Comcast-NBC Raises Government Scrutiny of Cable Industry
Comcast’s agreement to buy a controlling stake in NBC Universal is bound to raise scrutiny by legislators and regulators on broadcast and cable industry practices, said supporters and opponents we surveyed. The companies expected the deal, announced last week, to draw a year-long regulatory review (CD Dec 7 p2). It may also draw attention to Internet issues including subscription video, and consumer electronics matters such as CableCARDs, executives said.
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Predictions vary on the outcomes of congressional hearings and merger reviews by the FCC and either the Department of Justice or Federal Trade Commission. Opponents of the deal believe it will highlight how the broadcast and cable industries operate in anti-competitive ways. Supporters contend the attention will underline that the pay- TV industry faces ample competition and cable operators should continue to be able to withhold programming that they own from rivals. NAB and NCTA spokesmen declined to comment. A Comcast spokeswoman didn’t reply to messages seeking comment.
“For all of the cable operators who hope that a new FCC focused on broadband would mean that their rough ride under Kevin Martin is over, I think this is very disappointing,” said Legal Director Harold Feld of merger opponent Public Knowledge. “This is going to focus the spotlight on TV Everywhere, which is as much a Time Warner initiative and an initiative of the other cable operators as Comcast [and] it’s going to focus attention again on retrans” consent carriage deals between broadcasters and cable operators. “The Comcast deal implicates every single aspect of cable regulation,” he said.
Some cable operators seem worried that any conditions Comcast agrees to with the FCC will pave the way for rules for the rest of the industry, a communications industry lawyer said. If the company agrees to stop withholding its sports programming distributed to Philadelphia-area subscribers, that could set the stage for the commission to require Cablevision and Cox to do likewise elsewhere, the lawyer said. “The goal of the cable lobbyist is to be left alone,” and the worry is, “What will Comcast throw under the bus to get this deal done?”
The deal gives the cable industry a chance to show that competition is thriving and that what’s called the terrestrial exemption -- allowing exclusives on programming not distributed by satellite -- benefits competition, cable lawyer Steve Effros said. “If the premise is that competition is good, then the question is what are we competing on,” he said. “If the delivery is supposed to be neutral and open access, then we have to compete on exclusive programming. That’s what every newspaper does. That’s what every television network does. That’s what DirecTV does” with its exclusive deal to distribute the NFL Sunday Ticket. “If you commoditize everything, then you don’t really get competition,” Effros said, and “a sensible, non-emotional investigation of these questions has to get to some very fundamental issues.”
FCC rules requiring cable operators to use CableCARDs to separate set-top box security and navigation functions also may receive attention, Effros said. That would overall be “a good thing and consistent with our call for” the commission to see whether the purposes of Section 629 of the 1996 Telecom Act are being met, said CEA Vice President Jamie Hedlund. “But we also think -- given this commission and administration’s interest on open platforms and an open Internet -- it’s not surprising … that might happen without the proposed transaction.” The same is true of an examination of subscription online video, he said. The CEA isn’t taking a position on approval of the deal, Hedlund said.
Studying cable industry practices is “a good thing,” said President Matt Polka of the American Cable Association, which opposes the deal. “A lot of the issues that are going to get scrutiny are in my view the issues we care most about, which is the impact of these mergers and the impact of consolidation of content on consumers.” That will call attention to how the cable and media industries put their content online and how broadcasters strike carriage deals with pay-TV providers, he predicted. “The cable industry, as well as the media industry, is going to get a lot of scrutiny.”
Congressional hearings and regulatory review of the deal may help independent programmers by showing the difficulty they have getting carried by Comcast, said WealthTV President Charles Herring. An administrative law judge recently recommended that the FCC not uphold the programmer’s complaint against Comcast and three other cable operators. “We hope that the past practices and the future potential of harm that could be done are given intense scrutiny by all of the agencies,” Herring said. “We also hope that they will take time to hear from parties in secrecy that have been dealing with Comcast in the past,” because “fear of retaliation will stop independent programmers and others from speaking out.”