Letter submitted to the DOJ asking it to probe TV Everywhere

January 4, 2010

The Honorable Christine Varney
Assistant Attorney General
Antitrust Division
Department of Justice
950 Pennsylvania Avenue, NW, Suite 3109
Washington, DC 20530

Re: Request for Investigation into Potential Antitrust Violations Regarding "TV Everywhere"

Dear Ms. Varney:

The undersigned consumer advocacy organizations are writing to call your attention to a
problematic new business practice called "TV Everywhere," a new agreement between
competing incumbent video providers, or multichannel video programming distributors
(MVPDs), to upset the emerging market of online video. MVPDs include traditional cable
operators, satellite television operators and traditional phone companies now providing video
service. Essentially, the TV Everywhere model requires consumers who wish to watch popular
video content on the Internet to first subscribe to cable television-a traditional MVPD service.

Almost every incumbent MVPD has announced plans to implement the new agreement, and the
largest MVPD recently launched the first TV Everywhere service. While it is advertised as
having consumer benefits, recent reports suggest that TV Everywhere rests on an illegal
agreement among competitors specifically designed to undermine emerging Internet-based
competition and consumer choice in video programming delivery.

We ask that the agency consider initiating an immediate investigation. To support this request,
we are attaching a report issued today by Free Press. That report shows that sufficient evidence
exists in the public record to warrant an investigation into whether TV Everywhere is the result
of illegal collusion among existing competitors in the MVPD industry or is otherwise anticompetitive
in violation of the nation's antitrust laws. The report also demonstrates the harms of
a TV Everywhere model to consumers, innovation and competition.

As detailed in the report, news stories in the Wall Street Journal, New York Times, and industry
publications strongly suggest - and often explicitly state - that incumbent MVPD competitors
created TV Everywhere with what one reporter called "a rare agreement" made through
conversations carefully orchestrated by phone and in person, that could have been intended to
avoid an evidentiary paper trail. Moreover, the competitive circumstances, and the statements by
top MVPD executives, demonstrate that MVPDs would not introduce TV Everywhere services
unless assured of an agreement with competitors.

Incumbent MVPDs have the incentive to engage in such practices because they have
traditionally viewed the emergence of Internet-based video as a threat to the existing cable
market structure of limited competition. This is a rational business concern for them, because
tight control over competition and content has for years yielded ever-higher cable rates and
profits for them. For consumers, the emergence of online video is a breakthrough moment when
disruptive technologies can bring market forces to bear in their favor. Transformative moments
in media markets come along rarely, and it is critically important that the market functions
properly to maximize consumer benefit. The alternative is that incumbent operators in the old
media will crush new media competition before it can emerge.

The principle behind TV Everywhere is to prohibit a consumer from watching television
programming over an Internet-based service unless the consumer is also a subscriber to a
traditional MVPD. TV Everywhere is thus designed to ensure consumers cannot cancel their
MVPD subscriptions and turn to competing TV services that use the Internet, Internet-connected
televisions and set-top devices, which perhaps include over-the-air digital streams. By tying
online television to incumbent MVPD subscriptions, TV Everywhere is designed to undermine
new forms of competition and consumer choice currently emerging over the Internet.

First, it undermines consumer choice between channel programmers and MVPDs; for example,
the online service of Fox, Disney and NBC, called Hulu, could compete against Comcast.
Second, consumers could have the ability to choose between several incumbent MVPDs. For
example, today Comcast, Cox, and Time Warner Cable have MVPD "service areas" that tend not
to overlap. Through the Internet, Comcast's online TV service would compete nationally against
MVPD services offered over the Internet by Time Warner Cable or Cox, increasing competition
for the benefit of consumers. Third, it undermines consumer choice between incumbent MVPDs
and emerging online distributors, who use new online technologies and boxes connected to
television sets to compete for the living room screen.

The birth of TV Everywhere marks a critical bellwether for the future of video competition. Will
we see the traditional, limited-competition cable model dominate Internet delivery of video? Or
will we see a dynamic, innovative market of competitive video distributors online?

First indications are that the cartel of the old media market is using its power to replicate itself in
the new media market. According to the New York Times, industry executives took precautions
"so as to avoid being accused of collusion"; for example, "much of the discussions have been on
the telephone and in private, one-on-one chats during industry events."1 Published reports,
statements by MVPD executives, and the competitive circumstances all strongly suggest that
dominant MVPD industry participants have colluded to create their TV Everywhere initiative.

Consumers rely on government agencies and committees to investigate these practices.
Programming agreements implementing TV Everywhere are generally confidential, thus
requiring government investigators to reveal their terms. We urge you to consider a full
government investigation to determine the existence - or extent - of the collusion underlying
TV Everywhere services.

The future of television is at stake, as the MVPD industry observes. Consumers deserve
competing choices and competitive prices; emerging competitors deserve a fair chance to
compete; and constituents deserve to know whether our video marketplace will be subject to
competition or agreements among an existing club of providers. For these reasons, we urge you
to review the attached report and move swiftly to investigate potentially unlawful conduct by
MVPDs offering TV Everywhere services.

We are simultaneously informing the Department of Justice, the Federal Trade Commission, the
House and Senate Commerce and Judiciary Committees, and the Federal Communications
Commission about our concerns with the anti-competitive and anti-consumer effects of the TV
Everywhere initiative.

Respectfully submitted,
Ben Scott
Free Press

Parul P. Desai
Media Access Project

Mark Cooper
Consumer Federation of America

Sascha Meinrath
Open Technology Institute, New America Foundation

Nic Reville
Participatory Culture Foundation

Harold Feld
Public Knowledge

1 Roger Cheng, "Telcos, Satellite Join Cable's Push to Build Pay Wall On Web," Wall Street Journal, April 20, 2009; Tim
Arango, "Cable TV's Big Worry: Taming the Web," New York Times, June 23, 2009.