Policy

NBC Universal: Conditionally Comcastic

1/03/2011 12:01 AM Eastern

Washington — Comcast hopes to get
official Federal Communications Commission
approval of its NBC Universal
joint venture this month, after commissioners
vet and vote on a draft approval of
the deal replete with conditions on competitors’
access to video and online content,
network neutrality and more.

The FCC offered no conditions that the
companies couldn’t live with to get the deal
done, after marathon discussions with both
the commission and the Justice Department.
In a blog post, Comcast executive vice
president David Cohen said the draft, as circulated,
“will enable us to operate the NBC
Universal and legacy Comcast businesses in
an appropriate way.”

Last December, Comcast agreed to a
$13.75 billion deal to combine its national
programming assets with General Electric’s
NBC Universal unit in a joint venture. Comcast,
the nation’s No. 1 MSO, will control 51%
of the resulting JV.

The deal conditions cover a broad swath of
regulatory issues and should quell many of
the concerns raised by detractors of the deal.
Generally, all the conditions are in effect for
seven years, with some exceptions.

Broadly, the conditions include:

• Allowing competitors nondiscriminatory
access to online content, the first such
FCC condition, but perhaps not the last if
the video-distribution model continues its
online migration.

• Program-access conditions applied not
only to regional sports networks and TV stations,
but also to national programming
networks like USA Network and CNBC.
(“Essentially everything you own,” said
one source.)

• Standstill
agreements
that would
keep TV stations
and cable
networks
on cable systems
during
arbitration for retransmission-consent disputes.
(Presumably, this would “encourage
parties to seek arbitration before contracts expire,”
the source said.)

• Network-neutrality conditions mirroring
those in the FCC’s just-passed new rules, but
in effect for the seven-year length of the condition.

Those are just some of more than a dozen
conditions listed in an appendix of more than
25 pages, according to a source familiar with
the document. Other conditions cover arbitration,
local news, carriage of noncommercial
stations and, according to one source, applying
network neutrality to set-top boxes as well
as the high-speed Internet network.

The draft still has to be voted on by the
commissioners — expected in January — and
could still be tweaked. However, a source said
conditions already reflected input from all the
commissioners on key issues.

While aides to Genachowski declined to
talk about the specific conditions, the online
access conditions address the first broadbandera
merger of an Internet-service provider and
a major content provider, ensuring that competitors
can access online content on reasonable
terms.

Program-carriage conditions include arbitration
and a more streamlined complaint process,
as well as the standstill agreement with a
“true up” provision when there is a deal. That
means either the distributor would pay more or
the supplier would return some overpayment,
depending on the deal.

There is also a “good-neighbor” condition
of sorts, responsive to Bloomberg LP’s
complaint that Comcast would have the
ability and incentive to give its Bloomberg
TV a less-prominent position on its systems
than its co-owned CNBC or MSNBC
channels.

The condition requires that if Comcast does
group together or “neighborhood” those channels,
Bloomberg and similarly situated business
news channels must be included in that
grouping.

According to sources familiar with the
approval, some, but not all, of the Comcast
public-interest pledges have been made into
official conditions. Where possible, the affiliate
agreements and specific pledges are official,
though some constitutional issues
prevented parts of Comcast’s memoranda
of understanding with minority groups
from being enforceable conditions, and other
public-interest pledges were too amorphous
to include. The document is expected
to note those pledges and include them in a
lengthy appendix, however.

A source reviewing the conditions document
said that the online-access conditions
would not apply to every streaming service
that sought access to Comcast-NBC Universal
online content under nondiscriminatory conditions,
but only those services that met certain
qualifi cations.

The Justice Department is not expected to
block the deal, and will make that announcement
essentially in tandem with the FCC,
which has been closely coordinating its review
with the DOJ.

SWEETENING THE POT

Comcast sweetened its voluntary promises package only days before the
FCC’s transaction team announced its decision on approving the NBC Universal
joint venture, adding conditions tailored to address current high-profile
concerns of the Genachowski commission, such as broadband deployment,
community media and spectrum reclamation.

COMCAST PROMISED TO:

• Provide low-cost broadband service ($9.95 a month) and no-cost hookups for low-income families;

• Continue carrying — for the next seven years — the programming of any noncommercial TV station
that gives up its spectrum in the FCC’s wireless broadband spectrum reclamation push; and

• Team with nonprofit online local news outlets in half of its TV-station markets. (The FCC is currently
preparing a report on ways to foster community media.)

SOURCE: Multichannel News research

September