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FCC Blesses Condition-Laden Comcast-NBCU Deal

Jeff Baumgartner
1/18/2011

The Federal Communications Commission (FCC) , in a four-to-one vote, approved a deal that will soon give Comcast Corp. (Nasdaq: CMCSA, CMCSK) control of NBC Universal , but imposed a range of conditions aimed at protecting the still-developing online video market. (See Comcast-NBC Almost Wed, Comcast-NBCU Faces Full-Court Press , and FCC Eyes Conditions for Comcast-NBCU Merger.)

FCC Democratic Commissioner Michael Copps was the deal's lone dissenter, claiming that it "confers too much power in one company's hands."

With the FCC stamp, the Justice Department is also expected to approve the $30 billion deal and pave the way for the deal to close by the end of the month. [Ed note: The DoJ also approved the deal Tuesday afternoon, with similar conditions. More detail below.]

The deal, which will give Comcast 51-percent control of NBCU and a resulting joint venture, was announced on Dec. 3, 2009. (See Comcast to Take Control of NBC Universal.)

As expected, the FCC hit Comcast with a range of conditions designed to foster video competition, particularly when it comes to the emergence of over-the-top (OTT) video distribution and terms for programming owned and distributed by the merged entity. Some of the conditions and commitments that will remain in effect for seven years include:

  • Ensuring reasonable access to Comcast-NBCU programming for multichannel distribution. In part, this condition establishes "an improved commercial arbitration process" for resolving disputes about pricing, terms and conditions for Comcast-NBCU programming.

  • Protecting the development of online competition. Among these terms, Comcast and NBCU must provide to all MVPDs (multichannel video programming distributors) fair market value and non-discriminatory prices and terms for any affiliated content that Comcast makes available to its own subs or to other MVPD subscribers. The condition also holds Comcast accountable for offering its video programming to "legitimate" online video distributors (OVDs) on the same terms and conditions that would be available to an MVPD.

    Additionally, Comcast can't "disadvantage rival online video distribution" via its high-speed Internet service and/or set-top boxes. Comcast is also prevented from "unreasonably" withholding programming from Hulu LLC .

    However, the FCC is not asking Comcast to divest NBC's stake in the Web video hub. According to an FCC official, Comcast can have ownership of Hulu, but can't have any managerial control. News Corp. (NYSE: NWS) , Walt Disney Co. (NYSE: DIS) and Providence Equity Partners also own part of Hulu.


The FCC also approved the deal with a number of voluntary commitments made by Comcast and NBCU, including but not limited to:


  • Offering broadband service for less than $10 per month -- and PCs, netbooks and other computer equipment for less than $150 each to roughly 2.5 million low income households. Comcast is also on the hook to expand its broadband networks to about 400,000 additional homes in six additional rural communities, and provide free video and high-speed Internet service to 600 new "anchor institutions," such as school and libraries.

  • Increasing the availability of children's programming on its NBC and Telemundo broadcast stations, and adding at least 1,500 more choices to Comcast's video-on-demand offerings for children.

  • As part of its programming diversity commitment, Comcast will have to add at least 10 new independent channels to its cable-TV lineup.


Copps warns of the 'cable-ization of the open Internet'
Copps dissented on grounds that he thinks Comcast-NBCU will be too big and powerful and that the deal "grievously fails the public interest."

He added that the resulting joint venture "opens the door to the cable-ization of the open Internet. The potential for walled gardens, tollbooths, content prioritization, access fees to reach end users, and a stake in the heart of independent content production is now very real."

The American Cable Association (ACA) , which represents Tier 2 and Tier 3 MSOs, praised the conditions in general, but highlighted FCC Commissioner Mignon Clyburn's insistence that the conditions "provide all small pay-TV operators with remedies designed specifically to protect them from the harms of this transaction."

The ACA has been concerned that the deal would reduce competition and allow Comcast-NBCU to run roughshod over ACA members in negotiating for access to key programming services. (See ACA: No Stopping Comcast-NBC Merger and ACA Seeks Strong Conditions on Comcast-NBCU.)

Update:
The Department of Justice also approved the deal on Tuesday after reaching an agreement that the new joint venture license programming to online video competitors.

The DoJ settlement is similar to the competitive conditions imposed by the FCC, including one holding that Comcast must relinquish its management rights in Hulu and continue to make NBCU content available to Hulu comparable to the programming Hulu obtains from Disney and News Corp.

"Without such a remedy, Comcast could, through its seats on Hulu's board of directors, interfere with the management of Hulu, and, in particular, the development of products that compete with Comcast's video service," the DoJ said, in a statement.

— Jeff Baumgartner, Site Editor, Light Reading Cable

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BobCC
BobCC
12/5/2012 | 5:15:12 PM
re: FCC Blesses Condition-Laden Comcast-NBCU Deal


Has anyone seen any detail to this provision?

Jeff Baumgartner
Jeff Baumgartner
12/5/2012 | 5:15:12 PM
re: FCC Blesses Condition-Laden Comcast-NBCU Deal


The more detailed order hasn't been published yet, but here's how the FCC explains it in today's announcement:

·         Broadband Adoption and Deployment.  Comcast will make available to approximately 2.5 million low income households: (i) high-speed Internet access service for less than $10 per month; (ii) personal computers, netbooks, or other computer equipment at a purchase price below $150; and (iii) an array of digital-literacy education opportunities.  Comcast will also expand its existing broadband networks to reach approximately 400,000 additional homes, provide broadband Internet access service in six additional rural communities, and provide free video and high-speed Internet service to 600 new anchor institutions, such as schools and libraries, in underserved, low-income areas.

Jeff Baumgartner
Jeff Baumgartner
12/5/2012 | 5:15:12 PM
re: FCC Blesses Condition-Laden Comcast-NBCU Deal


Earthlink wanted an open ISP access condition applied so this deal such as the one that was applied to the Time Warner -AOL deal.  Neither the DoJ or FCC accepted that argument.  JB


 

Jeff Baumgartner
Jeff Baumgartner
12/5/2012 | 5:15:12 PM
re: FCC Blesses Condition-Laden Comcast-NBCU Deal


Also, as expected, Comcast agreed to offfer a stand-alone cable modem service for $49.95 per month.  Comcast already markets an unbundled service, so nothing all that new there, but now it's a codified condition of the NBCU deal.


JB


 

BobCC
BobCC
12/5/2012 | 5:15:11 PM
re: FCC Blesses Condition-Laden Comcast-NBCU Deal


Thanks Jeff...


We have a project going at the Community College of the Dstrict of Columbia that would greatly benefit from this type of commitment.


I'll keep following things.


 

paolo.franzoi
paolo.franzoi
12/5/2012 | 5:15:09 PM
re: FCC Blesses Condition-Laden Comcast-NBCU Deal


 


You know...its funny...there was this other thread here yesterday talking about the pain points associated with the ISP service and being a carrier.  But nobody seems to want to hand their ISP business to say Earthlink and rent them bandwidth.  Wonder why that is?


seven


 

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