Early Hearings Thought to Bode Well for Comcast-NBCU

Next up for the companies may be hearings in early March by the Senate Commerce and House Judiciary committees, lobbyists said. Sources in the Senate say they expect the hearing there in early to mid-March, and industry officials expect the House hearing around then. Those hearings, like Thursday’s, may take up net neutrality, said a broadcast lawyer who watched last week’s session. The new hearings may also home in on program access, online video and Comcast’s plans for the NBC broadcast network, some predicted. Committee representatives declined to comment on any future hearings.

House Judiciary members probably will take a close look at antitrust concerns about the deal, like the Senate subcommittee did, an industry lobbyist said. Lawmakers at coming hearings, especially Republicans, may push for a quick antitrust review by the Justice Department and public interest review by the FCC, the lobbyist said. Thursday “went reasonably well, but on the other hand they already had to give more on their conditions,” a lawyer with TV clients said of Comcast and CEO Brian Roberts. “On two or three things he sort of faded instantly into ‘we'll do this or that.’ From day one, I think that suggests the store is open for conditions” on program access, the lawyer added. “I don’t think it was a bad day, but it does indicate what everybody knew. There are people who are raising a considerable number of concerns, and unless you're talking to Cliff Stearns, there are people who think that has merit.” The Florida Republican is the House Communications Subcommittee’s ranking member.

Sen. Al Franken, D-Minn., set himself apart from colleagues on both sides of the aisle with his critical questioning, said an industry lobbyist and a broadcast lawyer. “If it wouldn’t have been for Al Franken, it would have been a complete snoozefest,” said the lobbyist. “I really didn’t think that there was much concern on the House side.” Executive Vice President David Cohen of Comcast noted that many members raised no problems with the transaction. “While most members had questions, the tone was almost always respectful,” he wrote on the cable operator’s blog Friday, http://xrl.us/bguose. “We also noted the bipartisan calls for an expeditious review by the Justice Department and the FCC.”

The tone of the hearings indicated that it’s “not a matter of if” the deal will be approved, but when and with what conditions, said Medley Global Advisors analyst Jeff Silva. Democrats raised many concerns, but most were presented in a rhetorical vein, and no one seemed to strongly oppose the deal, he said. The companies presented their case “masterfully,” with Roberts giving all the right answers to lawmakers’ questions, Silva said. Roberts’ statements that the deal wouldn’t kill jobs likely will count for a lot in the current economy, the analyst said.

No legislator opposed the deal outright in Thursday’s hearings, but Democratic leaders seem to want conditions ensuring that Internet TV remains a promising alternative in the video market and prevent Comcast from unfairly using new programming to hurt competitors, analyst Paul Gallant of Washington Research Group wrote Friday. Possible conditions to ensure that broadcast programming continues to be offered at no charge online and to be sold by companies such as Apple, Netflix and Google would be bad for pay-TV companies, since it would increase the risk of cord- cutting by subscribers, he said. Concerns about the effectiveness of program-access rules provide “political support” for the FCC to strengthen them, he said.

Net neutrality, program access and program carriage seem to be the points that could “derail” the deal, President Adam Thierer of the Progress & Freedom Foundation, a witness in the House hearing, told us Friday. But it will be tough to make the claim that neutrality is a matter specific to the deal, he said. Concerns about free online video raised the question of whether the current “analog” program access and carriage can be applied to the digital world, Thierer said. Comcast and NBC Universal “may not be ready” to share with competitors everything they put online, he said.

Thierer said he was surprised how many commitments Comcast and NBC made voluntarily. The companies in effect “raised the bar on themselves,” because groups that seek conditions will take their promises as “the new baseline,” he said. Broadcasters could still seek to block the deal, but NBC affiliates seem as if they'll go along with it conditions are imposed, he noted. A broadcast lawyer agreed. That support could take the wind “out of the sails” of any attack by broadcasters, Thierer said.

Net neutrality rules have no place in debate about the deal, said Seth Cooper of the Free State Foundation, an opponent of such mandates. “Regardless of the merits of net neutrality regulation, responsible administration calls for equal treatment by across-the-board application of rules,” he said. “Genuine anti-competitive harms should be the focus of any and all merger reviews, not extraneous policy initiatives.”

Some observers played down Franken’s questioning Robert’s trustworthiness and Comcast’s reputation. Silva said it was “good theatrics” but probably wouldn’t “carry much weight” in the grand scheme of things. Thierer said he doubts “one guy and one exchange” would derail the deal. Consumer groups praised the former professional comic’s charges against the cable company. “Senator Franken appropriately held Comcast accountable for its inconsistent statements regarding the Federal Communications Commission’s program access and program carriage rules,” said President Andrew Schwartzman of the Media Access Project, who testified at the Senate hearing Thursday. “The merger proponents took very different positions before the FCC, the courts, and Congress, and these inconsistencies call into question the public interest ‘commitments’ made in the companies’ merger approval applications.”

The Consumer Federation of America “teed up every issue” the group wanted, said Research Director Mark Cooper, who testified at both hearings Thursday. “There were a dozen hard questions and all sorts of new promises that were made” in the House hearing, he said Friday. “We certainly had a lively debate and conversation and the senators, to be sure, were thoroughly engaged on five issues” including local overlap between Comcast cable systems and NBC Universal TV stations, online video competition and FCC program access and program carriage, he added. Other witnesses couldn’t be reached for comment Friday. An NCTA spokesman declined to comment.

Roberts “did not” lie to Franken, Cohen told reporters after the Senate hearing. Cohen said he had attended the meeting between the two that Franken was referring to. There was confusion about which media issue Franken was asking about, Cohen said. At the hearing, Franken asked Roberts about program carriage, but in the meeting Cohen thought the senator was talking about program access, Cohen said. “I still don’t know. ... But I don’t want to get in a fight with Senator Franken.” At the hearing, Sen. Arlen Specter, D-Pa., suggested that he, Franken and Comcast hold a private meeting to work things out. “I'd love to get together,” Cohen said. “And I think we'll do that, and we'll talk it through.” There’s no inconsistency in Comcast’s position that program access rules will protect consumers adequately and the company’s having challenged some of the rules in court, he said. “It was never our contemplation to play games, and say ‘Yeah, we have program rules to protect us,’ and [then say] ‘oh, gotcha, next year the D.C. Circuit is going to overrule program access rules.”

Overall, the hearings Thursday “went very well,” Cohen said. “Brian Roberts and Jeff Zucker did a very good [job] making our case. At the end of the day,” it’s the FCC and Justice that will decide the fate of the joint venture. But the agencies probably will be listening for Congress’ opinion, Cohen said. “I want everyone to like the deal.”

The Congressional Research Service said the FCC and the Justice Department will likely approve the deal with “merger and/or conditions -- intended to protect competition, diversity of voices, and localism -- that may significantly affect the impact of the combination.” The “conditions might have the effect both of protecting the public against significant harms created by the combination and of limiting potential benefits created by the combination,” the service said in a report Tuesday.

“The issues likely to require the most attention of the DOJ and FCC include whether Comcast would be able to use its vertically integrated position to deny rival distributors access to programming or to raise the cost of that programming; whether Comcast would be able to use its vertically integrated position to favor the programming of NBCU at the expense of independent programmers; whether Comcast would have the incentive to use the merger to change NBC into a cable network, at the expense of local programming; and whether a combined Comcast-NBCU might have the unique ability to craft new business models that benefit consumers,” the report said.