FCC: Comcast/NBCU In Public Interest

Will have online conditions; Justice unlikely to weigh in until vote by FCC

By John Eggerton -- Broadcasting & Cable, 12/23/2010 11:04:48 AM

FCC Chairman Julius Genachowski has concluded that the Comcast/NBCU joint venture is, on balance, in the public interest, but with the scales tipped by a series of conditions on the deal, as well as the companies' public interest pledges.

The FCC will impose conditions on program access, program carriage, online access, broadcast competition and diversity, localism and other related issues, related to how each might advantage Comcast/NBCU or disadvantage others.

FCC officials speaking on background pointed to various steps the two companies promised, including broadband adoption and deployment, preserving over-the-air broadcasting protections, diversity, localism and children's programming.

Comcast struck a number of outside deals with minority groups and independent programmers to gain regulatory approval of the deal.

While they said the deal posed significant concerns, they said the conditions would be tough and narrowly tailored.

They would not say how long the conditions would be in place.

Those protections will be targeted to both traditional and over-the-top new media delivery. The commission was widely expected to adopt traditional program access conditions, as it has in other mergers, and in recent weeks it appeared clearer that they would extend that to online, where Genachowski has argued an increasing number of folks will be getting content, including on new mobile broadband platforms.

Program access is the ability of competitors to have access to NBCU programming, carriage is the ability of third parties to get the carriage on Comcast platforms, and online access involves access to programming and ability of viewers to get that programming online.

The officials said that the narrow tailoring of the online conditions was because they wanted effective conditions, but ones that recognized the business realities of a nascent online space to avoid unintended harms.

Comcast has argued that such conditions could have such unintended harms.

They also pointed out that FCC Chairman Julius Genachowski's vetting the deal should not be looked at as an opportunity to make industry policy, but to mitigate particular harms to consumers in this particular venture.

The Chairman has not voted the item yet himself. Since this will be the first time the other four commissioners have seen the order, it is essentially the beginning of a conversation about the proposal that could take until early January, particularly given the intervening holidays and the Consumer Electronics Show early next month.

Like the network neutrality draft order, the Comcast/NBCU order could change after that conversation, said senior FCC officials. Any substantive changes or edits would have to be approved by at least three members.

The commissioners will now have as much as four weeks to vote the order, though they could also theoretically vote on it immediately. Aides to various commissioners have suggested the latter is not going to happen given the size and importance of the deal, which combines the largest cable operator with a studio and major network.

One senior official said he recognized that it could take some time given the holiday season and the fact the commissioners will need to look at it. He said he expected the contributions of the other commissioners could be significant, though at the end of the day thought they would be able to agree. He also pointed out that the commissioners had met extensively with all the stakeholders and so were thoroughly briefed on the issues, if not the specific order.

The FCC is coordinating with the Justice Department, which is not expected to announce anything today, according to a source familiar with the Justice process speaking on background. Justice is not expected to block the deal, but instead to announce a consent decree with Comcast/NBCU on the competition policy issues in tandem with the FCC vote on the item, whenever that occurs.

The FCC and Justice have been working closely together on the review, as well as with Comcast and NBCU.

The deal, which FCC officials stressed was a joint venture rather than a merger, creates a company, majority owned by Comcast (51%) that pools all of NBCU's media content with most of Comcast's, with Comcast retaining full control of its cable and Internet assets. Comcast has the option of buying out NBCU parent GE's 49% interest in the joint venture over the next three to seven years.

The FCC's review stems primarily from the transfer of NBCU's broadcast licenses, and Comcast/NBCU had the burden of proving that the venture served the public interest, which is the FCC's standard of review, and includes competition, innovation, localism and diversity. If the augmented benefits (say Comcast's public interest pledges) and mitigated harms (conditions on access to content) tip the scale toward the public interest, the deal is approved.

The FCC is currently in day 208 of its informal 180-day shot clock of reviewing the deal.

Comcast had no comment at press time since the order had not yet been circulated to all the commissioners.