Government Approves Comcast-NBC Merger
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WASHINGTON — The government on Tuesday cleared the way for Comcast Corp., the country's largest cable company, to take over NBC Universal in a deal certain to transform the entertainment industry landscape.
Comcast is buying a 51 percent stake in NBC Universal, home of the NBC television network, from General Electric Co. for $13.8 billion in cash and assets.
The Justice Department and five state attorneys general said Tuesday that they have reached a court settlement allowing the companies to proceed with their combination, subject to conditions intended to preserve competition among video providers.
In addition, the five-member Federal Communications Commission on Tuesday voted 4-1 to approve the transaction, subject to similar but broader conditions.
Among other things, the government is requiring Comcast to make NBC programming available to competitors such as satellite and phone companies, as well as new Internet video services that could pose a threat to the company's core cable business. Officials want to guarantee that online video services from companies such as Netflix Inc., Amazon.com Inc. and Apple Inc. can get the movies and TV shows they need to grow – and potentially offer a cheaper alternative to monthly cable subscriptions.
The government's conditions will help ensure that the transaction cannot "chill the nascent competition posed by online competitors," said Christine Varney, head of the Justice Department's antritrust division.
Still, the conditions did not go far enough for Michael Copps, one of the three Democrats on the FCC and a vocal critic of media consolidation. Copps voted against the deal, warning that it "confers too much power in one company's hands."
Several public interest groups and at least a few members of Congress also decried the combination.
"This will ultimately mean higher cable and Internet bills, fewer independent voices in the media, and less freedom of choice for all American consumers," Sen. Al Franken, D-Minn., said in a statement.
Comcast Executive Vice President David Cohen, meanwhile, stressed that none of the conditions "will disadvantage the competitive positioning of the Comcast Cable or NBC Universal businesses."
Philadelphia-based Comcast has about 23 million cable TV subscribers and nearly 17 million Internet subscribers. It also owns a handful of cable channels, including E! Entertainment and the Golf Channel, and has a controlling interest in the Philadelphia 76ers and Flyers sports teams. Comcast's SportsNet Philadelphia channel carries Flyers, Phillies and 76ers games.
Taking over NBC will transform the company into a media powerhouse. NBC Universal owns the NBC and Telemundo broadcast networks; 26 local TV stations; popular cable channels including CNBC, Bravo and Oxygen; the Universal Pictures movie studio and theme parks; and a roughly 30 stake in Hulu.com, which distributes NBC and other broadcast programming online.
Most of the government conditions outlined Tuesday will remain in effect for seven years.
One key goal of federal regulators is to ensure that satellite companies, rival cable operators and other existing pay-TV providers can still get access to marquee NBC programming at reasonable prices once the deal closes. The FCC approval establishes an arbitration process to resolve disputes between Comcast and competitors that want to buy programming. It also prohibits Comcast from withholding programming during negotiations – a practice that broadcasters have been using recently to extract higher fees from cable companies.
In addition, both the FCC and the Justice Department are imposing a series of conditions to ensure that Comcast cannot starve new Internet video providers of popular programming. Those include requirements that Comcast offer its programming to legitimate Internet video providers on the same terms and conditions that it offers other pay-TV providers. In addition, if an Internet video provider has reached an agreement to buy programming from another major media company, Comcast must make comparable programming available at equivalent prices.
Both agencies are also imposing conditions to ensure that Comcast cannot force independent programmers seeking spots in its cable lineups to withhold their content, too, from online distribution platforms.
Yet another FCC condition requires Comcast to continue offering an affordable, standalone broadband option for customers who want Internet access but not cable TV service. This condition, too, is intended help drive the growth of online video by allowing consumers to cancel their cable subscriptions without losing their Internet connections.
At least one public-interest watchdog was pleased with the government's online video conditions. Mark Cooper, director of research for the Consumer Federation of America, said they could help pave the way for Internet distributors to break the cable industry's "stanglehold" over the video market.
The FCC and the Justice Department are also requiring Comcast to relinquish its management rights – including board seats and shareholder control – in Hulu to ensure that it cannot interfere with the development of competing online services. Comcast will still be required to make NBC content available to Hulu, however.
Another key condition being imposed by both agencies bars Comcast from discriminating against Internet video traveling over its broadband network. Although the FCC recently adopted industry-wide "network neutrality" rules barring broadband providers from interfering with Internet traffic on their systems, those regulations are likely to be challenged in court. The condition would ensure that Comcast, which has come under fire for discriminating against Internet traffic in the past, would still have to abide by the rules.
Other FCC conditions require Comcast to increase local news coverage, expand children's programming and programming for Spanish-speaking viewers, add 10 new independent channels and provide a subsidized broadband service for low-income households. The FCC is also prohibiting Comcast from giving its own channels preferential placement in its cable system line-ups.
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AP Technology Writer Ryan Nakashima in Los Angeles contributed to this report.
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JOELLE TESSLER 01/18/11 07:42 PM ET Associated Press