Comcast/NBCU Deal Approved by Justice

Conditions mirror those of FCC

By John Eggerton -- Broadcasting & Cable, 1/18/2011 3:13:35 PM

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As expected, the Justice Department Tuesday followed the FCC in approving the Comcast/NBCU deal, contingent among various agreements with the company, including that it will relinquish any management rights in Hulu.
 
Technically, that approval consists of first filing suit against the deal then announcing the settlement agreement that, with conditions, make it acceptable. Justice said the deal will "preserve new content distribution models that offer more products and greater innovation, and the potential to provide consumers access to their favorite programming on a variety of devices in a wide selection of packages."
 
Justice's conditions on the deal mirror those of the FCC, according to an FCC source, which includes prohibiting Comcast from "unreasonably discriminating in the transmission of an OVD's lawful network traffic to a Comcast broadband customer."

The FCC's approval order also says that Comcast/NBCU has to relinquish its managerial control over Hulu. The goal was to keep the NBC stake in Hulu so it has a vested interest in its success, but not allow it to assert management control. Comcast is also prevented from unreasonably witholding access to Hulu content to competitors.

One of the key Justice conditions requires Comcast to make a linear feed of its programming channels and networks available to competitors.

Justice and the FCC will divide up enforcement duties of its similar conditions, with the FCC taking the lead in enforcement, according to Assistant Attorney General Christine Varney. But complaints about access to programming can seek arbitration through Justice.

Varney emphasized that the conditions were transaction-specific. "This decree does not in any way limit what other companies can do." She would not comment on whether this agreement sets a stake in the ground on dealing with new media mergers going forward. But she did say that the current remedies in this merger "fully" addressed its concerns.
Varney said she had no interest in Comcast's financial stake in Hulu, which is why Justice did not seek divestiture of Hulu.

Other key conditions agreed-to by Comcast, according to Justice:
"Under the proposed settlement and the FCC order, the joint venture must make available to online video distributors (OVDs) the same package of broadcast and cable channels that it sells to traditional video programming distributors.  In addition, the joint venture must offer an OVD broadcast, cable and film content that is similar to, or better than, the content the distributor receives from any of the joint venture's programming peers.  These peers are NBC's broadcast competitors (ABC, CBS and FOX), the largest cable programmers (News Corp., Time Warner Inc., Viacom Inc. and The Walt Disney Co.), and the largest video production studios (News Corp., Sony Corporation of America, Time Warner Inc., Viacom Inc. and The Walt Disney Co.).
 
"In the event of a licensing dispute between the joint venture and an online video distributor, the department may seek court enforcement of the settlement or permit, in its sole discretion, the aggrieved online video distributor to pursue a commercial arbitration procedure established under the settlement.  The FCC order also requires the joint venture to license content to OVDs on reasonable terms and includes an arbitration mechanism for resolving disputes.  If timely arbitration is available for resolution of disputes under the FCC order, the department ordinarily will defer to the FCC's arbitration process to resolve such disputes.  The FCC order also allows Comcast's traditional competitors, such as satellite and telephone companies, to invoke arbitration at the FCC to resolve program access and retransmission consent disputes.
 
The settlement also includes other relief aimed at ensuring that Comcast cannot evade the provisions designed to protect competition.  For example:
 
"Comcast may not retaliate against any broadcast network (or affiliate), cable programmer, production studio or content licensee for licensing content to a competing cable, satellite or telephone company or OVD, or for raising concerns to the department or the FCC;       
 
"Comcast must relinquish its management rights in Hulu, an OVD.  Without such a remedy, Comcast could, through its seats on Hulu's board of directors, interfere with the management of Hulu, and, in particular, the development of products that compete with Comcast's video service.  Comcast also must continue to make NBCU content available to Hulu that is comparable to the programming Hulu obtains from Disney and News Corp;
 
"In accordance with recently established Open Internet requirements, Comcast is prohibited from unreasonably discriminating in the transmission of an OVD's lawful network traffic to a Comcast broadband customer.  Comcast must also maintain the high-speed Internet service it offers to its customers by continuing to offer download speeds of at least 12 megabits per second in markets where it has upgraded its broadband network.  Additionally, Comcast is required to give other firms' content equal treatment under any of its broadband offerings that involve caps, tiers, metering for consumption or other usage-based pricing; and Comcast may not, with certain narrow exceptions, require programmers or video distributors to agree to licensing terms that seek to limit online distributors' access to content."