Reading Between LinesOn Comcast/NBCU

FCC’s order offers clues to its thinking on video distribution and other key issues
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The FCC’s order approving the Comcast/NBC Universal merger runs to all of 279 pages, with much of the total devoted to rather bulky boilerplate and a veritable appendicitis of appendices (eight in all). But amidst the forbidding columns of type is language that actually signals where the FCC thinks the world of video distribution is heading, and could provide precedent for more generally applicable rules as the commission considers the issues of program access and carriage in the digital world. Here are the highlights:

Cut that cord: “[T]he fact that most OVD [online video distribution] services do not currently offer consumers all popular linear channels does not mean that they cannot and will not do so in the near future. By all accounts, OVD services have just begun,” says the order. “The growing popularity of online video, combined with the burgeoning technological options for viewing online video on television sets, is likely to heighten consumer interest in cord-cutting, provided a sufficient amount of broadcast and cable programming is replicated on the Internet.”

Observation: If OVDs become the new multichannel video programming distributors (MVPDs), the FCC is going to need to weigh in on whether online distributors will have to pay broadcasters retrans money. The issue currently has broadcasters and online streamer ivi TV at loggerheads in court, and is before the commission in the form of a complaint by online distributor Sky Angel against Comcast.

Cord-Cutting Threat: “The record here is replete with emails from Comcast executives and internal Comcast documents showing that Comcast believes that OVDs pose a potential threat to its businesses, that Comcast is concerned about this potential threat, and that Comcast makes investments in reaction to it,” the order says.

Observation: If the FCC gets its way and broadband becomes the next must-see TV, cable operators will have no choice but to invest in reaction to it.

The Twain Don’t Meet: “The Commission previously has found that MVPD services and broadcast television are not sufficiently close substitutes to warrant including them in the same product market. No evidence has been submitted in this proceeding suggesting otherwise. Accordingly, we continue to view MVPD services and broadcast television as different relevant product markets.”

Observation: The FCC has preserved the right to argue in other proceedings—like media ownership rule review—that the great number of cable channels, including regional news and sports channels, does not mean broadcasters have sufficient local market competition.

Doesn’t ‘Ad’ Up: “We find that the proposed transaction is unlikely to harm competition in advertising.” Why? “We find that many advertisers on cable networks would not substitute advertising on broadcast networks, because broadcast advertising generally does not allow targeting within the broadcast station’s footprint. We also find that many advertisers on broadcast networks would not substitute cable advertising, because they find it cost-effective to assemble their desired demographic coverage by targeting the larger audiences generally available with individual broadcast programming.”

Observation: Don’t look for broadcast and cable ad sales folk to start singing “Kumbaya” and going on joint sales calls.

E-mail comments to jeggerton@nbmedia.com and follow him on Twitter: @eggerton

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