Post

Verizon and Cable Cos Keep Playing Games

April 12, 2012 , , , ,

Verizon and the cable companies have always been reluctant to answer
the tough questions about their proposed deals to team up rather than
compete on voice, video, and data services, but now they’re even going
so far as to try to stop potential opponents of the deals from
participating in the FCC’s review at all. The FCC shouldn’t indulge
this kind of gamesmanship and should give all interested parties a meaningful opportunity to make thoughtful, well-informed arguments about these
deals.

Yesterday Verizon and the cable companies filed an objection to try to stop
Netflix’s outside counsel from reading the companies’
license transfer, agency, resale, and Joint Operating Entity agreements.

Why? Because Netflix has not filed a petition to deny opposing the deals.

Verizon and SpectrumCo are making a pretty technical procedural argument here. They say that only
“parties” can sign confidentiality acknowledgements to view
confidential information and that Netflix can’t be considered a party
because it did not file a petition to deny the transactions.

So by Verizon and SpectrumCo’s logic, companies or organizations only
have a right to read the agreements after they’ve submitted formal
filings opposing the agreements. That is ridiculous. As a general rule
of thumb, if your interpretation of FCC rules leads you to the
conclusion that the FCC is encouraging or requiring entities to oppose
a deal before they know what’s actually in that deal, you probably went off
track.

This is also, interestingly, the first time Verizon and SpectrumCo
have brought up this argument, even though every single entity that
has read the agreements in this proceeding did so before filing a
petition to deny
. Some never filed petitions to deny at all: for
example, the organization TechFreedom obtained access to the
agreements only after the petitions to deny had been filed, so it
could file reply comments.

Why do the companies want Netflix treated
differently? Likely because Netflix is the first online video company
to try to enter the fray here, and might end up having some pretty
persuasive arguments as to how this deal is going to stifle innovation
and hamper competition in the video market going forward.

As a online video company whose customers rely on the internet to reach its service, Netflix has a significant interest in examining and speaking out about deals that would hurt competition in in video programming and internet access service.

More broadly, this fits into part of Verizon and SpectrumCo’s strategy
for avoiding having to talk about the worst parts of its deal. The
companies seem to have expected that they’ll have to engage in
detailed arguments about the spectrum transfer part of this deal, but
when it comes to the patent-collecting Joint Operating Entity the
companies’ tactic has been to shroud every possible detail in
confidentiality to keep it out of the public eye.

As a result, when companies or organizations (like
PK) want to explain all of the anticompetitive harms threatened by the
JOE, they have to redact all of the details of those arguments, and
Verizon can safely ignore our arguments and trust that it will all fly
under the radar of the press and public. The basic idea: secrecy
shields Verizon and SpectrumCo from having to answer for the worst
parts of their deals.

Similarly, if Verizon and SpectrumCo can use confidentiality to prevent Netflix from ever
joining the debate here, they won’t have to face Netflix’s potential
arguments about why this deal is bad for online video competitors and
bad for online video consumers.

It’s clear that Verizon and the cable companies are playing legal games to avoid a conversation they don’t want to have.

These deals
have widespread potential ramifications for wireless, wireline, and
video services, and the FCC should hear from as many affected parties
as possible as it considers whether to block or condition the deals. The FCC shouldn’t let Verizon and
SpectrumCo off the hook here: if Netflix has something to say about
these deals it should be allowed to read the deals so its arguments
can be informed and therefore much more useful to the FCC.