Facing tough questions from politicians and withering reviews from critics, Comcast and NBC Universal defended their deal on Capitol Hill last week.
In a pair of hearings, the partners argued that the deal to give Comcast, the nation’s largest MSO, 51% control of NBCU is a consumer-friendly, vertical arrangement that will preserve the NBC network’s broadcast model while delivering TV anywhere and everywhere.
Looking to avoid opening up a new regulatory front in the online video space, the companies have argued that Comcast and a Comcast-controlled NBCU would combine for only a sliver of a hotly competitive online-video market.
Last week, though, that pitch came up against legislators in both the House and Senate who seemed determined to make online video a big part of the conversation. House Energy & Commerce Committee chairman Henry Waxman (D-Calif.) teed up the focus on online content by suggesting that TV would become another app in the broadband arsenal, and several senators extracted pledges that their favorite NBC programs would not be put in the “TV Everywhere” basket of online shows available only to cable subscribers.
What was clear from last week’s hearings is that, at least on the Hill, the deal is viewed as the combination of the largest residential broadband company and a major content supplier, with access to online programming talked about in the same breath as access to traditional content. That should come as no surprise in a town where broadband is driving policy on everything from entertainment and education to healthcare and energy.
There are no program-access or carriage rules for the online space, a point made during the hearings. Thus, some legislators were worried that the companies would have the power to shape the future of online video — and the incentive to favor their own content in that space.
Several House Democrats, led by Rep. Ed Markey (D-Mass.), called for network-neutrality conditions on the deal.
“The rule that could emerge is you can’t favor your content. I can see Congress doing something in that regard,” said a veteran cable attorney.
It’s not clear how much effect last week’s Capitol Hill venting will have. The Federal Communications Commission and the Justice Department, not the subcommittees, are required to sign off on the deal, with Congress in a secondary oversight role.
“This seems more like an episode of Montel Williams, a discussion about a topic of interest to society,” said the attorney, though he added that Congress “could clearly signal its enormous disappointment in doing this.”
On the Senate side, though, it seemed more like an episode of Jerry Springer, with Sen. Al Franken (D-Minn.) throwing the rhetorical equivalent of folding chairs. The hearing opened with Subcommittee chairman Herb Kohl (D-Wis.) taking aim: Comcast’s voluntary conditions would not be sufficient, he said, adding that they were only a starting point.
Kohl slammed the cable industry for price increases and what he called existing obstacles to competitors’ access to programming. Many fear such hurdles would be exacerbated by a Comcast-controlled NBCU, he added.
Kohl said his four major areas of concern were: Comcast’s ability to deny must- have programming or make rivals pay unreasonable prices; the potential move of NBC programming to cable; the ability of independent networks to get distribution on Comcast systems; and the effect on video competition.
NOT READY FOR PRIMETIME?
Comcast chairman and CEO Brian Roberts and NBCU president Jeff Zucker found themselves repeatedly challenged, and occasionally cut off, by a bordering-on-belligerent Franken, a former Saturday Night Live writer and performer who made it clear he did not think the merger was ready for primetime.
Franken suggested the companies’ public-interest promises could not be trusted. Comcast was arguing that FCC rules would protect consumers on one hand, he said, while fighting the same rules in court. Franken stopped just short of saying Roberts had misled him in a meeting they had in his office about the issue.
Roberts termed the difference of opinion a misunderstanding between challenges to program-access rules and program-carriage rules. Comcast lawyers may have argued against program access, Roberts added, but he was ready to commit to adherence to such rules even if the courts threw them out.
But the program-access rules are ineffective, said Colleen Abdoulah, CEO of independent cable operator WideOpenWest. With no timeline for review, she said, the FCC sometimes takes months or years to make program-access determinations.
The process — in which a complainant must prove an usurious price — makes such a case almost impossible to prove, she added, since confidentiality clauses in contracts make it impossible to obtain pricing information.
The hearing became something of a tag- team match with Roberts and Zucker against Franken, Andrew Schwartzman of Media Access Project and Mark Cooper of the Consumer Federation of America, with some help from Abdoulah.
Cooper and Schwartzman said there were no conditions that would make the deal palatable, while Abdoulah said it would take nondiscriminatory access to programming and a complaint process that was not stacked against the complainant.
Zucker’s argument in the Senate and earlier House hearing on the deal is that in today’s media free-for-all, Comcast’s commitment to the broadcast network model could be crucial to its survival.
Ultimately, the $30 billion Comcast-NBCU deal will likely be approved, unless activist groups convince lawmakers that online access is a game-changer or that there is more horizontal concentration than there seems to be. Even the American Cable Association, which has major problems with the deal, conceded it is likely to get through.
But more conditions will almost certainly be applied. Comcast essentially conceded that point by adding a new condition of its own related to the hot-button issue of program access.
Among the promises secured by legislators during last week’s Hill hearings: Roberts committed to no “massive” layoffs, to not migrating NBC.com content to the TV Everywhere service (available only to cable subscribers); to fair bargaining with unions; and, possibly, to outside arbitration in the case of an impasse.
Zucker and NBC affiliate board chairman Michael Fiorile had a bit of a disagreement over the need of separation between retransmission consent and affiliation discussions.
Fiorile said structural separation between such negotiations — enforced by the FCC — needs to be in place. Comcast and NBCU would have the ability to withhold network affiliation or bypass the stations if they cannot agree on retransmission consent, he said.
'DEAL MUST BE BLOCKED’
Zucker said he did not think such structural regulations were necessary.
Never has a major cable operator controlled one of the Big Four cable nets, Fiorile said, and that’s why there needs to be clear, specific and enforceable conditions.
At one point, Waxman tried to get Roberts to commit to not favoring Comcast-owned networks, citing a comment by Steve Burke, the MSO’s chief operating officer, that its networks were treated as siblings as opposed to strangers.
Roberts said he was not familiar with the context, but that the company sought the best content, regardless of where it came from. Waxman said he thought the FCC would need to look at how the potential to play favorites with owned content could affect independent programmers and consumer choice.
Meanwhile, seven Democrats led by Rep. Maurice Hinchey (N.Y.) fired off a letter to the Attorney General and FCC chairman calling on them to block the deal entirely.
According to a copy of the letter sent to Attorney General Eric Holder and FCC chairman Julius Genachowski, they said that the deal would be more consolidation, less choice and higher cable bills, the last a point hammered on in the Senate hearing.
“This merger would further limit the American people’s access to a wide array of information and broadcast content that is inherently necessary for a properly functioning democracy,” said Hinchey in announcing the letter. “The Comcast-NBC Universal deal must be blocked for the good of the American people.”