Analysis: FCC Sets Low Broadband Bar For Comcast
Key Conditions for NBCU Deal May Not Spur Broadband Adoption as Intended
By Todd Spangler -- Multichannel News, 1/21/2011 1:33:37 PM
The Federal Communications Commission attached conditions on Comcast's deal for NBC Universal aimed at widening U.S. broadband uptake -- but it appears several key provisions will not change anything.
Among the requirements, Comcast over the next three years will extend broadband service to 400,000 additional homes and offer a 6 Megabit per second tier for no more than $49.95 per month.
"We find that these commitments will lead to greater broadband demand, deployment and adoption, and thus adopt them as conditions so that the public will realize these considerable benefits," the FCC said in its approval order, released Thursday.
But the MSO should easily surpass the broadband-buildout commitment in the normal course of business, according to analysts.
"Seeing that Comcast added about 400,000 passings over the past year, and more than that the prior year, the requirement is irrelevant," Leichtman Research Group president Bruce Leichtman said. "Comcast was going to do these things anyhow."
From September 2007 to September 2010, Comcast increased the number of homes passed from 48.3 million to more than 51 million, according to filings with the Securities and Exchange Commission.
That's an increase of at least 2.7 million homes, or 5.6% over that three-year span -- far more than the 400,000 additional homes over 2011-14 that Comcast committed to under the FCC conditions, which would amount to less than a 1% increase over that time period. For the sake of comparison, the cable industry's increase in high-speed data homes passed from 2006-09 was 5.8%, according to SNL Kagan data.
Still, Republican FCC commissioner Meredith Attwell Baker, in an interview for C-SPAN's Communicators series, said the agency should not have placed any broadband buildout requirements as part of the merger approval. "[I]t seems to me that nowhere is there a nexus between a merger between a programmer and a distributor that causes us to force them to build out broadband to households," she said.
Meanwhile, the FCC said the reason it included a mandate that Comcast continue to deliver standalone broadband at a set price and minimum speed was "so that customers can access online video services without the need to purchase a cable television subscription from Comcast."
However, Comcast already provides standalone Internet service and didn't have any plans to change that.
Furthermore, Comcast offers its 12-Mbps Performance broadband tier for $42.95 to $60.95 per month, depending on market and bundling options -- meaning that unless broadband rates rise significantly in the next three years, the FCC-mandated price-capped tier is a worse value.
And under a current promotion, Comcast is letting existing customers upgrade to the Performance tier, which provides temporary burst speeds up to 15 Mbps with the PowerBoost feature, for $19.99 per month for six months.
Other broadband-related FCC conditions on Comcast/NBCU address bringing high-speed Internet to "underserved" areas. Comcast will hook up an additional 600 locations such as schools, libraries and other community institutions in low-income neighborhoods over three years, at the MSO's expense.
In addition, the operator pledged to offer its Economy tier with up to 1.5 Mbps downstream -- normally $24.95 per month -- for a monthly price of $9.95 to up to 2.5 million qualifying low-income households. Comcast also must subsidize computer equipment to let low-income families obtain a PC or netbook for less than $150.
But this is not a new idea, as the cable industry proposed a similar voluntary program to offer affordable broadband to low-income families. Under the National Cable & Telecommunications Association's "A+," or "Adoption Plus," initiative floated in December 2009, MSOs would extend half-price basic broadband to some 1.8 million households. To date, the A+ program has not been rolled out by the industry.
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