Web Video ‘Highly Unlikely’ to Rival Pay-TV, Comcast and NBCU Say

"Technological, pricing-related, and rights-related” hurdles for video on the Internet make it unlikely the format will compete directly with pay-TV service, Comcast and NBC Universal said. “Even assuming that an online video distributor designed to replace traditional linear MVPD service were to emerge, any attempt to foreclose that distributor would be unprofitable for the joint venture” of the merging companies, they said. They made similar contentions in earlier FCC filings (CD May 6 p3), while over-the-top video providers and Comcast rivals believe Comcast-NBC Universal threatens online video competition.

"Given the substantial bandwidth requirements of online video distribution, any online distributor competitive with Comcast’s MVPD service would be complementary to Comcast’s” broadband operations, the merging companies said. “Given the highly competitive and open nature of the Internet, it would be impossible for the combined entity to ‘foreclose’ the distribution of independent content.” The cable operator will follow the FCC’s 2005 net neutrality principles, agreed to when Martin was chairman, regardless of what happens with the reclassification of broadband transport or net neutrality rule enactment, Comcast and NBC Universal said. “Indeed, the pendency of those proceedings underscores that issues involving ISP network management practices are not transaction specific and should be addressed on an industry-wide basis."

Comcast and NBC Universal “ignore” the growing threat the cable operator’s business faces from online video programming distributors (OVPD) and the increasing chance that company will try to stanch competition, EarthLink said. “While Applicants are correct that there are challenges facing OVPDs, these hurdles are no more fundamental or unalterable than those of any new technology that disrupts a settled market. Indeed, the fact that multiple OVPDs have already made significant inroads into the market shows online video is not likely to remain solely a complement to traditional linear video.” EarthLink is among companies seeking broadband conditions on Comcast-NBC Universal (CD June 23 p3).

The online implications of the deal are a major concern because the Internet is increasingly a necessary component to traditional TV platforms, said Dish Network. It said Comcast’s views of the video market are defined by the traditional broadcast, cable and satellite platforms, whereas other companies are considering a present and future where online programming changes the video market. “Comcast does not address satisfactorily the risks to MVPD competition from foreclosing or hampering access to that crucial component,” Dish said. The FCC should either reject the deal or adopt merger-specific conditions to prevent threats to video competition, the company said. “The proposed transaction constitutes a fundamental reordering of competition within the media landscape, one that should motivate the Commission to act decisively in order to maintain a vibrant and rapidly evolving marketplace."

The deal would let Comcast-NBC Universal “exploit” an online loophole “under which Comcast could migrate NBCU programming to the Internet or to mobile or on-demand platforms, where Comcast could then deny it to competitors or restrict access to consumers”, said DirecTV. That could let Comcast supply NBC Universal content in HD or 3D while giving rivals only standard definition, make content available for itself before competitors or provide rivals with different length content that would allow for fewer ad opportunities, it said. The proposed public interest benefits Comcast claims, which include more Spanish-language programming and faster VoD, “either are already occurring without this transaction or would likely do so."

Rural telco groups that want the FCC to ban Comcast-NBCU from requiring MVPDs to buy a channel they don’t want in order to get the rights to distribute one they do want, similar to curbs sought by the American Cable Association (CD Aug 20 p4), also want conditions on Web video. The commission should forbid Comcast-NBC Universal from “any actions that impair the availability of online video content -- whether the content is controlled by the Venture or by unaffiliated providers,” said the Fair Access to Content & Telecommunications Coalition, National Telecommunications Cooperative Association and Western Telecommunications Alliance. “The withholding of online content, or the granting of access only under onerous or discriminatory terms, is a significant threat to the development of the online video market and to telcos seeking to compete with cable as MVPDs and/or” ISPs, the three groups said. Consumer acceptance of Web video as an alternative to pay-TV “flies in the face” of Comcast and NBC Universal’s contention of a complementary market, they said.

Comcast-NBC Universal “would foreclose that evolution,” said the Communications Workers of America. It’s represented by Martin, along with the rural telco groups. The combined company could limit the ability of over-the-top (OTT) service providers to get a wide range of video programming, the CWA said. “Despite Applicants’ assertions now that online video is a complement to cable television, both Comcast and NBC have argued that online video is a competitive offering,” including in Comcast FCC filings on video competition, the union said. “A growing body of evidence demonstrates that OTT video is emerging and will continue to grow as a challenge to the current model of multi-channel distribution of programming."

The U.S. Chamber of Commerce and “companies in the communications sector view the Commission’s actions in this matter as a bellwether for how the Commission will review transactions in the future and whether this Commission is committed to removing uncertainty and spurring investment,” wrote Senior Vice President William Kovacs. “Regulatory indecision can destroy shareholder value and threaten a business’ ability to operate."

Allbritton Communications asked the FCC to condition the deal (CD Aug 11 p11) after the broadcaster and owner of the last non-terrestrial regional news channel not owned by a cable operator couldn’t get Comcast to negotiate a new carriage deal independently of one for WJLA Washington, General Counsel Jerald Fritz said in an interview. Deals for both WJLA and NewsChannel8 expire Dec. 31, he said. “The clear message to us is they want to lower the value for NewsChannel8” by lumping talks together, Fritz said. “We tried not to go to the government. But when they said `nope, we're not going to do this deal,’ we had to go to the FCC and the Justice Department,” he said. “And it’s exactly what the FCC is reviewing, and that is the potential for a loss of a voice in the shadow of Congress and in the commission’s backyard” should the news channel have to shutter if it can’t get sufficient carriage money from Comcast.