Comcast and NBC: Did the Feds Fold?
[Source: The Washington Post, by Rob Pegoraro, January 18, 2011]
It's on: Comcast and NBC now have the government's blessing to set up a joint venture, increasingly controlled by Comcast, that will bring the nation's largest TV and Internet provider and one of the biggest creators of video content under the same management.
As Cecilia Kang outlined on Post Tech earlier this afternoon, the Federal Communications Commission and the Justice Department imposed separate but overlapping conditions on this combination before approving it.
If you read only descriptions of these terms from the FCC (PDF) and the DoJ, you might think that the two government agencies have tightly constrained what this new company can do.
The Comcast blog post by executive vice president David Cohen offers a more detailed description, portraying these conditions as fair and outright magnanimous concessions.
Yet another perspective emerged from a conference call that the Philadelphia-based firm held for reporters this afternoon. Cohen summed things up thusly: "I don't think any of the conditions is particularly restrictive."
Just what did the feds get for their approval?
The least-meaningful conditions require Comcast to increase the diversity of the programming put out by the combined Comcast-NBC Universal venture -- more local news, more children's shows, more programming for Hispanic, African American and Asian American communities -- as well as adding room for more independent networks in its cable bundles.
Those are all nice things, but Comcast was willing to give them up from the start. You'll find this move on Page 1 of most corporate-merger playbooks.
Then come clauses about Comcast's Internet service. The company pledges to reach another 400,000 homes and offer a steeply discounted, $9.95/month plan for families with children eligible for free lunches in school under federal guidelines. It also will offer a standalone, no-TV-required broadband service with downloads of at least 6 million bits per second for $49.99 a month for three years, which Comcast said represented no change from the company's current practice.
As part of these Internet conditions, Comcast pledges to follow the basic net-neutrality rules enacted by the FCC in December -- as if a company in this position would say anything else. Cohen noted that this regulatory framework excludes services delivered over its private network, such as its digital voice-calling service, and called it "comfortable for us as a company."
This category contains one interesting bone thrown to the FCC: a pledge by Comcast to carry public-broadcasting stations at their current levels for "several years" if they elect to sell their spectrum back to the government under one possible provision of the FCC's national broadband plan.
Things get a little more interesting with provisions governing how Comcast will make NBC and Comcast programming available to other TV services. The FCC required an streamlined, binding-arbitration process to settle squabbles over what other TV providers should pay Comcast for its own channels, including the regional sports networks that have been the subject of numerous carriage disputes in recent years. That's a step forward.
But although the FCC requires that Comcast not punish other networks seeking carriage on its own service, it didn't require any new dispute-resolution mechanism to settle the inevitable disagreements.
Finally, what Cohen called "the most complex" provisions govern how Comcast-NBCU will provide its own content for online distribution. The FCC and the DoJ secured non-discrimination conditions that rule out the worst abuses but may not upset the existing economic order.
Here's why: Both of the possibilities outlined in these conditions, what Cohen called the "benchmark" and "full freight" scenarios, require mirroring earlier distribution deals. In the benchmark situation, a Web-only service that inked a deal with a defined competitor of Comcast-NBCU would get "comparable" NBC content on similar terms and conditions. The full-freight option wouldn't require another network to offer anything to an online firm, but that firm would have to buy Comcast-NBCU's entire channel lineup and pay about the same as a cable or satellite firm would.
In the bargain, Comcast has to give up any control over Hulu, although it will retain its ownership role in that site.
The benchmark option offers the best hope of making Web viewing a far more viable and more flexible replacement for cable and satellite service -- but only if one of Comcast-NBCU's competitors takes the first step. Telecom scholar and law professor Susan Crawford -- who in earlier writings on her blog described Comcast as an increasingly entrenched monopolist "with unconstrained pricing power" -- phrased things semi-optimistically in a post this afternoon:
If daylight opens -- if a big programmer is willing to abandon the cable cabal TVEverywhere scheme online -- that will provide the moment for the new competitors to get access to Comcast's good programming as well.
But incumbent firms here have done quite well under the current business model, and schemes like TV Everywhere -- in which video sites like Comcast's own Fancast Xfinity TV limit access to current cable customers, with no option for others to pay for Web-only viewing -- would only cement that arrangement.
The conditions are silent about such issues as NBC's blocking Google TV receivers from videos hosted on its site or allowing customers to choose what channels they'll pay for.
And don't forget that all of these conditions expire in seven years. Some vanish in three.
Could the FCC have done better? Probably not. The FCC's two Republican members, Robert M. McDowell and Meredth Attwell Baker, only grudgingly supported today's conditions, complaining (PDF) that they forced too many "far-reaching and non-merger specific policy concessions." And at a panel discussion I led at CES in Las Vegas earlier this month, Baker, McDowell and Democratic commissioner Mignon Clyburn all expressed reluctance to wade deeper into regulating TV services.
Democratic member Michael J. Copps was the only one of five commissioners to vote against the joint venture, warning (PDF) that the deal "opens the door to the cable-ization of the open Internet."
I hope he's not right. But Comcast shareholders, in turn, need to hope this combination fares better than such earlier fusions of content and connectivity as the disastrous AOL-Time Warner marriage. And that may be a bigger and scarier unknown than any restrictions the Feds could have handed down.
Now I'd like to know what Comcast customers think: Are you happy with what the company's done with your money?
