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Comcast, NBC again make case to FCC as scrutiny of deal increases

NBC Universal and Comcast Corp. brass met with senior Federal Communications Commission officials Thursday and had a detailed discussion about commitments the two companies would make as part of the approval process for their $30-billion merger.

It's been more than a year since Comcast Corp. struck a deal with General Electric Co. to take majority control of NBC Universal. Both the FCC and the Justice Department are reviewing the deal to determine what conditions should be put on the two companies as part of the approval process.

Many lawmakers and regulators are concerned that a combination of the nation's largest cable and broadband company with a programming giant that owns a movie studio, a broadcast network and several powerful cable channels would harm competitors and consumers.

The challenge for the Obama administration is to put conditions on the merger with teeth to appease media watchdogs and lawmakers without derailing one of the biggest business deals and sending a negative sign to Wall Street. 

Among the issues of concern is the potential for the Comcast-NBC entity to give its own content priority on its cable and broadband systems, which would make content from its rivals less convenient to access, and to withhold its content from competing distributors.

The FCC's review process is further along than the Justice Department's, according to people familiar with the matter. Whether either will be done before the end of the year remains to be seen. Comcast and NBC have been pressing to get the deal through Washington, and the two companies have already unveiled their post-merger executive structure. That move irritated some lawmakers who said Comcast was jumping the gun and trying to push regulators into a hasty approval of the merger.

Last week, Comcast and NBC said they were extending the terms of their agreement to March of next year. D.C. insiders are expecting more back-and-forth on the deal from lawmakers, regulators and public policy advocates in the next few weeks.

Among the areas of discussion at the FCC were Comcast's commitment to launch new independent cable channels and increase children's educational programming on NBC stations. Details of the meeting between NBC Universal General Counsel Rick Cotton and Comcast Vice President Kathy Zachem with William Freedman, associate chief of the FCC's Media Bureau, and Jennifer Tatel, the chief of the bureau's Industry Analysis Division were included in a regulatory filing.

The two companies said they would launch 10 new channels over eight years, starting 18 months after the merger closed. Anticipating that some might view that as a small commitment, the two companies said they told the FCC that "this is a significant commitment given capacity constraints."

On the children's TV programming front, Comcast and NBC promised to provide an extra hour per week of educational fare "utilizing one of the channels of NBC's O&Os." That means the hour of educational programming could appear on the flagship NBC station or on one of NBC's digital channels, which do not have the same reach.

This week, NBC Affiliate Board Chairman Brian Lawlor is expected to make the rounds at the FCC to reiterate that the deal has the support of NBC stations not owned by the network.

Although Comcast and NBC have been clear in their commitments to increase kids' programming and commit to more diversity, they have been less specific about how they would treat competitors in content and distribution. Of particular concern are what, if any, conditions should be put on Comcast's broadband operations. There are fears that Comcast could stymie potential rival distribution services.

Comcast has dismissed some of those concerns as nothing more than rivals' trying to use the merger review process as leverage. It would also be likely that Comcast would argue that any conditions it has to adhere to should also apply to other media giants.

Late last week, the spotlight was again on Comcast when Level 3, a content delivery network that acts as a carrier of content for Netflix, complained about fees that Comcast was charging it to use its pipes. Comcast countered that this was a business dispute and not a case of Comcast playing hardball with a competitor.

"Level 3's problem apparently arises out of the fact that it recently won a bid to become one of Netflix's primary CDN providers.... Level 3 wants to avoid the commercial arrangements other CDN companies use," Comcast told the FCC.

-- Joe Flint

 
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