Comcast-NBCU Will Face Opposition In DC

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The NBCU-Comcast joint venture will face plenty of opposition in Washington, including from Free Press, Consumer Federation of America, unions worried about job losses, and from potentiail competitors including smaller and midsized cable operators concerned about competing with a 1,600 -pound gorilla.

It will be the first media merger to come under scrutiny by the new Democratic majority of the Federal Communications Commission, a Federal Trade Commission under Democratic management, and a Justice Department  with a charter from the Obama administration for more muscular merger reviews.

Look for Congressional hearings, as well House and Senate Commerce committees headed by veteran media critics Rep. Henry Waxman (D-Calif.) and Sen. Jay Rockefeller (D-W.Va.)

The FCC has a self-imposed 180-day shot clock on merger reviews, but that is only a target, not a deadline. It could stretch beyond that, particularly if the FCC is planning any media ownership rule modifications--as part of its quadrennial review--that could implicate the deal.

Free Press had a paper ready for release when the deal was officially announced counting the ways in which the deal was not in the public interest. Not surprising, since it already has a Web campaign to block the deal (http://www.freepress.net/comcast).

Those included that the deal would 1) "eliminate the hard bargaining for distribution and content" between the two formerly separate companies 2) lead to "anticompetitive rates for competitors; 3) increase the costs to consumers; 4) reduce media ownership diversity; 5) decrease competition in emerging online video; 6) and trigger further consolidation to keep pace.

It did not include baseball-style arbitration for retransmission-consent deals, but that is because it doesn't want the resulting company to own any TV stations.

While Free Press has indicated it no conditions are sufficient for a green light for the deal, the paper it released, co-authored by Consumer Federation Of America Resaerch Director Mark Cooper and Free Press policy Counsel Corie Wright, did offer suggested conditions if the government concludes such conditions could "repair the competitive harms."

Those include requiring divestiture of NBC's-owned TV stations; requiring nondiscrimination in carriage of unaffiliated programming on Comcast-owned cable systems; unbundling of Comcast/NBC content to unaffiliated distributors (likely a nonstarter with Comcast/NBCU); and similar access conditions on Internet content.

Combining the cable and studio assets of the two companies is already a red flag to Free Press and other consolidation foes, but online video and targetted marketing are new wrinkles in what is the first big media merger where regulators may be looking at its impact on that space as well, certainly if public interest groups have their way.

Just this week, Jeff Chester, executive director of the Center for Digital Democracy said he was contacting the Hill and regulators to make sure they included online data collection and targeted marketing as part of their merger review.

He has long argued that given the move of audience, and increasingly video, to the Web, that is the next big battle ground for media consolidation.

Calling it "the most important media merger since Lucy met Desi," Media Access Project President Andrew Schwartzman this week said his group will oppose the merger.

"No entity should have control over such a large audience," he said earlier this week following news that GE and Vivendi had come to an agreement on the purchase of Vivendi's stake in the company that would pave the way for that merger.

Schwartzman said that he was particularly concerned about the effects of the merger on distribution of online video.

Not long after rumors of the deal surfaced last month, Free Press, the Communications Workers of America, and the Consumer Federation, signaled they have major concerns.

They argue that the combination of the nation's top cable operator, Comcast, and NBC Universal, with its broadcast, cable, studio and online assets, threatens competition, innovation, labor rights, and the public interest.

Comcast is a big target, particularly for online concerns, given its high-profile FCC smackdown over managing/blocking BitTorrent file sharing and its online marketing efforts. As the biggest cable operator in the country, it is also a sizeable target for consolidation foes already.

Free Press suggested that there was no combination of voluntary or government mandated conditions that would convince it not to oppose the deal.

The media activists have been weighing in loudly and often against the proposed deal, partly as a reaction to analyst's early handicapping that it would probably successfully run the regulatory gauntlet

Analysts at investment firm Stifel Nicolaus have said they expect a Comcast-GE jointly owned NBC Universal to pass government muster in Washington. They argue that while they expect Justice to be "more open" to concerns about verticle integration--owning both the content and the distribution system, it would be tough to establish that the combo would be sufficiently anticompetitive" to warrant blocking the deal.

They suggested baseball-style arbitration for disputes over regional sport networks, collective bargaining for small cable operators and program access guarantees as likely precedent for those conditions.

They also pointed to the rise of AT&T and Verizon as video competitors who would likely push hard for conditions, as well as online video interests like Hulu, in which NBCU has a stake, as factors that would complicate the analysis.

"However, in the end, we believe the deal is likely to be approved," they said.

Others weren't so sure. One cable executive predicted there would be an alliance of broadcasters, smaller cable operators and public-interest groups massed against it.

Matt Polka, president of the American Cable Association, which represents about 900 smaller and midsized cable operators signaled as much this week. In an interview with Multichannel News on the eve of the announcement, Polka said ACA has "a lot of concerns" about the deal. "We have significant concerns about the ability of our members to access programmingand the rates they would have to pay." He says sports is a significant concern about the consolidation of Comcast's regional sports networks and NBC sports programming as a new and powerful competitior for ESPN. That, he said, could create a feeding frenzy in the marketplace with skyrocketing sports rights, "ultimately ending up in the consumers' lap and on their bill."

"I am sure that we will be working with other industry and consumer groups suggesting quite aggressively the harms to consumers that will result from this," he said.  Polka said ACA's view of this deal is similar to its reaction to the melding of News Corp. and DirecTV, which combined Fox TV stations with the satellite operator. "You have essentially what is the harmful consolidation of network programming, cable programming, owned and operated broadcast stations, affiliates, that can be combined in anticompetitive ways."

The FCC imposed conditions on DirecTV-News Corp. because of the "disproportionate leverage" that could be concerted by the combined companies, said Polka. "If that was the case in DirecTV-News Corp., it's off the chart with Comcast-NBCU particularly because of size. The largest cable operator and a major top-three network."

He agrees that the Internet is a new factor since the DirecTV-News Corp. conditions that has to be taken into consideration.

Chester put it bluntly back when the deal began to be more than water cooler buzz. "The DOJ or FTC is going to place Comcast's corporate DNA under an intense antitrust microscope. A Comcast-NBCU deal is the equivalent of Godzilla swallowing Rockefeller Center. Such an unholy marriage between the country's leading cable ISP and multichannel programmer with a broadcast/cable/studio powerhouse will be a political test for the Obama team at the FCC, FTC or DOJ."

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