Deal Conditions Pile On

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Washington — Comcast and NBC
Universal have agreed to numerous voluntary
public-interest conditions on
their proposed joint venture, and the Federal Communications
Commission is preparing to impose
more in a lengthy addendum to its
draft approval covering program access,
network neutrality and many other concerns.

While still not enough to assuage critics,
the conditions represent the “feeding
frenzy” that typically surrounds media
mergers — and could be the new price of
entry in an era where such deals involve
an increasing number of lines of business.

The pledges will cost Comcast millions
of dollars and range from setting up
venture-capital funds for minority ownership,
to development dollars for independent
programmers, to investments in
broadband deployment and independent
and local programming.

But Comcast is not balking at the expense
or the laundry list of conditions,
which may be a clue as to why deal opponents
are far from satisfied.

According to a source familiar with the
document, the FCC’s list of conditions on
the draft tentatively approving the Comcast-NBCU deal
runs to more than 25 pages. By contrast, the conditions of
Comcast and Time Warner Cable’s purchase of Adelphia
Communications cable systems in 2006
ran for about five pages, and the first big
cable combination with implications for
online access — the 2000 merger of America
Online and Time Warner Inc. — ran for
five pages.

Why so many conditions? For
one thing, Comcast and NBCU
volu nteered a raft of public -
interest conditions at the outset to try and
pave the way for the $13.75 billion deal,
which would combine the current NBCU’s
cable and broadcast networks and studio
library with Comcast’s national programming
assets in a joint venture that would
be 51% controlled by the cable operator.
(NBCU’s current parent, General Electric,
would hold 49% of the JV.)

The merger partners sweetened the pot
even more, crafting side deals with minority
groups, TV-station affiliates and,
toward the end of the process, agreeing
to voluntary conditions targeting two of
the FCC’s sweet spots: broadband deployment
and community media.

With the caveat that he had not seen
any of the conditions, a veteran Washington
lawyer agreed that one reason why
there are so many is the number of different
business lines affected by the merger.
Those include broadcast-TV affiliates,
multichannel-video and online competitors, unaffiliated
program networks, regional sports networks and telcos.

“The previous mergers had opponents and those affected,”
he said, “but not as many lines of business.”

And with each business segment involved comes a different
set of demands. “There’s been a growing understanding
that mergers are feeding frenzies for competitors,
and the scope of the businesses here permits many to try
to get conditions that might not pass the laugh test with,
say, a bankrupt Adelphia sorting its assets or mostly a
change in ownership that [DirecTV’s sale to Liberty Media]
involved,” the attorney said.

Rebecca Arbogast, managing director at Stifel Nicolaus,
said the laundry list of conditions was to be expected. But
it’s been her belief for a while that most of those caveats
“would not be material” to the company, she said.


Comcast has suggested that nothing in the draft was a
deal-breaker, which would include the conditions on
online access and network neutrality, at least as originally
drafted. (It told the FCC last week that online conditions
must be narrowly tailored, or they could have
“significant unintended consequences.”) The Philadelphia-
based MSO has already said it would abide by network-
neutrality conditions, even if they get thrown out
in court.

“Anytime there is a major, controversial merger, it attracts
lots of calls for ‘public-interest’ conditions,” Arbogast
said. “This merger had a broad canvas to paint these
on, because it has both broadband and media components.”

But broad canvas or no, deal critics like Free Press said
the FCC conditions, at least as reported by Multichannel
News and other press outlets, have failed to go beyond preserving
an already problematic status quo. It’s important
not to confuse the quantity of conditions with quality, Free
Press policy counsel Corie Wright said.

“The voluntary commitments are in some ways nice
gestures,” she said, “but it is not clear they are sufficient
to remedy a lot of problems. I wouldn’t say they are bad,
but the question is, do they really move the ball down
the field?”