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Comcast-NBC merger gains traction

By Cecilia Kang
Washington Post Staff Writer
Friday, December 24, 2010; A07

The chairman of the Federal Communications Commission said Thursday that he will vote to approve the proposed merger of Comcast and NBC Universal as long as certain conditions are met, a significant step toward the formation of a new Internet and media powerhouse.

Julius Genachowski issued a draft order of approval for the merger on the condition that the companies promise to share TV shows not only with competing cable and telecom services but also, to some extent, with new Web platforms, such as Apple TV and Netflix, that want to offer television over the Internet.

The order was circulated to the other four members of the FCC for consideration, with the agency likely to vote next month.

The Justice Department, which is conducting a separate antitrust review of the deal, has not indicated its position. But a source familiar with the agency's thinking said the companies have not satisfied concerns about how the deal might affect competition, particularly in the evolving industry of Internet TV.

Observers said the companies, eager for approval after a year-long review, want to alleviate those concerns with specific commitments to preserve competition. They say the deal will probably be approved by both agencies, allowing the industry giants to create a media titan that can reach Americans through TV sets, smartphones and computers.

Together, the companies have 16.7 million broadband subscribers, about 23 million cable customers and a vast library of popular shows, including "Saturday Night Live" and "The Office."

Comcast said it has no incentive to withhold shows from competitors or block rival programs from getting to its customers because doing so would be bad for business. The company has agreed to a number of conditions to appease regulators, saying it would operate fairly as both the owner of television content and a distributor of those shows.

"Starting on the day of the deal's announcement, we have emphasized that this transaction is pro-competitive, pro-consumer, and will deliver real public interest benefits," Comcast's executive vice president, David Cohen, wrote on a blog after the FCC's announcement.

The merger has been opposed by consumer interest groups, competing cable and broadcast companies, online television distributors, and some lawmakers, who say the merged company might wield too much influence over the fast-evolving Internet and media industries.

"It's hard to imagine how a cable giant like Comcast owning a content empire like NBC Universal could be a plus for consumers' pocketbooks and competition," said Parul Desai of Consumers Union. "Since the FCC is likely to approve the deal, it must take seriously obligations to protect the public interest and adopt strict and enforceable conditions."

The FCC's probe focused on a broadly interpreted mandate of ensuring that the union is in the public interest. As such, Comcast has agreed to promote independent programming and diversity in media.

FCC senior officials said in a press briefing Thursday that the agency found the merger to be in the public interest but had concerns including sharing content with other cable and telecom companies, blocking content to its own subscribers, sharing shows with Internet television companies, broadcast obligations, and diversity in media.

On Internet television obligations, the senior FCC officials, who spoke on the condition of anonymity because the decision is not yet final, said that the agency would not try tocreate industry-wide regulation through the merger and that conditions should apply directly to the business deal. The officials would not give details on conditions negotiated in the deal.

Sen. Herb Kohl (D-Wis.), chairman of the Judiciary subcommittee that oversees antitrust issues, said Comcast and NBC should divest their stake in the online video site Hulu to ensure that Comcast does not have too much influence online. Analysts say that isn't expected to happen but that regulators might require limits to Comcast's operational role over the Web company.

The merged company may also be required to share NBC content with Internet companies, such as YouTube and Roku, if other networks, such as CBS and Walt Disney, are doing so.

The Justice Department, meanwhile, is investigating whether the merger harms competition in television and cable markets as well as newly developing industries online.

A source familiar with the antitrust agency's thinking said regulators aren't quite ready to issue a consent decree of approval. The source said the agency is working on language that would ensure the company's commitment to avoid using its dominant power to hurt new competitors.

The agency will also look into conditions that prohibit "anti-retaliatory" moves, much as it did in the merger of Ticketmaster and Live Nation. In that deal, the department said the new company couldn't retaliate against any venue owner that chooses to use another company's ticketing services or promotional services.

In the Comcast-NBC deal, analysts said that would mean the merged company could not punish business partners who do business with Comcast's or NBC's competitors.

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