Telecom Deals Put Lawyers to Work

Telecom Deals Put Lawyers to Work

As federal antitrust regulators review Comcast Corp.’s pending $45 billion purchase of Time Warner Cable Inc. and AT&T Inc.’s $49 billion deal for DirecTV LLC, competitors and public interest advocates are on the attack — and they’re lawyering up with outside and in-house counsel to fight.

Filings with the Federal Com­mun­i­ca­tions Commission (FCC) show that at least a dozen companies or groups including Dish Network Corp., Netflix Inc., Cogent Communications Group Inc. and the American Cable Association have hired outside counsel including Boies, Schiller & Flexner and Steptoe & Johnson LLP to lobby regulators during the merger review process. Others like Free Press, Broadview Networks Inc. and the Independent Telephone and Telecommunications Alliance are handling advocacy in-house.

As for the merging companies, they’ve tapped nine law firms to fight off the attacks and convince the feds to green-light their transactions.

“It’s the perfect storm of political interests, consumer interests and big companies on both sides of the issue,” said Fenwick & West antitrust co-chairman Mark Ostrau, who is not involved in the transactions but is following them closely.

Some companies want to kill the mergers outright. Others want concessions that will give them a leg up. All want the ear of regulators at the Department of Justice and the FCC.

Of the two deals, the Comcast merger has generated more industry and public opposition, but it may be less vulnerable on pure antitrust grounds. That’s because the companies don’t compete head-on in most geographic locations. Comcast and Time Warner are, respectively, the first- and second-largest cable companies in the nation, and the first- and third-largest Internet service providers

“These are no more competitors than the Minnesota Twins [baseball team] and the Los Angeles Kings [hockey team],” said public interest antitrust attorney David Balto, a former Federal Trade Commission official, who is not representing any of the companies. “The key to merger law is whether firms effectively constrain each other in the marketplace, and there’s little to no evidence that either of these firms has much of an impact on the other.”

DIRECT COMPETITION

By contrast, AT&T competes with satellite-television provider DirecTV in 64 markets where AT&T offers its own pay TV service, U-Verse. “By black letter law, [the AT&T merger] would be easier to stop because of the horizontal competition issues,” said Matthew Woods, policy director at Free Press, which opposes both transactions.

Still, he noted that the AT&T deal has triggered less opposition than the Comcast combination, which has more repercussions for other telecom players. “As much as a cash machine as pay TV remains, broadband is the future-proof platform,” Woods said. “Linear TV is fighting to hang on the share that it has.”

Lawyers To Watch on Comcast-Time Warner
Here’s who represents the parties to and critics of the proposed merger.
COMPANY FIRM/OUTSIDE COUNSEL
Comcast

Willkie Farr & Gallagher/Francis Buono
Davis Polk & Wardwell/Arthur Burke

Time Warner Latham & Watkins/Matthew Brill
Charter Communications Inc. Jenner & Block/Samuel Feder
TDS Metrocom Bingham McCutchen/Tamar Finn
Cogent Communications Group, Inc. Boies, Schiller & Flexner/Robert Cooper; Richard Feinstein; James Denvir; Bates White (economic consultant)
American Cable Association Cinnamon Mueller/Barbara Esbin
Kelley Drye & Warren/Thomas Cohen
Squire Patton Boggs/Mark Botti; Gary Biglaiser, professor of economics, University of North Carolina (economic consultant)
NBC Television Affiliates Covington & Burling/Jennifer Johnson; Gerard Waldron
Dish Steptoe & Johnson LLP/Pantelis Michalopoulos; Stephanie Roy; David Sappington, professor of economics, University of Florida (economic consultant)
Netflix Steptoe & Johnson LLP/Markham Erickson, Global Economics Group (economic consultant)
TV One Steptoe & Johnson LLP/Markham Erickson
Independent Film and Television Alliance Podesta Group/Claudia James
Discovery Communications Charles River Associates (economic consultant)
Writers Guild of America, West Forscey PLLC/Michael Forscey
Beach TV Cable Co. W. James Mac Naughton/Solo practitioner, Newton, N.J.
Source: Public filings with the Federal Communications Commission

The FCC in its merger review goes beyond strict antitrust questions that are the purview of the Justice Department to focus on whether the combination is in the public interest — and that’s where the fight over the Comcast/ Time Warner deal is most intense.

One of the most vehement Comcast opponents is Internet access and data trans­port provider Cogent Commun­ica­tions Group Inc. The publicly traded company hired a team from Boies, Schiller & Flexner that includes Richard Feinstein, who stepped down last year as director of the Federal Trade Commission’s Bureau of Competition, and litigator Robert Cooper, whose prior antitrust clients include American Express Co., Delta Air Lines Inc. and Level 3 Communications Inc. Cogent also tapped economic consultant Bates White, which last year hired the FCC’s chief economist, Marius Schwartz.

Lawyers To Watch on AT&T-DirecTV
Here’s who represents the parties to and critics of the proposed merger.
COMPANY FIRM/OUTSIDE COUNSEL
AT&T

Arnold & Porter/Maureen Jeffreys; Richard Rosen
Crowell & Moring/Wm. Randolph Smith
Sidley Austin/David Lawson

DirecTV Harris, Wiltshire & Grannis/William Wiltshire; Michael Nilsson
Jones Day/Bruce McDonald; Joe Sims
Simpson Thacher & Bartlett/Sara Razi; Kevin Arquit
Alliance for Community Media Spiegel & McDiarmid/Tillman Lay
ReelzChannel Holland & Knight/William LeBeau
American Cable Association Kelley Drye & Warren/Thomas Cohen
Cinnamon Mueller/Barbara Esbin
Cogent Communications Boies, Schiller & Flexner/Robert Cooper; James Denvir; Richard Feinstein
Source: Public filings with the Federal Communications Commission

“The transaction raises very serious competition concerns, primarily with regard to Internet issues,” Cooper said in an interview. The merged company would have “bottleneck control … over an enormous number of consumers,” he said — a crucial issue for Cogent, which provides Internet access to commercial end-users such as Netflix that need to interconnect with Comcast customers.

Cogent wants the feds to block the deal or attach “very serious and targeted conditions,” Cooper said.

Cogent also retained Boies Schiller to review the AT&T merger, but to date has not taken a position on the transaction.

Likewise, Netflix openly opposes the Comcast merger. In February, the company grudgingly cut a deal with Comcast to pay for faster and more reliable connections to its customers. In letter to shareholders in April, CEO Reed Hastings wrote that the “combined company would possess even more anticompetitive leverage to charge arbitrary interconnection tolls for access to their customers.”

Netflix hired Steptoe & Johnson LLP partner Markham Erickson and consultant Global Economics Group for the FCC review. Steptoe and Netflix declined comment about the work. To date, Netflix has not taken a position on the AT&T/DirecTV deal.

Dish Network has also tapped Steptoe, turning to partners Pantelis Michalop­oulos and Stephanie Roy.

On July 30, according to FCC records, Dish executives met with 25 FCC officials including General Counsel Jonathan Sallet and Media Bureau chief William Lake, arguing that the merger should be blocked because “there do not appear to be any conditions that would remedy the harms that would result.” Dish argues that Comcast could use its broadband dominance to undermine competing video services.

LESS INTENSE OPPOSITION

Although Dish competes head-on against DirecTV, it has been far more muted in its opposition to that merger, at least before the FCC. In a series of meetings in July with FCC Chairman Tom Wheeler and the four FCC commissioners, Dish warned that AT&T and DirecTV could “combine their market power to leverage programming content, to the potential detriment of consumers,” according to a FCC filing.

Indeed, few competitors, industry groups or business partners outright oppose the AT&T merger. Most are more interested in using the merger as leverage to secure concessions.

For example, Reelz Channel, represented by Holland & Knight partner William LeBeau, doesn’t oppose the deal, but wants the FCC to consider discrimination against independent nonbroadcast networks in distribution negotiations and agreements, according to a filing with the agency.

The American Cable Association, which has hired Cinnamon Mueller, Kelley Drye & Warren and Squire Patton Boggs, wants the FCC to bar the merged company from charging higher prices to its rivals for access to programming such as DirecTV’s three regional sports ­networks.

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