AT&T/TW, Comcast Both Dispute DOJ Anticompetitive Claims

Facing DOJ assertions that a permanent Turner blackout could cost an MVPD 12 percent of its subscriber base, counsel for AT&T and Time Warner on Thursday went after the study the agency commissioned that came to that conclusion. "You can't reconcile" that past temporary Turner blackouts resulted in sub losses of a fraction of a percent for MVPDs with the model that indicates a shorter, one-month Turner loss would mean an 8.2 percent departure rate, said Peter Barbur, of Cravath Swaine, during the court argument. "I believe my numbers are accurate," replied John Hauser, Massachusetts Institute of Technology professor of marketing and a surveying expert.

Meanwhile, the harms the government worries about with a vertically integrated AT&T/TW aren't practices vertically integrated Comcast/NBCUniversal is either engaged in or worried about, testified Comcast Cable Executive Vice President-Content Acquisition Greg Rigdon. He said Comcast Cable hasn't used NBCU blackouts as a strategy to gain subscribers from other MVPDs or told NBCU to dramatically raise its affiliate fees on MVPD rivals. Rigdon said he has "no reason to believe" being part of New AT&T would change negotiations with Turner or HBO or those networks' negotiating leverage. Rigdon also waved off the idea that New AT&T might coordinate behavior with Comcast/NBCU, as DOJ alleged (see 1803120003).

Saying it was an attempt at "a novel approach," Judge Richard Leon of Washington allowed testimony and cross-examination in open court of the Comcast witness, and then closed the court for testimony and cross-examination on confidential business issues involving a series of "drop analyses" Comcast did in recent years before negotiations with Turner and HBO. Those analyses lay out the subscriber and financial costs of not carrying those networks, Rigdon said. Asked by Turner outside counsel Kevin Orsini of Cravath Swaine about a YES Network blackout on Comcast's system that included the New York City market and whether the subscriber losses were "a fraction" of what Comcast projected in its drop analysis, Rigdon declined to answer in open court.

Orsini also tried to raise red flags about a set of drop analyses Comcast prepared laying out economic and subscriber costs of not carrying Turner or HBO. Rigdon acknowledged, under Orsini questioning, he hadn't developed the methodology and wasn't familiar with the modeling used and "it's possible" they could be materially off.

Hauser testified for much of the morning about the online survey he used to ascertain the effects of a Turner blackout. AT&T and TW have disputed the 12 percent prediction (see 1803280025). Facing a series of pointed questions from Barbur, Hauser maintained he didn't craft the survey to give Justice a sizable departure rate. Barbur attacked fonts, point sizes and logos used in the online survey, plus wording of questions asking viewers if there was a "very slight possibility" vs. "slight possibility" if they would switch video providers in the face of no Turner programming.

It's one thing to ask about switching costs and another for a consumer to go through with the arduous process of canceling an MVPD contract and getting installation done with another provider, Barbur said. Consumers are generally aware what the costs are for switching, Hauser replied. Barbur also noted criticisms Hauser received for surveying he did in Apple/Samsung litigation aimed at trying to determine consumer willingness to pay for certain features on Apple products.