Verizon and Cable Cos Keep Playing Games

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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.

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