yield back. >> this time i recognize the ranking member of the subcommittee. >> as i noted in my opening statement, this transaction presents substantial opportunities for transforming labor standards in the telecommunications industry. the communications workers of america noted in a letter that at&t is the largest full-time union work of any company in america. i know everybody doesn't agree that that is something that is
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worthy, but i think it is very worthwhile. i would ask unanimous consent to make it part of the record a letter from the communications workers of america in support of this merger. >> without objection. without objection, i'm sorry. >> mr. randall stephenson, many of your employees, including workers and union positions in my district enjoy great benefits. how would at&t plan to extend this industry-leading respect for the rights of employees to directv as a result of the proposed merger? >> as you mentioned, we have the
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largest full-time union in the united states. we have a long history of working with our union members in collective bargaining. we have always been open to contract neutrality and we have opened employees to make the choice as to whether they wanted to be represented in collective bargaining or not. with directv, we should assume that they will be offered that same option, to collectively bargain or not. it will be their choice. >> i agree. i agree. we certainly welcome the opportunity. i think there is fabulous talent that at&t brings. we think directv has great talent as well. we think their world-class benefit programs will be a good thing. >> i would like to ask you both to talk a little bit about the company's commitment to diversity, the merged company's commitment to diversity in a number of different contexts. everyone will agree that having a diverse group of individuals
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as real partners, both inside and outside the company is important. at&t's public interest statement pledges that at&t's diversity best practices will be applied to directv. such action would be laudable, given at&t's history in promoting supplier diversity and inclusion. cleese describe the best practices -- please describe the best practices referred to in the public interest statement. >> i will start with employees. we have a strong belief that our employees on to reflect the markets we serve. i don't believe you can be successful in a marketplace of you don't have employees, executives, and all the way up to the board that reflect the market we serve. we think we have a good track record in that regard, all the way from our board down to our front-line employees serving the
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market. we also extend the commitment and expectation to our supplier community. in 2013, our supplier community, when you look at the total, over 25% of our spend has been diverse suppliers. that is in excess of billions of dollars in diverse suppliers. our cultures are very compatible. we look at directv, we see comparable practices. >> anything to add? >> 40% of our workforce are people of color. 43% of our new hires were people of color. 42% of our summer interns are people of color. i passionately believe that you cannot understand customers, if your employee base and management base and your board, and our board does as well, reflects that diversity.
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we are proud of our commitments to diversity and inclusion at directv. i would say, i look forward to leveraging some of the supply chain. at&t has done best in class work in that area. >> that is great to hear. do these best practices for diversity apply to banking and finance? >> yes, for at&t, it is through all the disciplines. it is 25% across all disciplines. we impose these supply requirements -- diverse supply requirements. >> thank you. i yield back. >> my first question -- how the proposed merger will affect americans jobs. let me go further than that and say also, the prices that
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constituents pay for both video and internet. how will customers benefit? will this create jobs? >> mike made this comment in his opening statement. this deal is about growth. i'm very enthusiastic about this for a couple of reasons. as we both stated, these are complementary assets. you are not going to have the significant overlap of responsibilities as you do in a traditional merger. in 75% of the united states, we don't compete at any degree. to the extent that there are overlapping jobs that need to be taken care of, we have a very good track record at at&t of elegantly working our way
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through those, using attrition, placing people in other assignments. this deal has a lot of investment tied to it. enhancing 15 million homes with new broadband is a significant capital outlay, in spite of what some of the comments were, this is significant capital. these are hardhat jobs that will be deploying this capital. it involves new antenna arrays, installations in the home. there is a lot of capital investment tied to this. capital investment is synonymous with jobs in our industry.
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i feel good about this from a jobs standpoint. >> do you have anything to add? >> i would only echo what randall said. i think of this is a complementary combination, taking the best assets of two. often in a merger of this size, there are significant job losses. that is not the case. this is a very different transaction. this is going to create job growth. it is going to create better broadband access to rural america and it is a win-win for both sides. >> we are talking about two service calls on two different days. substituting that, having one, obviously customers benefit from one call. that is not the kind of job consolidation any of us are concerned about. we would love to have new services offered and capital outlays and new jobs created is what we are looking for, not duplication of the same job. this is been described as a
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merger between a broadband provider and an internet provider. i think that is somewhat true -- i mean a video provider, i'm sorry. and a broadband provider. except that u-verse -- you do have a video offering. that is very popular in my area. i want to know what is that going to do going forward -- what effect is this going to have on u-verse? >> u-verse will continue to expand. one of the advantages of this transaction is that directv, because of their content programmer relationships, we feel very good about what it will do to our overall content cost, including on u-verse.
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we are losing money on the tv platform on u-verse. this will allow us to turn that into a profitable operation. this changes the economics. we can expand it. we have an opportunity -- we have committed to expanding the platform by an additional 2 million homes with a full one gigabyte broadband capability. >> thank you. my final question is this. many rural members were concerned about issues related to rural programming and the importance to customers. many have interest in rural communities. i have asked you a similar question. is rural america important to at&t?
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what is your commitment to carry programming that is important to rural america? >> rural america is very important to us. we had opportunities in the past to sell off our rural assets. we have chosen not to. we have been working digitally -- diligently to provide a broadband solution for rural america. now, when you have a profitable tv product that reaches
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rural america, it changes the economics even for rural broadband deployment. this is going to allow us to build out a rural broadband footprint using new wireless technology -- fixed wireless local loop. this is one of the more exciting technologies i have been a part of for quite some time. we are committed to building a 13 million homes in rural america. it will be priced like a landline service. we think this gives us the opportunity to do exciting things for rural america. >> at this time, i recognize the former committee chairman, mr. conyers. >> maybe future chairman. [laughter] >> you can leave it like that. i just want to ask about the comment anything mr. burgmayer shared. >> when it comes to the
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investment promises at&t is making, i would urge the subcommittee to put them in context. it is important to distinguish upgrades from new build outs. a lot of at&t's numbers consist of upgrades, adding a fixed wireless product to an existing wireless coverage area. that might be some amount of investment. but it is less than an initial it is important to put it into the context of the existing upgrade plans. they already have a fairly ambitious buildup plan that has something called project vip, which talks about a lot of the new buildup in coverage that at&t plans to do. it has an initiative where wants to upgrade and number of cities. it is not exactly clear, the
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scope of at&t's existing plans. we know that they are, but it is hard to quantify them. it is difficult to compare any new commitments they are making today to those existing plans. standard. if we expected at&t to provide a certain level of service in 2006, you would hope they would meet any commitment and continue to upgrade the service as the definition of broadband continues to be reworked by the fcc and policymakers. that is my concern. it is not enough to simply meet a certain commitment and then stay there. we expect a continuing level of investment. >> do you generally agree with those comments? >> no, sir. i generally do not agree. the commitments we have made, i think they're very well-documented. we have laid them out in public filings on our vip that we will
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build broadband to 57 million homes. we will expand our video foot print by 8 million homes. we will pass one million business locations with fiber. we will pass 300 million people with our mobile broadband lte service. those are all documented public record and are in our financial filings and we're fulfilling those. the commitments we have made -- the 15 million new or enhanced broadband are all on top of that commitment that is in the public domain. all of that is incremental. the capital requirements to do that. just 2 million households with fiber to the home is a significant capital investment. the 13 million fixed wireless local loops, that is a massive geography we are talking about passing. while it may be incremental to investment that is already there, for a company that is investing $21 billion a year, that is a significant amount we are taking out of that. >> ok. do we have a consensus here of
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his rebuttal? does that work out for you? >> i understand that at&t has a very ambitious buildup plan. some of the numbers in question that are supposedly in the public filings are rejected and confidential in the fcc filings, so i haven't looked at them. it is difficult to see how the numbers are simultaneously redacted and public. how merger specific are these promises? as with the t-mobile merger, whether at&t has buildout plans and they are simply restating them for the purpose of getting a merger approved.
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>> mr. stephenson, how would allowing this transaction to go forward result in putting downward pricing pressure on cable products? >> it is an interesting one. you heard mike describe the process by which he sells video services. you put the two together and you have a lot of customer efficiencies that come with that. it is cheaper. the customer experience is better, and we had an economist study this. it is in our filing with the s c fcc. we had an economist study this. we had a detailed econometric model. before the merger synergies were incorporated, this would have not only a downward pricing bias on our prices, but also on the cable companies prices. >> let me get a response from mr. lieberman before we close out. >> thank you. i just want to say mr. stephenson and mr. white are polished about the benefits they
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are willing to make. we have not heard them talk about the concerns that they are vertically integrating programming, particularly sports networks that are owned by directv are not subject to any arbitration conditions and they will have an incentive ability to increase the prices for that programming for smaller cable operators. if they're going to be making commitments,st it would be nice to hear them address that problem as well. member's time of expire. the chair recognizes himself or for his questions. i want to go back to something. i want to make it clear that directv will not be forced to unionize, correct? forced to unionize. >> no, sir. we leave it up to the employees. forhis will be a request them to vote to join the union, or will it be a required vote? >> the union has to go in and
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solicit and see if they can hold a vote. >> ok, good. mr. lieberman, as you may know i , had previous questions about the proposed comcast time warner - merger. when the subcommittee held a hearing on that merger earlier this year, could you give me your view on this issue and especially any difference in the impact of the comcast-time warner merger compared to the at&t-directv proposed merger? >> aca is concerned that comcast-time warner cable would be able to exclude agents and advertisers from regional advertising interconnect. this would not be the case from with at&t and directv, which do not control an advertising interconnect. >> i would like to open it up. mr. white, would you like to talk about that? >> i would make two comments. advertising is quite a different business model. most of our advertising is
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national. we are less than 1% of the advertising. i don't think it affects the market at all. it will open up opportunities for small businesses to advertise. as it relates to the regional sports networks, we have three of them. one in denver, one in seattle, one in pittsburgh. at&t does not even have a footprint in those three states, so it does not have any impact on those regional support networks and we are subject to the requirement access of the fcc. >> i believe the vigorous competition will help consumers get a good deal. no matter where it may be in. competitive markets is genuine choice for consumers in terms of who supplies a good service that they demand. in both at&t and directv's written testimony, you say this merger will increase competition. competition is not an end, but it should be a mechanism by which consumers realize an actual benefit. i will open this up to everyone. can you say with certainty or at least is it possible in the business world that this merger will or will not directly result in more choice in short-term and long-term and to what extent?
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it is portrayed in these mergers that this is what will happen, but the reality is spotlights are off and this does not happen. i would like to hear each of you answer that question. >> i will take the pay-tv side. and randall can talk to the broadband benefits. from a customer standpoint, we believe in choice. we have to. we sell a pure play offering. it is going to be like vanilla, chocolate, and strawberry. we will have a pure play, a bundle with at&t capability, a particularly with the 15 million homes that they are going to buildout, which will be a new benefit for consumers. in terms of the overall value to consumers, today those bundles are not very competitively priced. when you make one company, you as our modeling shows you will , see a better value on goal bundle offering to those customers. >> a quick question. full disclosure. will the two different services
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become a bundle opportunity for us or are we stuck? with the current practice packas that we have until they are over. >> that would be your choice. we believe in choice. the way we have built our business, it is up to the customer to decide. we will give that choice. you can choose a, b, or c or you can stay where you are. >> mr. stephenson. >> there is another facet to this. when you ask about consumer benefits, the over-the-top model is evolving very quickly. we had 100 million wireless subscribers at at&t or demanding -- who are demanding access to the types of content that mike has on the directv product. one thing you should expect to see as we begin to integrate the offerings and deliver that content seamlessly across the mobile devices, that is one benefit. accelerating the ott model. the second is in terms of consumer benefits, the 15 million additional broadband
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homes pass is a significant consumer benefit that would not happen but for this transaction. we think that is significant. obviously, the pricing implications. i will not go into the econometric model, but it is really compelling what happens to pricing not just with us but across the industry as a result. >> i may have said more choice and more cost -- that may be what i've experienced in the past. i would assume the other two disagree with that. because of time i have to. i want to go back to this issue the chairman brought up. ike, i haveust make him i'v had other issues. i have had conversations with your folks. i want to continue to harp on this until we get this fixed. this is not an issue i am going to let go of. you know when i get on sunday, i really do not leave until i get an answer. at this point, i have encouraged that. my time is expired. we will go to the gentleman from new york, mr. jeffries. >> thank you, mr. chair.
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let me thank the witnesses for your testimony today. there has been some discussion about the workforce transition. i want to go over some of the ground again. mr. stephenson at&t has the , largest unionized work force of the country, correct? >> full-time union. >> i commend you for that. and for demonstrating that you have been able to be an incredibly successful company with that workforce. your employees are represented by the communications workers of america, correct? >> that is correct. >> mr. white what is the , percentage of unionization of your current work force at directv? >> at directv we have outsourced , partners, but specifically as it relates to directv, in terms of owned employees, it is mostly a nonunion workforce. some of our installers in the northeast and elsewhere are union. >> have there been efforts in to unionize the workforce in the past? >> we have had a vote in one
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geography in california. >> what was the outcome? >> that result was in favor of unionizing. we have had some questions from our standpoint about going through with the commission about challenging that. we are waiting for the ruling. from the nlrb, i believe. >> thank you. mr. stephenson in terms of , legacy directv employees, i believe you have indicated that they will have an opportunity to join the cwa? >> we have it policy of open card check neutrality. >> that potential transition will be through neutrality in terms of card track. >> yes, we have a long track record in this regard. when we bought at&t wireless for example, we opened up the workforce to card check. the union came in, held a vote, and across many locations, they voted to join or to become part of the collective bargaining process.
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some places not, but we leave that up to the employees to make that decision. >> you expect the merger to create jobs. i believe both mr. white and mr. stephenson, you testified in that regard, correct? >> yes, we are enthusiastic about that. first and foremost we're are , investing in 15 million home s with broadband. those are hard hat jobs. >> in terms of the ambitious capital buildup program and the complementary nature of the company, there does not seem to be much disagreement about that, there is an expectation that you would create jobs. mr. bergmayer, is there a reason for you to disagree with that assertion? >> in mergers, there are usually job redundancies. that is not the focus of my concern. today i am more focused on the , consumer side here today.
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>> in terms of the potential creation of jobs, is there a specific regional distribution you would anticipate would receive any job growth? more so than other parts of the country? >> the places that come to mind first are the 2 million homes that we are passing with our gigabit technology, high-speed broadband capability. that involves taking fiber all the way to the home, putting electronics in the field. that is a significant build. that will be within our old traditional franchise landline territory. the 22 states where we operate today. the rural broadband build, which is the wireless deployment, will hit 48 states. that is going to be a fairly broad-based deployment. and in our company, jobs align with capital. they're perfectly correlated. at the would best, you are more people. i don't want to mislead. there will be places where there are redundancies in jobs. but we do have a very good track
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record on how to address those situations and we use extensively attrition and also i feel good about our track record in that regard. >> you don't currently offer video services in the new york city market, is that correct? >> we offer wireless services and large corporate businesses we offer service to. >> but not video. >> not today. >> now, mr. white directv does , offer video in new york city, that's right? >> we do. >> how do you expect the potentially merged entity to -- to impacttv the nature of the services that would be offered by a combined company? >> in urban markets like new york, there would not be any change, frankly, in general, to a pay-tv standpoint.
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we will continue to compete hard. we will have an opportunity to bundle on the wireless side. that is something different we have not done before. >> there is no current bundle in the new york city market. >> no. we might with verizon and was with slower speed internet service. fios is very competitive in new york. >> thank you. i yield back. >> thank you, mr. jeffries. at this time, i recognize the gentleman from texas. >> thank you, mr. chairman. >> he is the vice chairman of the subcommittee. >> i would like to follow-up with you on the question that mr. collins asked about local broadcasters. as the satellite technology is adopted in homes, how does the local car dealer reach that market outside the local broadcast stations that you carry? the car dealer or whomever can
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go to a cable company and buy some of the local sales of the channels and with satellite it does not. i would assume u-verse had an ability to buy local ads on cable and if you didn't, you should have. >> you are right. u-verse because it is a local products, it does have local advertising. as far as directv is concerned, the nature of the satellites in the sky is kind of national. we grew up as a national business meeting with companies much larger than we are. more recently, we got a new technology that is enabling us to do some target advertising. we have done a joint venture with dish for political advertising. this is a new technology leveraging the internet, which is enabling us to target homes, and we are hopeful to be able to grow the local advertising, but historically, $70 million of our
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$600 million in advertising is local. it is very small. >> he might have technology that helpingthe -- that is local companies, not hurting. i want to talk about the buildout. common sense to me dictates -- the driving force behind broadband right now is video, and if you have got a cheap way to deliver video via satellite as opposed to broadband, there is a discouragement in rolling out your fiber network. i read an article in the "dallas how you are" about actually still rolling it out because you're competing with google fiber, so how are we going to see people out of fiber affected in markets that google is not entering yet, and when is it going to filter down to the midsized city and then eventually to be smaller towns?
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>> that is one of the i guess interesting things about this transaction, and i have referenced it a couple of times now, but our video service, whether it be over fiber or fiber to the node technology, we lose money from the video service. directv, andh creating the opportunity to make our programming costs look like directv's programming costs makes our fiber-based tv product possible. once the tv product becomes profitable, it fundamentally changes the economics of a fiber build. so when we announced the deal, that we were going to expand our fiber to the home footprint by 2 million homes, it is because of the economics of a more profitable video product. in fact, in your district, i think corpus christi -- 16,000 homes will get fiber to the home as a result of this transaction. the torilla county, out and around that area, it is a fairly significant number, we will get
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fixed wireless local loop wireless coverage where they do not have any today. it changes the economics of a broadband bill that makes a fiber deployment more compelling, not less compelling. >> so you are willing to tell me under oath that this will not slow down your fiber deployment? >> this will actually cause us to do more fiber deployment. >> you talk about lowering programming costs and the buying power you get with this merger, and i see how that is a competitive advantage. what about making the space new comingor television networks you go you see a growing market in spanish-language networks, you see it grow market in sports, and news for these things, what will happen if i -- god forbid, do not get reelected
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next year and decide to start blake tv? we aret now i think considering 50. i'm not have satellite capacity for 50, but we do have two new satellites going up over the next year, so we have a process internally where a couple of times a year i sit down with all of the requests. independentave 152 channels. we welcome that as a diversity as part of our offerings. i would expect as part of our new satellite capacity, and with respect to the gigabit to the home, with affordably you can do video that would have more diversity of independent channels. >> thank you very much. i see my time has expired. >> thank you. cicillineme, mr. recognize for five minutes. >> thank you, mr. chairman, thank you for the witnesses for being here. phenson, mr.enson, mr
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bergmayer has said at&t does not have any public benefits and he argues that the bill that you speak of a 15 million customers is in fact enhancements rather than build up and may have in fact been something that is part of your capital investment anyway. and if something that is not in your public filings. can you tell us about 16 million, how many are enhancements, how many are build up for new customers -- is in fact something you planned to do anyway and is not specific to this merger -- not to say it is not a good thing, but in evaluating this, could you respond to that? >> i would be glad to. the commitments we have made our in our public financial filings where we have committed fiber, broadband to 57 million homes and businesses pass with fiber, 300 million people coverage lte.
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all of that is baseline. we make commitments and we're finishing the construction now. eithermillion broadband enhancements or editions are incremental to that. the 15 million is split. 13 million is a technology we are very enthusiastic about. it is called fixed wireless local loop. very interesting name for the technology. but what it is is taking advantage where we have significant spectrum, and it tends to be rural america. in fact, it is almost all rural america where we have 20 megahertz of spectrum, we are deploying this technology and using wireless to deliver 15 to 20 megahertz. we will use existing cell site infrastructure to put up these capabilities, but we will have to go up and put antennas into homes, a lot of installation required. that is 13 million. there are 2 million homes where it is called enhanced, but what we are doing is deploying fiber literallye,
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digging up streets and putting fiber to the home. that is a significant commitment to what we have party made. >> thank you. several of the witnesses in their testimony have raised issues with this net neutrality. should part of the remedy to address some of the issues that have been raised with the transaction include extension of net neutrality, the net neutrality rules to wireless -- should we do this as part of this process -- or should it be done, i should say? >> we have been very constructive in the net neutrality debate. rules in the 2010, we worked extensively with the fcc to make sure it accomplished what the industry needed, the tech people at all, and we think those rules landed at the right place. cautious.s were very wireless networks are not like fixed line network. with limited spectrum that this congress is working aggressively to deal with. we have limited spectrum, limited capacity, doing things
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where constraints what you can do to deliver traffic can be you will, tos, if service quality in general, so we felt we had to walk very cautiously and be very, very delicate in how we deal with the wireless situation. >> thank you. mr. white, could you talk to me a little bit about what directv is either committed to doing or what will be part of the terms of this merger agreement to ensure that smaller, independent will dictate a fair rates given the directv over the second-largest video distributor and will presumably only have its market position enhanced as a part of this merger? of this merger agreement would protect that? >> i do not think we have yet put anything specific to the merger agreement. distributor of video right now is struggling with rising content costs, which
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are 60% of our costs, and they are growing at far and excessive consumer incomes, high single 10% a year, which puts pressure on the business it needs to raise consumers' prices. certainly the colors how we look at all negotiations, both big and small. either way, we have taken on the big guys. i think we have probably been a leader in the industry to battle to keep costs lower. it is a tough battle. as it relates to independent channels, we have both our public interest obligations that we continue to live with. 4% of our channels would be pio's. we have i think 26 of those. we have 152 independent channels. and in today's world as well with broadband, we could put things up as an application just like we have done with pandora and youtube so we can expand even be on that and would certainly look to if consumers wanted. my just asked the
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final two witnesses to submit written answers to this question, if you think there are things we could do that would allay concerns you both have raised short of an outright opposition to the merger, but it's could address the important issues you raise. if you can answer that in writing, i would be grateful. i yield back. >> thank you, mr. cicilline. mr. ison for five minutes. >> thank you, mr. chairman. as a chairman next-door, i am used to going first, so all material is mine. when you get down this far, usually most of the good questions have been asked, and this is no exception, but i want to run a concept by you because i serve on this committee. i am also a member of the energy and commerce committee that often looks at the other side of your issue and the fcc, so when i say for example comcast, time warner, nbc, at&t, directv,
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dish network, cbs, sprint, t-mobile, abc, and google, and everyone else -- are we looking at a future in which in order to be competitive, companies have to find these harder ships, these allies, these murderers in order to be able to create real, viable -- in this case, at&t-directv, to some of those other hypothetical and not hypothetical maze that i mentioned? mr. stephenson and mr. white. be to thelet rentals broadband aspect, but i think there is a story there as well. when 60% of the cost survey content that you distribute -- we are just a distributor, and seven companies control 75% of our content cost, so we are already in a world of dealing
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with big scale providers of content. tough negotiations, big and small. in our case, we have had our battles with big ones on behalf of our customers, so i think as a reality to do the kinds of investments that we are talking about in broadband, and i think mr. bergmayer referred to earlier -- to me, what is exciting is not just the commitment we are making today but the fact of at&t having a profitable video business will support them to continue to invest in increasing speeds in broadband, which we know that is where the future is going for the long term. >> randall. >> i do not know where future industry goes and what consolidation transpires. mike and i -- we view this as very different. this is not comcast-time warner. this is not to cable companies getting together -- >> and you don't have a major content elements. names ande other
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hypothetical names i mentioned do have, and that is why i asked the question. >> you are exactly right because we are putting his tv product with our broadband and wireless product and creating a unique composition, but there is not a content per se in this acquisition. >> mr. bergmayer, in your opening statement, you are very concerned, but i would presume you would be equally or more concerned when major cable companies and content providers join, right? >> yes, sir. >> ok, mr. lieberman, same thing. >> yes, there is definitely a concern. i just want to say, it is not only content providers merging with distributors. it is also distributors getting larger. when they get larger, they get more influence over programmers. that drives programmers to want to get larger as well. as a small provider who does not have the financial resources to get larger themselves, they suffer. if we want to have a market that is dominated by larger players where consumers in rural areas don't have options, then that
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may be the market that we're going to look at. >> well, and that is the reason i started this way. of rayburn office building, we deal in the antitrust question, but antitrust since the dawn of antitrust, since teddy roosevelt , has been about recognizing that companies naturally compete if not for a trust situation they give them an unfair advantage. do you all agree to that? that that is really what antitrust is about. maintaining the opportunity for real competition. so now i go back to my basic question, which is not just for your merger, but in my mind for how this committee deals with, if you will, the promoting of competition. in fact, do we not have a problem that if we do not create certain large entities that can toiver products and compete my household to make sure that i have multiple choices to my
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household wherever i live, that in fact we will not have competition either for delivery of content or quite frank we have a problem with delivery of content being at a good value -- isn't that true? is certainly true, and i think this merger creates a greater opportunity for us to combine with at&t's broadband capability. for us, every satellite costs $400 million. on his wireless business, randall is spending $10 billion, $20 billion a year in capital spending. it is expensive to rewire america, and that is kind of what we are about collectively, and that is how we compete. >> thank you. , thehairman, fortunately good news is those launches tend to cause a similar amount, although spacex is reducing the cost of the launch, but those satellites are transmitting so many more channels and so much more bandwidth that i am
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confident that in fact competition from space the comes one of the competitions that hopefully this committee will realize needs to be viable to maintain an antitrust environment. i.t. white and yield back. -- i thank you and yield back. >> i just want to make a statement about the government investment in infrastructure. the space program. the hundreds of millions of dollars that the federal , through taxpayer prepared to to turn it industry over to the private sector, of which mr. issa is so proud -- and justifiably. i think it is a tribute to government spending. with that, i will yield back. >> thank you. gentleman from north carolina is recognized for five minutes. >> thank you, mr. chairman. the core that i represent in
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north carolina want to know in real terms what it means to them, the merger. we have had lots of good conversations in this hearing, so i would like for you all to succinctly boil it down and answer this question. years from now, what are the top two things that you think that my constituents, who are your customers, will appreciate or dislike about this merger? i will ask mr. stephenson, mr. white, and i will ask mr. bergmayer and mr. lieberman to hit their top two points. starting with you, mr. white, two things that you think my constituents will appreciate about this merger in three years time. 15 million more rural americans will have internet service that don't have high-speed internet today, and i think of to 70 million homes in america out of 115 million will have a much better bundle offer to compete with the cable companies. >> mr. stephenson. >> as that plays itself out,
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what the econometric model would show we firmly believe is there will be downward pricing pressure in this industry as we become a more viable competitor, as our programming costs began to climb at a lower rate. we think it is beneficial to consumers from a pricing standpoint. think also more broadband is buried at for the over the top content distribution models, so more broadband will help accelerate the over the top models and bring more choices for customers on content. >> mr. lieberman. maybe the top two things that they will not appreciate in three years. >> yes, i think that the rising , theirthat they will see service providers who were not directv have to pay for directv programming, and i think number two concern that they would have is just the increasing pressure competitioncreasing a smaller providers can provide as a result of the increasing consolidation that is happening in the marketplace, not only due
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to at&t-directv, but also comcast-time warner cable. >> mr. bergmayer. >> the rural resident, i would be wondering whether i were resigned to only having wireless choices or whether i had some future prospect of getting the same sort of fiber and high-speed broadband options that are available to people in more densely populated areas. i would also be concerned -- i agree that over the top video is a great benefit to consumers, and i think people benefit from a variety of over the top providers. i would hope that in the future, customers are not driven toward using just one or another over the top video provider. for reasonable, if at&t operates its own over-the-top video service but it is not discriminate in favor that service and a scriptable from using competing services, for example by sending only its own services from data cap were not those of the competitors. >> thank you. mr. chairman, i yield back. >> thank you, mr. holding. the time, i recognize tournament from missouri, mr. smith.
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five minutes. >> thank you, mr. chairman. my first question is for mr. dwight. mr. white, the american cable association state that reduction in programming costs, that at&t and directv may receive as a ,esult of the proposed merger which may lead to higher programming costs for their members. how do you respond to that? >> first of all, the reduction in programming costs that we referred to as a reduction in the costs that currently at&t pays, so we did not make any assumptions that directv's costs would go down necessarily, but it is all related to the cost of content that at&t pays today. our belief is that as we look at frankly all of us -- there is a significant amount of leverage.
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it is hard to me to say in a world where there is over $40 billion in affiliate fees that are $1 billion of savings out of the $40 billion would make that much difference over time to what they would charge the small operators. >> so do you think this mortar will increase the cost of your competitors by any means? >> that has got nothing to do with our thinking on it. this was all about getting the capability to service the 75% of customers that leave directv because they cannot get a bundle right now. so i do not accept that at all. furthermore, i think some of our smaller operators -- you have got to remember in a local market, they are very, very powerful in terms of the negotiate veryey tough. i do not expect them to want to see their prices increase any higher than they already are. >> thank you. mr. stephenson, i have a very rural congressional district in southeast missouri. population.erved
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at&t and many other wireline providers as well as cable operators have made significant investments to reach my constituents, many of whom struggle to get dial-up. can you explain how this transaction will result in increased broadband services for rural communities like mine? >> yeah, in fact, i am looking at a list here. fixed wireless locally that this transaction will accommodate. again, we have a profitable tv product that we now pair with a broadband technology, and it makes the economic for deploying broadband look really attractive . we are going to use a wireless technology, which will give 15 megabits to 20 megabits, build 13 million households in rural america. in missouri, that is 340,000 households will be passed with this technology. this one here we are most enthusiastic about. we have been looking at this technology a long time, trying to get the economics to work, and it works want to put a profitable video products, which
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directv brings to bear with this technology, so that is what missouri should see. >> thank you. you know, representing a very rural congressional district with your statements there, i want to point out that the only way i can get internet service at my house, which is 13 miles from a community of 25,000 people, is through wireless or satellite. that is extremely important for rural america. larger sized, typicallys have an advantage relative to their smaller size competitors as relative to scale. smaller size competitors can outperform on service and quality. what other competitive advantages aside from size will be combined entity of at&t-directv have? >> thank you.
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as you know, consumers do benefit from having independent distributors in the markets, companies like new wave are important in their community's comments as often in areas where larger players do not want to invest and do not want to serve. with regards to your question, first and foremost, i cannot discount the importance of just being large when you're negotiating for programming costs. even at&t-directv have said that 60% of their costs go to programming. that is to deliver their video service. that is the same for smaller operators as well. i think being large has other advantages than just having more financial resources, whether or is marketing to your customers, for instance. these things give great advantages to directv in a lot of their competition with smaller operators. that arehe aca members
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present throughout my district -- will they be able to compete with the combined entity of at&t and directv on the basis of better service and higher product quality? >> they will compete. they will do what they can to overcome the significant disadvantage that they face in paying programming fees that are significantly higher than directv, but that competitive ability is getting more and more difficult over time, and if your customers enjoy having a competitive choice between two satellite providers and a local cable operator, then i think we need to look at the underlying that arethe market driving these consolidations to ensure that consumers can continue to benefit from that in the future. >> thank you, mr. chairman. >> thank you. we are going to have a second round for members who are here if they desire, so mr. smith, if you want a second round, you can certainly -- mr. johnson, do you have follow-up questions? i will go, and then you if you
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have any. let me start with mr. bergmayer. mentioned net neutrality and that they were committed to the fcc's -- and some of their guidance, but you know, i am not sure what the on net neutrality is. it seems to me they are backing from what was originally conceived as net neutrality. >> as i understand it, at&t is committed to following the 2010 open internet order. those rules are partly vacated by the d c circuit, but part of the merger condition, certainly at&t might promise to abide by those rules, even if they are no longer enforced for some of the industry. i think there is a question about the extent of protection they offer to wireless users. or is apple, while they provide less protection to wireless users than for wired lines broadband users, they provide no protection, and one of the areas
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where they provide section is for services that the provider itself on certain -- offers, in some cases where they cannot compete. over&t does offer a new the top video service, those rules my cake and. that is sort of an interesting point with the 2010 rules. united -- most members of commerce are very concerned. the internet has sort of been a gateway, and at a gate keeper. i know as a telephone company, -- you are subject as a common carrier. of fastseen reports lanes, slow lanes, which i think are -- if there is a reason not
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to have that, it is concerning. >> i mean, public knowledge is working at the fcc now for strong net neutrality rules that would apply to the entire industry, not just one company. i question whether ms. a lot of have rules that apply to one company and not others. if we succeed in our effort to get rules that are better than the 2010 rules in place, if they levelond the 2010 rules of protection, then presumably at&t would be subject then, but if they go not as far as the 2010 rules, we will still hold a cd the 2010 rules. >> i know there is some discussion on the common carrier , it is something the committee ought to look at. mr. lieberman, discriminatory pricing obviously is a concern.
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we want to preserve the competition we have, and you talked about a differential of 30% in your testimony. you said the proposed transaction will increase directv-affiliate programmers' incentive to charge higher prices. then you say regulators should adopt a remedy to eliminate the ability of dry tv-affiliate programmers to charge higher prices. i think the same thing would apply to comcast, nbc, and obviously others. it would not just be directv. i know there was some arbitration that expired -- and directv had to submit to arbitration. i think comcast still does. i think you said in your feelment that you did not like that with sufficient.
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do you want to comment further on that or on discriminatory pricing? >> yeah, let me start with i think the issue that is most readily tied to the at&t-directv deal, which is directv's incentive to charge its rivals higher prices for its programming, which will get greater as a result of this deal. currently, there is not enough protections to avoid a problem. mr. white has explained that the program access rules are subject them currently, however, those rules themselves are not enough. even directv has suggested in programergers where access rules already exist that there should be heightened protections and that is argued for arbitration conditions. fcc has asked for that same condition. direct tv is part of a 2008 merger had arbitration , baseball-style arbitration space on coming up with a rate that was fair market
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value for the programming. that has expired. and we believe that a similar condition should be adopted to address that harm, however, the one that was previously adopted had some flaws. it remained too expensive for smaller operators to use, so if you have a remedy that is to incentive for a cable operator with 1000 subscribers to use, you pretty much have no remedy, so we need to read look at this type of remedy, put some modifications to make sure it works for all providers that need it. >> just a limited the ability altogether? -- just eliminate the ability altogether? >> we should a limited the ability to increase the prices for the rivals more than the prices they were charged to non-rivals. a --l supports that would be interesting. let me close by saying what some
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members of congress -- this is the most frequent questions i was asked. i do not think anyone has asked of us. one of the principal components of the atc-directv merger is directv's continuing relationship with the nfl. ust can you share of regarding that relationship and aur customers' ability to get package which they very much value? >> thank you for the question, commerc congressman. as you can imagine, nfl content, all of our customers are excited each year. we have a 20-year relationship with the nfl. we value that relationship. our relationship is excellent. our current year was a multiyear deal, expires at the end of this coming season, so we are in active discussions with the nfl
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about renewing our nfl sunday ticket product, and we are very hopeful and optimistic that that will happen, and i am confident based on the discussions that we will get that done before the end of the year. >> thank you. mr. johnson, i will close the hearing with this question -- >> thank you. as part of its merger with nbc universal, comcast plan to partner with the schools to teach digital literacy and occurs adoption among low-income families. comcast likewise committed to low income families broadband internet access at affordable rates. as a result of this program, 1.2 million americans have joined the program, 86% of whom use the internet daily now. 21,000 which are in my home state of georgia and was just over 17,000 families in the city of atlanta alone. will at&t commit to a similar
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program to advance the public interest through affordable broadband access and digital learning -- excuse me, digital literacy? >> i am not intimately familiar with that, congressman, but i will commit to you -- we will look at it. i think it is probably and not only the communities we serve interest summit like that, but probably in our own self-interest. we are doing a lot in terms of nano degrees, trying to help with the low-cost education for people to get degrees that would equip them to do things in the digital world, and we are very excited about it. we also have made a number of investments to ensure that we can address that end of the market and ensure that the customers at that end of the market are getting really robust broadband capabilities. our spirit is in terms of getting good penetration of broadband into lower income communities is not the access to
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broadband -- it is the access to computers. and what is happening is happening at a very quick pace are these devices. these are very low-cost computers that are wirelessly getting really low cost for people in lower income communities to gain access to the internet, to the digital economy, so we are focused in this, but i will be glad to look at the areas you addressed and evaluate it. >> thank you. as part of its rollout of a fiber network in kansas city, google includes a free monthly service with basic internet service if consumers pay a one-time construction fee to connect their home to the network. does at&t offer a similar service for its fiber networks? >> what we have done -- google did some very creative things in kansas city, and i take my hat off to them. they modified their approach and took it to austin.
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what they receive in terms of permitting to build out a fiber network in austin from the municipalities was very interesting, and in fact as soon as they announced it, we told the austin community if you will make the same concessions to us, we will build a fiber network as well. we launched our fiber network back in november. google has yet to launch theirs in austin, but it is a good indication of competition and the robustness of fiber deployment in these communities and different business models that are emerging, like the one you mentioned in canton city, different one in austin, we announced one in north carolina as well. >> ok, what are the outreach programs does at&t offer two unconnected homes, specifically those in low income neighborhoods and in rural areas? >> what programs? programshat outreach does at&t offer two unconnected unconnected homes,
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physically those in low-income and rural areas. at&t and aspire. i think it is a valuable program. it keeps students from dropping out of school, and that is a very large program. and when they don't drop out of school, they get a good job, and they have the ability to use -- in multiple, hundred million dollar commitment focus on a dropout crisis, focused on native americans, african americans, and hispanic americans. this moved the needle in a lot of areas and this has continued. >> and $300 million something -- >> the first was $200 million, the second was $250 million, i think. >> that is commendable, but in terms of outreach to
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enable low income families and also rural folks, what the opportunities are in terms of what you offer and how we can benefit the people, so in terms muchst outreach, not so the programming itself, but what do you do in order to make ofple aware of the benefits internet connection and the other services that you provide? good challenge, and like i said, i cannot give you specifics of what we are doing there. if nothing, i will let you know and we will take it underpins iteration and what we can do, do better. >> aspire is an outreach program. the biggest problem in indication, our dropout rate. >> you should be commended for that. >> i will tell you in that
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regard, one of our biggest issues of a company -- >> it is a tremendous program. i tell you. [laughter] >> you all agree? ok. [laughter] all right. yes. say one of ourto biggest issues of the company over the next six years is access to what i would call computer and digital literate employees. we are going to need a significant number of them. and we are doing a lot of creative things. not the least of which we are fully funding employees that qualify a masters in computer science at georgia tech university, purely online. it has been certified by the governor and by the board of fully accredited degree and at&t is committing to pay anybody who can qualify and make it through that, into that program, those who cannot lie to get into it, we are bringing it in house, and we will do at&t certifications to build these skill sets for people. >> ok, well that is great.
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training -- doy you have any programs that enable those without that skill and take itut it vantage of a? -- and take advantage of a? any programs that you might have. >> we have a number of it is digital literary program. and the aspire program, we have done a number of things or rehab invested in companies cyo do digital literary training. we have made some investments. these areas that continue to be a focus of ours -- i will be glad to give you a full detailed listing of all the efforts we have going on in that area. >> ok, that would be great, and i just look forward to you all thinking outside of the box and
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coming up with some new, attractive ways of making your whoices available to those cannot afford or who simply do not know about it, and those -- you have already covered the fact that those without access, you are going to take care of that. there is that other, more softer component of it all, so thank you. i yield back. the gentleman. this concludes today's hearing. i think all of our witnesses for attending and answering our questions. i think you all gave excellent testimony. out objection, all members will have five additional days to submit additional materials for the record. this hearing is adjourned, now you can go over to the senate and answer their questions. [captions copyright national cable satellite corp. 2014]
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[captioning performed by national captioning institute] >> next, we are live with your calls and comments on "washington journal," then "newsmakers" with john thune. after that, a committee discusses veterans health care legislation. >> author daniel shulman on the koch brothers, their rise to political power, and their two decade power over their father's empire. v. koch is between all four koch brothers, and it culminates in a boardroom showdown that charles ends up wording. bill, frederick, and some of the other company shareholders were essentially trying to expand the size of the board, and this
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would have ended up opposing charles as the chairman, and they would've taken a greater role in the direction of the company. the end result is bill is tossed out of the company -- >> by his brothers. >> by his brothers, and there is a really dramatic moment in the book where, you know, the board has to sit down and decide bill's fate. writes "sons of wichita" author daniel shulman tonight at 8:00 on c-span's "q&a." >> this morning, a reporters roundtable with the news of the week with paul waldman and weekly standard writer michael warren. then a discussion on the supreme court ruling on presidential recess appointments with chris later, eric olson from the woodrow wilson center talks about why so many
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unaccompanied minors are crossing the border into the u.s. and as always, we will figure calls and you can join the conversation on facebook and twitter. " is next.n journal ♪ good morning. on capitol hill, the flag made that half-staff in memory of howard baker, the tennessee republican who died last thursday. is spending much of his week in washington, d.c., on wednesday he will be meeting with leading economist to discuss job creation and economic growth. we are going to begin on that topic, one of the headlines from the wall street journal, the u.s. economy shrinks by the most in the last five years. this question -- what is the best way to create jobs?
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