STATE OF CALIFORNIA

EDMUND G. BROWN JR., Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE
SAN FRANCISCO, CA 94102-3298

February 13, 2015

FILED
2-13-15
02:36 PM

Agenda ID #13731
Ratesetting

TO PARTIES OF RECORD IN APPLICATION (A.) 14-04-013 AND A.14-06-012

This is the proposed decision of Administrative Law Judge Bemesderfer. Until and
unless the Commission hears the item and votes to approve it, the proposed decision
has no legal effect. This item may be heard, at the earliest, at the Commissions
March 26, 2015, Business Meeting. To confirm when the item will be heard, please see
the Business Meeting agenda, which is posted on the Commissions website 10 days
before each Business Meeting.
Parties of record may file comments on the proposed decision as provided in Rule 14.3
of the Commissions Rules of Practice and Procedure.

/s/ RICHARD SMITH for

David M. Gamson
Chief Administrative Law Judge
DMG:avs
Attachment

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PROPOSED DECISION

Agenda ID #13731
Ratesetting

Decision PROPOSED DECISION OF ALJ BEMESDERFER (Mailed 2/13/2015)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Joint Application of Comcast Corporation, Time

Warner Cable Inc., Time Warner Cable
Information Services (California), LLC, and
Bright House Networks Information Services
(California), LLC for Expedited Approval of the
Transfer of Control of Time Warner Cable
Information Services (California), LLC (U6874C);
and the Pro Forma Transfer of Control of Bright
House Networks Information Services
(California), LLC (U6955C), to Comcast
Corporation Pursuant to California Public
Utilities Code Section 854(a).

Application 14-04-013
(Filed April 11, 2014)

And Related Matter.

Application 14-06-012

DECISION GRANTING WITH CONDITIONS

APPLICATION TO TRANSFER CONTROL

146814573

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TABLE OF CONTENTS
Title

Page

DECISION ON APPLICATION TO TRANSFER CONTROL ................................... 2

Summary .................................................................................................................. 2
1. Background ......................................................................................................... 3
2. The Corporate Entities and the Financial ....................................................... 7
2.1. Comcast ............................................................................................................ 7
2.2. Time Warner .................................................................................................... 8
2.2.1. Time Warner Cable Companies ........................................................ 8
2.2.2. TWICS ................................................................................................... 8
2.3. Bright House .................................................................................................... 9
2.4. Charter Fiberlink ........................................................................................... 10
2.5. Description of Financial Transaction ......................................................... 10
3. Jurisdiction and Scope of Proceeding ........................................................... 11
3.1. Request for Exemption Under Section 853(b) ........................................... 12
3.2. Application of Section 854(a) ...................................................................... 12
3.3 Applicability of Sections 854(b) and (c) ...................................................... 12
3.3.1. Section 854(b) ..................................................................................... 12
3.3.2. Section 854(c) ...................................................................................... 13
3.4. Applicability of Section 706(a) of the
1996 Telecommunications Act ....................................................................... 18
4. Evidentiary Hearings ...................................................................................... 21
4.1. No Statute or Commission Rule Requires Evidentiary Hearings ......... 21
4.2. There is Sufficient Evidence in the Record to Permit
the Commission to Decide the Matter .......................................................... 23
4.3. The Commission Can Resolve, and has Frequently resolved,
Issues of Fact Without Evidentiary Hearings ............................................. 24
4.4. Opportunity to be Heard and Motions for Evidentiary Hearings ........ 26
5. Public Interest Criteria .................................................................................... 26
5.1. Section 854(c) Requirements ....................................................................... 27
5.1.1. Maintain or Improve Financial Condition ...................................... 27
5.1.2. Effects on Quality of Service ............................................................. 28
5.1.3. Effects on Quality of Management ................................................... 29
5.1.4. Effects on Public Utility Employees ................................................. 29
5.1.5. Effects on Public Utility Shareholders ............................................. 29
5.1.6. Effects on State and Local Economies
and Communities of Interest ........................................................... 30
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TABLE OF CONTENTS
Con't.
Title

Page

6. Effects of the Merger in California ................................................................ 31

6.1. Broadband Deployment and Build Out of Broadband
Networks to Unserved Areas ........................................................................ 31
6.2. Safety and Reliability .................................................................................... 32
6.3. Effects of the Merger California Consumers............................................. 33
6.4. Merger-Specific and Verifiable Efficiencies .............................................. 34
6.5. Effects of the Merger on Special Access and Backhaul Services ............ 35
6.6. Effects of the Merger on Competition in the
California Marketplace for Broadband Customers .................................... 35
7. Intervenors Arguments Against Approval of the
License Transfers or, in the Alternative, Imposing Conditions................ 36
7.1. Arguments Against Approval .................................................................... 36
7.1.1. Effects of the Merger on Competition
in the California Marketplace for Broadband Customers ............ 36
7.1.2. Effects of the Merger on Special Access and Backhaul Services .. 43
7.1.3. Merger-Specific and Verifiable Efficiencies .................................... 45
7.1.4. Service Quality .................................................................................... 47
7.1.5. Effects of the Merger on California Consumers ............................. 51
7.1.6. Broadband Deployment and Build Out of
broadband Networks to Unserved and Undeserved Areas ........ 57
7.1.7. Safety and Reliability .......................................................................... 58
7.2. Discussion ...................................................................................................... 60
7.3. Proposed Mitigation Measures and Conditions ...................................... 69
7.3.1. Broadband Deployment ..................................................................... 69
7.3.2. Commitment to Lifeline ..................................................................... 71
7.3.3. Improved Safety and Reliability ....................................................... 71
7.3.4. Miscellaneous Proposed Conditions ................................................ 72
8. Mitigation Measures to Address Adverse
Consequences of the Merger.......................................................................... 74
9. Comments on Proposed Decision ................................................................. 84
10. Assignment of Proceeding ............................................................................ 84
Findings of Fact ............................................................................................................... 84
Conclusions of Law ........................................................................................................ 86
ORDER ............................................................................................................................. 87
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TABLE OF CONTENTS
Con't.
Title

Page

APPENDIX A - Conditions Applicable to Transfer of Control of Time Warner

Cable Information Services (California), LLC; and the Pro Forma
Transfer of Control of Bright House Networks Information
Services (California), LLC, to Comcast Corporation

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DECISION GRANTING WITH CONDITIONS APPLICATION

TO TRANSFER CONTROL
Summary
We grant the application of Comcast Corporation (Comcast), Time Warner
Cable Inc. (Time Warner), Time Warner Cable Information Services (California),
LLC (TWCIS) and Bright House Networks Information Services (California), LLC
(Bright House) for approval of the transfer of control of TWCIS and Bright House
to Comcast. In addition, we grant the application of Comcast, TWCIS and
Charter Fiberlink CA-CCO, LLC (Charter Fiberlink) to transfer a limited number
of business customers and associated regulated assets of Charter Fiberlink.1 We
have reviewed the proposed merger under the authority of the California Public
Utilities Code (Pub. Util. Code) 854,2 and the limited delegated authority
granted under Section 706(a) of the 1996 Telecommunications Act3, to determine
whether the merger is in the public interest. We have determined that Section
706(a) of the 1996 Telecommunications Act and 854(a) and (c) apply to this
transaction. We do not consider aspects of this merger, such as video
programming, that are outside the delegated authority of Section 706(a), except
to the extent that they affect the deployment of advanced telecommunications.
Review of the non-delegated aspect of the merger will fall under the purview of
the Federal Communications Commission (FCC), the U.S. Department of Justice
Hereinafter, we refer to Comcast Corporation (Comcast), Time Warner Cable Inc.
(Time Warner), Time Warner Cable Information Services (California), LLC (TWCIS),
Charter Fiberlink CA-CCO, LLC (Charter Fiberlink) and Bright House Networks Information
Services (California), LLC (Bright House) as Joint Applicants.
1

2 Statutory references are to the Cal. Pub. Util. Code unless otherwise noted.
3 Codified at 47 U.S.C. 1302(a).

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5(USDOJ), and State Attorney Generals (State AGs). The FCC is also reviewing
the impacts of the merger on a national basis and may come to a separate
conclusion once they review a larger aspect of the merger than what falls under
the Commissions Section 706(a) delegated authority and 854.
The Applicants must meet the conditions adopted herein in order to
provide reasonable assurance that the proposed transaction will be in the public
interest in accordance with Pub. Util. Code 854(a) and (c). The conditions
adopted herein are based upon review of the proposals submitted by parties in
this proceeding. Although we do not discuss every single proposal that was
presented, we have taken parties proposals into consideration in developing the
adopted conditions. We only adopt conditions which mitigate an effect of the
merger in order to satisfy the public interest requirements of 854. The fact that
we decline to adopt a particular partys proposed condition should not be
construed as an indication of whether or not the proposal may have merit in
some other context or proceeding.
1. Background
On April 11, 2014, Comcast, Time Warner, TWCIS, and Bright House filed
an application for approval of the transfer of control of TWCIS and Bright House
to Comcast. TWCIS and Bright House are regulated entities licensed by the
Commission. The Application was filed under 854(a) of the Public Utilities
Code which provides, in relevant part, that transfers of control of regulated
entities may only be made with the prior approval of the Commission. The
Application also contained a brief analysis of the ways in which the Joint
Applicants meet the factors set forth in Pub. Util. Code 854(c).
Protests were filed on May 15 and May 19, 2014 by the following parties:
Jesse Miranda Center for Hispanic Leadership, the Los Angeles Latino Chamber

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of Commerce, the Orange County Interdenominational Alliance, the National

Asian American Coalition, the Ecumenical Center for Black Church Studies,
Christ Our Redeemer AME Church, and the National Hispanic Christian
Leadership Conference (collectively, Joint Minority Parties); the Commissions
Office of Ratepayer Advocates (ORA); The Utility Reform Network (TURN); and
The Greenlining Institute (Greenlining). Dish Network L.L.C. (DISH) filed a
response to the Application on May 16, 2014.
Applicants filed a consolidated reply to the protests and responses on
June 9, 2014. A prehearing conference (PHC) was held on July 2, 2014, and the
assigned Commissioner issued a Scoping Memorandum by Ruling on August 14,
2014, making a preliminary determination that evidentiary hearings are not
necessary.
In relation to the current application, Comcast, TWCIS and Charter
Fiberlink filed Application (A.)14-06-012 to transfer a limited number of business
customers and associated regulated assets of Charter Fiberlink to TWCIS on June
17, 2014. Comcast, TWCIS, Charter Fiberlink and Bright House filed a motion on
August 20, 2014 to consolidate A.14-06-012 with A.14-04-013, the Comcast-Time
Warner merger application. The assigned Administrative Law Judge (ALJ)
issued a Ruling on August 29, 2014 granting this motion and stated that the
August 14, 2014 Scoping Memo Ruling would govern the consolidated
proceeding.
On September 16, 2014, ORA filed a motion 1) to compel information and
documents, including responses to the Federal Communications Commission
(FCC) data requests, 2) for the production of the information in a format
consistent with Rules 1.13(b)(1) and 1.10(c) of the California Public Utilities Rules
of Practice and Procedure (Rules) and 3) for a Ruling on the handling of

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confidentiality issues in this proceeding. In a Ruling issued on

September 23, 2014 the ALJ found that ORAs motion did not identify specific or
actual areas of dispute, or show that ORA had engaged in a good faith effort to
resolve them. In addition, the ALJ ordered Joint Parties to produce confidential
documents and documents subject to the FCCs protective order and stated that
such documents would be subject to the standard that defines the scope of
confidentiality under Pub. Util. Code 583. On October 1, 2014, ORA filed a
motion to reconsider the ALJs September 23, 2014 Ruling and another motion to
change the proceedings schedule due to Joint Applicants failure to timely and
completely comply with parties data request. ORAs motion to change the
schedule was supported by the following parties: California Emerging
Technology Fund (CETF), TURN, Greenlining, National Asian American
Coalition, Center for Accessible Technology (CforAT), DISH, Media Alliance and
the Writers Guild of America, West Inc. (Writers Guild). On October 4, 2014 the
ALJ suspended the proceeding and scheduled a Law and Motion Hearing on
October 16, 2014 to resolve parties discovery disputes. At the hearing, Comcast
proposed and ORA, Greenlining and TURN accepted a document production
arrangement using specified software where Comcast would pay for software
and training. Regarding programming materials requested by ORA and other
parties that were in dispute at the FCC, the ALJ ruled that the FCC would decide
this matter and ORA may determine whether to renew this part of its motion at a
later date.
On November 26, 2014, the ALJ set a new briefing schedule whereby Joint
Applicants were to file opening briefs on December 3, 2014, parties were to file
Reply Briefs on December 10, 2014 and any motions for evidentiary hearings
were to be filed on December 10, 2014. Briefs were required to include as

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attachments any admissible documents including prepared testimony,

declarations and/or stipulations of facts by the parties. On December 10, 2014,
only Joint Minority Parties filed a motion for evidentiary hearings. On
December 12, 2014, the ALJ denied Joint Minority Parties motion because the
motion failed to identify any material factual issue for the resolution of which
evidentiary hearings are necessary. In addition, the ALJ provisionally admitted
all attachments to expert declarations and/or briefs into the record. On
December 16, 2014, Joint Applicants filed a motion for leave to file a reply to
parties Briefs. In an e-mail Ruling on December 23, 2014 the ALJ denied Joint
Applicants motion. On January 16, 2015, Engine, a non-profit advocacy group,
filed a brief concurrently with a motion for party status and a motion to late file
their brief. Engine claimed that they did not have adequate notice to be aware of
this proceeding and file their brief on time. On January 21, 2015, Joint Applicants
filed a motion requesting the Commission deny Engines late filed brief. On
January 29, 2015 the ALJ denied Engines motion for party status. On
January 20, 2015, ORA filed a motion to make ORAs brief and the exhibits
attached to ORAs brief public. On February 6, 2015, CforAT filed a motion to
request that the Commission take official notice of the following documents: (a)
The FCC 2015 Broadband Progress Report and Notice of Inquiry on Immediate
Action to Accelerate Deployment, adopted January 29, 2015, (b) The United
States Circuit Court for the District of Columbias Order setting the date for oral
argument in the appeal regarding programming documents for February 20,
2015; (c) Comcasts 2015 Form 8-K, Current Report to the Securities and
Exchange Commission (SEC) indicating that the merger agreement deadline has
been extended to August 12, 2015.

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2. The Corporate Entities and the Financial

2.1. Comcast
Comcast Corporation is a publicly traded corporation organized under the
laws of Pennsylvania with its principal offices located at One Comcast Center,
Philadelphia, Pennsylvania 19103-2838. Comcast has network facilities covering
portions of 39 states and the District of Columbia and is the largest provider of
broadband and cable in the United States. Comcast Phone of California, LLC
(Comcast Phone), an indirect subsidiary of Comcast, holds a Certificate of Public
Convenience and Necessity (CPCN) from this Commission to provide facilitiesbased and resold local exchange and interexchange telecommunications services
in California as a Competitive Local Exchange Carrier (CLEC). Comcast Phone is
primarily a wholesale provider offering interconnection services to Comcast IP
Phone II, LLC (Comcast IP), another Comcast subsidiary that provides voice
services to Comcast customers in California. Comcast Phone does not offer any
retail services to residential customers, but does have retail business customers.
Comcast Phone and Comcast IP have the same Officers and principal place of
business and share some employees. Business operations and staff from various
Comcast entities support both Comcast Phone and Comcast IP.

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2.2. Time Warner

2.2.1. Time Warner Cable Companies
Time Warner is a publicly traded Delaware corporation with its
headquarters located at 60 Columbus Circle, New York, NY 10023. Time Warner
has network facilities in 31 states, including California, and is the second largest
provider of cable service and third largest provider of broadband service in
California. Through its broadband infrastructure, Time Warner provides
interconnected Voice over Internet Protocol (VoIP) services through its
geographic footprint. Time Warner serves the five greater Los Angeles area
counties of Ventura, Los Angeles, Orange, San Bernardino, and Riverside as well
as the desert cities area surrounding Palm Springs, portions of San Diego
County, and El Centro in Imperial County
2.2.2. TWICS
TWCIS is a wholly-owned indirect subsidiary of Time Warner whose
principal offices are located at 60 Columbus Circle, New York, NY 10023. TWCIS
is a public utility and a telephone corporation authorized to provide limited
facilities-based and resold interexchange services and limited facilities-based and
resold local exchange services in California as a non-dominant interexchange
carrier (NDIEC) and a CLEC. TWCIS has a CPCN issued by this Commission on
March 16, 2004. TWCIS does not itself provide direct end-user voice services but
offers wholesale telecommunications services, including switched access service
and local interconnection service to retail VoIP providers including TWCISs
own non-carrier affiliate, TWC Digital Phone, LLC.4 TWCIS was also recently
In The Matter of the Application of Time Warner Cable Information Services (California), LLC for a
Certificate of Public Convenience and Necessity to Provide Facilities-Based and Resale Competitive Local,
IntraLATA and InterLATA Voice Service, D.04-03-032 (Mar. 18, 2004).
4

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designated as an Eligible Telecommunications Carrier (ETC) in D.14-03-038,

adopted March 27, 2014, for the purposes of offering Lifeline services. As part of
its application for ETC designation TWCIS stated that TWC Digital Phone LLC
plans to transfer its retail customers to TWCIS well before it begins offering
Lifeline services in California.5
2.3. Bright House
Time Warner holds an indirect ownership interest in Bright House, a
Delaware corporation with its principal place of business located at
3701 North Silleet Ave., Bakersfield, CA 93308. In D.05-06-045, Bright House was
authorized to provide limited facilities-based and resold interexchange services
as an NDIEC and limited facilities-based and resold local exchange services as a
CLEC. Bright House operates as a wholesale telecommunications carrier
providing telecommunications services to its direct parent, Bright House
Networks, LLC (BHN) and other carriers, including backhaul services to wireless
carriers. BHN utilizes those wholesale services to provide voice, video, and
broadband services to subscribers throughout its cable franchise areas, which
include Bakersfield and Kern County. Time Warner holds 66.67 percent of Time
Warner entertainment Advance-Newhouse Partnership (TWE-A/N), which in
turn is the sole member of BHN. Time Warner also provides certain services to
BHN for an annual fee. Advance-Newhouse Partnership holds the remaining
33.33 percent of TWE-A/N and has exclusive day-to-day management
responsibility for and de facto control over the operation of the BHN entities,
including Bright House.
Application of Time Warner Cable Information Services (California), LLC (U6874C) for Designation as
an Eligible Telecommunications Carrier, A.13-10-019, filed on October 25, 2013 at 3, n.6.
5

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2.4. Charter Fiberlink

Charter Fiberlink is a wholly-owned subsidiary of Charter
Communications, Inc. (Charter). Charter is a publicly traded Delaware
corporation that operates in 29 states, including California, and provides
traditional cable video services (basic and digital), advanced video services,
high-speed Internet services, and voice services to more than six million
residential and business customers. Charter Fiberlink is a limited liability
company organized under the laws of the state of Delaware with its principal
business office located at 12405 Powerscourt Drive, St. Louis, Missouri 63131.
Pursuant to a CPCN issued by this Commission on May 6, 2004, Charter
Fiberlink is authorized to do business in California as an NDIEC and CLEC that
provides limited facilities-based and resold interexchange services and limited
facilities-based and resold local exchange services. Under its CPCN, Charter
Fiberlink provides interstate and intrastate telecommunications services to
business customers, including private line and data/wide area network services.
Charter Fiberlink does not provide residential end-user voice services itself, but
it enables its VoIP affiliate to do so by providing network interconnection,
telephone numbers, and other services. Charter Fiberlink also provides switched
exchange access services to interconnection carriers who terminate calls on its
network.
2.5. Description of Financial Transaction
The proposed merger would create the largest broadband service provider
in the United States. The merged company would control about 40 percent of the
national broadband market, and may control a larger share if high speed
broadband at 25 mbps up and 3 mbps down is calculated separately. In
addition, the merger would more than double the size of Comcasts footprint in

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California, increasing the number of California households served by Comcast

from approximately 34% to 84%.6
Under the proposal, Time Warner would merge into Tango Acquisition
Sub, Inc., a newly formed wholly owned subsidiary of Comcast created for the
specific purpose of this transaction. At that time, the separate corporate
existence of Tango Acquisition Sub, Inc. will cease to exist and Time Warner will
become a wholly owned subsidiary of Comcast. Comcast will acquire
100 percent of Time Warners equity in exchange for Comcast Class A shares.
Contemporaneously with the merger, each Time Warner share will be converted
into the right to receive 2.875 shares of Comcast Class A shares. Upon
completion of the transaction, TWCIS and all the other Time Warner subsidiaries
will become indirect, wholly-owned subsidiaries of Comcast Corporation.
As part of the merger between Comcast and Time Warner, Comcast will
divest approximately 3.9 million residential video customers to Charter. As part
of this transaction, Charter Fiberlink will transfer to TWCIS all of its California
business telecommunications service customers within certain franchise areas,
excluding those customers in Charter Fiberlinks operating territory in the
Lake Tahoe area.
3. Jurisdiction and Scope of Proceeding
The scope of this proceeding is governed by Pub. Util. Code 851-856
and Section 706(a) of the 1996 Telecommunications Act.

Brief of the Office of Ratepayer Advocates, Exhibit A, Declaration of Lee L. Selwyn

(Selwyn Declaration), filed on December 10, 2014 at 152-153.

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3.1. Request for Exemption Under Section 853(b)

Because we conclude that Sections 854(a) and 854(c) apply to these license
transfers, we also conclude that exemption of the license transfers under 853(b)
as requested by Joint Applicants is not appropriate.
3.2. Application of Section 854(a)
We conclude that 854(a) of the Public Utilities Act applies to this
transaction. Pub. Util. Code 854(a) specifies that, [n]o person or corporation,
whether or not organized under the laws of this state, shall merge, acquire, or
control either directly or indirectly any public utility organized and doing
business in this state without first securing authorization to do so from this
Commission. The Commission may establish by order or rule the definitions of
what constitute merger, acquisition, or control activities that are subject to this
section of the statute.
There is no dispute as to the applicability of Pub. Util. Code 854(a) to the
transfer of TWCIS and Bright House to Comcast. Parties dispute the
applicability of 854(a) to the broadband aspect of the merger that includes
Comcast and Time Warner affiliates. This issue is addressed in Section 3.4
below.
3.3 Applicability of Sections 854(b) and (c)
3.3.1. Section 854(b)
We conclude that Pub. Util. Code 854(b) does not apply to the current
transaction. The plain language of 854(b) guides our application of this statute.
Pub. Util. Code 854(b) states:
Before authorizing the merger, acquisition, or control of any
electric , gas, or telephone utility organized and doing
business in this state, where any of the utilities that are parties
to the proposed transaction has gross annual California
revenues exceeding five hundred million dollars
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($500,000,000), the commission shall find that the proposal

does all of the following:
(1) Provides short-term and long-term economic benefits to
ratepayers.
(2) Equitably allocates, where the commission has ratemaking
authority, the total short-term and long-term forecasted
economic benefits, as determined by the commission, of the
proposed merger, acquisition, or control, between
shareholders and ratepayers. Ratepayers shall receive not less
than 50 percent of those benefits.
(3) Not adversely affect competition. In making this finding,
the commission shall request an advisory opinion from the
Attorney General regarding whether competition will be
adversely affected and what mitigation measures could be
adopted to avoid this result.
Pub. Util. Code 854(b) applies where any of the utilities that are parties to
the proposed transaction has gross annual California revenues exceeding
$500 million. In the present case, although Comcast and Time Warner have
various entities within their organizations, the only two public utilities involved
in this merger that hold CPCNs from this Commission are TWCIS and
Bright House, neither of which has intrastate California revenues exceeding
$500 million. Therefore, under the plain language of the statute, 854(b) is
inapplicable.
3.3.2. Section 854(c)
We conclude that Pub. Util. Code 854(c) applies to this transaction.
Joint Applicants maintain that the Commissions jurisdiction is limited to
evaluating the impact of the proposed license transfer on the market for voice
services in California. They contend that the Commission, as part of its public
interest analysis, cannot include a review of the broader aspects of the merger
that include Comcast and Time Warner affiliates.

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ORA, TURN and Joint Minority Parties argue that the Commission should
adopt a broad public interest standard and look at not only the implications of
the transfer for voice customers of TWCIS and Bright House but also at the
implications of the proposed merger for the cost and availability of broadband
services in California. Joint Minority Parties and Greenlining argue that the
merger will widen the digital divide between affluent and poor communities by
restricting access to broadband services and making them more expensive.
TURN argues that the Joint Applicants have failed to demonstrate the claimed
public benefits of the merger. ORA, TURN and Joint Minority Parties, therefore,
argue that the Commission should judge the transaction by the standards of
review established by Pub. Util. Code 854(c).
854(c) of the Pub. Util. Code states:
Before authorizing the merger, acquisition or control of any
electric, gas, or telephone utility organized and doing business
in this state, where any of the entities that are parties to the
proposed transaction has gross annual California revenues
exceeding five hundred million dollars ($500,000,000), the
commission shall consider each of the criteria listed in
paragraphs (1) to (8), inclusive, and find, on balance, that the
merger, acquisition, or control proposal is in the public
interest:

(1) Maintain or improve the financial condition of the

resulting public utility doing business in the state;
(2) Maintain or improve the quality of service to public
utility ratepayers in the state;
(3) Maintain or improve the quality of management of
the resulting public utility doing business in the
state;
(4) Be fair and reasonable to affected public utility
employees, including both union and nonunion
employees;
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(5) Be fair and reasonable to the majority of all affected

public utility shareholders;
(6) Be beneficial on an overall basis to state and local
economies, and to the communities in the area
served by the resulting public utility;
(7) Preserve the jurisdiction of the commission and the
capacity of the commission to effectively regulate
and audit public utility operations in the state; and
(8) Provide mitigation measures to prevent significant
adverse consequences which may result.

In the present case, Comcast and Time Warner are entities that are parties

to the proposed transaction and each entity has gross annual California revenues
exceeding $500 million. Therefore, this transaction is subject to Pub. Util. Code
854(c) and Joint Applicants are required to demonstrate that the proposed
change of control satisfies the 854(c) criteria enumerated above.
The Commission may also look to the 854(c) standards for guidance even
if the plain language of 854(c) does not apply to this transaction. Over time, the
Commission has used its discretion in different ways in reviewing mergers. In
D.97-08-29 the Commission approved a transfer of control after determining that
the transaction would not be adverse to the public interest.7 Historically, the
Commission has sought more broadly to determine whether a change in control
is in the public interest:
1. The Commission is primarily concerned with the question
of whether or not the transfer of this property from one
ownership to another...will serve the best interests of the
public. To determine this, consideration must be given to
whether or not the proposed transfer will better service
7

In the matter of the Joint Application of MCI Communications Corporation and British
Telecommunications, D. 97-07-060, 1997 Cal. PUC LEXIS 557, Finding of Fact 3, 645.

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PROPOSED DECISION

conditions, effect economies in expenditures and

efficiencies in operation.8
D.97-07-060 notes that over the years, our decisions have identified a
number of factors that should be considered in making the determination of
whether a transaction is in the public interest.9 More recently, D.00-06-079
provides an overview of these factors:
2. Antitrust considerations are also relevant to our
consideration of the public interest.10 In transfer
applications we require an applicant to demonstrate that
the proposed utility operation will be economically and
financially feasible.11 Part of this analysis is a consideration
of the price to be paid considering the value to both the
seller and buyer.12 We have also considered efficiencies
and operating costs savings that should result from the
proposed merger.13 Another factor is whether a merger
will produce a broader base for financing with more
resultant flexibility.14
3. We have also ascertained whether the new owner is
experienced, financially responsible, and adequately
equipped to continue the business sought to be acquired.15
We also look to the technical and managerial competence

8
9

Union Water Co. of California, 19 CRRC 199, 202 (1920) at 200.

D.9707060,1997CalPUCLEXIS557at2225.

10

D.70829,65CPUCat637,n.1.

R.L.Mohr(AdvancedElectronics),69CPUC275,277(1969).Seealso,SantaBarbaraCellular,Inc.
32CPUC2d478(1989).

11

12

UnionWaterCo.ofCalifornia,19CRRC199,202(1920).

13

SouthernCountiesGasCo.ofCalifornia,70CPUC836,837(1970).

SouthernCaliforniaGasCo.ofCalifornia,74CPUC30,50,modifiedonothergrounds,
74CPUC259(1972).

14

15

CityTransferandStorageCo.,46CRRC5,7(1945).

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PROPOSED DECISION

of the acquiring entity to assure customers of the

continuance of the kind and quality of service they have
experienced in the past.16
Subsequently, D.00-06-079 assessed the proposed transaction against the
seven criteria identified in 854(c), and included a broad discussion of antitrust
and environmental considerations.17 Thus, even if a plain reading of 854(c) did
not apply to this transaction, it is reasonable to consider the 854(c) factors in
helping us determine if this transaction is in the public interest.
In addition, the Commission has previously stated that competition is a
relevant factor in weighing the public interest and is one of the factors that must
be considered in the Commissions decision-making process.18 Specifically, the

CommunicationsIndustries,Inc.13CPUC2d595,598(1993);Seealso,IntheMatterofQwest
CommunicationsCorporation,LCIInternationalTelecomCorp.,USLDCommunications,Inc.,Phoenix
Network,Inc.andUSWestLongDistance,Inc.,andUSWestInterpriseAmerica,Inc.,D.0006079
(2000CalPUCLEXIS645,*17*20),footnotesincludedbutrenumberedintothecurrent
sequence.
16

Id.,at1738;seealsoD.0106007(2001Cal.PUCLEXIS390at2526)forasimilarlistof
factors.

17

NorthernCaliforniaPowerAgencyv.PublicUtilitiesCom.,5Cal.3d370,377(1971)at380.See
also,IntheMatteroftheApplicationofSCECorpanditspublicutilitysubsidiarySCCEandSDG&E
forAuthoritytoMergeSDG&EintoSCE,D.9105028,40CPUC2d159;UnitedStatesSteelCorp.v.
PublicUtilitiesCom.,29Cal.3d603(Cal.1981);IndustrialCommunicationsSystems,Inc.v.PUC,22
Cal.3d572;ReProposedPoliciesGoverningRestructuringCaliforniasElectricServicesIndustryand
ReformingRegulation,D.9902085;85CPUC2d158,February18,1999;Rulemakingonthe
Commissionsownmotionforthepurposeofmodifyingexistingtarifffilingrulesfortelecommunications
utilities,otherthanlocalexchangecarriersandAT&TC,andforthepurposeofaddressingotherissues
concerningtheregulationoftheseutilities,D.9206069,1992Cal.PUCLEXIS972,23(Cal.PUC
1992);GreenliningInstitutev.PublicUtilitiesCom.,103Cal.App.4th1324,1333(Cal.App.1st
Dist.2002);1981Cal.AGLEXIS74,1113(Cal.AG1981).

18

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PROPOSED DECISION

Commission must take into account any antitrust implications and competitive
considerations when it weighs the public interest.19
Therefore, a review of this transaction in terms of 854(c), as well as a
consideration of safety, consumer benefits, broadband infrastructure, and
competitive issues, constitutes the appropriate scope of this proceeding.
In addition, Joint Applicants have tied together the merger between
Comcast and Time Warner with the change of control and asserted that the
merger will benefit TWCIS and Bright House and other affiliates of the merging
companies.20 The Commission, therefore, may review these assertions and
require Joint Applicants to provide factual data to verify these assertions of
public interest benefits.
3.4. Applicability of Section 706(a) of the
1996 Telecommunications Act
We conclude that under Section 706(a) of the 1996 Telecommunications
Act this Commission has limited jurisdiction to evaluate the broadband aspects
of the merger between Comcast and Time Warner.

See,Phonetele,Inc.,v.PublicUtil.Com.(1974)11Cal.3d125;IndustrialComm.Systemsv.Public
Util.Com.(1978)22Cal.3d572;andU.S.SteelCorp.v.PublicUtil.Com.(1981)29Cal.3d603).

19

JointApplicationofComcastCorporation,TimeWarnerCableInc.,TimeWarnerCableInformationServices
(California),LLC,andBrightHouseNetworksInformationServices(California),LLCforExpeditedApprovalofthe
TransferofControlofTimeWarnerCableInformationServices(California),LLC(U6874C);andtheProForma
TransferofControlofBrightHouseNetworksInformationServices(California),LLC(U6955C),toComcast
CorporationPursuanttoCaliforniaPublicUtilitiesCodeSection854(a)(JointApplication),filedonApril11,2014
at14,n.16: ThefocusinthissectionisonbenefitsthatwillinuretoComcastCorporation,
TimeWarnerCableandtheiraffiliates(Emphasissupplied);Seealso,JointApplicationat14,where
JointApplicantsstatethemergerwillencouragemorenetworkinvestmentbypermitting
ComcastCorporationandTimeWarnerCabletocombinethebestaspectsofComcastsand
TimeWarnersrobustandinnovativevoiceservices,andbyaddingscaletoComcast
Corporationsoverallbusiness. (Emphasisadded.)
20

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PROPOSED DECISION

ORA, NAAC, and TURN argue that the Commission has jurisdiction to
review the effects of the merger on broadband deployment in California under
Section 706(a) of the federal Telecommunications Act, citing to a recent decision
of the District of Columbia (D.C.) Circuit Court on this topic.21 Joint Applicants
dispute the Section 706(a) argument under federal law and strongly object to
including an examination of the effects of the Merger on broadband deployment,
which they argue is an action beyond the jurisdiction of the Commission.
Section 706(a) of the 1996 Federal Telecommunications Act states, in
relevant part:
The Commission and each State commission with Regulatory
jurisdiction over telecommunications services shall encourage
the deployment on a reasonable and timely basis of advanced
telecommunications capability to all Americans (including, in
particular, elementary and secondary schools and classrooms)
by utilizing, in a manner consistent with the public interest,
convenience and necessity, price cap regulation, regulatory
forbearance, measures that promote competition in the local
telecommunications market, or other regulating methods that
remove barriers to infrastructure investment.22 (Emphasis added.)
This section of the 1996 Act was the subject of a recent opinion of the D.C.
Circuit Court in which the question discussed was whether this language
constitutes a grant of authority to the FCC and the state commissions or is merely
an expression of legislative intent.23 The D.C. Circuit Court unambiguously
found the former to be the preferred interpretation, saying that the legislative
history suggests that Congress may have, somewhat presciently, viewed the
21

Verizonv.FCC,740F.3d623,638(D.C.Cir.2014).

22

47U.S.C.1302(a),etseq.

23

Verizonv.FCC,740F.3d623,638(D.C.Cir2014).

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PROPOSED DECISION

provision [Section 706(a)] as an affirmative grant of authority to the

Commission24 The D.C. Circuit Court rejected the argument that
Section 706(a) was merely a statement of congressional policy: the language [of
Section 706(a)] can just as easily be read to vest the Commission with actual
authority to utilize such regulating methods to meet this stated goal.25 In
essence, the D.C. Circuit Court found Section 706(a) to be an actual grant of
authority to the FCC and the state commissions to take concrete steps by
utilizing measures that promote competition and remove barriers to
infrastructure investment. However, the D.C. Circuit Court also noted that
Section 706(a)s delegation of authority is limited:
The FCC has identified at least two limiting principles
inherent in 706(a). First, the section must be read in
conjunction with other provisions of the Communications
Act, including, most importantly, those limiting the FCC's
subject matter jurisdiction to interstate and foreign communication
by wire and radio. 47 U.S.C.S. 152(a) Second, any
regulations must be designed to achieve a particular purpose:
to encourage the deployment on a reasonable and timely
basis of advanced telecommunications capability to all
Americans.26
Therefore, two operative limitations on the FCCs and states authority to
act are that the regulatory measures chosen relate to transmission by wires or
radio waves, and to the reasonable and timely deployment of broadband. In
addition, the D.C. Circuit Court also precluded any common carrier regulation
such as rate of return regulation, unless and until the FCC reversed its 2002
24

Id.,at639.

25

Id.,at637.

26

Id.,at640.

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PROPOSED DECISION

Cable Broadband decision classifying broadband access services as information

services: We think it obvious that the Commission would violate the
Communications Act were it to regulate broadband providers as common
carriers.27
While Joint Applicants maintain that reliance on Section 706(a) is
precluded by
710 of the Pub. Util. Code, we conclude that Section 706(a) of the 1996
Telecommunications Act provides the express delegation of authority allowed by
710:
The Commission shall not exercise regulatory jurisdiction or
control over Voice over Internet Protocol or Internet Protocol
enabled services except as required or expressly delegated by federal
law. (Emphasis added.)
In view of the D.C. Circuit Courts conclusion that Section 706(a) is an
affirmative grant of authority to the FCC and the state commissions, it appears
to fall clearly within the highlighted exemption in Pub. Util. Code. 710.
Therefore, this Commission may evaluate the broadband aspects of the
merger between Comcast and Time Warner within the limited authority granted
under Pub. Util. Code 854 and Section 706(a) of the 1996 Telecommunications
Act.
4. Evidentiary Hearings
4.1. No Statute or Commission Rule
Requires Evidentiary Hearings
No provision of law or Commission rule provides any party in this
proceeding with a right to an evidentiary hearing. Pub. Util. Code 1701.1(a)

27

Id.,at650.

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PROPOSED DECISION

provides that this Commission consistent with due process, public policy and
statutory requirements, shall determine whether a proceeding requires a
hearing. The Commission has previously addressed this issue of whether and
when due process considerations require hearings. In Re Competition for Local
Exchange Service, the Commission stated:28
Due process is the federal and California constitutional
guarantee that a person will have notice and an opportunity
to be heard before being deprived of certain protected
interests by the government. Courts have interpreted due
process as requiring certain types of hearing procedures to be
used before taking specific actions.
The California Supreme Court has laid down a simple rule
regarding the application of due process. According to the
Court if a proceeding is quasi-legislative, as opposed to quasijudicial, there are no vested interests being adjudicated, and
therefore, there is no due process right to a hearing. (Citing
Consumers Lobby Against Monopolies v. Public Utilities Com.
(1979) 25 Cal.3d 891, 901; Wood v. Public Utilities Commission
(1971) 4 Cal. 3d 288, 292).
This proceeding is not a quasi-judicial proceeding in which a hearing is
required as no vested interests of any party are being adjudicated. Rather, it is
categorized as a ratesettingproceeding. Moreover, no party argued in its protest
that theproceeding should be classified as adjudicatory for purposes of 1701 of
the Public Utilities Code or the Commissions rules.
For purposes of determining whether evidentiary hearings are necessary,
ratesetting cases are treated like quasi-legislative proceedings. The California
Court of Appeal has confirmed that the Public Utilities Code does not require the
Commission to conduct public hearings concerning rates, but leaves the matter
28

ReCompetitionforLocalExchangeService,D.9509121,1995Cal.PUCLEXIS788,at1314.

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PROPOSED DECISION

to the Commissions discretion,29 noting that the Code expressly permits the
Commission to determine whether or not to hold hearings.30 For example, Pub.
Util. Code 1701.3 states that if the Commission determines that a ratesetting
proceeding requires a hearing,certain procedures should apply, thus indicating
that the Commission has the discretion to determine whether to hold a hearing in
a ratesetting proceeding. Similarly, Pub. Util. Code 454(b) allows the
Commission to adopt rules that apply in ratesetting cases including the form and
manner of the presentation of the showing, with or without a hearing, and the
procedure to be followed. These statutes and precedents demonstrate that, in a
ratesetting case such as this one, the Commission has discretion to determine
whether to hold an evidentiary hearing. The Commission has also affirmed that
due process does not require a hearing that serves no useful purpose.31
4.2. There is Sufficient Evidence in the
Record to Permit the Commission
to Decide the Matter
The record in this proceeding is sufficient. This evidentiary record was
developed through extensive discovery where intervenors had opportunity to
discover the facts on which the Joint Applicants positions are based and to
present facts which support their own positions. The parties presented their
positions in many hundreds of pages of briefs and reply briefs, with attached
testimony, declarations and /or any stipulations of facts by the parties.
PacificGas&ElectricCo.v.StateDepartmentofWaterResources,112Cal.App.4th477,500502
(2003).

29

30

Id.at500501.

InTouchCommunications,Inc.andInflexionCaliforniaComm.Corp.,FortheSaleandPurchase,
RespectivelyoftheCustomerBase,OperatingAuthoritiesandotherAssets,D.0409027,2004Cal.
PUCLEXIS417at67.

31

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PROPOSED DECISION

Because the Commission has sufficient information in this extensive record

to determine whether the proposed transaction satisfies the requirements of law,
no evidentiary hearings are needed.32
4.3. The Commission Can Resolve, and Has
Frequently Resolved, Issues of Fact
Without Evidentiary Hearings
The Commission on many occasions has decided complex and contentious
proceedings without holding evidentiary hearings. The Commission has
approved a number of contested applications involving mergers or changes in
control of telecommunications carriers without holding evidentiary hearings.
Mergers or changes in control involving AT&T and Comcast (D.02-11-025),
Qwest Communications Corporation (D.00-06-079), AT&T and Media One
(D.00-05-023), MCI and WorldCom (D.98-08-068), and MCI and British Telecom
(D.97-07-060) all were protested by one or more parties and all (except for
AT&T/Comcast) were subjected by the Commission to an analysis of the public
interest factors set forth in 854(c). Despite extensive differences of opinion and
disputes of facts presented and argued in the protests and the replies to protests
in these cases regarding the public interest factors and other matters, the
Commission elected not to hold evidentiary hearings, generally concluding that
there was sufficient information in the record to determine whether the
application complied with the requirements of 851-856 and whether the
application should be approved.33

32

See,AT&T/MediaOne,D.0005023,2000Cal.PUCLEXIS355at17.

33

InReAT&TandMediaOne,supra,2000Cal.PUCLEXIS355at17.

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PROPOSED DECISION

The Commissions resolution of complex and contentious cases without

holding evidentiary hearings is not restricted to telecommunications merger
cases. In D.98-12-026,34 the Commission made several significant modifications
to the New Regulatory Framework (NRF) applicable to Pacific Bell and GTE,
including the suspension of sharing mechanisms by which cost savings related to
streamlined regulation were shared with ratepayers and the elimination of
Z factor adjustments related to the recovery of certain costs by local exchange
carriers. Although parties to the NRF proceeding differed greatly on whether
such modifications should be made and the impact on ratepayers from making
or not making such modifications, the Commission made its decision without
holding evidentiary hearings.
In D.04-11-015,35 the Commission resolved a number of contested issues
regarding PG&Es issuance of bonds related to its bankruptcy including the
timing of the bond issuances, the permitted uses of bond proceeds, and the
recovery of bond charges from departing load and new municipal load. Again,
despite the fact that parties differed greatly on the resolution of these issues and
their impact on ratepayers and others, the Commission resolved these matters
without holding evidentiary hearings.
The mere existence of disputed facts does not require that evidentiary
hearings be held. As in the telecommunications merger cases cited above, the
question of whether to hold evidentiary hearings depends on whether there is
sufficient information in the record to enable the Commission to determine
34

InRulemakingReThirdTriennialReviewoftheNewRegulatoryFramework,D.9810026,

1998Cal.PUCLEXIS669.
35

InRePG&EEnergyRecoveryBonds,D.0411015,2004Cal.PUCLEXIS538.

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PROPOSED DECISION

whether the Application should be approved. Here, the record is clearly

sufficient. There are no factual disputes that we require evidentiary hearings to
resolve. Thus, a hearing would serve no useful purpose.
4.4. Opportunity to be Heard and
Motions for Evidentiary Hearings
The parties have had an adequate opportunity to be heard, consistent with
due process. In a November 26, 2014 Ruling, the ALJ set a new briefing schedule
and requested that any motions for evidentiary hearings be filed on
December 10, 2014. Evidentiary hearings, if necessary, were scheduled for
December 17-18, 2014. All parties except the Joint Minority Parties stated that
evidentiary hearings were not necessary or declined to file a motion for
evidentiary hearings. Joint Minority parties requested evidentiary hearings to
require Comcast disclose the amount of compensation its experts received.
However, the motion failed to identify any material factual issue for which
evidentiary hearings are necessary. In addition, Joint Minority parties failed to
demonstrate that a hearing or further discovery on expert compensation was
necessary to develop an adequate record to render a decision in this proceeding.
Therefore, the fact that all parties except the Joint Minority Parties did not file a
motion for evidentiary hearings further supports this Commissions decision that
there are no factual disputes that would require evidentiary hearings.
5. Public Interest Criteria
As previously stated, in order to obtain approval of the proposed license
transfers, Joint Applicants must satisfy the public interest criteria of 854(c), and
satisfy the Commissions concerns regarding safety, consumer benefits,
broadband deployment, and competition set out in the Scoping Memorandum.
In sub-sections 5.1.1 through 5.1.6 below, we summarize the
Joint Applicants arguments that they have satisfied the 854(c) criteria. In sub- 26 -

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PROPOSED DECISION

sections 6.1 through 6.6, we summarize Joint Applicants arguments that they
have satisfied the merger and broadband related concerns of the Scoping
Memorandum. In Section 7 we summarize and discuss intervenors objections to
approval of the license transfer and/or their proposed conditions on approval.
In Section 8 we enumerate conditions we impose on approval to ensure
compliance with state and federal law and the requirements of the Scoping
Memorandum.
5.1. Section 854(c) Requirements
5.1.1. Maintain or Improve Financial Condition
Pub. Util. Code 854(c)(1) requires that the merged company maintain or
improve the financial condition of the resulting public utility. The
Joint Applicants assert that Comcasts financial statements show a strong balance
sheet with significant assets.36 The proposed transfer involves a stock for stock
transaction at the holding company level that does not entail the issuance of any
additional debt or other obligations that might impair the financial condition of
the new California entity.37 Additionally, Applicants assert the transfer of
control will generate substantial overall efficiencies and cost savings for the
combined company. Comcast estimates approximately $1.5 billion in operating
efficiencies and approximately $400 million in capital expenditures efficiencies
by the third year resulting from the nationwide transaction, with operating

36

JointApplication,ExhibitC(ComcastCorp.AnnualReportForm10K),filedonApril11,2015.

OpeningBriefofJointApplicants,ExhibitA,DeclarationofChristopherMcDonald(McDonald
Declaration),filedonDecember3,2015at3.

37

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PROPOSED DECISION

expense efficiencies recurring at or above the $1.5 billion level each year
thereafter.38
5.1.2. Effects on Quality of Service
Pub. Util. Code 854(c)(2) mandates that the Commission consider, in its
evaluation of a merger proposal, whether the merger maintains or improves
service to public utility ratepayers in the state. Joint Applicants assert that the
Merger will result in the extension of enhanced voice services currently available
to Comcast customers to the customers of TWCIS. Such services include the
ability of residential voice customers to access their voice services from different
locations including wired and wireless connections provided by Comcast, as well
as Wi-Fi connections and public Internet connections provided by third parties;
and Voice 2Go which allows users to place outbound calls over a Wi-Fi or data
connection using an application installed on a mobile device, and to receive calls
to their home numbers through the mobile application; readable voicemail;
unlimited text messaging via a mobile device or a downloadable application; and
expanded international calling options.39

38

Id.

OpeningBriefofJointApplicants,ExhibitB,DeclarationofShanePortfolio(PortfolioDeclaration),
filedonDecember3,2015at3.

39

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PROPOSED DECISION

5.1.3. Effects on Quality of Management

Section 854(c)(3) requires the Commission to consider whether the
proposed merger will [m]aintain or improve the quality of management of the
resulting utility doing business in the state. Both the Comcast and Time Warner
management teams will remain in place following the Merger, maintaining the
existing quality of management at all levels.40
5.1.4. Effects on Public Utility Employees
Section 854(c)(4) requires that the merger be fair and reasonable to public
utility employees. We have found this condition is satisfied when a transaction
will not result in a combination of operating subsidiaries or when employees will
benefit from the creation of a stronger California entity. Both conditions are
satisfied by the Merger. Because the Merger will occur at the holding company
level, it will have no effect on existing employment relationships.
5.1.5. Effects on Public Utility Shareholders
Section 854(c)(5) requires the Commission to consider whether the
proposed merger will [b]e fair and reasonable to the majority of all affected
public utility shareholders. In evaluating this factor we consider whether all
pertinent information regarding the proposed transaction has been disclosed and
whether the transaction is supported by the relevant Boards of Directors,
financial advisors and/or shareholders. In this transaction, Time Warner
shareholders will receive 2,875 shares of Comcast Class A common stock for

Id.,at45.(Seealso,OpeningBriefofJointApplicants,ExhibitM,SelectedManagementBiographies,
filedonDecember3,2014.)

40

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PROPOSED DECISION

every share of Time Warner stock owned. An overwhelming majority of the

shareholders of both companies has approved the proposed transfer of control.41
5.1.6. Effects on State and Local Economies
and Communities of Interest
Section 854(c)(6) requires that the merger be beneficial to state and local
economies and to local communities. To demonstrate compliance with this
provision of the statute, Joint Applicants point to Comcasts commitment to
diversity including voluntary full compliance with the Commissions
General Order (GO) 156 supplier diversity program,42 its commitment to
enhanced access for persons with disabilities,43 and its extensive energy
conservation programs,44 all of which will be extended to the customers of Time
Warner upon completion of the Merger. With particular regard to the impact of
the Merger on broadband availability in underserved communities,
Joint Applicants point out that Comcast has already extended low-cost Internet
access to nearly 1.4 million qualifying low-income individuals through its

OpeningBriefofJointApplicants,filedonDecember3,2014at47;PressRelease,Comcast.
Corp.ComcastShareholdersOverwhelminglyApprovetheStockIssuanceforMergerwith
TimeWarner,(October8,2014),http://corporate.comcast.com/newsinformation/news
feed/comcastshareholdersoverwhelminglyapprovethestockissuanceformergerwithtime
warnercable?print=1;PressRelease,TimeWarnerCableInc.,TimeWarnerCableStockholders
ApproveMergerwithComcastCorporation,(Oct.9,2014),
http://www.timewarnercable.com/content/twc/en/aboutus/press/twcshareholdersapprove
mergerwithcomcast.html.
41

42

Id.,at1518.

43

Id,at1819.

44

Id.,at1920.

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PROPOSED DECISION

Internet Essentials (IE) program, which it will continue to maintain and

expand following the Merger.45
6. Effects of the Merger in California
6.1. Broadband Deployment and Build Out of
Broadband Networks to Unserved Areas
While continuing to insist that Section 706(a) of the 1996
Telecommunications Act does not confer jurisdiction on the Commission to
review the broadband-related aspects of the Merger, Joint Applicants assert that
the Merger will have beneficial impacts on broadband deployment in California.
In support of this assertion they make the following arguments:
--Comcast has an all-digital network for its Internet services.
Time Warner does not. After the acquisition, Comcast will add
existing Time Warner customers to that network, providing
them with higher speeds and other technical advancements
which they do not presently enjoy.46
--Comcast is building out a nationwide Wi-Fi network which is
available to its customers at no additional charge. The Time
Warner customers who become Comcast customers as a result
of the Merger will receive no-cost access to this network.47
--Comcast will achieve economies of scale that will allow it to
build out its network faster and to consider greater build out
of network facilities, with CASF support, to unserved and
underserved areas in the State.48

Id.,at5052;Seealso,McDonaldDeclarationat714foradetaileddescriptionoftheInternet
Essentialsprogram.

45

46

OpeningBriefofJointApplicantsat7783.

47

Id.,at8387.

48

Id.,at76and8892.

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PROPOSED DECISION

In summary, Joint Applicants assert that if the Merger is approved,

existing Time Warner customers in southern California will receive all-digital
Internet service with higher upload and download speeds and access to a much
larger complementary Wi-Fi network. Schools and low-income communities
throughout California will continue to qualify for the Internet Essentials program
and may receive additional low-cost Internet access, depending on a variety of
factors including the availability of CASF funding.49
6.2. Safety and Reliability
Joint Applicants assert the combined system will create increased
reliability for the current customers of Time Warner by migrating them to a
technically superior all-digital platform. With regard to safety during power
outages and similar events, Comcast asserts that it presently offers its
residential customers reasonably priced backup batteries for use in power
outages and other emergencies. The batteries have an average standby life of
eight hours of telephony service.50 Comcast fully expects to follow the same
procedures in the California systems acquired from Time Warner.51 Following
the merger, Comcast will continue to provide service to LifeLine customers of
TWCIS unless and until Comcast files and the Commission approves an
application to relinquish the TWCIS LifeLine certification.52

49

Id.,n.343.

50

Id.,at43;PortfolioDeclarationat11.

51

Id.

52

PortfolioDeclarationat3.

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PROPOSED DECISION

6.3. Effects of the Merger

California Consumers
As noted above, Comcast currently makes its Internet Essentials
program available to approximately 1.4 million people nationwide. The basic
criterion for inclusion in IE is being a household that has at least one child
enrolled in a school lunch program. IE provides Internet access at minimal
speeds of 5 Megabits per second (Mbps) download and 1 Mbps upload for
$9.95/month, plus the opportunity to acquire an Internet-ready computer for
$150. Comcast does not promise to extend the reach of IE either through
broadening the eligibility criteria or increasing minimum speeds. It will make IE
available to qualifying households in the Time Warner service territory if the
Merger is approved.53
Joint Applicants assert that the transfer of control will bring together the
best aspects of Comcasts and Time Warners innovative voice and data transport
services, resulting in best in class products and offerings that improve the
quality of services for residential and business customers in California. This will
enhance competition with Incumbent Local Exchange Carriers (ILECs) and other
large providers (e.g., Level 3) that have long dominated the provision of wireline
telephone and data transport services in the State, resulting in lower prices,
higher quality offerings, and other immediate economic benefits.54 In addition,
Joint Applicants assert that the transfer of control will give the combined

53

OpeningBriefofJointApplicantsat51;McDonaldDeclaration,at813.

54

Opening Brief of Joint Applicants at 4.

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PROPOSED DECISION

company the greater scale and geographic reach necessary to compete effectively
for large business customers.55
6.4. Merger-Specific and
Verifiable Efficiencies
In response to an ORA data request, Comcast stated that it expects to
achieve significant national operating efficiencies as a result of the merger,
including approximately $1.5 billion in operating expenses and $400 million in
capital expenditures by the third year, with operating expense efficiencies
reoccurring at or above the $1.5 billion level each year thereafter. Comcast
expects to achieve $750 million of the $1.5 billion in operating efficiencies in the
first year after closing, another 25 percent in year two and the remaining
25 percent in year three.56 As a result, Joint Applicants assert that the
additional investments and innovations that will be needed to deliver the
services consumers are demanding in the future will be more effectively and
efficiently achieved by the combined company than either company could
achieve alone.57 Generally, Joint Applicants make four general claims about
efficiencies: 1) Joint Applicants argue that Comcast offers consumers superior
products and services to what Time Warner Cable offers, so that Time Warner
subscribers would be upgraded; 2) Joint Applicants argue that Comcast needs
to be even larger than it is today in order to gain economies of scale and scope
and spread its fixed costs; 3) Joint Applicants argue that the two companies
together could offer consumers the best of both in terms of products and
55

Id.

OpeningBriefofJointApplicants,ExhibitK,ComcastResponsetoORAdatarequest3:61,filedon
December3,2014.

56

57

OpeningBriefofJointApplicantsat7576.

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PROPOSED DECISION

services; and 4) Joint Applicants claim that through the merger they would be
able to take additional steps to help bridge the digital divide.58
6.5. Effects of the Merger on Special Access
and Backhaul Services
Joint Applicants assert that the Merger will create a more effective
competitor for the provision of wireless backhaul and special access services. A
majority of these wholesale services are currently provided by a handful of
national facilities-based providers. The merged entity will be in a stronger
position to compete with these existing providers in offering backhaul services to
wireless networks, resulting in better service at lower rates.59
6.6. Effects of the Merger on Competition in the
California Marketplace for Broadband Customers
Comcast and Time Warner do not compete with one another for the
provision of broadband Internet services in any local market in California.
According to Joint Applicants, there is no reasonable likelihood that they would
do so in the future, given the prohibitive cost of overbuilding an existing cable
companys service territory.60 Accordingly, Joint Applicants claim that the
merged company will be a stronger competitor against other providers of
broadband Internet services, including ILECs, satellite companies and local
Internet Service Providers (ISPs) and will increase competition for the business of

58

Id.

59

OpeningBriefofJointApplicantsat7073.

OpeningBriefofJointApplicants,ExhibitD,DeclarationofMarkA.Israel,etal(Israeletal
Declaration)at35.

60

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PROPOSED DECISION

super-regional companies to the ultimate benefit of such businesses and their

customers.61
7. Intervenors Arguments Against Approval
of the License Transfers or, in the Alternative,
Imposing Conditions
ORA, TURN, Joint Minority Parties, Common Cause, Greenlining,
Consumers Union, Media Alliance, Writers Guild, CforAT, and DISH oppose
granting the license transfer applications. Nonetheless, many parties
acknowledge that if the Commission does approve the merger, then the
application of conditions are necessary to mitigate harms.
7.1. Arguments Against Approval
All opponents of approving the application share the belief that the
merged company will increase its markets share to such an extent that it will
cause significant adverse consequences and, therefore, not be in the public
interest. Below, we discuss each argument as it relates to the issues presented in
the proceedings Scoping Memorandum.
7.1.1. Effects of the Merger on Competition
in the California Marketplace for
Broadband Customers
ORA cites the testimony of Dr. Lee Selwyn to show why approval of the
merger will result in competitive harms to California consumers. For example,
ORA points out that Comcast will increase its post-merger footprint from 33.7%
to 84% of California households.62 This number is even higher when we measure
Comcasts footprint by homes passed.63 The numbers are in stark contrast to
61

Id.,at15.

62

SelwynDeclarationat13and153.

63

Id.,at1315.

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PROPOSED DECISION

national numbers where the equivalent post-merger footprint of the combined

companies will increase to approximately 60 percent.64 Dr. Selwyn uses the U.S.
Census Bureau definitions of households and homes. As a result of this
increased footprint, ORA states that concentration of the market for fixed
broadband, as measured by the Herfindahl-Hirschman Index (HHI),65 will
increase by 4,927, from 2,968 to 7,895. Under the U.S. Department of Justice and
Federal Trade Commissions 2010 Horizontal Merger Guidelines, a market with
an HHI in excess of 2,500 is defined as highly concentrated.66 The Horizontal
Merger Guidelines also state that [m]ergers resulting in highly concentrated
markets that involve an increase in the HHI of more than 200 points will be
presumed to be likely to enhance market power.67 Therefore, according to ORA,
just based on the significant increase in HHI this merger should be denied.
Further, ORA states that in the market for fixed high speed broadband,
recently defined by FCC Chairman Tom Wheeler as measuring service at
download speeds of 25 Mbps and above, the majority of post-merger Comcast
customers will have no or limited competitive options other than the merged

64

Id.,at19.

TheU.S.DepartmentofJustice,theFederalTradeCommission,andstateattorneysgeneral
haveusedtheHHIsince1982tomeasuremarketconcentration.TheHHImeasuresmarket
concentrationbysummingthesquaresofmarketshareenjoyedbyvariouscompetitors.For
example,anHHIof10,000indicatesamonopoly.Ifthatmarkethadtenparticipantseach
supplying10%ofdemand,theHHIwouldbe1,000(10shareofmarketsquared=100;10times
100=1,000).AnHHIof1,000indicatesacompetitivemarket.

65

UnitedStatesDepartmentofJusticeandFederalTradeCommission,HorizontalMerger
Guidelines2010edition(HMG),at5.3,MarketConcentration;seealsoSelwynDeclaration
at15,13.

66

67

Id.

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PROPOSED DECISION

entity.68 ORA cites the tables below in Dr. Selwyns testimony to bolster the
argument that a post-merger Comcast will become the single dominant provider
of last-mile broadband access in California.69 For high speed broadband Internet
access offering download speeds of 25 Mbps and above in California, Comcast
will have a monopoly except in those few areas where Verizon's FiOS or a
high-speed version of AT&T's U-Verse is deployed.70 This limited choice is
exacerbated by price stickiness in the market due to high switching costs that
include early termination fees and equipment rental fees.71 As FCC Chairman
Tom Wheeler recently observed:
Counting the number of choices the consumer has on the day
before their Internet service is installed does not measure
their competitive alternatives the day after. Once consumers
choose a broadband provider, they face high switching costs
that include early-termination fees, and equipment rental fees.
And, if those disincentives to competition werent enough the
media is full of stories of consumers struggles to get ISPs to
allow them to drop service.72

WetakeofficialnoticeofthefactthatonJanuary29,2015,theFCCadoptedthe2015
BroadbandProgressReportandupdateditsbroadbandbenchmarkspeedsto25megabitsper
second(Mbps)fordownloadsand3Mbpsforuploads.

68

69

SelwynDeclarationat19.

70

Id.

71

SelwynDeclarationat88.

PreparedRemarksofChairmanWheeler,FactsandFutureofBroadbandCompetition
presentedatthe1776Headquarters,Washington,D.C.,September4,2014at4(emphasisin
original).http://www.fcc.gov/document/chairmanremarksfactsandfuture
broadbandcompetition.(Seealso,Id.)
72

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PROPOSED DECISION

Table1
CENSUSBLOCKSPASSEDWITHATLEASTONECOMPETINGPROVIDERATEACHDOWNLOADSPEEDTIER73

Table2
HOUSEHOLDSPASSEDWITHATLEASTONECOMPETINGPROVIDERATEACHDOWNLOADSPEEDTIER74

73

SelwynDeclarationat71.

74

Id.,at72.

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PROPOSED DECISION

Finally, ORA states that by including the transfer of Charter customers to

Comcast in California, the merger will eliminate another competitor in a market
that is already lacking in competition.
TURN also states that the proposed merger will harm competition in the
residential consumer market and cites the testimony of its expert witness,
Dr. Susan M. Baldwin. While Dr. Baldwin acknowledges that Comcast and Time
Warner do not currently compete in each others market, she nonetheless states
in her testimony that the merger would still have anticompetitive consequences.
First, Dr. Baldwin asserts that the merger would eliminate a valuable industry
benchmark.75 Currently, the Commission can compare the reliability, customer
service, prices, and service offerings of Comcast and Time Warner in California
in order to gauge the companies relative performances and contribution to the
state. Once this benchmark is eliminated, it harms the Commissions ability to
consider best practices, prepare for and respond to emergencies, and promote
advanced telecommunications services.76 Further, eliminating this benchmark
will harm consumers ability to compare suppliers relative performance and
prices and enhance Comcasts already substantial ability to set the bar for
consumers expectations. Knowledge of a different suppliers superior version of
a product (even if it is offered outside the consumers geographic market) may
assist consumers in advocating on their own behalf with their suppliers if they
are dissatisfied.77 Second, Dr. Baldwin states that the merger will eliminate
ReplyBriefoftheUtilityReformNetwork,OpeningTestimonyofSusanM.Baldwin(Baldwin
OpeningTestimony),filedonDecember10,2014at33.

75

76

Id.

77

BaldwinOpeningTestimonyat33.

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PROPOSED DECISION

potential competition whereby Comcast or Time Warner could, at a future date,

decide to enter each others territory.78 Third, Dr. Baldwin notes that the merger
will increase Comcasts overall scale and scope, thus entrenching Comcasts
dominance in the broadband Internet access market and increasing its share of
the total voice market in California.79 TURN cites statistics that show cable
companies like Comcast and Time Warner have approximately 61 percent of
Californias broadband Internet access market for connections at least 3 Mbps
downstream. This compares to a 28.1 percent market share for Digital Subscriber
Lines (xDSL) and 9% for fiber, both provided by Independent Local Exchange
Carriers like Verizon and AT&T.80 TURN also states that AT&T and Verizon are
on record as either stopping or slowing down any further investment in fiber to
residential consumers.81

78

Id.,at34.

Id.;JoshLowensohn,Comcastcouldmandateamonthlydatacaponallcustomersinthe
nextfiveyears,TheVerge,May14,2014,http://www.theverge.com/2014/5/14/5718746/comcast
saysitcouldbringdatacapstohomeinternetserviceforall.
79

Id.at4853;ReplyBriefoftheUtilityReformNetwork(TURNBrief),filedon
December10,2014at18.

80

81

Id.

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PROPOSED DECISION

The Writers Guild also points to the anti-competitive harms of the merger
and claims that removing Time Warner as a potential competitor will harm
benchmark competition, limit the chances of overbuilding, and reduce the
quality of broadband offerings.82 For example, Writers Guild cites comments
from Comcasts Executive Vice President that envision Comcast moving to a
usage based billing model for all customers in the next five years.83 In contrast,
Time Warners customers face no limitations or added costs for data usage on
any of Time Warners plans and Time Warner has stated that its customers will
always have access to unlimited broadband.84
Joint Minority Parties assert that due to a lack of effective competition and
a lack of government regulations, Americans are currently paying higher prices
for slower Internet service when compared to the rest of the world.85 The current
transaction, therefore, would hurt competition by forcing mergers among
competitors who will need to increase their scale in order to remain relevant.86
As an example, the Joint Minority Parties cite AT&Ts pending merger with
DirecTV. Further, Joint Minority Parties state that a post-merger Comcast would
BriefoftheWritersGuildofAmerica,WestInc.(WritersGuildBrief),filedonDecember10,2014
at1320.

82

Id.,at16;JoshLowensohn,Comcastcouldmandateamonthlydatacaponallcustomersin
thenextfiveyears,TheVerge,May14,2014,
http://www.theverge.com/2014/5/14/5718746/comcastsaysitcouldbringdatacapstohome
internetserviceforall.
83

84

Id.

ReplyBriefoftheJointMinorityParties,filedonDecember10,2014at5;RickKarr,Whyis
EuropeanBroadbandFasterandCheaper?BlametheGovernment,ENGADGET,June28,2011,
http://www.engadget.com/2011/06/28/whyiseuropeanbroadbandfasterandcheaperblame
thegovernme/.
85

86

ReplyBriefoftheJointMinorityPartiesat7.

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PROPOSED DECISION

increase its presence to 92 percent of the top 25 designated market areas (DMA),
the most lucrative markets in the country including San Francisco and
Los Angeles.87
ORA, TURN, Greenlining, Writers Guild, Media Alliance, and Joint
Minority Parties also raise the concern that a combined Comcast and Time
Warner will have enormous capacity to damage startup activity, online content,
and new innovations through exploiting their terminating access monopoly
power as a result of the post-merger entitys significant increase in market share.
DISHs opposition is based on the asserted negative impact that the merger
would have on video programming and competing video providers by
foreclosing or degrading their offered services, imposing discriminatory data
caps on them, favoring content provided by Comcast affiliates, and withholding
online rights from DISH.88
7.1.2. Effects of the Merger on
Special Access and
Backhaul Services
The California Association of Telecommunications Companies (CALTEL)
addresses the harmful impacts that the proposed merger would have on the

Id.,at8;InvestorPresentation,ComcastandTimeWarnerCable,February13,2014at6,
http://files.shareholder.com/downloads/CMCSA/2671320491x0x725713/781d73e7063547b4
b25e34e5c7ea4ff9/Comcast%20Investor%20Presentation.pdf;SeeDMARegions,NIELSEN,
http://www.nielsen.com/us/en/campaigns/dmamaps.html,DMAregionsarethegeographic
areasintheUnitedStatesinwhichlocaltelevisionviewingismeasuredbyTheNielsen
company.TheDMAdataareessentialforanymarketer,researcher,ororganizationseekingto
utilizestandardizedgeographicareaswithintheirbusiness.
87

BriefofDishNetworkCorporationinOppositiontoProposedMerger(DISHBrief),filedon
December10,2014at2.

88

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PROPOSED DECISION

availability of special access and backhaul services.89 CALTEL argues that the
proposed merger would significantly diminish competitive choice in the market
for wholesale inputs needed by CALTEL members and other Competitive Local
Exchange Carriers (CLECs).90 CALTELs expert, Ms. Sarah DeYoung, argues that
CLECs will be uniquely affected by the proposed merger because they
simultaneously purchase and receive wholesale inputs from cable companies
while competing against them in the retail telecommunications and Internet
service markets.91 Unlike Time Warner, Comcast is not committed to continuing
to provide resold voice and Internet or last mile carrier Ethernet services to CLEC
customers and is unlikely to continue offering wholesale inputs to carriers, thus
diminishing competition in this area.92 According to Ms. DeYoung, until the
merger with Time Warner was announced, Comcast offered wholesale carrier
Ethernet on a take-it-or-leave-it basis with onerous terms and conditions.93 In
contrast, Time Warner offers valuable wholesale inputs to CLECs and wireless
carriers that otherwise would only be available from ILECs, thereby providing
critical pricing and terms-and-conditions discipline on the emerging Ethernet
wholesale market. For example, Time Warner currently provides three primary
categories of wholesale products: 1) business voice and Internet access products
for Value Added Resellers (VARs), 2) Carrier Ethernet Last Mile Access used by
OpeningBriefoftheCaliforniaAssociationofTelecommunicationsCompanies(CALTELBrief),filed
onDecember10,2014at2.

89

Id.,at3;OpeningBriefoftheCaliforniaAssociationofTelecommunicationsCompanies,Testimonyof
SarahDeYoung(DeYoungTestimony),filedonDecember10,2014at4.

90

91

DeYoungTestimonyat5.

92

Id.,at14.

93

Id.,at6.

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PROPOSED DECISION

facility-based competitive carriers, and 3) Carrier Ethernet Transport used by

CLECs, ILECs, cable companies, IXCs, wireless carriers and others. Eliminating
such competitive discipline, Ms. DeYoung asserts, would lead to a decrease in
competitive services offered to business customers.94
7.1.3. Merger-Specific and
Verifiable Efficiencies
Greenlining and Consumers Union, ORA, and Media Alliance question
Comcasts claims regarding merger specific efficiencies, especially as they relate
to California.
Greenlining and Consumers Union claim that Joint Applicants assertions
of merger efficiencies are unverifiable, vague, selective, not merger-specific and
do not hold up to scrutiny.95 Greenlining and Consumers Union point out, for
example, that if the merger is accepted, Time Warner customers will likely lose
access to Lifeline and the ability to use Roku as an independent video
programming platform.96 In addition, Greenlining and Consumers Union claim
that past experience shows that the transaction would cause significant
disruptions and substantial diversion of resources to integration efforts. As an
example, a small boundary realignment between Comcast and Time Warner
resulted in years of transition problems, including a customer who waited three
years to get a malfunctioning exterior installation corrected.97

94

Id.,at1720.

ReplyBriefoftheGreenliningInstituteandConsumersUnion(GreenliningandCUBrief),filedon
December10,2014at41.

95

96

Id.,at42.

97

Id.,at47.

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PROPOSED DECISION

Further, Greenlining and Consumers Union claim that the proposed

transaction will result in a combined company that maintains Comcasts
insufficient commitment to diversity. For example, while California
telecommunications providers reported spending over $2.6 billion on supplier
diversity in 2013, Comcasts share was only $24 million, the lowest amount of
any provider. Comcast received an F+ grade in Greenlinings 2014 Supplier
Diversity Report Card and did not move above 1 percent in African American
and Minority Women-Owned Business Enterprise contract spending. In the
Native American and the Disabled Veteran-Owned Business Enterprise
categories, spending remained at zero.98
ORA states that Joint Applicants have failed to demonstrate that the
merger efficiencies could not be achieved absent this merger.99 In addition, ORA
claims that Joint Applicants have failed to demonstrate that any of these
efficiencies will flow through to consumers or result in best practices.100 In fact,
ORA points out that Comcast Executive Vice President David L. Cohen has
publicly stated that Were certainly not promising that customer bills are going
to go down or even increase less rapidly.101
Media Alliance asserts many of these same points and states that the
planned reductions in network operations and corporate overhead are likely to

Id.,at39;StephanieChenandNoemiGallardo,SupplierDiversityReportCard:Unexpected
AchievementsandContinuingGapsat10(June2014),availableathttp://greenlining.org/wp
content/uploads/2014/06/2014SupplierDiversityReportCardprinterfriendly.pdf.
98

99

BriefoftheOfficeofRatepayerAdvocates(ORABrief),filedonDecember10,2014at53.

100

Id.

101

Id.,at54.

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PROPOSED DECISION

result in significant job loss, with resulting costs to the California economy as
workers relocate to other jobs in other industries.102
7.1.4. Service Quality
ORA, CforAT, Media Alliance, Greenlining and Consumers Union claim
that the merger bodes poorly for broadband and voice customers because it
represents a merger of companies that have an objectively poor track record in
providing customer service.
ORA claims that the Joint Applicants have simply provided a corporate
public relations package without providing detailed plans and commitments of
direct benefits to consumers.103 ORA points out that Comcast claims to have no
standards or metrics for ascertaining how well they are servicing their
customers.104 However, ORA claims that objective data shows that consumers
are generally unhappy with Comcasts and Time Warners broadband service,
with both companies consistently ranking near the bottom of virtually every
independent evaluation of service quality for cable broadband providers.105 For
example, ORA cites to J.D. Powers 2014 Residential Internet Service Provider
Satisfaction Study West where Comcasts Xfinity service ranks seventh among
the nine largest companies, achieving the lowest available scores in 4 of the 5
categories. Time Warner is slightly above at #6, while Charter was closer to the

102

ReplyCommentsoftheMediaAlliance,filedonDecember10,2014at13.

103

ORABriefat61.

Id.,at6263;BriefoftheOfficeofRatepayerAdvocates,Exhibit3,DeclarationofAdamJ.Clark
(ClarkDeclaration),filedonDecember10,2014at1617.

104

105

Id.

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PROPOSED DECISION

top at #4.106 Looking back over a longer period from 2009-2014, in five of the last
six years J.D. Powers studies assigned Comcast and Charter Communications a
sub-average score for Overall Customer Satisfaction. In each of the six years
from 2009-2014, Time Warner failed to earn one average mark for overall
customer satisfaction.107 ORA further cites the American Customer Satisfaction
Index (ACSI) where Comcast, Time Warner and Charter received the lowest
scores of all Internet service providers in the study, and their scores went down
from 2013-2014.108
ORA also points to a University of Michigan study where Comcast and
Time Warner are the lowest rated companies compared to not only Internet
service providers, but across all industries and companies included in the
study.109 In addition, there has been an upward trend in the number of
broadband complaints to the Joint Applicants. Comcast escalated many more
complaints (per broadband connection) than Time Warner between
January 1, 2010 and August 31, 2014.110 According to ORA, if Comcast acquires
Time Warner there is a risk that the merged entity will adopt less effective
quality assurance processes and protocols than what Time Warner currently
employs today. Further, Comcast takes much longer than Time Warner to

106

Id.,at1011.

107

Id.

108

Id.,at11.

109

Id.,at1617.

Id.Escalatedcomplaintsarecomplaintsthatarenotresolvedafterthefirstpointofcontact
bythecustomer.TimeWarnerandComcasthavedifferentprocessestoresolveescalated
complaints.

110

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PROPOSED DECISION

complete broadband installations.111 Finally, ORA points out that, unlike

Time Warner and Charter, Comcast does not track broadband outages in
California.112
In regard to voice service, ORA claims that the service quality challenges
this merger faces are not just a simple litany of a few things that need to be fixed
but are extensive and pervasive.113 In contrast to Comcast, both Time Warner
and Charter have existing plans to improve service quality and reliability of
voice service and both Time Warner and Charter have relatively systematic
approaches to assessing service and improving service quality.114 At the same
time, both Comcast and Time Warner fell below the Commissions minimum
service quality standards on metrics related to voice service installation intervals
and service orders completed out of those received.115 According to the
J.D. Power and Associates survey, among eight large western telephone service
providers in 2014, both Comcast and Time Warner are two of three companies
ranked in the lowest rung, getting two power circles. Charter is one above
with three power circles while Cox, AT&T and Verizon are at the top.116 On
the subject of customer complaints, ORA cites data showing that Comcast has

111

Id.

112

Id.

113

ORABriefat76.

BriefoftheOfficeofRatepayerAdvocates,Exhibit2,DeclarationofAyatOsman
(OsmanDeclaration),filedonDecember10,2014at1617at78.

114

115

Id.at13.

116

Id.at17.

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PROPOSED DECISION

higher complaint rates than Time Warner. In some instances these rates are
dramatically higher.117
Greenlining and Consumers Union also assert that the proposed
transaction will not improve service quality for consumers. According to a 2014
survey of Consumers Union members, respondents who were current and
former Comcast customers complained of: service that cuts in and out
constantly; download and upload speeds that change erratically and are
sometimes fast and sometimes very slow; [f]requent interruption in Internet
services without explanation; inadequate bandwidth; blocked channels and
unreliable phone service.118
Media Alliance points out that the Customer Satisfaction Index ranked the
Joint Applicants dead last in customer service benchmarks among hundreds of
major US corporations. At ConsumerAffairs.com, 2,513 comments are recorded
about Comcast, 88% of them giving the company 1 star out of 5, the lowest
possible rating. Also, in Worcester, Massachusetts, the City Council voted not to
approve a Charter to Comcast franchise transfer on the basis of poor customer
service.119
CforAT states that to the extent Comcast has attempted to show that its
service is less bad than others, it has not affirmatively demonstrated that it can
or will provide effective customer service following a merger.120

117

Id.,at2426.

118

GreenliningandCUBriefat31;GreenliningandCUBrief,ExhibitA.

119

ReplyCommentsoftheMediaAllianceat7.

120

BriefoftheCenterforAccessibleTechnology(CforATBrief),filedonDecember10,2014at20.

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PROPOSED DECISION

7.1.5. Effects of the Merger

on California Consumers
CETF, ORA, TURN, Greenlining, Consumers Union, Media Alliance,
Writers Guild, CforAT, and Joint Minority Parties all commented on the
inadequacies of the Internet Essentials (IE) program and the effect of the merger
on Californias consumers.
ORA claims that the merger will jeopardize Lifeline and other low-income
programs. Comcast stopped participating in the California Lifeline program in
2008.121 While Time Warner is able to offer Lifeline service to its voice customers
because the Commission recently designated Time Warner an Eligible
Telecommunications Carrier (ETC), according to ORAs expert witness,
Eileen Odell, it does not currently offer Lifeline.122 In addition, Ms. Odell points
out that, post-merger, Comcast will be under no obligation to provide Lifeline
nor has Comcast expressed an intention to do so.123
ORA also states that while the Internet Essentials Program, a FCC
condition of Comcasts prior merger with NBC Universal, is a step in the right
direction towards fulfilling Californias universal service goals, its progress has
been slow.124 According to ORA, the program has the following limitations:
ORABriefat80;BriefoftheOfficeofRatepayerAdvocates,Exhibit4,DeclarationofEileenOdell
(OdellDeclaration),filedonDecember10,2014at3;CPUCDecisionGrantingRequestforEligible
TelecommunicationsCarrierStatus,D.1403038,adoptedMarch27,2014.

121

122

OdellDeclarationat4.

123

Id.

Id.,at6;Pub.Util.Code709(d),thatcallsfor:bridgingthedigitaldividebyencouraging
expandedaccesstostateofthearttechnologiesforrural,innercity,lowincome,anddisabled
Californians;Pub.Util.Code281(b)(1),referringtothegoalsoftheCaliforniaAdvanced
ServicesFundprogram,createdtoencouragedeploymentofhighqualityadvanced
communicationsservicestoallCalifornians.;Pub.Util.Code281(a).

124

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PROPOSED DECISION

1) a subscription rate of only a small minority of eligible consumers in California,

2) a speed offering that does not qualify as served under California
benchmarks of 6 Mbps down and 1.5 Mbps up, and 3) eligibility that is limited to
only low income families with school-age children.125 It does nothing to bridge
the digital divide for other underserved communities such as the elderly, the
disabled, and non-elderly low-income childless adults.126 In addition, according
to ORA, Comcast has provided no plans to increase the 5 Mbps offered to its
low-income customers to Californias minimum served speed of 6 Mbps or the
high speeds touted by FCC Chairman Tom Wheeler.127
TURN also claims that Comcasts promises of benefits to consumers are
empty because they include no binding, enforceable commitments. TURN
asserts that Joint Applicants provide no commitments for any benefits to
consumers aside perhaps from the notion that some benefits will
trickle-down.128 In regard to the Internet Essentials program, TURNs expert
witness Ms. Baldwin references the low numbers of participants in California,
both in absolute and percentage terms.129 In addition, Ms. Baldwin asserts that
the IE program does not provide flexibility to address specific access issues in
California.130 In conclusion, Ms. Baldwin states that her main concern with the
125

OdellDeclarationat8.

126

Id.at9.

Id.at11;TomWheeler,Chairman,FCC,RemarksatNationalDigitalLearningDay:TheFacts
andFutureofBroadbandCompetition(Sept.4,2012).

127

TURNBriefat20;ReplyBriefoftheUtilityReformNetwork,ReplyTestimonyofSusanMBaldwin
(BaldwinReplyTestimony),filedonDecember10,2014at3233.

128

129

BaldwinOpeningTestimonyat73.

130

Id.at74.

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PROPOSED DECISION

Internet Essentials program is that it fails to provide Internet access to other

underserved demographic groups like the elderly.131
CETF filed comments primarily to provide the Commission with data on
Comcasts Internet Essentials performance in California and to request the
Commission order significant program improvements. CETF asserts that in
three years through December 2013, Comcast signed up just 14.7% of the eligible
population in California for the Internet Essentials program.132 If the merger is
approved then 87% of all California students on the free-and-reduced-lunch
program will reside in Comcast service territory.133 For this reason, CETF claims
it is essential that the Commission hold Comcast accountable for making public
verifiable data available to accurately measure the companys performance in
reaching Internet Essentials eligible households.134 Based on CETFs relationship
with partner Community Based Organizations (CBOs) who have worked
alongside Comcast, CETF has found the following to be key problems with the
program:
1) Comcast imposes obstacles that restrict sign-ups. First, the
waiting period between the initial call to Comcast and the
IE application arriving can be 8-12 weeks and sometimes
the application fails to arrive at all. After submitting the
application, another 2-4 weeks elapse before the computer
equipment arrives at the familys home. Second, the lack
of a Social Security Number (SSN) means IE applicants

131

Id.,at75.

CommentsoftheCaliforniaEmergingTechnologyFund(CommentsoftheCETF),filedon
October19,2014at4.

132

133

Id.

134

Id.

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PROPOSED DECISION

often must travel long distances via public transportation

to verify their identities. Third, Comcast IE representatives
also sometimes will enroll only the eldest child in the
family in the program, even if there are younger eligible
children in the family.135
2) Comcast Denies Service Contrary to program rules. For
example, contrary to program rules, CBOs have
observed that Comcast has conducted credit checks for
some prospective customers which can negatively
impact a consumers creditworthiness. Early on in the
program, some IE customer service representatives told
potential customers they could pay a $150 deposit to
avoid a credit check, contrary to program rules.136
3) Comcast IE Advertising is Ineffective and Questionable
in Motives. Comcast began running ads in 2014 that
appeared to be more aimed at impressing policymakers
and federal regulators than in signing up new IE
participants. For example, one full-page newspaper ad
listed only a website, which is useless for families who
are not yet online. Another broadcast ad simply touted
Comcast and IE without stating who is eligible and how
to sign-up.137
4) ComcastFailstoProvideaPublicListof
AutoEnrollmentSchools,whereatleast70percentof
thestudentsareontheNationalSchoolLunchprogram
thusmakingthemeligiblefortheIEprogram.138

135

Id.,at13.

136

Id.,at14.

137

Id.,at17.

138

Id.

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PROPOSED DECISION

Greenlining and Consumers Union claim that extending the Internet

Essentials program to low income customers in Time Warners territory will not
help educate consumers on using computers and the Internet when service is
provided. For example, only 29 percent of IE customers took advantage of
IE in-person or online training.139 Greenlining and Consumers Union point out
that expanding Comcasts digital literacy training to current Time Warner
customers is not likely to result in a meaningful increase in digital literacy,
particularly in light of the fact that Applicants appear unwilling to make a
binding commitment to continue the Internet Essentials program.140
CforAT asserts that the Internet Essentials program has not effectively
reached the disability community, which is not directly targeted and which has
not been directly recruited for enrollment. CforAT states that the greatest
limitation of the program is that low income households that do not include a
school-aged child are ineligible. Households are also excluded if they are
already Comcast customers or have an outstanding balance owed to Comcast.141
In addition, CforAT describes in detail experiences with otherwise eligible
households who were unable to enroll in the program due to arbitrary eligibility
restrictions.142 In one instance, a family that was a Comcast customer was told
that they would have to give up their existing Comcast Internet for at least 90
OpeningBriefofJointApplicants,ExhibitA,AttachmentA,JohnB.Horrigan,PhD,The
EssentialsofConnectivity:ComcastsInternetEssentialsProgramandaPlaybookfor
ExpandingBroadbandAdoptionandUseinAmerica,March21,2014at21.

139

140

GreenliningandConsumersUnionBriefat26.

CforATBriefat16;BriefoftheCenterforAccessibleTechnology,DeclarationofDmitriBelser
(BelserDeclaration),filedonDecember10,2014at5.

141

142

BelserDeclarationat67.

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PROPOSED DECISION

days to become eligible for the program.143 In other instances, families who were
eligible for the program were not recognized by Comcast as eligible for the
program.144 Even for families that Comcast recognized as eligible, there were
significant delays between the time that the family applied for the program and
the time they actually obtained access.145 As a consequence, Comcast managed to
sign up only 11 percent of eligible families from CforATs pool of applicants in
California.146 In contrast, CforAT points out that Comcast spent $3.2 million in
California alone on Public Service Announcements.147
Media Alliances main criticism of the IE program is in the programs
strong performance in the area of public relations and weak performance in
relation to closing the digital divide. Media Alliance cites to the mere
46,000 California households who are part of the IE program.148 In order to
achieve these numbers, Media Alliance reports that Comcast made 88 million
media impressions, 2.3 million telephone calls, and 242,000 public service
announcements.149 Despite this media blitz, Media Alliance points out that
Comcast does not serve 87% of the eligible population for the program.150 Media
Alliance also urges the Commission to look at the level of service offered by the

143

Id.

144

Id.

145

Id.

146

Id.

147

Id.,at8.

148

ReplyCommentsoftheMediaAllianceat5.

149

Id.

150

Id.

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PROPOSED DECISION

IE program, contrasting the low speeds offered under IE to the 25 Mbps Comcast
is intending to offer California residents under a standard plan.151 Finally, Media
Alliance states that the modems provided under the IE program do not provide
in-house Wi-Fi service, thus preventing households from using more than one
computer and limiting access to tablet devices that are provided to students in
many educational assistance programs.152
TheJointMinorityPartiesconcurwiththeissuesraisedaboveregarding
theInternetEssentialsprogramandpointoutthatthespeedsfortheIEprogram
areinadequate.Forexample,whileIEoffersdownloadspeedsof5Mbps,
Comcastsnationwideaveragedownloadspeedisabout32Mbps.153
7.1.6. Broadband Deployment and Build Out
of broadband Networks to Unserved
and Undeserved Areas
Greenling and Consumers Union assert that Joint Parties claims of
upgrading Time Warners customers is contradicted by the fact that
Time Warner was already planning to speed up service in New York and Los
Angeles to give its standard subscribers a full 50 Mbps download speed,
higher than Comcasts standard of 25 Mbps.154 In addition, Greenlining and

151

Id.,at6.

152

Id.

153

Id.,at14.

Id.,at43;AdiRobertson,ComcastHasVeryBadReasonsforWantingtoBuyTimeWarnerCable:
DefendingtheMassiveTakeovertotheFCCRequiresSomeLeapsofLogic,TheVerge,April9,2014
http://www.theverge.com/2014/4/9/5597074/insidecomcastsshakyfccdefenseoftimewarner
cabletakeover;SeealsoDOrazio,supranote10;TimeWarnerJan.30,2014PressRelease,supra
note101(TimeWarnerCablecustomersinNewYorkCityandLosAngeleswillbethefirstto
benefitfrommajorenhancementsthatwilltransformtheirserviceastheyknowit.).
154

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PROPOSED DECISION

Consumers Union state that the benefit the combined company would gain in
being able to take further advantage of network effects, by which the
attractiveness of a product increases with the number of people using it, would
come at the expense of increasing barriers to entry and further entrenching
Comcasts dominance.155
ORA points to the problems with extending Comcasts home Wi-Fi
gateways to Time Warners service territory. While Comcast heralds the
expansion of its Wi-Fi service by converting its customers home Internet routers
into public Wi-Fi hotspots, ORA points to issues related to privacy, security,
service degradation, energy use, notification to customers and a lack of customer
authorization for this service.156 Essentially, Comcast proposes to use peoples
home Wi-Fi routers as public gateways to allow others who have a Comcast
account to access the Internet as long as they are within the vicinity of a Comcast
customers Wi-Fi router. ORA cites to a recent case where Comcast was sued by
its customers for failing to obtain authorization prior to engaging in this use of
the customers equipment and Internet service for public, non-household use.157
7.1.7. Safety and Reliability
CETFs concerns with the merger rely primarily on the mergers impact on
safety and reliability in California, especially as those impacts affect disabled
customers who are disproportionately low income and highly dependent on
effective, reliable and affordable telecommunications service. From CforATs

155

Id.,at46.

156

ORABriefat5457.

Id.at55;Grearv.Comcast,CaseNo.4:14cv05333,U.S.DistrictCourtfortheNorthern
DistrictofCalifornia.
157

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PROPOSED DECISION

perspective, the public safety issue most implicated for residential customers of a
potential merged entity is the availability and reliability of service in an
emergency, particularly during a power outage. Unlike an ILEC provided
telephone that has an independent power source, a cable phone requires a
battery backup in order to work in a power outage. A phone that works during a
power outage is especially important for members of the disabled community.
CforAT claims that deficiencies in Comcasts battery backup program would be
harmful to consumers if the merger were to be accepted. Currently, Comcast
voice customers must personally check and replace back-up batteries, which
must be purchased from Comcast at substantial expense, and which require 7-10
business days for delivery.158 In addition, education and information provided to
Comcast customers is extremely limited.159 In general, CforAT claims that
improvements are needed in Comcasts provision of battery back-up information
to customers, battery monitoring so customers are aware of changes in battery
performance such as audible alerts for the blind, and increased 911 location
information.160 CforAT claims Comcast has significant improvements to make in
providing accessibility and communications for customers with disabilities.161
CforAT also points out that many of Comcasts materials are not accessible to
people with disabilities. For example, while customer bills are accessible in
Braille for the totally blind, Comcast does not provide information in large print

158

CforATBriefat4.

159

Id.,at5.

160

Id.,at48.

161

Id.,at10.

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PROPOSED DECISION

for the sight impaired.162 In comparison, CforAT asserts that other entities under
the Commission missions jurisdiction, such as PG&E, have taken steps to
provide greater accessibility to materials for the disabled.163
7.2. Discussion
ORA, Common Cause, Greenlining, Consumers Union, CforAT,
Media Alliance and DISH oppose granting the license transfer applications,
arguing that the harms that would be caused by the merger cannot be
ameliorated through the imposition of conditions on the license transfers. All
opponents of approving the application share the belief that the merged
company will be so powerful that it will constitute a de facto state-wide
monopoly in the provision of broadband Internet services, allowing, as the ORA
brief puts it, the merged entity to increase prices without effective restraint, and
constrain the ability of other entrants to provide competitive services at
reasonable prices and offer comparable content to their customers.164 DISHs
opposition is based on the asserted negative impact that the merger would have
on competing video providers by foreclosing or degrading their offered services,
imposing discriminatory data caps on them, favoring content provided by
Comcast affiliates, and withholding online rights from them.165 The protests
based on the allegedly increased market power of the merged company are
within the scope of the proceeding and are addressed below. DISH objections
based on video content agreements are considered only to the extent that they
162

Id.,at11.

163

Id.,at12.

164

ORAbriefat23.

165

DISHBriefat2.

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PROPOSED DECISION

illustrate a way that the merger will retard advanced telecommunications

deployment in California.
Comcast and Time Warner each has an effective monopoly on providing
broadband services within its local geographic area. Merger of the parent
companies creates a single company that is capable of serving over 84% of the
homes in California. Under the Federal Trade Commissions merger guidelines,
which the Commission has invoked in the past when evaluating proposed
transfers of control, the resulting market for cable-based Internet service is
extremely concentrated with an HHI in excess of 5,000.166 In the provision of
broadband speeds at or above 25 Mbps, which represents Comcasts standard
broadband offering and is considered the FCCs benchmark broadband speed,
almost 80% of Californians will have Comcast as their only provider.167 Comcast
argues that we should disregard this extreme degree of market concentration
because, from the point of view of former Time Warner customers, the license
transfer per se does nothing other than to change the name of the southern
California entity from Time Warner to Comcast. Comcast contends that in spite
of the extreme increase in market concentration, former customers of Time
Warner will face the same competitive landscape after the merger as they faced
before the merger. That is, after the merger they will have the same choice
between continuing to receive services from Comcast/Time Warner or switching

UnitedStatesDepartmentofJusticeandFederalTradeCommission,HorizontalMerger
Guidelines2010edition(HMG),at5.3,MarketConcentration:definesamarketwithanHHI
inexcessof2500ashighlyconcentrated,andsuggeststhatmergersresultinginhighly
concentratedmarketsthatinvolveanincreaseintheHHIofmorethan200pointswillbe
presumedtobelikelytoenhancemarketpower.

166

167

SelwynDeclarationat7172.

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PROPOSED DECISION

to services from the same alternate service providers--such as the ILECs or small
local Internet Service Providers (ISPs)--as were available to them before the
merger. Comcast argues that a similar logic applies to the protestors and
intervenors concerns about the allegedly enhanced ability of the merged
company to compete for business from super-regional customers, i.e., businesses
with locations in both northern and southern California. Pre-merger such
businesses could obtain cable-based services from Comcast in northern
California and from Time Warner in southern California. Post-merger, such
businesses will also face the same competitive landscape as they faced before the
merger. That is, they can choose between receiving cable-based services from the
merged company, arguably a net benefit, or receiving non-cable-based services
from the same alternative service providers as were available to them premerger. In summary, Comcast argues that because the merger does not
materially change the choices available to existing and potential customers of the
merged companies, their allegedly enhanced ability to compete for customers is
not a sufficient reason to reject the license transfer applications.
But the merger does more than simply change the name of the southern
California cable company from Time Warner to Comcast. As Comcast has
acknowledged, the corporate policies and practices of Comcast will supplant the
policies and practices of Time Warner. To the extent that Time Warner
customers have enjoyed better, more reliable service than Comcasts customers,
they could see the quality of their service decline as a result of the merger if this
transaction is approved without conditions. Comcasts record of customer

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PROPOSED DECISION

service has been heavily criticized by protesters,168 yet it will now become the
standard of service for the former customers of Time Warner, absent any
conditions that require Comcast to improve its customer service standards. And
content customers may have received from Time Warner may not be available to
them any longer if the content provider and Comcast are unable to agree on the
terms on which Comcast will carry the content providers material. This may be
true for Internet content as Comcasts share of the Internet Service Provider
market is increased. The ability to exercise that increased market share on
Internet content may be constrained by some of the conditions of this Decision,
and will likely be analyzed in more detail in the proceedings before the Federal
Communications Commission (FCC), the U.S. Department of Justice (USDOJ),
and State Attorney Generals (State AGs).
We are also skeptical that Comcasts plan to turn each subscribing
customers home router into a public Internet Wi-Fi hot spot is in the public
interest. As ORA has pointed out, such a plan, particularly if it is undertaken
without the knowledge or prior approval of the customer, raises serious issues of
privacy and potentially degrades service quality. A plan that, at least on the
surface, fails to address such concerns, does not supply us with a reason to
approve the transaction to which it is related. We are also persuaded by
CforATs discussion of the mergers impact on safety and reliability in California,
in particular the deficiencies in Comcasts customer notification and battery
backup program. Thus, it is not the case that the change of ownership amounts
to nothing more than a change of name from the point of view of the acquired
See,ORABriefat6163,76;ClarkDeclaration;OsmanDeclaration;GreenliningandCUBrief
at31.

168

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PROPOSED DECISION

customers. The merger presents Time Warner customers with the real possibility
that they will receive poorer customer service, fewer service offerings, and fewer
program choices from Comcast after the merger than they received from Time
Warner before the merger.
We are also troubled by Comcasts poor performance in regard to
increasing both workplace and supplier diversity. As Joint Minority Parties169
and Greenlining170 point out, Comcasts record in this regard is substantially
poorer than that of other communications companies and Commission regulated
entities.
Further, as TURN and Writers Guild point out, the Commission and the
ratepayers it represents will lose the ability to compare best practices of both
companies relative benchmarks and the ability to compare both companies
relative performance and prices. For consumers, knowledge of a different
providers superior version of a product, even if it is offered outside the
consumers geographic market, can assist those consumers in advocating on their
own behalf if they are dissatisfied with a providers product. Elimination of such
a benchmark would have the effect of harming both the Commission and
consumers.
The Commission and the parties to Commission proceedings also lose
policy competitors whose different positions and business models affect
Commission decisions. For example, Time Warner has applied to the
Commission to offer Lifeline as a tariffed service, while Comcast has not. Time
Warner argued in the Lifeline proceeding that the Commission decision should

169

ReplyBriefoftheJointMinorityPartiesat12.

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PROPOSED DECISION

ensure that companies that offer VoIP as a tariffed service should be able to offer
Lifeline in Phase I of the program rollout.
TURN and ORA also mention that although neither Comcast nor
Time Warner currently compete in each others geographic area, there may come
a time in the future when it becomes in either companies interest to overbuild
into an adjacent providers service area. A merger between Comcast and
Time Warner at this point in time would preclude any chance of future
competition between these two entities.
ORA and its companion protesters conclude from these lines of argument
that we should find that approval of the license transfers is not in the public
interest. They argue that no conditions that we might reasonably impose on the
transfers will offset the harm that will result from allowing these companies to
merge, especially considering that Comcast will become the sole provider of
broadband service at or above 25 Mbps in almost 80 percent of California. While
we agree that the potential harms identified by these protesters are real, we are
also mindful that our jurisdiction is limited to consideration of the impact of the
license transfers as measured by the factors enumerated in Pub. Util. Code
854(c) and the impact of the merger on broadband deployment in California as
authorized by Section 706(a) of the Telecommunications Act. Potentially
negative impacts of approving the applications on voice communications, such
as degradation of customer service or shrinking of service offerings, are within
our jurisdiction under the Pub. Util. Code. Potentially negative impacts of the
proposed merger on broadband deployment are also within our jurisdiction

170

GreenliningandCUBriefat39.

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PROPOSED DECISION

under Section 706(a) of the 1996 Telecommunications Act, provided that we, like
the FCC in itsOpenInternetOrder,concludethatsuchactionsultimatelyretard
thedeploymentofbroadbandwithinthestate.As the D.C. Circuit observed in
its review of theOpenInternetOrder,
The Commission could reasonably have thought that its
authority to promulgate regulations that promote broadband
deployment encompasses the power to regulate broadband
providers' economic relationships with edge providers if, in
fact, the nature of those relationships influences the rate and
extent to which broadband providers develop and expand
their services for end users.171
Since Section 706(a) by its terms confers parallel powers on state
commissions and the FCC, the same rationale applied by the D. C. Circuit in its
review of the FCCs Open Internet Order applies to our review of the probable
consequences of the merger on broadband deployment in California. In other
words, while we may not regulate the terms and conditions on which Comcast
sells Internet access to content providers, we may take note of the potentially
adverse consequences of Comcasts use of its market power against content
providers on the deployment of broadband in California and impose conditions
on our approval to mitigate those consequences.
We may also take note of the mergers likely enhancement of that market
power, if the merger is consummated. From an edge providers perspective, its
choices in reaching California consumers through high-speed broadband in
California will be substantially curtailed. Instead of the choice between two
large cable systems delivering high speed broadband to upwards of 80% of the

171

FCCvs.Verizon,740F.3d.623,4849(D.C.Circuit2014).

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PROPOSED DECISION

households in California, the edge or content provider will have only one choice,
Comcast. Even figuring Verizons FIOS and the high-end AT&T U-Verse
products into the mix, Comcast will have significantly expanded market power
to act anti-competitively if it so chooses. The Comcast-Netflix contract at least
suggests that Comcast could compel competing content providers to enter into
contracts with it in order to ensure timely delivery of their competing content to
Comcast subscribers.172 As the D.C. Circuit put it:
Because all end users generally access the Internet through a
single broadband provider, that provider functions as a
"'terminating monopolist,'" with power to act as a
"gatekeeper" with respect to edge providers that might seek to
reach its end-user subscribers. As the Commission reasonably
explained, this ability to act as a "gatekeeper" distinguishes
broadband providers from other participants in the Internet
marketplace--including prominent and potentially powerful
edge providers such as Google and Apple--who have no
similar "control [over] access to the Internet for their
subscribers and for anyone wishing to reach those
subscribers."173
This is precisely the terminating monopoly power that intervenors
fear.174 The power of the terminating monopolist to discriminate or otherwise act
anti-competitively vis-a-vis edge or content providers could increase the cost and
reduce the attractiveness of that competing content. This, in turn, lessens the
demand for high-speed broadband access to the Internet, and thus runs counter
to Section 706(a)s mandate to promote competition in broadband services:

172

SeeORABriefat4247.

173

743F.3dat647(citationsomitted).

174

See,e.g.,ORABriefat4647.

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PROPOSED DECISION

The Commission's theory, to reiterate, is that its regulations

protect and promote edge-provider investment and
development, which in turn drives end-user demand for more
and better broadband technologies, which in turn stimulates
competition among broadband providers to further invest in
broadband.175
Although Verizon derided this theory as a triple cushion shot, the
Circuit Court found that such a triple-cushion shot counts the same as any other
shot, and that the FCC had presented a reasonable theory of competition.176
In more concrete terms, the proposed merger between Comcast and Time
Warner reduces the possibilities for content providers to reach the California
broadband market. While the FCCs pending reworked net neutrality rules may
mitigate some of this effect,177 the sheer dominance of Comcasts post-merger
position causes us concern.
Parties have made a convincing showing of the anti-competitive
consequences that Comcasts post-merger market power may have on the
deployment of broadband in California, and of anti-competitive harms that
would occur in California if the merger is consummated.178 We are also
persuaded by evidence of Comcasts Internet Essentials programs weak
performance in closing the digital divide in California and fulfilling universal

175

740F.3dat643.

176

Id.

See,February5,2015FCCpressrelease,http://www.fcc.gov/document/chairmanwheeler
proposesnewrulesprotectingopeninternet.
177

WearepersuadedbythefollowingpartiesargumentsthataresummarizedinSectionVI
above:ORA,TURN,Greenlining,ConsumersUnion,CETF,MediaAlliance,JointMinority
Parties,WritersGuild,CETF,DISHandCALTEL.

178

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PROPOSED DECISION

service goals, and thus do not view it as a mitigating factor without additional
conditions.
While the protesters and intervenors vigorously assert that we should
deny the applications outright, they also urge us, in the alternative, to impose
conditions ameliorating the potential harms should we decide that such
conditions are within our powers and sufficient to render the resulting
transaction not adverse to the public interest. While we are troubled by the
protesters and intervenors many examples of potential harms that may flow
from the merger, we believe that those harms may be mitigated by the
imposition of conditions on our approval consistent with our powers under state
and federal law.
7.3. Proposed Mitigation Measures
and Conditions
We now consider conditions proposed by the protesters to mitigate the
adverse consequences of the merger.
7.3.1. Broadband Deployment
The most frequently voiced criticism of the license transfer applications is
that they do not include a commitment by Comcast to expand the availability of
broadband Internet to unserved and underserved communities. While Comcast
has committed to offer Internet Essentials to qualifying customers acquired from
Time Warner as a result of the merger, it has made no promises regarding
expanded IE eligibility, concrete enrollment goals for IE, faster download and
upload speeds for IE recipients, continued provision of standalone broadband
Internet access at reasonable rates, or the construction of additional Internet
access points in underserved communities. CETF, CforAT, The Joint Minority
Parties (JMP), TURN, and the Writers Guild have all proposed mitigation

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measures designed to increase broadband availability in underserved

communities. We summarize the recommended mitigation measures as follows:
a. Expanded Enrollment in Internet Essentials. IE is
currently available to families with at least one child
enrolled in the National School Lunch Program.179 CforAT
urges expansion to all low-income families in Comcasts
service areas defined (per CforAT) as family income equal
to 150% of the federal poverty level or less.180 CETF urges
adoption of a target of 45% enrollment of eligible
customers within two years and a long-run target of 80%
enrollment.181 In addition, CETF proposes that applicants
without social security numbers should be permitted to fax
or email photocopied IDs for verification purposes.182
Also, CETF states that Comcast should update its modem
offering to align IE to the FCC E-rate Modernization Order,
which emphasizes Wi-Fi as the preferred solution for
internal connections of learning devices.183 TURN urges
expansion to all Lifeline-eligible households; households
with a disabled member; and households with a member
age 65 and above, particularly those of low, moderate or
fixed incomes.184 Writers Guild makes similar
recommendations.185 JMP recommends unspecified
increased eligibility for IE.186

179

McDonaldDeclarationat11.

180

CforATBriefat1517;BelserDeclarationat410.

181

CommentsofCETFat4,13,19;Seealso,AttachmentsA,CandD.

182

CommentsofCETFat13.

183

Id.,at18.

184

TURNBriefat2122;BaldwinOpeningTestimonyat3233.

185

WritersGuildBriefat3435.

186

ReplyBriefoftheJointMinorityPartiesat1416.

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b. Stand-alone broadband Internet access. A second line of

criticism of the applications is that Comcast has not promised to
keep Time Warners current standalone Internet offering which is
more robust and provides cheaper service than Comcasts current
standalone offerings. TURN proposes that we require the
merged company to offer all its customers standalone broadband
with a minimum download speed of 4 mbps for no more than
$15/month for 5 years.187 Writers Guild proposes requiring the
merged company to offer all its customers standalone broadband
on a sliding scale from 3 mbps download speed for 14.99/month
to 100 mbps for $44.99/month.188
c. No opposition to municipal broadband development.
TURN189 and Writers Guild190 propose that we require Comcast
to agree that it will not oppose municipal broadband
development.
7.3.2. Commitment to Lifeline
TURN191 and CforAT192 urge us to require Comcast to commit to offer
Lifeline phone service to voice customers of the merged company.
7.3.3. Improved Safety and Reliability
TURN makes three specific recommendations for improving the safety and
reliability of cable-based telephony: (1) require Comcast to work with state
officials to plan for the handling of emergencies; (2) educate consumers on the

187

TURNBriefat23.

188

WritersGuildBriefat14,17,18.

189

BaldwinReplyDeclarationat9.

190

WGABriefat36.

191

TURNBriefat67;BaldwinOpeningTestimonyat3233.

192

CforATBriefat19;PortfolioDeclarationat3.

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technical limitations of VoIP telephony; and (3) report to the state all voice and
broadband outages for the next three years.193
CforAT makes four specific safety and reliability recommendations:
1) require Comcast to disclose to consumers that cable-based phone systems
require battery back-up; (2) make information about battery back-up and
911 systems more prominent; (3) install more effective low battery indicators;
and (4) make available effective battery replacement.194
7.3.4. Miscellaneous Proposed Conditions
CALTEL argues for imposing a series of conditions specifically related to
the merged companies wholesale services. These include:
a. Time Warner actually launching the resold business voice
and Internet product (BCP with SIA) that Time Warner
describes as currently available in its responses to data
requests.
b. Comcast continuing to offer Time Warners BCP with SIA
to interested CLECs for a period of 5 years at existing
prices, terms and conditions.
c. Comcast continuing to offer Time Warners Carrier
Ethernet Last Mile Access product to interested CLECs for
a period of 5 years at existing prices, terms and conditions.
d. Comcast committing to develop a product similar to Time
Warners BCP with SIA and offering it to interested CLECs
for 5 years at prices, terms and conditions comparable to
those of the Time Warner product.
e. Comcast committing to develop and expand its share of
the carrier Ethernet last mile market for a period of 5 years

193

TURNBriefat1519;BaldwinOpeningTestimonyat3057.

194

CforATBriefat48;ComcastresponsetoCforATDataRequestNo.1at7.

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PROPOSED DECISION

at prices, terms and conditions comparable to those of the

Time Warner product.195
Joint Minority Parties argue for a series of conditions including:
a. Offering customer service in all Asian-American languages
spoken by 100,000 or more persons.
b. Requiring Comcast to report General Order (GO) 156 data
and increase its efforts to comply with GO 156 until it
achieves comparable employment and supplier diversity to
other companies reporting GO 156 data.
c. Requiring Comcast to meet with Asian-American, Black,
Latino and Native American community leaders to
develop regional and national programs for promoting
diversity.196
Although ORA opposes granting the license transfer applications, it also
supports certain of the conditions proposed by other intervenors, including the
safety and reliability conditions related to VoIP telephony proposed by TURN
and CforAT;197 the expansion of Internet Essentials to include a broader range of
eligible participants;198 and the provision of standalone Internet access with
adequate performance and reasonable prices.199

195

DeYoungTestimonyat6,8,10,11,13,1418,20,25.;andAttachmentAthereto.

196

BriefofJointMinorityPartiesat1214;CommentsofCETF,DeclarationofFaithBautistaat2.

197

OsmanDeclarationat3547.

ORABriefat7982;OdellDeclarationat411.SeealsoORABriefat6079;ClarkDeclaration
at45,1014,1617,1926,3141,84;ORABriefat6879;OsmanDeclarationat714,1718,2226,
3034.

198

199

ORABriefat29;SelwynDeclarationat13,15,24,3233,59,6372,87,145149.

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8. Mitigation Measures to Address Adverse

Consequences of the Merger
In determining which, if any, conditions offered by the various protesters
we will impose on the license transfers, we look first to the standard of review
we are applying to the applications. With regard to issues of safety, reliability,
and benefit to consumers, we are guided by the public interest standard of
854(c) of the Public Utilities Code. With regard to issues relating to the effect of
the proposed transactions on broadband deployment, we are guided by the
language of Section 706(a) of the 1996 Telecommunications Act which authorizes
us to adopt pro-competitive conditions that encourage the deployment of
broadband Internet capability to underserved communities, schools and
libraries.
Turning first to the public interest standard under state law, a threshold
question we address is whether, in evaluating the applications for compliance
with the Public Utilities Code, we may take into account the likely effects of the
parent corporation merger on the post-merger operations of the licensed entities
to the extent that we are able to evaluate them. The answer to that question is
Yes.
While reviewing the implications of the merger for broadband deployment
in California pursuant to the authority granted to us under Section 706(a), we
have paid particular attention to the recommendations of various protesters that
we require a greater public service commitment from Comcast as a condition of
approving the applications. It is the policy of this state to bridge the so-called
digital divide that prevents underserved communities from realizing the full
benefits of the Internet. The merger will create a single state-wide Internet access
provider. Requiring that provider to expand its offerings to unserved and

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PROPOSED DECISION

underserved communities is the simplest and most effective means available to

bridge the digital divide.
With these considerations in mind, we conclude that granting the
applications with the conditions listed in this Decision will encourage broadband
deployment in California pursuant to the authority granted to us by
Section 706(a) and improve access to high quality voice service in California. To
ameliorate identified harms resulting from the merger and satisfy the public
interest requirements of 854(c), we impose the following conditions on the
grant of the applications:
1.

Comcast shall extend the Lifeline program to all eligible

customers of the merged companies, and offer California
Lifeline and Federal Lifeline on the same basis as Time
Warners October 2013 filing (A.13-10-019) with the
Commission. Comcast shall provide California Lifeline
as a tariffed service and shall apply to the Commission,
within four months of the effective date of the parent
company merger, to offer Lifeline as a tariffed service on
the same terms as in Time Warners application
(A.13-10-019). Comcast shall commence offering
California Lifeline as a tariffed service within five months
of any Commission decision or order granting approval
of its application or advice letter to provide California
Lifeline.

2.

Comcast shall collect and report annually, for a period of

five years from the effective date of the parent company
merger, data showing compliance of the merged
companies with General Order 156. Within two years of
the effective date of the parent company merger and for
each year thereafter, Comcast shall achieve a diversity
goal at least equal to the average of AT&Ts and Verizon,
Inc.s prior year achievement across all GO 156
sub-categories (i.e., women-owned, minority owned, and
disabled-veteran owned business procurement). For
example, in 2017 Comcast must achieve a diversity goal
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at least equal to the average of what AT&T and

Verizon Inc. achieved in 2016. As a point of reference, in
2013 Comcast procured 8.2 percent of goods and services
from minority-owned businesses, 14.1 percent from
women-owned businesses, and 0 percent from
disabled-veteran owned businesses. The comparable
amounts for Verizon were 24.84 percent, 20.88 percent
and 3.13 percent respectively. The comparable amounts
for AT&T were 31.33 percent, 12.48 percent and
5.97 percent respectively.200
3.

Comcast shall advise all customers of the merged

companies of the necessity for using backup batteries in
connection with a VoIP-based telephone system and the
risks associated with power outages. Such information
shall be made available in Chinese, Japanese, Korean,
Spanish, Tagalog and Vietnamese language versions, as
well as large print and Braille versions for visually
impaired customers, and shall be communicated to all
customers of the merged companies no later than ninety
days following the effective date of the parent company
merger. Comcast shall work with staff of the
Commissions Communications Division to develop the
form and language of such notices.

4.

Comcast shall review the design and presentation of

information available on its web site and certify to the
Director of the Commissions Communication Division
compliance with best in practice web access standards
within 12 months following the effective date of the
parent company merger.

StephanieChenandNoemiGallardo,SupplierDiversityReportCard:UnexpectedAchievementsand
ContinuingGapsat10(June2014),availableathttp://greenlining.org/wp
content/uploads/2014/06/2014SupplierDiversityReportCardprinterfriendly.pdf;2013Utility
SupplierDiversityProcurementReports,CaliforniaPublicUtilitiesCommission,availableat
http://www.cpuc.ca.gov/PUC/SupplierDiversity/2013_Utility_Supplier_Diversity_Procurement
_Reports.htm.
200

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5.

Comcast shall ensure that all customer communications

are accessible to customers with disabilities. Comcast
shall, at the least, provide communications in the
following alternative formats, if requested: large print,
Braille, electronic and audio. Any customer who requests
to receive bills in an alternative format shall
automatically receive all direct communications in the
same format. Standard print materials and materials
provided for broad distribution, such as advertising, shall
include key information in large print, including
information about the availability of alternative formats
and information on how such material can be requested.
Alternative format versions of all printed material shall
be provided promptly upon request by any customer.
All information about the Internet Essentials program
shall be available in alternative formats, including but not
limited to outreach and enrollment material.

6.

Starting no later than 90 days following the effective date

of the parent company merger, Comcast shall (a) supply
backup batteries at no cost as part of any new installation
of VoIP telephones, (b) fully implement the guidelines for
customer education programs regarding backup power
systems adopted by this Commission in Decision
(D.) 10-01-026, and (c) offer to sell backup batteries at cost
to any present or future customer of the merged
companies.

7.

Comcast shall offer Time Warners Business Calling Plan

with Stand Alone Internet Access to interested CLECs
throughout the combined service territories of the
merging companies for a period of five years from the
effective date of the parent company merger at existing
prices, terms and conditions.

8.

Comcast shall offer Time Warners Carrier Ethernet Last

Mile Access product to interested CLECs throughout the
combined service territories of the merging companies for
a period of five years from the effective date of the parent
company at the same prices, terms and conditions as
offered by Time Warner prior to the merger.
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PROPOSED DECISION

Comcast shall for a period of five years from the effective

date of the parent company merger , offer all of its
California customers the ability to use Roku or other
independent video programming platforms, on the same
basis that Time Warner did prior to the merger.

10. Neither Comcast nor its affiliates, agents, or

intermediaries shall interfere with any customers ability
to access voice services or degrade a users ability to
originate or complete calls.
11. Comcast shall extend its Internet Essentials program to
all former Time Warner customers and provide all
elements of the program that are provided at the time this
Decision is adopted by the Commission. In addition,
Comcast shall at a minimum provide broadband service
speeds of 10 Mbps download and 1 Mbps upload as part
of the Internet Essentials program and, at no additional
cost, a Wi-Fi router so that Internet Essentials enrollees
can benefit from accessing more than one device to the
Internet, especially devices such as tablets that are
provided at low or no cost by numerous California school
districts.
12. Comcast shall revise its eligibility criteria for
participation in the Internet Essentials program to include
all households in the service territory of the merged
company having household incomes equal to 150% of the
federal poverty level or less.
13. Comcast shall enroll at least 45% of eligible households in
Internet Essentials within two years of the effective date
of the parent company merger, unless Comcast can show
that the penetration rate for its customers who are not
Internet Essentials eligible (Base Penetration Rate) is less
than 45%, in which case the penetration rate for Internet
Essentials shall not be less than the Base Penetration Rate.
Comcast shall submit, for Commission approval, a plan
to achieve its Internet Essentials enrollment requirement
no later than 90 days following the effective date of the
parent company merger, and each calendar year

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thereafter for a period of five years. The plan shall

include (a) specific cost details, including but not limited
to the amount of funds allocated to outreach and
marketing, with a minimum amount of $275 allocated per
eligible household;201(b) process improvements to speed
enrollment and reduce wait times and the burden on the
household trying to enroll; and (c) Wi-Fi options for
multiple users in an eligible households, and account for
use of tablet devices not suitable for modem-based access.
Comcast is encouraged to cooperate with CETF and other
CBOs who have significant experience in marketing and
outreach to low income communities.
14. No later than four years following the effective date of
the parent company merger, Comcast shall connect
and/or upgrade Internet infrastructure for K-12 schools
and public libraries in unserved and underserved areas in
Comcasts combined California service territory so that it
is providing high speed Internet to at least the same
proportion of K-12 schools and public libraries in such
unserved and underserved areas as it provides to the
households in its service territory. For example, if
Comcast supplies broadband Internet access to 40% of the
households in its service territory, it shall provide similar
access to 40% of the unserved or underserved K-12
schools and public libraries in its service territory. Such
infrastructure improvements shall be developed in
cooperation with the California Public Utilities
Commission, California K12 High Speed Network, the
Department of Education and the State Board of
Education and shall be in addition to similar
infrastructure investments made by the state and comply
with the needs requirements established in the
forthcoming statewide report of network connectivity
See,CommentsofCETF,AttachmentCat2,thatprovidesfinancialdetailsregardingthe
minimumcostestimateperhouseholdforCBOstosignuplowincomeCaliforniansforthe
InternetEssentialsprogram.

201

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PROPOSED DECISION

infrastructure by the K-12 High Speed Network that is

scheduled for release by March 1, 2015. No later than
90 days following the effective date of the parent
company merger, Comcast shall submit a plan for
Commission approval detailing Comcasts plan and
expenditures to comply with this condition. Comcast
shall file an annual report with the Commission no later
than March 31st of the following calendar year whereby
progress shall be compared to the March 1, 2015
statewide report of network connectivity infrastructure
by the K12 High Speed Network.
15. Comcast shall, within 24 months of the effective date of
the parent company merger, upgrade facilities to make
broadband services available in all California households
where the Joint Applicants currently provide only video
service. Such upgrades shall provide, at a minimum,
broadband service speeds of 10 Mbps download and
1 Mbps upload. Comcast shall provide data to Staff no
later than April 15, 2015, with information that clearly
identifies areas of the State within Comcasts footprint
where there is a lack of broadband availability but where
there is video availability. This information shall be
provided in addition to the information provided for
purposes of compliance with the provisions of the Digital
Infrastructure and Video Competition Act of 2006.
16. Within five years after the merger Comcast shall make
broadband services available throughout its service
territory at 25 Mbps down and 3 Mbps up, to conform to
the FCCs definition of minimum broadband speeds, as
may be adjusted by the FCC.
17. Comcast shall offer to all customers of the merged
companies, for a period of five years following the
effective date of the parent company merger, the
opportunity to purchase stand-alone broadband Internet
service at a price not to exceed the price charged by Time

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PROPOSED DECISION

Warner for providing that service to its customers, and at

speeds, prices, and terms, at least comparable to that
offered by Time Warner prior to the mergers closing.202
Currently, Time Warner offers 3 Mbps broadband service
for $14.99 a month, 10 Mbps service for $29.99 a month,
50 Mbps service for $34.99 a month, and $100 Mbps
service for $44.99 a month.203
18. No later than three years following the effective date of
the parent company merger, Comcast shall build at least
10 new broadband facilities that are adjacent to or near
areas that Comcast currently serves by broadband, or
within the next three years Comcast will serve by
broadband, and are areas that are unserved or
underserved by broadband according to the FCC
definition. No later than 90 days following the effective
date of the parent company merger, Comcast shall submit
a plan for Commission approval detailing Comcasts plan
and expenditures to comply with this condition.
19. Comcast shall for a period of five years following the
effective date of the parent company merger neither
oppose, directly or indirectly, nor fund opposition to, any
municipal broadband development plan in California,
nor any CASF or CTF application within its service
territory that otherwise meets the requirements of CASF
or CTF.
20. Comcast shall take action to respect customer privacy
and report to the Commission within six months of the
effective date of the parent company merger any
complaints about violation of customer privacy such as,
WetakeofficialnoticeofthefactthatonDecember11,2014,theFCCrequiredcompanies
receivingConnectAmericafundingforfixedbroadbandtoserveconsumerswithspeedsofat
least10Mbpsfordownloadsand1Mbpsforuploadstoreflectmarketplaceandtechnological
changesthatoccurredsincetheFCCsetitspreviousrequirementof4Mbps/1Mbpsspeedsin
2011.

202

203

WritersGuildBriefat3738.

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PROPOSED DECISION

but not limited to, publication or directory listing of

unlisted phone numbers. Comcast shall not contest
Commission jurisdiction regarding any customer privacy
complaints for its California voice or broadband
customers.
21. Comcast shall take action to improve customer service
including respecting customer choice and competitive
choices, and meet the Commissions minimum service
quality standards as set forth in GO 133-C on metrics
related to voice service installation intervals and service
orders completed, and complete installations, including
broadband installations, in a time frame no longer than
Time Warners average service prior to the merger.
Comcast shall report to the Commission within
six months of the effective date of the parent company
merger any complaints about customer service for voice
and broadband customers, including, but not limited to,
complaints about Comcast employee rudeness or slow
action to allow customers to change or drop Comcast
services. Comcast shall not contest Commission
jurisdiction regarding any customer service, slamming,
cramming or service quality issues for its California voice
customers.
22. Immediately following the merger, Comcast shall work to
improve the reliability of its phone and broadband
service and ensure that service is adequate to support
911/e911 standards. The Commission may take action as
appropriate to ensure adequate service, particularly so
customers have voice or broadband service sufficient to
access 911/e911 and 911/e911 interconnected services.
23. Comcast shall report to the Commission every
six months, beginning February 1, 2016, on the following:
(a) Comcasts efforts to improve reliability and address
service outages or complaints, including providing
information about the duration of outages, the extent and
type of service degradation experienced by customers,
the number of customer complaints about service outages
or degraded service, any geographical or other
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PROPOSED DECISION

concentrations of customers experiencing outages, and

Comcasts actions to address those issues; (b) Comcasts
commitment to improve consumer service and respect
customer choice in California, and to comply with the
CPUCs rules, orders, decisions, and the California Public
Utilities code regarding any request for change or
discontinuation of service; and (c) Comcasts
commitment to protect customer privacy in accordance
with the California constitutions privacy protection, and
the Commissions General Order requiring telephone
corporations to protect customer privacy.
24. For a period of five years following the effective date of
the parent company merger, Comcast shall file an annual
report with the Commission no later than March 31st of
the following calendar year detailing its compliance with
the conditions imposed by this decision. Such report
shall include, but not be limited to: (a) The most recent
J.D. Power and Associates rating of customer satisfaction
with Comcasts service offerings. By the end of 2016, and
then maintained through at least the fifth year after the
mergers closing, those measures of customer satisfaction
for the combined companys California operations shall
be at least at the most current average of the residential
customer satisfaction scores achieved for all entities in the
Internet and residential voice industry segments for the
West Region; (b) The most recent information available to
the company regarding the number and percentage of
eligible households enrolled in Internet Essentials and
Comcasts outreach plans for the upcoming year; (c) A
report on broadband deployment throughout Comcasts
service area including data and maps showing the
distribution of broadband customers (d) FCC Form 477,
(f) A report on the progress toward incorporating best
practices into Comcasts website and certification of
compliance with web accessibility requirements (g) the
status of measures to comply with each condition in this
Decision and (h) the General Order 156 report required

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PROPOSED DECISION

by Condition 2. Comcast shall report on the status of

measures to comply with each condition in this Decision.
25. If Comcast does not promptly and fully comply with
these conditions then parties, the public, or the
Commission may take enforcement action against
Comcast based on the Commissions rules, orders, and
decision, and the California Public Utilities Code, and
Comcast shall not contest the Commissions jurisdiction
to do so.
9. Comments on Proposed Decision
The Proposed Decision of the ALJ in this matter was mailed to the parties
in accordance with Section 311 of the Public Utilities Code and comments were
allowed under Rule 14.3 of the Commissions Rules of Practice and Procedure.
Comments on the Proposed Decision were filed on ____________ and replies
were filed on _______________ by _____________.
10. Assignment of Proceeding
Carla J. Peterman is the assigned Commissioner and Karl J. Bemesderfer is
the assigned Administrative Law Judge in this proceeding.
Findings of Fact
1. Comcast is the dominant supplier of cable-based Internet access in
northern California.
2. Time Warner is the dominant supplier of cable-based Internet access in
southern California.
3. Comcast and Time Warner do not compete with one another.
4. Comcast and Time Warner compete with other providers of Internet access
services in their respective service territories including incumbent local exchange
carriers, satellite companies, municipalities, and local Internet Service Providers.

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5. Comcast and Time Warner compete with other providers of so-called

backhaul services in their respective service territories including incumbent
local exchange carriers and owners of dedicated fiber optic systems.
6. The merged company will have enhanced ability to compete for the
provision of backhaul services to customers that operate in both northern and
southern California.
7. Comcast has an all-digital platform for its broadband services.
8. Time Warner does not have an all-digital platform for its broadband
services.
9. Upon completion of the merger, Comcast will extend its all-digital
platform to Time Warner customers.
10. Comcast provides low-cost Internet access to low and moderate income
families throughout its service territories by means of its so-called Internet
Essentials program.
11. Time Warner provides stand-alone broadband Internet services on a
sliding scale to customers throughout its service territories.
12. Time Warner is able to offer Lifeline service to its voice customers based
on D.14-03-038, adopted March 27, 2014, that designated Time Warners
subsidiary TWCIS as an Eligible Telecommunications Carrier.
13. Under traditional market analysis, market power is usually measured in
terms of concentration, or market shared. This is a statistical analysis using the
Herfinhdahl-Herschman Index (HHI) which calculates the sum of the squares of
each firms market share.
14. ORA presented calculations of the HHI with respect to the concentration
of the market for fixed broadband. This analysis showed that the HHI was

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already highly concentrated before the merger, and becomes more highly
concentrated as a result of the Comcast acquisition.
15. As of June 30, 2014, according to the California Broadband Availability
Database, 76.6% of households in Joint Applicants territory have no competitors
for broadband service at download speed tiers greater than or equal to 25
Megabits per second.
16. Post-merger, Comcast will serve 84% of the households in California.
17. Deficiencies in Comcasts customer notification and battery backup
program have a negative impact on safety and reliability in California.
18. Comcasts Internet Essentials program has had a weak performance in
closing the digital divide in California and fulfilling universal service goals.
19. The anti-competitive effects of the merger, absent any mitigation
measures, will hinder broadband development in California.
Conclusions of Law
1. The Commission examines proposed mergers, acquisitions, or transfers of
control on a case-by-case basis to determine the applicability of Pub. Util. Code
854.
2. To obtain approval of the proposed transfers, Applicants must
demonstrate that they meet the requirements of 854(a) and (c).
3. Section 854(e) requires that the Applicants must prove by a preponderance
of the evidence that the requirements of 854(c) are met.
4. Section 706(a) of the 1996 Telecommunications Act, codified in 47 United
States Code 1302(a) is a grant of authority to the Commission to examine the
implications of the proposed merger of the parent companies on broadband
deployment in California and to impose pro-competitive conditions that enhance

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PROPOSED DECISION

broadband deployment, especially to schools, libraries and underserved

communities.
5. The authority granted to the Commission by Section 706(a) of the 1996
Telecommunications Act satisfies the requirement of express delegation under
federal law set out in 710 of the Pub. Util. Code.
6. As modified by this decision, the proposed transfers meet the requirements
of 854(a) and (c) and are in the public interest.
7. The approval of the transfer of control between parties to this merger and
the conditions applied herein is consistent with the requirements of Section 710
of the Public Utilities Code and consistent with the Commissions jurisdiction
expressly delegated by applicable federal law and statute.
O R D E R
IT IS ORDERED that:
1. The application of Comcast Corporation, Time Warner Cable Inc., Time
Warner Cable Information Services (California), LLC, and Bright House
Networks Information Services (California), LLC for the transfer of control of
Time Warner Cable Information Services (California), LLC; and the Pro Forma
Transfer of Control of Bright House Networks Information Services (California),
LLC, to Comcast Corporation, is approved with the conditions set forth in
Appendix A of this decision.
2. The application of Comcast Corporation, Time Warner Cable Information
Services (California), LLC (U6874C) and Charter Fiberlink CA-CCO, LLC for
approval to transfer certain assets and customers of Charter Fiberlink CA-CCO,
LLC to Time Warner Cable Information Services (California), LLC, is approved
with the conditions set forth in Appendix A hereto.

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3. Within 30 days of the issuing date of any decision by another jurisdiction

which materially changes the terms of the proposed transaction as it affects any
of Applicants' California utility operations, Applicants shall file a copy of that
decision with the Commission, with a copy served on the service list in this
proceeding and the Director of the Telecommunications Division. The filing shall
also include an analysis of the impact of any terms and conditions contained
therein as they affect any of Applicants' California utility operations.
4. Applicants shall notify the Commission, with a copy served on the service
list in this proceeding and the Director of the Communications Division, of the
date the merger is consummated. The notice shall be served within 30 days of
merger consummation.
5. Comcast Corporation, Time Warner Cable Inc. and Charter Fiberlink
CA-CCO, LLC shall each submit a written notice to the Director of the
Commission's Communications Division of their agreement, evidenced by a duly
authenticated resolution of their respective Boards of Directors, Board of
Managers, or the equivalent authority, to each of the conditions in Appendix A.
6. Application (A.) 14-04-013 and A.14-06-012 are closed.
This order is effective today.
Dated

, at San Francisco, California.

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APPENDIX A

A.14-04-013, A.14-06-012 ALJ/KJB/avs

Appendix A
Conditions Applicable to Transfer of Control of Time Warner Cable
Information Services (California), LLC; and the Pro Forma Transfer of
Control of Bright House Networks Information Services (California), LLC,
to Comcast Corporation
1. Comcast shall extend the Lifeline program to all eligible
customers of the merged companies, and offer California
Lifeline and Federal Lifeline on the same basis as Time
Warners October 2013 filing (A.13-10-019) with the
Commission. Comcast shall provide California Lifeline
as a tariffed service and shall apply to the Commission,
within four months of the effective date of the parent
company merger, to offer Lifeline as a tariffed service on
the same terms as in Time Warners application
(A.13-10-019). Comcast shall commence offering
California Lifeline as a tariffed service within five
months of any Commission decision or order granting
approval of its application or advice letter to provide
California Lifeline.
2.

Comcast shall collect and report annually, for a period of

five years from the effective date of the parent company
merger, data showing compliance of the merged
companies with General Order 156. Within two years of
the effective date of the parent company merger and for
each year thereafter, Comcast shall achieve a diversity
goal at least equal to the average of AT&Ts and Verizon,
Inc.s prior year achievement across all GO 156
sub-categories (i.e., women-owned, minority owned, and
disabled-veteran owned business procurement). For
example, in 2017 Comcast must achieve a diversity goal
at least equal to the average of what AT&T and
Verizon Inc. achieved in 2016. As a point of reference, in
2013 Comcast procured 8.2 percent of goods and services
from minority-owned businesses, 14.1 percent from
women-owned businesses, and 0 percent from
disabled-veteran owned businesses. The comparable
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amounts for Verizon were 24.84 percent, 20.88 percent

and 3.13 percent respectively. The comparable amounts
for AT&T were 31.33 percent, 12.48 percent and
5.97 percent respectively.204
3.

Comcast shall advise all customers of the merged

companies of the necessity for using backup batteries in
connection with a VoIP-based telephone system and the
risks associated with power outages. Such information
shall be made available in Chinese, Japanese, Korean,
Spanish, Tagalog and Vietnamese language versions, as
well as large print and Braille versions for visually
impaired customers, and shall be communicated to all
customers of the merged companies no later than ninety
days following the effective date of the parent company
merger. Comcast shall work with staff of the
Commissions Communications Division to develop the
form and language of such notices.

4.

Comcast shall review the design and presentation of

information available on its web site and certify to the
Director of the Commissions Communication Division
compliance with best in practice web access standards
within 12 months following the effective date of the
parent company merger.

5.

Comcast shall ensure that all customer communications

are accessible to customers with disabilities. Comcast
shall, at the least, provide communications in the
following alternative formats, if requested: large print,
Braille, electronic and audio. Any customer who requests
to receive bills in an alternative format shall

StephanieChenandNoemiGallardo,SupplierDiversityReportCard:UnexpectedAchievementsand
ContinuingGapsat10(June2014),availableathttp://greenlining.org/wp
content/uploads/2014/06/2014SupplierDiversityReportCardprinterfriendly.pdf;2013Utility
SupplierDiversityProcurementReports,CaliforniaPublicUtilitiesCommission,availableat
http://www.cpuc.ca.gov/PUC/SupplierDiversity/2013_Utility_Supplier_Diversity_Procurement
_Reports.htm.
204

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automatically receive all direct communications in the

same format. Standard print materials and materials
provided for broad distribution, such as advertising, shall
include key information in large print, including
information about the availability of alternative formats
and information on how such material can be requested.
Alternative format versions of all printed material shall
be provided promptly upon request by any customer.
All information about the Internet Essentials program
shall be available in alternative formats, including but not
limited to outreach and enrollment material.
6.

Starting no later than 90 days following the effective date

of the parent company merger, Comcast shall (a) supply
backup batteries at no cost as part of any new installation
of VoIP telephones, (b) fully implement the guidelines for
customer education programs regarding backup power
systems adopted by this Commission in Decision
(D.) 10-01-026, and (c) offer to sell backup batteries at cost
to any present or future customer of the merged
companies.

7.

Comcast shall offer Time Warners Business Calling Plan

with Stand Alone Internet Access to interested CLECs
throughout the combined service territories of the
merging companies for a period of five years from the
effective date of the parent company merger at existing
prices, terms and conditions.

8.

Comcast shall offer Time Warners Carrier Ethernet Last

Mile Access product to interested CLECs throughout the
combined service territories of the merging companies for
a period of five years from the effective date of the parent
company at the same prices, terms and conditions as
offered by Time Warner prior to the merger.

9.

Comcast shall for a period of five years from the effective

date of the parent company merger , offer all of its
California customers the ability to use Roku or other
independent video programming platforms, on the same
basis that Time Warner did prior to the merger.

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10. Neither Comcast nor its affiliates, agents, or

intermediaries shall interfere with any customers ability
to access voice services or degrade a users ability to
originate or complete calls.
11. Comcast shall extend its Internet Essentials program to
all former Time Warner customers and provide all
elements of the program that are provided at the time this
Decision is adopted by the Commission. In addition,
Comcast shall at a minimum provide broadband service
speeds of 10 Mbps download and 1 Mbps upload as part
of the Internet Essentials program and, at no additional
cost, a Wi-Fi router so that Internet Essentials enrollees
can benefit from accessing more than one device to the
Internet, especially devices such as tablets that are
provided at low or no cost by numerous California school
districts.
12. Comcast shall revise its eligibility criteria for
participation in the Internet Essentials program to include
all households in the service territory of the merged
company having household incomes equal to 150% of the
federal poverty level or less.
13. Comcast shall enroll at least 45% of eligible households in
Internet Essentials within two years of the effective date
of the parent company merger, unless Comcast can show
that the penetration rate for its customers who are not
Internet Essentials eligible (Base Penetration Rate) is less
than 45%, in which case the penetration rate for Internet
Essentials shall not be less than the Base Penetration Rate.
Comcast shall submit, for Commission approval, a plan
to achieve its Internet Essentials enrollment requirement
no later than 90 days following the effective date of the
parent company merger, and each calendar year
thereafter for a period of five years. The plan shall
include (a) specific cost details, including but not limited
to the amount of funds allocated to outreach and

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marketing, with a minimum amount of $275 allocated per

eligible household;205(b) process improvements to speed
enrollment and reduce wait times and the burden on the
household trying to enroll; and (c) Wi-Fi options for
multiple users in an eligible households, and account for
use of tablet devices not suitable for modem-based access.
Comcast is encouraged to cooperate with CETF and other
CBOs who have significant experience in marketing and
outreach to low income communities.
14. No later than four years following the effective date of
the parent company merger, Comcast shall connect
and/or upgrade Internet infrastructure for K-12 schools
and public libraries in unserved and underserved areas in
Comcasts combined California service territory so that it
is providing high speed Internet to at least the same
proportion of K-12 schools and public libraries in such
unserved and underserved areas as it provides to the
households in its service territory. For example, if
Comcast supplies broadband Internet access to 40% of the
households in its service territory, it shall provide similar
access to 40% of the unserved or underserved K-12
schools and public libraries in its service territory. Such
infrastructure improvements shall be developed in
cooperation with the California Public Utilities
Commission, California K12 High Speed Network, the
Department of Education and the State Board of
Education and shall be in addition to similar
infrastructure investments made by the state and comply
with the needs requirements established in the
forthcoming statewide report of network connectivity
infrastructure by the K-12 High Speed Network that is
scheduled for release by March 1, 2015. No later than
90 days following the effective date of the parent
See,CommentsofCETF,AttachmentCat2,thatprovidesfinancialdetailsregardingthe
minimumcostestimateperhouseholdforCBOstosignuplowincomeCaliforniansforthe
InternetEssentialsprogram.

205

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company merger, Comcast shall submit a plan for

Commission approval detailing Comcasts plan and
expenditures to comply with this condition. Comcast
shall file an annual report with the Commission no later
than March 31st of the following calendar year whereby
progress shall be compared to the March 1, 2015
statewide report of network connectivity infrastructure
by the K12 High Speed Network.
15. Comcast shall, within 24 months of the effective date of
the parent company merger, upgrade facilities to make
broadband services available in all California households
where the Joint Applicants currently provide only video
service. Such upgrades shall provide, at a minimum,
broadband service speeds of 10 Mbps download and
1 Mbps upload. Comcast shall provide data to Staff no
later than April 15, 2015, with information that clearly
identifies areas of the State within Comcasts footprint
where there is a lack of broadband availability but where
there is video availability. This information shall be
provided in addition to the information provided for
purposes of compliance with the provisions of the Digital
Infrastructure and Video Competition Act of 2006.
16. Within five years after the merger Comcast shall make
broadband services available throughout its service
territory at 25 Mbps down and 3 Mbps up, to conform to
the FCCs definition of minimum broadband speeds, as
may be adjusted by the FCC.
17. Comcast shall offer to all customers of the merged
companies, for a period of five years following the
effective date of the parent company merger, the
opportunity to purchase stand-alone broadband Internet
service at a price not to exceed the price charged by Time
Warner for providing that service to its customers, and at
speeds, prices, and terms, at least comparable to that

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offered by Time Warner prior to the mergers closing.206

Currently, Time Warner offers 3 Mbps broadband service
for $14.99 a month, 10 Mbps service for $29.99 a month,
50 Mbps service for $34.99 a month, and $100 Mbps
service for $44.99 a month.207
18. No later than three years following the effective date of
the parent company merger, Comcast shall build at least
10 new broadband facilities that are adjacent to or near
areas that Comcast currently serves by broadband, or
within the next three years Comcast will serve by
broadband, and are areas that are unserved or
underserved by broadband according to the FCC
definition. No later than 90 days following the effective
date of the parent company merger, Comcast shall submit
a plan for Commission approval detailing Comcasts plan
and expenditures to comply with this condition.
19. Comcast shall for a period of five years following the
effective date of the parent company merger neither
oppose, directly or indirectly, nor fund opposition to, any
municipal broadband development plan in California,
nor any CASF or CTF application within its service
territory that otherwise meets the requirements of CASF
or CTF.
20. Comcast shall take action to respect customer privacy
and report to the Commission within six months of the
effective date of the parent company merger any
complaints about violation of customer privacy such as,
but not limited to, publication or directory listing of
unlisted phone numbers. Comcast shall not contest
WetakeofficialnoticeofthefactthatonDecember11,2014,theFCCrequiredcompanies
receivingConnectAmericafundingforfixedbroadbandtoserveconsumerswithspeedsofat
least10Mbpsfordownloadsand1Mbpsforuploadstoreflectmarketplaceandtechnological
changesthatoccurredsincetheFCCsetitspreviousrequirementof4Mbps/1Mbpsspeedsin
2011.

206

207

WritersGuildBriefat3738.

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Commission jurisdiction regarding any customer privacy

complaints for its California voice or broadband
customers.
21. Comcast shall take action to improve customer service
including respecting customer choice and competitive
choices, and meet the Commissions minimum service
quality standards as set forth in GO 133-C on metrics
related to voice service installation intervals and service
orders completed, and complete installations, including
broadband installations, in a time frame no longer than
Time Warners average service prior to the merger.
Comcast shall report to the Commission within
six months of the effective date of the parent company
merger any complaints about customer service for voice
and broadband customers, including, but not limited to,
complaints about Comcast employee rudeness or slow
action to allow customers to change or drop Comcast
services. Comcast shall not contest Commission
jurisdiction regarding any customer service, slamming,
cramming or service quality issues for its California voice
customers.
22. Immediately following the merger, Comcast shall work to
improve the reliability of its phone and broadband
service and ensure that service is adequate to support
911/e911 standards. The Commission may take action as
appropriate to ensure adequate service, particularly so
customers have voice or broadband service sufficient to
access 911/e911 and 911/e911 interconnected services.
23. Comcast shall report to the Commission every
six months, beginning February 1, 2016, on the following:
(a) Comcasts efforts to improve reliability and address
service outages or complaints, including providing
information about the duration of outages, the extent and
type of service degradation experienced by customers,
the number of customer complaints about service outages
or degraded service, any geographical or other
concentrations of customers experiencing outages, and
Comcasts actions to address those issues; (b) Comcasts
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A.14-04-013, A.14-06-012 ALJ/KJB/avs

commitment to improve consumer service and respect

customer choice in California, and to comply with the
CPUCs rules, orders, decisions, and the California Public
Utilities code regarding any request for change or
discontinuation of service; and (c) Comcasts
commitment to protect customer privacy in accordance
with the California constitutions privacy protection, and
the Commissions General Order requiring telephone
corporations to protect customer privacy.
24. For a period of five years following the effective date of
the parent company merger, Comcast shall file an annual
report with the Commission no later than March 31st of
the following calendar year detailing its compliance with
the conditions imposed by this decision. Such report
shall include, but not be limited to: (a) The most recent
J.D. Power and Associates rating of customer satisfaction
with Comcasts service offerings. By the end of 2016, and
then maintained through at least the fifth year after the
mergers closing, those measures of customer satisfaction
for the combined companys California operations shall
be at least at the most current average of the residential
customer satisfaction scores achieved for all entities in the
Internet and residential voice industry segments for the
West Region; (b) The most recent information available to
the company regarding the number and percentage of
eligible households enrolled in Internet Essentials and
Comcasts outreach plans for the upcoming year; (c) A
report on broadband deployment throughout Comcasts
service area including data and maps showing the
distribution of broadband customers (d) FCC Form 477,
(f) A report on the progress toward incorporating best
practices into Comcasts website and certification of
compliance with web accessibility requirements (g) the
status of measures to comply with each condition in this
Decision and (h) the General Order 156 report required
by Condition 2. Comcast shall report on the status of
measures to comply with each condition in this Decision.

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25. If Comcast does not promptly and fully comply with

these conditions then parties, the public, or the
Commission may take enforcement action against
Comcast based on the Commissions rules, orders, and
decision, and the California Public Utilities Code, and
Comcast shall not contest the Commissions jurisdiction
to do so.

(END OF APPENDIX A)

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