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With Comcast-NBC conditions, Feds try to open a door to online video

By Rob Pegoraro
Washington Post Staff Writer
Saturday, January 22, 2011; 5:19 PM

Ideally, nobody should have to worry about one TV and Internet provider buying a TV network. In that ideal world, you'd have enough choices for those services that competition would keep the newly combined company honest.

But we don't live in that world. In this one, Comcast - the nation's largest TV and Internet provider - has a monopoly in some homes and, more often, is one of two options for high-speed Internet and one of three or four for TV.

Whatever you read about the union of Comcast's video properties and those of NBC Universal, blessed by the government Tuesday, keep that in mind. This isn't a functioning market along the lines of an Economics 101 text.

When the FCC and the Justice Department approved the Comcast-NBC deal, they tried to account for that problem by placing conditions.

Will they avert what opponents are calling a Comcastrophe, in which many people's least favorite company crushes its rivals? When David Cohen, Comcast executive vice president, summed things up on a conference call Tuesday by saying, "I don't think any of the conditions is particularly restrictive," does that mean Comcast got a free ride?

Most of the rules and limits fall into two categories: Those that aim to prevent abusive conduct against the Philadelphia company's current competitors and those that look to crack open the door to additional rivals in the video-service market.

(Comcast also pledged a variety of moves to increase the diversity of the programming put out by the combined Comcast-NBC Universal venture. That is a good thing to do, but it's also on Page 1 of corporate playbooks.)

On reflection, the terms imposed by the feds look a little more positive than they seemed Tuesday. The government didn't attempt to remake this company through regulation, but it does seem to have thought a few chess moves ahead.

The most important non-abuse provisions limit Comcast's ability to keep its and NBC's video content - including regional sports networks, cable channels such as MSNBC and the Universal Pictures movie library - from other services.

Comcast can no longer withhold selected programming (such as the sports networks it has refused to provide to satellite broadcasters in the Philadelphia market). And any carriage disputes over pricing will be settled in binding arbitration.

The company can't retaliate against other networks when they seek carriage on its own cable systems, although no binding dispute-resolution system will settle the inevitable dust-ups.

Comcast is also pledging to follow the basic net-neutrality rules enacted by the FCC - though any company in its position would say the same.

And in the bargain, Comcast has to give up any control over Hulu, although it will retain NBC's partial ownership of the popular video site.

Unfortunately, the FCC and Justice punted on the chance to require that Comcast and NBC stop blocking Internet users from viewing videos on their public sites if they use the "wrong" software, such as Google TV.

Things get a little more interesting with provisions governing how Comcast-NBC may do business with current and emerging online-video services.

First, Comcast has to offer standalone, no-TV-required Internet access with downloads of at least 6 million bits per second for $49.95 a month for the next three years. Although Comcast says that represents no change from its current practice, it has charged extra for Internet-only service in the past.

(It's also pledging to reach an additional 400,000 homes and offer a discounted, $9.95/month plan for families with children eligible for free lunches in school under federal guidelines, which could expand broadband access across the country.)

Second, Comcast-NBC can't say no to a video site that wants to resell its content.

In the simpler but less-likely scenario, a site could agree to carry the company's entire lineup online, paying about the same as a cable or satellite service would.

In a second possibility, once an Internet video service inked a distribution deal with any of a defined set of competitors to NBC, Comcast would have to offer it "comparable" content on similar terms and conditions. So, for example, it can't yank NBC content off Netflix.

It's possible that none of these Hollywood companies will go beyond today's Web arrangements. They have seemed content with restrictive "TV Everywhere" schemes like Comcast's own Fancast Xfinity TV that limit access to current cable customers, with no option for others to pay for Web-only viewing.

But maybe they will. Public Knowledge lawyer Harold Feld suggested that Viacom had reason to upset the current system, while Stifel Nicolaus telecom analyst Rebecca Arbogast said Disney might be more likely to be a spoiler.

And from then on, what Arbogast called a "one-way ratchet" could lead to an increasing variety of cable-bound content appearing online.

We'll find out in seven years, when all these conditions expire. If the entertainment industry continues to march in lock step, against the obvious wishes of customers looking for cheaper, more flexible ways to watch TV, the government's gambit won't go anywhere. Then again, Comcast's shareholders should be nervous about the odds of this faring any better than such earlier unions of content and connectivity as the ugly AOL-Time Warner marriage.

There's probably only one safe prediction to make about this union and its terms: Cable rates will continue to go up.

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