United States, et al. v. Comcast Corp., et al.; Proposed Final Judgment and Competitive Impact Statement, 5440-5466 [2011-1821]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 76, Number 20 (Monday, January 31, 2011)]
[Notices]
[Pages 5440-5466]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-1821]



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Vol. 76

Monday,

No. 20

January 31, 2011

Part III





Department of Justice





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Antitrust Division



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United States, et al. v. Comcast Corp., et al.; Proposed Final Judgment 
and Competitive Impact Statement; Notice

Federal Register / Vol. 76 , No. 20 / Monday, January 31, 2011 / 
Notices

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DEPARTMENT OF JUSTICE

Antitrust Division


United States, et al. v. Comcast Corp., et al.; Proposed Final 
Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec.  16(b)-(h), that a proposed Final 
Judgment, Stipulation and Order, and Competitive Impact Statement have 
been filed with the United States District Court for the District of 
Columbia in United States of America, et al. v. Comcast Corp., et al., 
Civil Action No. 1:11-cv-00106. On January 18, 2011, the United States 
filed a Complaint alleging that the proposed joint venture between 
Comcast Corp. and General Electric Co., which would give Comcast 
control over NBC Universal, Inc., would violate Section 7 of the 
Clayton Act, 15 U.S.C. 18. The proposed Final Judgment, filed 
simultaneously with the Complaint, requires the defendants to license 
the joint venture's content to online video programming distributors 
under certain conditions, relinquish its management rights in Hulu, 
LLC, and subject itself to Open Internet and anti-retaliation 
provisions, along with other requirements.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection at the Department of 
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth 
Street, NW., Suite 1010, Washington, DC 20530 (telephone: 202-514-
2481); on the Department of Justice's Web site at https://www.usdoj.gov/atr; and at the Office of the Clerk of the United States District Court 
for the District of Columbia. Copies of these materials may be obtained 
from the Antitrust Division upon request and payment of the copying fee 
set by Department of Justice regulations.
    Public comment is invited within sixty (60) days of the date of 
this notice. Such comments, and responses thereto, will be published in 
the Federal Register and filed with the Court. Comments should be 
directed to Nancy Goodman, Chief, Telecommunications & Media 
Enforcement Section, Antitrust Division, Department of Justice, 450 
Fifth Street, NW., Suite 7000, Washington, DC 20530 (telephone: 202-
514-5621).

Patricia A. Brink,
Director of Civil Enforcement.

United States District Court for the District of Columbia

    United States of America, United States Department of Justice, 
Antitrust Division, 450 Fifth Street, NW., Suite 7000, Washington, 
DC 20530; State of California, Office of the Attorney General, CSB 
No. 184162, 300 South Spring Street, Suite 1702, Los Angeles, CA 
90013; State of Florida, Antitrust Division, PL-01, The Capitol, 
Tallahassee, FL 32399-1050; State of Missouri, Missouri Attorney 
General's Office, P.O. Box 899, Jefferson City, MO 65109; State of 
Texas, Office of the Attorney General, 300 W. 15th Street, 7th 
Floor, Austin, TX 78701; and State of Washington, Office of the 
Attorney General of Washington, 800 Fifth Avenue, Suite 2000, 
Seattle, WA 98104-3188, Plaintiffs, v. Comcast Corp., 1 Comcast 
Center, Philadelphia, PA 19103; General Electric Co., 3135 Easton 
Turnpike, Fairfield, CT 06828; and NBC Universal, Inc., 30 
Rockefeller Plaza, New York, NY 10112, Defendants.

Case: 1:11-cv-00106.
Assigned to: Leon, Richard J.
Assign. Date: 1/18/2011.
Description: Antitrust.

Complaint

    The United States of America, acting under the direction of the 
Attorney General of the United States, and the States of California, 
Florida, Missouri, Texas, and Washington, acting under the direction of 
their respective Attorneys General or other authorized officials 
(``Plaintiff States'') (collectively, ``Plaintiffs''), bring this civil 
action pursuant to the antitrust laws of the United States to 
permanently enjoin a proposed joint venture (``JV'') and related 
transactions between Comcast Corporation (``Comcast'') and General 
Electric Company (``GE'') that would allow Comcast, the largest cable 
company in the United States, to control some of the most popular video 
programming among consumers, including the NBC Television Network 
(``NBC broadcast network'') and the cable networks of NBC Universal, 
Inc. (``NBCU''). If the JV proceeds, tens of millions of U.S. consumers 
will pay higher prices for video programming distribution services, 
receive lower-quality services, and enjoy fewer benefits from 
innovation. To prevent this harm, the United States and the Plaintiff 
States allege as follows:

I. Introduction and Background

    1. This case is about how, when, from whom, and at what price the 
vast majority of American consumers will receive and view television 
and movie content. Increasingly, consumers are demanding new ways of 
viewing their favorite television shows and movies at times convenient 
to them and on devices of their own choosing. Consumers also are 
demanding alternatives to high monthly prices charged by cable 
providers, such as Comcast, for hundreds of channels of programming 
that many of them neither desire nor watch.
    2. Today, consumers buy video programming services only from the 
distributors serving their local areas. Incumbent cable companies 
continue to serve a majority of customers, offering services consisting 
of multiple channels of linear or scheduled programming. Beginning in 
the mid-1990s, cable companies first faced competition from the direct 
broadcast satellite (``DBS'') providers. More recently, firms that 
traditionally offered only voice telephony services--the telephone 
companies or ``telcos,'' such as AT&T and Verizon--have emerged as 
competitors. The video programming offerings of these competitors are 
similar to the cable incumbents' programming packages, and their 
increased competition has pushed cable companies to offer new features, 
including additional channels, digital transmission, video-on-demand 
(``VOD'') offerings, and high-definition (``HD'') picture quality.
    3. Most recently, online video programming distributors (``OVDs'') 
have begun to provide professional video programming to consumers over 
the Internet. This programming can be viewed at any time, on a variety 
of devices, wherever the consumer has high-speed access to the 
Internet. Cable companies, DBS providers, and telcos have responded to 
this entry with further innovation, including expanding their VOD 
offerings and allowing their subscribers to view programming over the 
Internet under certain conditions.
    4. Through the JV, Comcast seeks to gain control of NBCU's 
programming, a potent tool that would allow it to disadvantage its 
traditional video programming distribution competitors, such as cable, 
DBS, and the telcos, and curb nascent OVD competition by denying access 
to, or raising the cost of, this important content. If Comcast is 
allowed to exercise control over this vital programming, innovation in 
the market for video programming distribution will be diminished, and 
consumers will pay higher prices for programming and face fewer 
choices.
    5. Attractive content is vital to video programming distribution. 
Today, consumers subscribe to traditional video programming 
distributors in order to view their favorite programs (scheduled

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or on demand), discover new shows and networks, view live sports and 
news, and watch old and newly available movies. Distributors compete 
for viewers by marketing the rich array of programming and other 
features available on their services. This marketing often promotes 
programming that is exclusive to the distributor or highlights the 
distributor's rivals' lack of specific programming or features.
    6. NBCU content, especially the NBC broadcast network, is important 
to consumers and video programming distributors' ability to attract and 
retain customers. Programming is often at the center of disputes 
between subscription video programming distributors and broadcast and 
cable network owners. The public outcry when certain programming is 
unavailable, even temporarily, underscores the damage that can occur 
when a video distributor loses access to valuable programming. The JV 
will give Comcast control over access to valuable content, and the 
terms on which its rivals can purchase it, including the possibility of 
denying them the programming entirely.
    7. NBCU content is especially important to OVDs. NBCU has been an 
industry leader in making its content available over the Internet. If 
OVDs cannot gain access to NBCU content, their ability to develop into 
stronger video programming distribution competitors will be impeded.
    8. Comcast itself recognizes the importance of the NBC broadcast 
network, which it describes as an ``American icon.'' NBC broadcasts 
such highly rated programming as the Olympics, Sunday Night Football, 
NBC Nightly News, The Office, 30 Rock, and The Today Show. NBCU also 
owns other important programming, including the USA Network, the 
number-one-rated cable channel; CNBC, the leading cable financial news 
network; other top-rated cable networks, such as Bravo and SyFy; and 
The Weather Channel, in which it holds a significant stake and has 
management rights.
    9. Comcast faces little video programming distribution competition 
in many of the areas it serves. Entry into traditional video 
programming distribution is expensive, and new entry is unlikely in 
most areas. OVDs' Internet-based offerings are likely the best hope for 
additional video programming distribution competition in Comcast's 
cable franchise areas.
    10. Thus, the United States and the Plaintiff States ask this Court 
to enjoin the proposed JV permanently.

II. Jurisdiction and Venue

    11. The United States brings this action under Section 15 of the 
Clayton Act, as amended, 15 U.S.C. 25, to prevent and restrain Comcast, 
GE, and NBCU from violating Section 7 of the Clayton Act, 15 U.S.C. 18.
    12. The Plaintiff States, by and through their respective Attorneys 
General and other authorized officials, bring this action under Section 
16 of the Clayton Act, 15 U.S.C. 26, to prevent and restrain Comcast, 
GE, and NBCU from violating Section 7 of the Clayton Act, 15 U.S.C. 18. 
The Plaintiff States bring this action in their sovereign capacities 
and as parens patriae on behalf of the citizens, general welfare, and 
economy of each of the Plaintiff States.
    13. In addition to distributing video programming, Comcast owns 
programming. Comcast and NBCU sell programming to distributors in the 
flow of interstate commerce. Comcast's and NBCU's activities in selling 
programming to distributors, as well as Comcast's activities in 
distributing video programming to consumers, substantially affect 
interstate commerce and commerce in each of the Plaintiff States. The 
Court has subject-matter jurisdiction over this action and these 
defendants pursuant to Section 15 of the Clayton Act, as amended, 15 
U.S.C. 25, and 28 U.S.C. 1331, 1337(a), and 1345.
    14. Venue is proper in this District under Section 12 of the 
Clayton Act, 15 U.S.C. 22, and 28 U.S.C. 1391(b)(1) and (c). Defendants 
Comcast, GE, and NBCU transact business and are found within the 
District of Columbia. Comcast, GE, and NBCU have submitted to personal 
jurisdiction in this District.

III. Defendants and the Proposed Joint Venture

    15. Comcast is a Pennsylvania corporation headquartered in 
Philadelphia, Pennsylvania. It is the largest video programming 
distributor in the nation, with approximately 23 million video 
subscribers. Comcast is also the largest high-speed Internet provider, 
with over 16 million subscribers for this service. Comcast wholly owns 
national cable programming networks, including E! Entertainment, G4, 
Golf, Style, and Versus, and has partial interests in Current Media, 
MLB Network, NHL Network, PBS KIDS Sprout, Retirement Living 
Television, and TV One. In addition, Comcast has controlling interests 
in the following regional sports networks (``RSNs''): Comcast SportsNet 
(``CSN'') Bay Area, CSN California, CSN Mid-Atlantic, CSN New England, 
CSN Northwest, CSN Philadelphia, CSN Southeast, and CSN Southwest; and 
partial interests in three other RSNs: CSN Chicago, SportsNet New York, 
and The Mtn. Comcast also owns digital properties such as 
DailyCandy.com, Fandango.com, and Fancast, its online video Web site. 
In 2009, Comcast reported total revenues of $36 billion. Over 94 
percent of Comcast's revenues, or $34 billion, were derived from its 
cable business, including $19 billion from video services, $8 billion 
from high-speed Internet services, and $1.4 billion from local 
advertising on Comcast's cable systems. In contrast, Comcast's cable 
programming networks earned only about $1.5 billion in revenues from 
advertising and fees collected from video programming distributors.
    16. GE is a New York corporation with its principal place of 
business in Fairfield, Connecticut. GE is a global infrastructure, 
finance, and media company. GE owns 88 percent of NBCU, a Delaware 
corporation, with its headquarters in New York, New York. NBCU is 
principally involved in the production, packaging, and marketing of 
news, sports, and entertainment programming. NBCU wholly owns the NBC 
and Telemundo broadcast networks, as well as ten local NBC owned and 
operated television stations (``O&Os''), 16 Telemundo O&Os, and one 
independent Spanish-language television station. Seven of the NBC O&Os 
are located in areas in which Comcast has incumbent cable systems--
Chicago, Hartford/New Haven, Miami, New York, Philadelphia, San 
Francisco, and Washington, DC. In addition, NBCU wholly owns national 
cable programming networks--Bravo, Chiller, CNBC, CNBC World, MSNBC, 
mun2, Oxygen, Sleuth, SyFy, and the USA Network--and partially owns A&E 
Television Networks (including the Biography, History, and Lifetime 
cable networks), The Weather Channel, and ShopNBC.
    17. NBCU also owns Universal Pictures, Focus Films, and Universal 
Studios, which produce films for theatrical and digital video disk 
(``DVD'') release, as well as content for NBCU's and other companies' 
broadcast and cable programming networks. NBCU produces approximately 
three-quarters of the original, primetime programming shown on the NBC 
broadcast network and the USA cable network--NBCU's two highest-rated 
networks. In addition to its programming-related assets, NBCU owns 
several theme parks and digital properties, such as iVillage.com. 
Finally, NBCU is a founding partner and

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32 percent owner of Hulu, LLC, an OVD. In 2009, NBCU had total revenues 
of $15.4 billion.
    18. On December 3, 2009, Comcast, GE, NBCU, and Navy, LLC 
(``Newco''), a Delaware corporation, entered into a Master Agreement, 
whereby Comcast agreed to pay $6.5 billion in cash to GE, and Comcast 
and GE each agreed to contribute certain assets to the JV to be called 
Newco. Specifically, GE agreed to contribute all of the assets of NBCU, 
including its interest in Hulu and the 12 percent interest in NBCU it 
does not currently own but has agreed to purchase from Vivendi SA. 
Comcast agreed to contribute all its cable programming assets, 
including its national networks as well as its RSNs, and some digital 
properties, but not its cable systems or its online video Web site, 
Fancast. As a result of the content contributions and cash payment by 
Comcast, Comcast will own 51 percent of the JV, and GE will retain a 49 
percent interest. The JV will be managed by a separate board of 
directors initially consisting of three Comcast-designated directors 
and two GE-designated directors. Board decisions will be made by 
majority vote.
    19. Comcast is precluded from transferring its interest in the JV 
for a four-year period, and GE is prohibited from transferring its 
interest for three and one-half years. Thereafter, either party may 
sell its respective interest in the JV, subject to Comcast's right to 
purchase at fair market value any interest that GE proposes to sell. 
Additionally, three and one-half years after closing, GE will have the 
right to require the JV to redeem 50 percent of GE's interest; after 
seven years, GE will have the right to require the JV to redeem all of 
its remaining interest. If GE elects to exercise its first right of 
redemption, Comcast will have the contemporaneous right to purchase the 
remainder of GE's ownership interest once a purchase price is 
determined. If GE does not exercise its first redemption right, Comcast 
will have the right to buy 50 percent of GE's initial ownership 
interest five years after closing and all of GE's remaining ownership 
interest eight years after closing. It is expected that Comcast 
ultimately will own 100 percent of the JV.

IV. The Professional Video Programming Industry

    20. The professional video programming industry has had three 
different levels: Content production, content aggregation or networks, 
and distribution.

A. Content Production

    21. Television production studios produce television shows and 
license that content to broadcast and cable networks. Content producers 
typically retain the rights to license their content for syndication 
(e.g., licensing of series to networks or television stations after the 
initial run of the programming) as well as for DVD distribution and VOD 
or pay-per-view (``PPV'') services. In addition to first-run rights 
(i.e., the rights to premiere the content), content producers such as 
NBCU also license the syndication rights to their own programming to 
broadcast and cable networks. For example, House is produced by NBCU, 
licensed for its first run on the FOX broadcast network, and then rerun 
on the USA Network, a cable network owned by NBCU. These content 
licenses often include ancillary rights to related content (e.g., short 
segments of programming or clips, extras such as cast interviews, 
camera angles, and alternative feeds), as well as the right to offer 
some programming on demand (both online and through traditional cable, 
satellite, and telco distribution methods).
    22. A content owner controls which entity receives its programming 
and when, through a process known as ``windowing.'' Historically, the 
first television release window was reserved for broadcast on one of 
the four major broadcast networks (ABC, CBS, NBC, and FOX), followed by 
broadcast syndication, and, ultimately, cable syndication. Over the 
past couple of years, however, content owners have created new windows 
and begun to allow their content to be distributed over the Internet on 
either a catch-up (e.g., next day) or syndicated (e.g., next season) 
basis.
    23. In addition to producing content for television and cable 
networks, NBCU produces and distributes first-run movies through 
Universal Pictures, Universal Studios, and Focus Films. Typically, 
these movies are distributed to theaters before being released on DVD, 
then licensed to VOD/PPV providers, then to premium cable channels 
(e.g., Home Box Office (``HBO'')), then to regular cable channels, and 
finally to broadcast networks. As they have with television 
distribution, over the past several years content owners have 
experimented with different windows for distributing films over the 
Internet.

B. Programming Networks

    24. Networks aggregate content to provide a 24-hour-per-day service 
that is attractive to consumers. The most popular networks, by far, are 
the four broadcast networks. The first cable network was HBO, which 
launched in the early 1970s. Since then, cable networks have grown in 
popularity and number. As of the end of 2009, there were an estimated 
600 national, plus another 100 regional, cable programming networks. 
More than 100 of these networks were also available in HD.
1. Broadcast Networks
    25. Owners of broadcast network programming or broadcasters (e.g., 
NBCU) license their broadcast networks (e.g., NBC, Telemundo) either to 
third-party television stations affiliated with that network (``network 
affiliates''), or to their owned and operated television stations or 
O&Os. The network affiliates and O&Os distribute the broadcast network 
feeds over the air to the public and, importantly, retransmit them to 
professional video programming distributors such as cable companies and 
DBS providers, which in turn distribute the feeds to their subscribers.
    26. The Cable Television Consumer Protection and Competition Act of 
1992 (``1992 Cable Act''), Public Law 102-385, 106 Stat. 1460 (1992), 
gave broadcast television stations, whether network affiliates or O&Os, 
the option to demand ``retransmission consent,'' a process through 
which a distributor negotiates with the station for the right to carry 
the station's programming for agreed-upon terms. Alternatively, 
stations can elect ``must carry'' status, which involves a process 
through which the station can demand to be carried without 
compensation. Stations affiliated with the four major broadcast 
networks, including the O&Os, all have elected retransmission consent. 
Historically, these stations negotiated for non-monetary reimbursement 
(e.g., carriage of new cable channels) in exchange for retransmission 
consent. Today, most broadcast stations seek fees based on the number 
of subscribers to the cable, DBS, or telco service distributing their 
content. Less popular broadcast networks generally have elected must 
carry status, although recently they also have begun to negotiate 
retransmission payments.
    27. In the past, NBCU has negotiated the retransmission rights only 
for its O&Os, but it has expressed interest in and made efforts to 
obtain the rights from its NBC broadcast network affiliates to 
negotiate retransmission consent agreements on their behalf. NBCU could 
also seek to renegotiate its agreements with its affiliates to obtain a 
share of any retransmission consent fees the affiliates are able to 
command.

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2. Cable Networks
    28. In addition to the broadcast networks, programmers produce 
cable networks and sell them to video programming distributors. Most 
cable networks are based on a dual revenue-stream business model. They 
derive roughly half their revenues from licensing fees paid by 
distributors and the other half from advertising fees. The revenue 
split varies depending on several factors, including the type of 
programming (e.g., financial news or general entertainment) and whether 
the program is established or newly launched.
    29. Generally, an owner of a cable network receives a monthly per-
subscriber fee that may vary based upon the popularity or ratings of a 
network's programming, the volume of subscribers served by the 
distributor, the packages in which the programming is included, the 
percentage of the distributor's subscribers receiving the programming, 
and other factors. In addition to the right to carry the network, a 
distributor of the cable network often receives two to three minutes of 
advertising time per hour on the network that it can sell to local 
businesses (e.g., car dealers). A distributor may also receive 
marketing payments or discounts to encourage greater penetration of its 
potential consumers. In the case of a completely new cable network, a 
programmer may pay a distributor to carry the network or offer other 
discounts.
    30. Over time, some video programming distributors, such as Comcast 
and Cablevision Corp., have purchased or launched their own cable 
networks. Vertical integration between content and distribution was a 
reason for the passage of Section 19 of the 1992 Cable Act, 47 U.S.C. 
548. Pursuant to the Act, Congress directed the Federal Communications 
Commission (``FCC'') to promulgate rules that place restrictions on how 
cable programmers affiliated with a cable company can deal with 
unaffiliated distributors. These ``program access rules'' apply to a 
cable company that owns a cable network, and prohibit both the cable 
company and the network from engaging in unfair acts or practices, 
including (1) Entering into exclusive agreements for the cable network; 
(2) selling the cable network to the cable company's competitors on 
discriminatory terms and conditions; and (3) unduly influencing the 
cable network in deciding whom, and on what terms and conditions, to 
sell its programming. 47 CFR 76.1001-76.1002. The prohibition on 
exclusivity sunsets in October 2012, unless extended by the FCC after a 
rulemaking proceeding. The program access rules do not apply to online 
distribution or to retransmission of broadcast station content.

C. Professional Video Programming Distribution

    31. Video programming distributors acquire the rights to transmit 
professional, full-length broadcast and cable programming networks or 
individual programs or movies, aggregate the content, and distribute it 
to their subscribers or users.
1. Multichannel Video Programming Distributors (``MVPDs'')
    32. Traditional video programming distributors offer hundreds of 
channels of professional video programming to residential customers for 
a fee. They include incumbent cable companies, DBS providers, cable 
overbuilders, also known as broadband service providers or ``BSPs'' 
(e.g., RCN), and telcos. These distributors are often collectively 
referred to as MVPDs (``multichannel video programming distributors''). 
In response to increasing consumer demand to record and view video 
content at different times, many MVPDs offer services such as digital 
video recorders (``DVRs'') that allow consumers to record programming 
and view it later, and VOD services that allow viewers to view 
broadcast or cable network programming or movies on demand at times of 
their choosing.
2. Online Video Programming Distributors (``OVDs'')
    33. OVDs offer numerous choices for on-demand professional (as 
opposed to user-generated, e.g., typical YouTube videos), full-length 
(as opposed to clips) video programming over the Internet, whether 
streamed to Internet-connected televisions or other devices, or 
downloaded for later viewing. Currently, OVDs employ several business 
models, including free advertiser-supported streaming (e.g., Hulu), 
[aacute] la carte downloads or electronic sell-through (``EST'') (e.g., 
Apple iTunes, Amazon), subscription streaming models (e.g., Hulu Plus, 
Netflix), per-program rentals (e.g., Apple iTunes, Vudu), and hybrid 
hardware/subscription models (e.g., Tivo, Apple TV/iTunes).
    34. Consumer desire for on-demand viewing and increased broadband 
speeds that have greatly improved the quality of the viewing experience 
have led to distribution of more professional content by OVDs. Online 
video viewing has grown enormously in the last several years and is 
expected to increase. Today, some consumers regard OVDs as acceptable 
substitutes for at least a portion of their traditional video 
programming distribution services. These consumers buy smaller content 
packages from traditional distributors, decline to take certain premium 
channels, or purchase fewer VOD offerings, and instead watch that 
content online, a practice known as ``cord-shaving.'' A smaller but 
growing number of MVPD customers also are ``cutting the cable cord'' 
completely in favor of OVDs. These trends indicate the growing 
significance of competition between OVDs and MVPDs.
    35. OVD services, individually or collectively, are likely to 
continue to develop into better substitutes for MVPD video services. 
Evolving consumer demand, improving technology (e.g., higher Internet 
access speeds, better compression to improve picture quality, improved 
digital rights management to fight piracy), and advertisers' increasing 
willingness to place their ads on the Internet, likely will make OVDs 
stronger competitors to MVPDs for greater numbers of existing and new 
viewers.
    36. Comcast and other MVPDs recognize the impact of OVDs. Their 
documents consistently portray the emergence of OVDs as a significant 
competitive threat. MVPDs, including Comcast, have responded by 
improving existing services and developing new, innovative services for 
their customers. For example, MVPDs have improved user interfaces and 
video search functionality, offered more VOD programming, and begun to 
offer programming online.
    37. GE, through its ownership of NBCU, is a content producer and an 
owner of broadcast and cable channels. Comcast is primarily a 
distributor of video programming, although it owns some cable networks. 
Through the proposed JV, Comcast will control assets that produce and 
aggregate some of the most significant video content. Comcast also will 
continue to own the nation's largest distributor of video programming 
to residential customers.

V. Relevant Market

    38. The relevant product market affected by this transaction is the 
timely distribution of professional, full-length video programming to 
residential customers (``video programming distribution''). Both MVPDs 
and OVDs are participants in this market. Video programming 
distribution is characterized by the aggregation of professionally 
produced content, consisting of entire episodes of shows and movies, 
rather than short clips. This content includes live programming, 
sports, and general entertainment

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programming from a mixture of broadcast and cable networks, as well as 
from movie studios. Video programming distributors typically offer 
various packages of content (e.g., basic, expanded basic, digital), 
quality levels (e.g., standard-definition, HD, 3D), and business models 
(e.g., free ad-supported, subscription). Video programming can be 
viewed immediately by consumers, whether on demand or as scheduled 
(i.e., in a cable network's linear stream).
    39. A variety of companies distribute video programming--cable, 
DBS, overbuilder, telco, and online. Cable has remained the dominant 
distributor even as other companies have entered video programming 
distribution. In the mid-1990s, DirecTV and DISH Network began offering 
hundreds of channels using small satellite dishes. Around the same 
time, firms known as ``overbuilders'' began building their own wireline 
networks, primarily in urban areas, to compete with the incumbent cable 
operator and offer video, high-speed Internet, and voice telephony 
services--the ``triple-play.'' More recently, Verizon and AT&T entered 
the market with their own networks and also offer the triple-play. 
Competition from these video programming distributors has provoked 
incumbent cable operators across the country to upgrade their systems 
and thereby offer substantially more video programming channels, as 
well as the triple-play. Now, OVDs are introducing new and innovative 
business models and services to inject even more competition into the 
video programming distribution market.
    40. Historically, over-the-air (``OTA'') distribution of broadcast 
network content has not served as a significant competitive constraint 
on MVPDs because of the limited number of channels offered. In 
addition, OTA distribution likely will not expand in the future, as no 
new broadcast networks are likely to be licensed for distribution. This 
diminishes the possibility that OTA could increase its content package 
substantially to compete with MVPDs. Thus, OTA is unlikely to become a 
significant video programming distributor. By contrast, OVDs, though 
they may offer more limited viewing options than MVPDs currently, are 
expanding rapidly and have the potential to provide increased and more 
innovative viewing options in the future.
    41. Consumers purchasing video programming distribution services 
select from among those distributors that can offer such services 
directly to their home. The DBS operators, DirecTV and DISH, can reach 
almost any customer in the continental United States who has an 
unobstructed line of sight to their satellites. OVDs are available to 
any consumer with a high-speed Internet service sufficient to receive 
video of an acceptable quality. However, wireline cable distributors 
such as Comcast and Verizon generally must obtain a franchise from 
local, municipal, or state authorities in order to construct and 
operate a wireline network in a specific area, and then build lines 
only to homes in that area. A consumer cannot purchase video 
programming distribution services from a wireline distributor operating 
outside its area because that firm does not have the facilities to 
reach the consumer's home. Thus, although the set of video programming 
distributors able to offer service to individual consumers' residences 
generally is the same within each local community, that set differs 
from one local community to another and can vary even within a local 
community.
    42. For ease of analysis, it is useful to aggregate consumers who 
face the same competitive choices in video programming distribution by, 
for example, aggregating customers in a county or other jurisdiction 
served by the same group of distributors. The United States thus 
comprises numerous local geographic markets for video programming 
distribution, each consisting of a community whose residents face the 
same competitive choices. In the vast majority of local markets, 
customers can choose from among the local cable incumbent and the two 
DBS operators. Approximately 38 percent of consumers can also buy video 
services from a telco, and a much smaller percentage live in areas 
where overbuilders provide service. OVDs are emerging as another viable 
option for consumers who have access to high-speed Internet services. 
OVDs rely on other companies' high-speed Internet services to deliver 
content to consumers.
    43. The geographic markets relevant to this transaction are the 
numerous local markets throughout the United States where Comcast is 
the incumbent cable operator, covering over 50 million U.S. television 
households (about 45 percent nationwide), and where Comcast will be 
able to withhold NBCU programming from, or raise the programming costs 
to, its rival distributors, both MVPDs and OVDs. Because these 
competitors serve areas outside Comcast's cable footprint, other local 
markets served by these rival distributors may be affected, with the 
competitive effects of the transaction potentially extending to all 
Americans.
    44. A hypothetical monopolist of video programming distribution in 
any of these geographic areas could profitably raise prices by a small 
but not insignificant, non-transitory amount. While consumers naturally 
look for other options in response to higher prices, the number of 
consumers that would likely find these other options to be adequate 
substitutes is insufficient to make the higher prices unprofitable for 
the hypothetical monopolist. Thus, video programming distribution in 
any of these geographic areas is a well-defined antitrust market and is 
susceptible to the exercise of market power.

VI. Market Concentration

    45. The incumbent cable companies often dominate any particular 
market with market shares within their franchise areas well above 50 
percent. For example, Comcast has the market shares of 64 percent in 
Philadelphia, 62 percent in Chicago, 60 percent in Miami, and 58 
percent in San Francisco (based on MVPD subscribers). Combined, the DBS 
providers account for approximately 31 percent of total video 
programming distribution subscribers nationwide, although their shares 
vary and may be lower in any particular local market. AT&T and Verizon 
have had great success and achieved penetration (i.e., the percentage 
of households to which a provider's service is available that actually 
buys its service) as high as 40 percent in the selected communities 
they have entered, although they currently have limited expansion 
plans. Overbuilders serve only about one percent of U.S. television 
households nationwide.
    46. Today, OVDs have a de minimis share of the video programming 
distribution market in any geographic area. OVD services are available 
to any consumer who purchases a broadband connection. However, 
established distributors, such as Comcast, view OVDs as a growing 
competitive threat and have taken steps to respond to that threat. 
OVDs' current market shares, therefore, greatly understate both their 
future and current competitive significance in terms of the influence 
they are having on traditional video programming distributors' 
investment decisions to expand offerings and embrace Internet 
distribution themselves.

VII. Anticompetitive Effects

    47. Today, Comcast competes with DBS, overbuilder, and telco 
competitors by upgrading its existing services (e.g., improving its 
network, expanding its

[[Page 5445]]

VOD and HD offerings), and through promotional and other forms of price 
discounts. In particular, Comcast strives to provide a service that it 
can promote as better than its rivals' services in terms of variety of 
programming choices, higher-quality services, and unique features 
(e.g., unique programming or ease of use). Consumers benefit from this 
competition by receiving better quality services and, in some cases, 
lower prices. This competition has also fostered innovation, including 
the development of digital transmission, HD and 3D programming, and the 
introduction of DVRs and VOD offerings.
    48. The proposed JV would allow Comcast to limit competition from 
MVPD competitors and from the growing threat of OVDs. The JV would give 
Comcast control over NBCU content that is important to its competitors. 
Comcast has long recognized that by withholding certain content from 
competitors, it can gain additional cable subscribers and limit the 
growth of emerging competition. Comcast has refused to license one of 
its RSNs, CSN Philadelphia, to DirecTV or DISH. As a result, DirecTV's 
and DISH's market shares in Philadelphia are much lower than in other 
areas where they have access to RSN programming.
    49. Control of NBCU programming will give Comcast an even greater 
ability to disadvantage its competitors. Carriage of NBCU programming, 
including the NBC broadcast network, is important for video programming 
distributors to compete effectively. Out of hundreds of networks, the 
NBC broadcast network consistently is ranked among the top four in 
consumer interest surveys. It receives high Nielsen ratings, which 
distributors and advertisers use as a proxy for a network's value. The 
importance of the NBC broadcast network to a distributor is underscored 
by the fact that NBCU has recently negotiated significant 
retransmission fees with certain distributors that when combined with 
its advertising revenues, rival the most valuable cable network 
programming. Economic studies show that distributors that lose 
important broadcast content for any significant period of time suffer 
substantial customer losses to their competitors.
    50. NBCU's cable networks also are important to consumers and 
therefore to video programming distributors. USA Network has been the 
highest-rated cable network the past four years. CNBC is by far the 
highest-rated financial news cable network, and Bravo and SyFy are top-
rated cable networks for their particular demographics. NBCU's cable 
networks are widely distributed and command high fees.
    51. As a result of the JV, Comcast will gain control over the NBC 
O&Os in local television markets where Comcast is the dominant video 
programming distributor. The JV will give Comcast the ability to raise 
the fees for retransmission consent for the NBC O&Os or effectively 
deny this programming entirely to certain video programming 
distribution competitors. In addition, Comcast may be able to gain the 
right to negotiate on behalf of its broadcast network affiliate 
stations or the ability to influence the affiliates' negotiations with 
its distribution competitors. In either case, these distributors would 
be less effective competitors to Comcast. Comcast also will control 
NBCU's cable networks and film content, increasing the ability of the 
JV to obtain higher fees for that programming. The JV will have less 
incentive to distribute NBCU programming to Comcast's video 
distribution rivals than a stand-alone NBCU. Faced with weakened 
competition, Comcast can charge consumers more and will have less 
incentive to innovate.
    52. The impact of the JV on emerging competition from the OVDs is 
extremely troubling given the nascent stage of OVDs' development and 
the potential of these distributors to significantly increase 
competition through the introduction of new and innovative features, 
packaging, pricing, and delivery methods. NBCU has been one of the 
content providers most willing to support OVDs and experiment with 
different methods of online distribution. It was a founding partner in 
Hulu, the largest OVD today, and prior to the announcement of the 
transaction entered into several contracts with OVDs, such as Apple 
iTunes, Amazon, and Netflix.
    53. Comcast and other MVPDs have significant concerns over emerging 
competition by OVDs. To the extent that consumers, now or in the 
future, view OVDs as substitutes for traditional video programming 
distributors, they will be able to challenge Comcast's dominant 
position as a video programming distributor. Comcast has taken several 
steps to keep its customers from cord-shaving or cord-cutting in favor 
of OVDs. These efforts include launching its own online video portal 
(Fancast), improving its VOD library and online interactive interface 
(in order to compete with, e.g., Netflix and Amazon), and deploying its 
``authenticated'' online, on-demand service. Consumers have benefited 
from Comcast's competitive responses and, absent the JV, would benefit 
from increased competition from OVDs.
    54. Comcast has an incentive to encumber, through its control of 
the JV, the development of nascent distribution technologies and the 
business models that underlie them by denying OVDs access to NBCU 
content or substantially increasing the cost of obtaining such content. 
As a result, Comcast will face less competitive pressure to innovate, 
and the future evolution of OVDs will likely be muted. Comcast's 
incentives and ability to raise the cost of or deny NBCU programming to 
its distribution rivals, especially OVDs, will lessen competition in 
video programming distribution.

VIII. Absence of Countervailing Factors

 A. Entry

    55. Entry or expansion of traditional video programming 
distributors on a widespread scale or entry of programming networks 
comparable to NBCU's will not be timely, likely, or sufficient to 
reverse the competitive harm that would likely result from the proposed 
JV. OVDs are less likely to develop into significant competitors if 
denied access to NBCU content.

B. Efficiencies

    56. The proposed JV will not generate verifiable, merger-specific 
efficiencies sufficient to reverse the competitive harm of the proposed 
JV.

IX. Violations Alleged

Violation of Section 7 of the Clayton Act by Each Defendant

    57. The United States and the Plaintiff States hereby incorporate 
paragraphs 1 through 56.
    58. Pursuant to a Master Agreement dated December 3, 2009, Comcast, 
GE, and NBCU intend to form a joint venture.
    59. The effect of the proposed JV and Comcast's acquisition of 51 
percent of it would be to lessen competition substantially in 
interstate trade and commerce in numerous geographic markets for video 
programming distribution, in violation of Section 7 of the Clayton Act, 
15 U.S.C. 18, and Sections 1 and 2 of the Sherman Act, 15 U.S.C. 1, 2.
    60. This proposed JV threatens loss or damage to the general 
welfare and economies of each of the Plaintiff States, and to the 
citizens of each of the Plaintiff States. The Plaintiff States and 
their citizens will be subject to a continuing and substantial threat 
of irreparable injury to the general welfare and economy, and to 
competition, in their respective jurisdictions unless the

[[Page 5446]]

Defendants are enjoined from carrying out this transaction, or from 
entering into or carrying out any agreement, understanding, or plan by 
which Comcast would acquire control over NBCU or any of its assets.
    61. The proposed JV will likely have the following effects, among 
others:
    a. Competition in the development, provision, and sale of video 
programming distribution services in each of the relevant geographic 
markets will likely be eliminated or substantially lessened;
    b. Prices for video programming distribution services will likely 
increase to levels above those that would prevail absent the JV; and
    c. Innovation and quality of video programming distribution 
services will likely decrease to levels below those that would prevail 
absent the JV.

X. Requested Relief

    62. The United States and the Plaintiff States request that:
    a. The proposed JV be adjudged to violate Section 7 of the Clayton 
Act, 15 U.S.C. 18;
    b. Comcast, GE, NBCU, and Newco be permanently enjoined from 
carrying out the proposed JV and related transactions; carrying out any 
other agreement, understanding, or plan by which Comcast would acquire 
control over NBCU or any of its assets; or merging;
    c. The United States and the Plaintiff States be awarded their 
costs of this action;
    d. The Plaintiff States be awarded their reasonable attorneys' 
fees; and
    e. The United States and the Plaintiff States receive such other 
and further relief as the case requires and the Court deems just and 
proper.

Dated: January 18, 2011

Respectfully submitted,

For Plaintiff United States:

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Christine A. Varney (DC Bar 411654)
Assistant Attorney General for Antitrust

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Molly S. Boast
Deputy Assistant Attorney General

/s/--------------------------------------------------------------------

Gene I. Kimmelman (DC Bar 358534)
Chief Counsel for Competition Policy and Intergovernmental Relations

/s/--------------------------------------------------------------------

Patricia A. Brink
Director of Civil Enforcement

/s/--------------------------------------------------------------------

Joseph J. Matelis (DC Bar 462199)
Counsel to the Assistant Attorney General

/s/--------------------------------------------------------------------

Nancy M. Goodman
Chief

Laury E. Bobbish
Assistant Chief, Telecommunications & Media Enforcement

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John R. Read (DC Bar 419373)
Chief

David C. Kully (DC Bar 448763)
Assistant Chief, Litigation III

/s/--------------------------------------------------------------------
Yvette F. Tarlov* (DC Bar 442452)
Attorney, Telecommunications & Media Enforcement, Antitrust 
Division, U.S. Department of Justice, 450 Fifth Street, NW., Suite 
7000, Washington, DC 20530, Telephone: (202) 514-5621, Facsimile: 
(202) 514-6381, E-mail: Yvette.Tarlov@usdoj.gov

Matthew J. Bester (DC Bar 465374)
Shobitha Bhat
Hillary B. Burchuk (DC Bar 366755)
Luin P. Fitch
Paul T. Gallagher (DC Bar 439701)
Peter A. Gray
F. Patrick Hallagan
Michael K. Hammaker (DC Bar 233684)
Matthew C. Hammond
Joyce B. Hundley
Robert A. Lepore
Erica S. Mintzer (DC Bar 450997)
H. Joseph Pinto III
Warren A. Rosborough IV (DC Bar 495063)
Natalie Rosenfelt
Blake W. Rushforth
Anthony D. Scicchitano
Jennifer A. Wamsley (DC Bar 486540)
Frederick S. Young (DC Bar 421285)
Attorneys for the United States

* Attorney of Record

For Plaintiff State of California

Kamala D. Harris
Attorney General

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Jonathan M. Eisenberg
Deputy Attorney General, California Department of Justice, Office of 
the Attorney General, CSB No. 184162, 300 South Spring Street, Suite 
1702, Los Angeles, California 90013, Phone: (213) 897-6505, 
Facsimile: (213) 620-6005, jonathan.eisenberg@doj.ca.gov

For Plaintiff State of Florida

Pamela Jo Bondi
Attorney General, State of Florida

/s/--------------------------------------------------------------------

Patricia A. Conners
Associate Deputy Attorney General

Eli A. Friedman
Assistant Attorney General

Lizabeth A. Brady
Chief, Multistate Antitrust Enforcement, Antitrust Division, PL-01, 
The Capitol, Tallahassee, FL 32399-1050, Tel: (850) 414-3300, Fax: 
(850)488-9134, E-mail: Eli.Friedman@myfloridalegal.com

For Plaintiff State of Missouri

/s/--------------------------------------------------------------------

Chris Koster
Attorney General

Anne E. Schneider
Assistant Attorney General/Antitrust Counsel

Andrew M. Hartnett
Assistant Attorney General

P.O. Box 899 Jefferson City, MO 65109 573/751-7445, F: 573/751-2041, 
anne.schneider@ago.mo.gov,

For Plaintiff State of Texas

Greg Abbott
Attorney General of Texas

Daniel T. Hodge
First Assistant Attorney General

Bill Cobb
Deputy Attorney General for Civil Litigation

/s/--------------------------------------------------------------------

John T. Prud'homme, Jr.
Chief, Antitrust Division, Office of the Attorney General, 300 W. 
15th St., 7th floor, Austin, Texas 78701, (512) 936-1697, (512) 320-
0975--facsimile

For Plaintiff State of Washington

/s/--------------------------------------------------------------------

David M. Kerwin
Assistant Attorney General, Antitrust Division, Office of the 
Attorney General of Washington, 800 Fifth Avenue, Suite 2000, 
Seattle, WA 98104-3188, 206/464-7030, davidk3@atg.wa.gov

United States District Court for the District of Columbia

United States of America, State of California, State of Florida, 
State of Missouri, State of Texas, and State of Washington, 
Plaintiffs, v. Comcast Corp., General Electric Co., and NBC 
Universal, Inc., Defendants.

Case: 1:11-cv-00106.
Assigned To: Leon, Richard J.
Assign. Date: 1/18/2011.
Description: Antitrust.

Competitive Impact Statement

    The United States of America (``United States''), acting under the 
direction of the Attorney General of the United States, pursuant to 
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or 
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact 
Statement relating to the proposed Final Judgment (attached hereto as 
Exhibit A) submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    On December 3, 2009, Comcast Corporation (``Comcast''), General 
Electric Company (``GE''), NBC Universal, Inc. (``NBCU''), and Navy, 
LLC (``Newco''), announced plans to form a new Joint Venture (``JV'') 
to which Comcast and GE will contribute broadcast and cable network 
assets. As a result of the transaction, Comcast--the nation's largest 
cable company--will have majority control of a JV holding highly valued 
video programming needed by Comcast's video distribution rivals to 
compete effectively.
    The United States filed a civil antitrust Complaint on January 18, 
2011, seeking to enjoin the proposed transaction because its likely 
effect

[[Page 5447]]

would be to lessen competition substantially in the market for timely 
distribution of professional, full-length video programming to 
residential customers (``video programming distribution'') in major 
portions of the United States in violation of Section 7 of the Clayton 
Act, 15 U.S.C. 18. The transaction would allow Comcast to disadvantage 
its traditional competitors (direct broadcast satellite (``DBS'') and 
telephone companies (``telcos'') that provide video services), as well 
as competing emerging online video distributors (``OVDs''). This loss 
of current and future competition likely would result in lower-quality 
services, fewer choices, and higher prices for consumers, as well as 
reduced investment and less innovation in this dynamic industry.
    On January 18, 2011, the Federal Communications Commission 
(``FCC'') adopted a Memorandum Opinion and Order relating to the 
foregoing transaction.\1\ The FCC's Order approved the transaction 
subject to certain conditions.
---------------------------------------------------------------------------

    \1\ Memorandum Opinion and Order, In re Applications of Comcast 
Corp., General Electric Co. and NBC Universal, Inc. for Consent to 
Assign Licenses and Transfer Control of Licensees, FCC MB Docket No. 
10-56 (adopted Jan. 18, 2011). Under the Communications Act, the FCC 
has jurisdiction to determine whether mergers involving the transfer 
of a telecommunications license are in the ``public interest, 
convenience, and necessity.'' 47 U.S.C. 310(d).
---------------------------------------------------------------------------

    Under the proposed Final Judgment filed by the United States 
Department of Justice simultaneously with this Competitive Impact 
Statement and explained more fully below, Defendants will be required, 
among other things, to license the JV's programming to Comcast's 
emerging OVD competitors in certain circumstances. When Defendants and 
OVDs cannot reach agreement on the terms and conditions of the license, 
the aggrieved OVD may apply to the Department for permission to submit 
its dispute to commercial arbitration under the proposed Final 
Judgment. The FCC Order contains a similar provision. For so long as 
commercial arbitration is available for the resolution of such disputes 
in a timely manner under the FCC's rules and orders, the Department 
will ordinarily defer to the FCC's commercial arbitration process to 
resolve such disputes. However, the Department reserves the right, in 
its sole discretion, to permit arbitration under the proposed Final 
Judgment to advance the Final Judgment's competitive objectives. In 
addition, the Department may seek relief from the Court to address 
violations of any provisions of the proposed Final Judgment. The 
proposed Final Judgment also contains provisions to prevent Defendants 
from interfering with an OVD's ability to obtain content or deliver its 
services over the Internet.
    The proposed Final Judgment will provide a prompt, certain, and 
effective remedy for consumers by diminishing Comcast's ability to use 
the JV's programming to harm competition. The United States and 
Defendants have stipulated that the proposed Final Judgment may be 
entered after compliance with the APPA. Entry of the proposed Final 
Judgment would terminate this action, except that the Court would 
retain jurisdiction to construe, modify, or enforce the provisions of 
the proposed Final Judgment, and to punish and remedy violations 
thereof.

II. Description of Events Giving Rise to the Alleged Violation

A. Defendants, the Proposed Transaction, and the Department's 
Investigation

1. Comcast
    Comcast is a Pennsylvania corporation headquartered in 
Philadelphia, Pennsylvania. It is the largest cable company in the 
nation, with approximately 23 million video subscribers. Comcast is 
also the largest Internet service provider (``ISP''), with over 16 
million subscribers. Comcast also wholly owns national cable 
programming networks, including E! Entertainment, G4, Golf, Style, and 
Versus, and has partial ownership interests in Current Media, MLB 
Network, NHL Network, PBS KIDS Sprout, Retirement Living Television, 
and TV One. In addition, Comcast has controlling and partial interests 
in regional sports networks (``RSNs'').\2\ Comcast also owns digital 
properties such as DailyCandy.com, Fandango.com, and Fancast, its 
online video Web site. In 2009, Comcast reported total revenues of $36 
billion. Over 94 percent of Comcast's revenues, or $34 billion, were 
derived from its cable business, including $19 billion from video 
services, $8 billion from high-speed Internet services, and $1.4 
billion from local advertising on Comcast's cable systems. In contrast, 
Comcast's cable programming networks earned only about $1.5 billion in 
revenues from advertising and fees collected from video programming 
distributors.
---------------------------------------------------------------------------

    \2\ Comcast owns Comcast SportsNet (``CSN'') Bay Area, CSN 
California, CSN Mid-Atlantic, CSN New England, CSN Northwest, CSN 
Philadelphia, CSN Southeast, and CSN Southwest, and holds partial 
ownership interests in CSN Chicago, SportsNet New York, and The Mtn.
---------------------------------------------------------------------------

2. GE and NBCU
    GE is a New York corporation with its principal place of business 
in Fairfield, Connecticut. GE is a global infrastructure, finance, and 
media company. GE owns 88 percent of NBCU, a Delaware corporation, 
headquartered in New York, New York. NBCU is principally involved in 
the production, packaging, and marketing of news, sports, and 
entertainment programming.
    NBCU wholly owns the NBC and Telemundo broadcast networks, as well 
as ten local NBC owned and operated television stations (``O&Os''), 16 
Telemundo O&Os, and one independent Spanish language television 
station. In addition, NBCU wholly owns national cable programming 
networks--Bravo, Chiller, CNBC, CNBC World, MSNBC, mun2, Oxygen, 
Sleuth, SyFy, and USA Network--and partially owns A&E Television 
Networks (including the Biography, History, and Lifetime cable 
networks), The Weather Channel, and ShopNBC.
    NBCU also owns Universal Pictures, Focus Films, and Universal 
Studios, which produce films for theatrical and digital video disk 
(``DVD'') release, as well as content for NBCU's and other companies' 
broadcast and cable programming networks. NBCU produces approximately 
three-quarters of the original primetime programming shown on the NBC 
broadcast network and the USA cable network, NBCU's two highest-rated 
networks. In addition to its programming assets, NBCU owns several 
theme parks and digital assets, such as iVillage.com. In 2009, NBCU had 
total revenues of $15.4 billion.
    NBCU also is a founding partner and 32 percent owner of Hulu, LLC, 
currently one of the most successful OVDs. Hulu is a joint venture 
between NBCU, News Corp., The Walt Disney Company, and a private equity 
investor. Each of the media partners has representation on the Hulu 
Board, possesses management rights, and licenses content for Hulu to 
deliver over the Internet.
3. The Proposed Transaction
    On December 3, 2009, Comcast, GE, NBCU, and Newco, entered into a 
Master Agreement (``Agreement''), whereby Comcast agreed to pay $6.5 
billion in cash to GE, and Comcast and GE each agreed to contribute 
certain assets to the JV. Specifically, GE agreed to contribute all of 
the assets of NBCU, including its interest in Hulu, and the 12 percent 
interest in NBCU that GE does not own but has agreed to purchase

[[Page 5448]]

from Vivendi SA. Comcast agreed to contribute all its cable programming 
assets, including its national programming networks, its RSNs, and some 
digital properties, but not its cable systems or its Internet video 
service, Fancast. As a result of the content contributions and cash 
payment by Comcast, Comcast will own 51 percent of the JV, and GE will 
retain a 49 percent interest. The JV will be managed by a separate 
Board of Directors consisting initially of three Comcast-designated 
directors and two GE-designated directors. Board decisions will be made 
by majority vote.
    The Agreement precludes Comcast from transferring its interest in 
the JV for a four-year period, and prohibits GE from transferring its 
interest for three and one-half years. Thereafter, either party may 
sell its respective interest in the JV, subject to Comcast's right to 
purchase at fair market value any interest that GE proposes to sell. 
Additionally, three and one-half years after closing, GE will have the 
right to require the JV to redeem 50 percent of GE's interest and, 
after seven years, GE will have the right to require the JV to redeem 
all of its remaining interest. If GE elects to exercise its first right 
of redemption, Comcast will have the contemporaneous right to purchase 
the remainder of GE's ownership interest once a purchase price is 
determined. If GE does not exercise its first redemption right, Comcast 
will have the right to buy 50 percent of GE's initial ownership 
interest five years after closing and all of GE's remaining ownership 
interest eight years after closing. It is expected that Comcast 
ultimately will own 100 percent of the JV.
4. The Department's Investigation
    The Department opened an investigation soon after the JV was 
announced and conducted a thorough and comprehensive review of the 
video programming distribution industry and the potential implications 
of the transaction. The Department interviewed more than 125 companies 
and individuals involved in the industry, obtained testimony from 
Defendants' officers, required Defendants to provide the Department 
with responses to numerous questions, reviewed over one million 
business documents from Defendants' officers and employees, obtained 
and reviewed tens of thousands of third-party documents, obtained and 
extensively analyzed large volumes of industry financial and economic 
data, consulted with industry and economic experts, organized product 
demonstrations, and conducted independent industry research. The 
Department also consulted extensively with the FCC to ensure that the 
agencies conducted their reviews in a coordinated and complementary 
fashion and created remedies that were both comprehensive and 
consistent.

B. The Video Programming Industry

    NBCU and Comcast are participants in the video programming 
industry, in which content is produced and distributed to viewers 
through their television sets or, increasingly, through Internet-
connected devices. Historically, the video programming industry has had 
three different levels: content production, content aggregation or 
networks, and distribution.
1. Content Production
    Television production studios produce television shows and 
coordinate how, when, and where their content is licensed in order to 
maximize revenues. They usually license to broadcast and cable networks 
the right to show a program first (i.e., the first-run rights). Content 
producers also license their content for subsequent ``windows'' such as 
syndication (e.g., licensing series to broadcast and cable networks 
after the first run of the programming), as well as for DVD 
distribution, video on demand (``VOD''), and pay per view (``PPV'') 
services. For example, the television show House is produced by NBCU, 
licensed for its first run on the FOX broadcast network and then rerun 
on the USA Network, a cable network owned by NBCU. These content 
licenses often include ancillary rights such as the right to offer some 
programming on demand.
    Historically, first-run licenses were reserved for one of the four 
major broadcast networks (ABC, CBS, NBC, and FOX), followed by 
broadcast syndication and, ultimately, cable syndication. Over the past 
several years, however, content owners have begun to license their 
content for first run on cable networks and distribution over the 
Internet on either a catch-up (e.g., next day) or syndicated (e.g., 
next season) basis.
    In addition to producing content for television and cable networks, 
NBCU produces and distributes first-run movies through Universal 
Pictures, Universal Studios, and Focus Films. Typically, producers 
distribute movies to theaters before releasing them on DVD, then 
license them to VOD/PPV providers, then to premium cable channels 
(e.g., Home Box Office (``HBO'')), then to regular cable channels, and 
finally to broadcast networks. As with television distribution, studios 
have experimented with different windows for film distribution over the 
past several years.
2. Programming Networks
    Networks aggregate content to provide a 24-hour service that is 
attractive to consumers. The most popular networks,