FCC Blesses Condition-Laden Comcast-NBCU Deal
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.)
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