Comcast Conditions Mount; Opposition Remains

Megamerger inspires feeding frenzy by critics over public interest concerns 1/10/2011 12:01:00 AM Eastern

Comcast and NBC Universal have agreed to pages worth of
voluntary public interest conditions on their proposed joint venture.
And the FCC is preparing to impose those conditions, and
more, in a lengthy addendum to its draft approval, covering online and
on-air program access, network neutrality and other issues.

While still not enough to assuage critics, the conditions
indicate the “feeding frenzy” surrounding media mergers,
and could be the new price of entry in an era where mergers
are involving an increasing number of business lines.

The pledges will cost Comcast millions—from 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 at the
laundry list of conditions—which may offer a clue as to
why opponents of the deal 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’s purchase
of Adelphia cable systems in July 2006 ran about
five pages, the same number as in the first big cable combo affecting
online access, AOL/Time Warner.

Why so thick a sheaf? For one thing, Comcast and NBCU volunteered a
raft of public interest conditions at the outset to help pave the way for the
deal, which combines the nation’s largest cable operator with a studio library
and broadcast and cable networks. Comcast/NBCU sweetened the pot
even more with side deals with minority groups and TV station affiliates,
along with voluntary conditions toward the end of the process that targeted
the FCC’s broadband-deployment and community media sweet spots.

With the caveat that he had not seen any of the conditions, a veteran
Washington cable attorney agreed that one reason for the number of conditions
was the abundance of different business lines involved, including
broadcast affiliates, MVPD and online competitors, unaffiliated program
networks, regional sports networks and telcos. “The previous mergers had
opponents,” the attorney says, “but not as many lines of business.”

Rebecca Arbogast, a managing director at investment firm Stifel Nicolaus,
said the laundry list of conditions was to be expected, but added
she has believed for a while that most of them “would not be material”
to the operator. 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. Comcast has already said
it would abide by net neutrality conditions even if they were thrown out
by the courts.

“Anytime there is a major, controversial merger, it
attracts lots of calls for ‘public interest’ conditions,”
says Arbogast. “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
say the FCC conditions, at least as advertised in press
accounts including by B&C, have failed to go beyond
preserving a status quo it thinks has problems already.

Corie Wright, Free Press policy counsel, says it is important
not to confuse quantity with quality. “The voluntary
commitments are in some ways nice gestures,”
Wright says. “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?” With the caveat that the FCC draft is not yet
public, Wright argues they don’t. For example?

“Comcast’s proposal to increase local programming on NBC stations
by 1,000 hours does not include Telemundo,” Wright says. According
to FCC sources, that has been changed in the draft order, with 1,000
hours for the Spanish-language stations as well. Wright says there needs
to be a specific definition of local programming, and that it is not clear
how meaningful and enforceable the Comcast voluntary conditions are.

How long each of the conditions remains in effect is another devil in the
details, Wright adds. While deal conditions generally run for seven years,
Comcast will be able to petition to lift the conditions if it can make a case
they are not needed, according to sources inside and outside the FCC.

Andrew Schwartzman of Media Access Project says no matter how
conditions are imposed, it will not be sufficient. “That said, we certainly
think that what we’ve been hearing about needs to be beefed up.”

If there is any beefing up to do, it will stem from the current vetting
the FCC draft was getting last week from commission staffers. A vote is
expected no earlier than this week.

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