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FCC likely to approve Comcast-NBC Universal deal with conditions

December 23, 2010 |  9:51 am

FCC

The Federal Communications Commission is expected to give its blessing to Comcast Corp.'s deal to take a controlling interest in General Electric Co.'s NBC Universal.

FCC Chairman Julius Genachowski is pushing for approval of the deal, but only if it includes conditions that would seek to limit Comcast's ability to flex too much muscle in ways that would harm consumers or unfairly disadvantage its competitors, people close to his office said.

The regulatory agency, which along with the Department of Justice is charged with reviewing the deal to determine if it serves the public interest and is not anti-competitive, has circulated a proposed order to approve the deal from Genachowski's office. It will now be reviewed by the four other commissioners and voted on sometime early next year.

The combination of Comcast's distribution with NBC Universal's content has some competitors, lawmakers and media watchdogs concerned that it would give Comcast an unfair advantage in cable television and online video.

With that in mind, the proposed conditions on FCC approval include requirements that would attempt to prevent Comcast from favoring its own content versus that of its rivals, both on its systems and in online operations, agency officials said. There will also likely be conditions that would make it difficult for Comcast to withhold its own content from rival distributors and platforms.

There is particular concern that Comcast, loaded with NBC Universal content, will have too much power in determining how the Internet develops as a video medium. Earlier this week, the FCC pushed through controversial rules meant to prevent the owners of high-speed lines and airwaves from favoring their services over competitors and to preserve open access to the Internet.

Specifically, there is a mechanism in the proposed order that would make it difficult for Comcast to withhold its content from video sites that its competitors are providing with content, people familiar with the document said. These conditions would apply only to Comcast, so if, for example, CBS isn't giving content to a company but other media companies are, CBS would not be coerced into having to provide its content.

One of the other key areas the FCC and Justice Department may look at is what role Comcast should have in Hulu, the popular online video site that NBC Universal co-owns with Walt Disney Co. and News Corp. Media watchdogs have waived red flags about the idea of Comcast, which has its own online video site, also having a role in Hulu. The Senate's antitrust subcommittee even suggested that Comcast should have to divest NBC Universal's stake in Hulu. Whether the FCC and Justice Department would go that far remains to be seen, but they could try to regulate Comcast's role in the operation and management of Hulu.

The agency is also concerned about how Comcast positions its own cable networks vs. its competiors on the dial and may try to require the cable operator to put similar channels near its each other on the dial.

The FCC has a say in the deal because the agreement includes the transfer of licenses for NBC Universal's broadcast television stations to Comcast. The FCC also often weighs in on deals that combine content with distribution.

The $30-billion deal would lead to the creation of a new company made up of NBC Universal (parent of NBC), Universal Studios and several powerful cable networks including USA, CNBC and Bravo and Comcast's smaller programming units, which includes E!, Versus and the Golf Channel. NBC Universal's stake in Hulu would also be part of the new company.

That company would be 51% owned by Comcast Corp. and 49% owned by General Electric and would be housed inside Comcast Corp., which is the nation's largest cable and broadband provider. Comcast has almost 23 million cable subscribers and 16 million broadband subscribers.

The requirements the FCC wants Comcast to adhere to are to be made public after the agency votes on the deal. Although it is possible that the vote could go against Comcast, usually when the FCC chairman signs off, there will be a majority in favor of the decision. The makeup of the commission is three Democrats (including Genachowski) and two Republicans. One of the Democrats, Michael Copps, is very outspoken about his concerns with media consolidation. Both Republicans are likely to support the deal, although they may seek to water down the conditions, meaning that even if Copps was to take the unusual step and vote against Genachowski, Comcast would still have its three votes.

In a statement, Comcast said it would continue to "work with the commissioners so that the FCC order will not undermine our business combinations and will ensure that consumers will benefit and that competitors are treated fairly."

Any conditions the FCC puts on Comcast could eventually expire or be reviewed on a regular basis to see if the government thinks there is still a need for them.

Though the FCC's review process is fairly public -- more than 30,000 comments on the merger have been filed since the agency started its analysis early this year -- the Justice Department operates below the radar. It has been working closely with the FCC to ensure that neither steps on the other's toes.

Comcast, which announced the deal last December, has already detailed its executive team for the new company. Steve Burke, currently the chief operating officer of Comcast, will become the chief executive. Jeff Zucker, the current chief executive of NBC Universal, will leave the company after the merger is closed.

-- Joe Flint

Photo: FCC Commissioner Michael Copps (left) and Chairman Julius Genachowski (center) at a recent meeting. Credit: Andrew Harrer / Bloomberg

 

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