Comcast, GE Reach Deal for NBC Universal Joint Venture

Comcast will own 51 percent of the company and plans to buy GE out over time with profits from the business, it said. For now, Comcast is contributing only its national cable networks, regional sports networks and Fandango and Daily Candy Web properties. The cable operator said it will

invest $6.5 billion in cash after “certain adjustments” to bring its stake to 51 percent.

“There will be conditions, but we do not perceive nor would we want to proceed if they had a material impact on the company,” Comcast Chairman Brian Roberts said on a teleconference Thursday. Comcast laid out public-interest commitments for the new company in a memo by Executive Vice President David Cohen. Among them was a promise to follow program-access rules for the HD signals of all its cable networks whose standard definition signals already fall under the rules. The company also said it would handle retransmission consent talks for its broadcast stations under the program-access rules.

The promises don’t go far enough, some industry executives told us, predicting that the deal will face tough study in Washington. But HDNet Chairman Mark Cuban praised the cable operator’s proposal to add two new, independently run channels to its digital lineups annually for three years. “The FCC will carefully examine the proposed merger and will be thorough, fair, and fact-based in its review,” Press Secretary Jen Howard said.

Program Access Commitments Controversial

The program-access commitments floated by Comcast seem to amount to little more than what’s already required by the FCC, said President Matt Polka of the American Cable Association. “They do not go far enough” and lack “some other hook like arbitration rights” for other pay-TV providers in carriage disputes with Comcast, he said. “We're going to be looking through this with a fine-toothed comb and raising other concerns.” The association plans to work with other trade groups and competitors of Comcast to make that case to Congress, antitrust regulators and the FCC, Polka said. “You will have quite the diverse array of voices that will be coming out together suggesting serious concerns with the merger that will run the gamut.”

Closing what’s called the terrestrial exemption in Philadelphia -- where it’s allowed to withhold carriage from pay-TV rivals networks it owns and distributes without using satellites -- would be “a much more significant condition that I think regulators should definitely ask of them,” Polka said. Analyst Paul Gallant of the Washington Research Group said, “The voluntary concessions were surprisingly comprehensive. But on the issue of the Philadelphia sports channels, I have to wonder if the FCC will be satisfied with anything less than a complete sharing with rival pay-TV providers.” Comcast’s practices with its Philadelphia regional sports network comply with commission rules and have withstood multiple reviews, a company spokeswoman said. “The FCC has reviewed it in the context of past mergers, the courts have reviewed it and found we comply with the rules as they currently exist.”

Comcast’s plan to add independent networks bodes well for all such channels, Cuban said. “My hope is that other cable companies follow their lead.” The commission should “recognize” that “as a valuable precedent that will prove invaluable to the independent programming community,” he added.

Cable operators seem worried about other conditions that Comcast may go along with the FCC on to win approval of the deal, a communications lawyer said. “Whatever conditions come out of this could become the new de facto floor of cable rules.” Comcast’s offer “is irrelevant” to the concerns of Public Knowledge, President Gigi Sohn said. “It made no mention of making programming available to other online providers.”

Current program access rules and conditions to other mergers “have been largely ineffective in controlling the discriminatory impact of Comcast’s existing integration of content and distribution,” said Senior Vice President Richard Ramlall of RCN. They too would be “woefully inadequate” for a combined Comcast and NBC Universal, he added. “Comcast has proposed to voluntarily agree to a handful of commitments in an attempt to deflect more effective -- and competitively essential -- conditions to this new merger.”

Hill Democrats Alarmed

Congressional Democrats immediately called for hearings into the proposed deal, warning it would lead to increased media consolidation and higher consumer prices. Consumer groups panned the proposal. The Communications Workers of America urged close review, complaining that Comcast “has a long history of violating workers’ rights, firing workers who want union representation, refusing to bargain fairly for contracts, and running aggressive campaigns to decertify unions and much more.” CWA represents about 2,000 Comcast workers and about 2,500 NBC-Universal broadcast technicians and other workers.

The House Judiciary Committee plans hearings “soon,” a committee aide said. Also planning a hearing is Senate Antitrust Subcommittee Chairman Herb Kohl, D-Wis. “This acquisition will create waves throughout the media and entertainment marketplace and we don’t know where the ripples will end,” he said. Antitrust regulators need to ensure that all content providers are treated fairly on the Comcast platform, and that the company doesn’t get “undue advantages” in gaining access to programming, he said. House Commerce Committee Chairman Henry Waxman, D-Calif., said he plans hearings “at the earliest practicable date” in conjunction with Communications Subcommittee Chairman Rick Boucher, D-Va.

The deal has implications for net neutrality policy, said Rep. Ed Markey, D-Mass., author of a bill on neutrality regulation. “I want to ensure that the combination of a major network operator and a large content owner does not open the door to discrimination on the Internet to the detriment of users,” he said. “This merger has the potential to be a market game changer, not only in the cable but online and broadcast marketplaces,” said Rep. Jay Inslee, D-Wash. Similar mergers in the past have reduced competition and choice and raised prices for consumers, he said.

Senate Commerce Committee Jay Rockefeller, D-W.Va., said he has “some serious questions about the deal,” which will benefit from regulatory oversight. The Senate Communications Subcommittee will monitor the process closely, said Chairman John Kerry, D-Mass. It “raises some complex questions that I fully expect Obama Administration officials will consider carefully.”

“There appears to be very little in this deal that is good for consumers,” said Consumers Union policy analyst Joel Kelsey. “The federal government should approach this merger with deep skepticism.” Pundits that predict the merger “will be a cakewalk haven’t done a careful analysis of the damage it will do to the competitive fabric of the video marketplace,” said Mark Cooper, research director for the Consumer Federation of America: “This merger’s potential to foreclose competition and stifle innovation is significant and real.”

Comcast Makes Further Promises

Comcast also promised to preserve NBC’s free-over-the- air distribution through its local affiliates and to increase the local programming it produces. The company also committed to carry public, educational and governmental (PEG) channels on its analog tier until it ends analog service in an area or the local community agrees to a digital PEG channel, the memo said.

Comcast promised not to interfere with NBC’s news and public affairs programming, and to use some of NBC’s broadcast TV spectrum to develop children’s programming. It also will use the spectrum of Telemundo stations to offer more programming for Spanish-speaking audiences and will increase that programming in its VoD lineup.

The deal raises questions about how NBCU will approach issues such as online video distribution and retransmission consent under Comcast’s control. As a minority partner in Hulu, NBCU has been approaching online video along the same lines as Comcast would, said Chief Operating Officer Steve Burke. Comcast mainly puts its broadcast programming online for free and is very “careful” with how it distributes cable programming online, he said. That bodes well for the next year when GE will remain the full owner of NBC Universal pending regulatory approval of the deal, he said. “NBCU is highly likely to be doing exactly what we would do.”

Comcast’s approach to retransmission consent and programming costs in general isn’t as clear cut. “I think we have an opportunity by being in both businesses to help find constructive solutions to allow the broadcast business to strive and continue to invest in the highest class of programming that it does,” Roberts said. “But we're still a cable operator who is trying to manage its costs.”

Free Press said the proposal is a “marriage made in hell, and we need a citizens’ uprising to stop the merger."