D.C. Handicaps the Deal


When the government gauntlet is run — in about a year from now, according to handicappers — the Comcast-NBCU joint venture will likely get government approval, but not before serious scrutiny on the access-to-content issue, both on-air and online.

The Comcast-NBCU deal didn’t lack for vocal critics last week. The American Cable Association, a trade group representing independent cable operators, suggested its collection of public interest pledges was a “Band-Aid on an ax wound.” Rep. Maurice Hinchey (D-N.Y.) called the deal a dangerous precedent for future consolidation with “devastating impact.”

But the key will be what the Federal Communications Commission and the Justice Department (or the Federal Trade Commission) have to say, with an assist from legislators.

On a conference call, top executives at Comcast and NBC had no comment on what government conditions might be deal-breakers, but Comcast chairman and CEO Brian Roberts appeared confident it would not come to that: “We have had a pretty good history of finding ways to get transactions approved that are fair and pro-consumer,” he said.

The FCC’s consideration of the merger goes beyond antitrust concerns to public-interest protections. So, the Democrat-led commission could well apply explicit program-access conditions that go beyond Comcast’s pledges. For example, Media Access Project president Andrew Schwartzman said he expects mandating nondiscriminatory access to terrestrially delivered regional sports nets (the terrestrial exemption) will be one of the conditions.

A veteran cable attorney agrees, saying he’ll look for the FCC to enforce some rights of access for small content companies. “What Comcast has left open is folding the tent on the terrestrial exemption,” the attorney said.

Comcast executive vice president David Cohen said he expects the exemption to come up, as it did when Comcast and Time Warner Cable bought Adelphia Communications’ cable operations. He points out, though, that Comcast already does not assert the exemption, per Adelphia merger conditions, anywhere but Philadelphia, and is ready to make Comcast SportsNet Philadelphia available to DirecTV just as soon as DirecTV and the National Football League make the “NFL Sunday Ticket” out-of-market game package available to cable on nondiscriminatory terms.

If the exemption is raised, he said, Comcast will be happy to discuss it.

Schwartzman said he expects the process to take a long time. “Depending on whether the Justice Department or the FTC gets it, the antitrust review will be much more searching than has heretofore been the case,” he said. “It will not be approved without some very significant concessions.”

Free Press policy director Ben Scott is dead set against the deal, but is not willing to predict its demise. “Truth is, I don’t know,” he said. “I think they have done an impressive job of creating a narrative of inevitability, but the more I analyze the facts of this combination the more skeptical I am that it passes antitrust scrutiny and public interest scrutiny.”

Scott said he would have a better sense of the merger’s chances when he sees what happens on the Hill. Both the House Communications Subcommittee and Judiciary Committee have already said they will hold hearings on the deal.

What conditions would make the deal palatable to Free Press? Scott said none that would leave the deal standing.

Whether it is Justice or the FTC, either will give this a very hard look, said Christopher Kelly, a partner at Mayer Brown and former member of the Justice Department’s antitrust division. He said a lot of people in both departments who know the industry and “who haven’t had the opportunity to do much in the area in the last eight years or so, and they are going to be raring to go.”

He said he expects Justice will get the review, and said they will look hard at the online access issue, as well as any complaints from competitors that the deal could cut off the programming spigot.

While agreeing that the government would put the deal under a microscope, and would look hard at the online element, Schwartzman and Kelly parted company on how effective Comcast’s public interest pledges would be.

“What they have offered up is nothing,” Schwartzman said. Kelly disagreed. Though he said the companies “are not exactly giving blood,” he thinks the conditions will play well with the FCC audience.

Michael Copps, a Democrat FCC commissioner and outspoken critic of media consolidation, said he the thought the deal would have a “steep climb” before he’s persuaded. But FCC chairman Julius Genachowski had no discouraging words, with the only comment from a spokeswoman being that the deal would get a fair and impartial hearing. Cohen said he had spoken with Copps, and the commissioner had acknowledged the company’s commitments on localism, public interest programming and news.

Cohen said that he doesn’t think there is any need to create a “separate legal paradigm” because it is a vertical transaction that does not increase concentration of ownership. But he also said he thinks the company’s agreement to extend program access to retrans is an extension of existing law.

“I am not aware of any responsible legal view that would say the program access rules apply to retransmission consent,” Cohen said.

Comcast’s pledge, he said, is to make retransmission consent available to competitors on a nondiscriminatory basis, though that does not necessarily mean at the same price.

Kelly pointed out that the Tele-Communications Inc./Liberty Media deal got through a tough DOJ investigation, “subject to commitments along the lines of what you have here from Comcast to not discriminate against rivals. At the end of the day my guess is that it will get this through the antitrust folks in Washington.”

Added Schwartzman: “In the end you have to figure more likely than not it will get through.”