Intense Review Is Expected for NBC Deal
Posted: Monday November 9, 2009
By Brian Stelter, NY TIMES
The Center for Digital Democracy, a public interest group, has already called the potential union of Comcast and NBC Universal “the equivalent of Godzilla swallowing Rockefeller Center.”
Clearly, some media reform advocates are girding for a fight.
Comcast’s plan to gain control of NBC Universal, which is expected to be announced in the weeks ahead, barring any unforeseen developments, is likely to be the first major test of the Obama administration’s media regulators. Given its scope, analysts and public interest groups anticipate that the deal will undergo intense government scrutiny.
Comcast and General Electric, which owns 80 percent of NBC Universal, are close to a deal that would give Comcast a stake of about 51 percent in NBC, people close to the deal have said. The programming arms of both companies could be spun out into a separate venture, according to those people.
The venture would create a media behemoth. Comcast is the biggest cable system operator in the United States. NBC Universal owns broadcast networks and a portfolio of popular cable channels.
Bernstein Research has estimated that the combined entity “would be calling the shots for one out of every five viewing hours in the United States.”
Outlets controlled by Comcast, however, would still represent only a small fraction of the channels on most customers’ lineups.
One prominent progressive group with a history of opposing media mergers, Free Press, has flagged the combination as being “bad for the public interest.” The Center for Digital Democracy told Broadcasting & Cable magazine last month that the deal would be “a political test for the Obama team.”
As a candidate, President Obama called for closer inspection of media mergers and said Bush-era media consolidation had diminished the diversity of information available to TV viewers.
Josh Silver, the executive director of Free Press, asked, “Is the Obama administration going to make good on the pledges to support media diversity?”
Most of the regulatory experts interviewed last week said they foresaw the deal being approved, but perhaps only with significant conditions attached, as in the News Corporation’s deal for DirecTV in 2003.
Rebecca Arbogast, a managing director at Stifel Nicolaus, a financial services firm that prepared an analysis of the deal last month, said, “They’d take a long and very close look at it.” But, she said, despite the proposed company’s prospective size, “when you sit down and ask yourself, ‘What precisely would be the competitive risks?,’ it has, at least so far, been a bit challenging to think of why the government would view this as being anticompetitive in ways that could not be addressed through conditions, and block it.”
Comcast and NBC Universal executives have not commented publicly, but both companies say privately that they expect approval to take up to a year.
The Federal Communications Commission will be expected to review the deal, but the extent of government regulatory authority is unclear because the terms of the deal itself are unclear.
In part, government action may hinge on whether Comcast intends to sell NBC Universal’s 33 owned-and-operated television stations, 16 of which are NBC affiliates and 17 of which are Telemundo affiliates. The F.C.C. oversees transfers of station licenses. The commission declined to comment last week.
In addition to the F.C.C., the Justice Department or the Federal Trade Commission will also be expected to study the antitrust implications of the deal. The agencies declined to comment.
A crucial concern of public interest groups is so-called vertical integration. By bringing together the makers of programs and the distributors of those programs, the owner could make access to its programming more difficult for its rivals, some interest groups say. Conceivably, they say, Comcast could block its competitors’ access to NBC’s prime-time shows and local newscasts.
“Comcast will use it for competitive advantage, and it will raise costs across the board,” Mr. Silver said.
Issues of vertical integration have been fairly loosely regulated in recent years, Ms. Arbogast said, but Obama administration officials have said they will look more closely at them.
Similar concerns about vertical integration arose when the News Corporation bought a controlling stake in the parent company of DirecTV, the satellite TV distributor, in 2003. In that case, the F.C.C. imposed rules about carriage of the Fox network and required baseball-style arbitration of disputes over the carriage of sports networks. News Corporation divested itself of its stake in DirecTV last year. Many experts say those conditions could be a blueprint for decisions about Comcast and NBC Universal.
Of most concern to groups like the Media Access Project, a public interest law firm, is the impact the deal could have on the nascent Internet video distribution market. The movement of consumers to the Internet for TV and film viewing threatens the business models of companies like Comcast. With the NBC deal, Comcast would gain a stake of about 30 percent in Hulu, a popular video Web site. The company could push to “have it transformed into a very different type of service,” possibly limiting access to free TV episodes, said Andrew Jay Schwartzman, the project’s president.
Already, however, executives at other Hulu stakeholders have indicated they foresee a subscription model in the site’s future.