Friday, December 4, 2009

Watchdogs lining up to battle Comcast-NBCU deal

No one expects one of the biggest media mergers of all time to sail through regulatory approval quickly, particularly since the proposed deal to have Comcast acquire a 51% stake in NBC Universal from General Electric is the first major merger to face scrutiny by the Obama Administration.

Critics are lining up to try to kill the latest move toward media consolidation.

Free Press and the Consumer Federation of America were quick out of the box with a new analysis showing why the organizations believe the deal poses a major threat to video competition that would seriously harm the public interest."The pundits who are predicting this merger will be a cakewalk haven’t done a careful analysis of the damage it will do to the competitive fabric of the video marketplace. This merger’s potential to foreclose competition and stifle innovation is significant and real," said Mark Cooper, research director for the Consumer Federation of America.

The report claims that:

-- A Comcast-NBC merger would hurt competition in traditional video markets. A merger between the nation’s No. 1 cable operator and a major television network threatens competitive rivalry and diversity in the video marketplace. The new entity could leverage its control over content to charge more to its rivals

— costs that will ultimately be paid by consumers.

-- A Comcast-NBC merger would hurt competition in the emerging online video market. Comcast is the largest residential broadband Internet service provider; NBC produces top-notch content and has a substantial interest in the online video provider Hulu. A merged company would have a powerful motive to starve competing online video sources by denying them access to vital content.

-- A Comcast-NBC merger would trigger more media consolidation. Approval of this deal will undoubtedly trigger a merger wave, as the remaining players in both the distribution and content markets seek to muscle-up to match this new behemoth.

As a result, competition from new entrants will be limited, consumer choice will be restricted, and prices will rise."The Obama administration has made a commitment to reinvigorating the nation’s antitrust laws," said Corie Wright, policy counsel of Free Press. "They can’t ignore the severe threat this merger poses and must take the necessary measures to prevent harm to competition and consumers. The correct response to this merger is to just say no."

Even before the deal was official, the Seattle Times had published an editorial calling for regulators to say no. The newspaper was quick with a second editorial stating that not only should Comcast not own NBC Universal, but that GE shouldn’t either. “NBC Universal should be independent,” the newspaper declared. “The consolidation in media is dangerous — to the economic interests of the public and to democracy itself. The trend toward media giantism should be stopped, and the place to begin is this proposed deal,” the Seattle Times editorial concluded.

“This mega-merger clearly spotlights the dangers of media consolidation in the Internet Age,” declared the Communications Workers of America (CWA).“Comcast is not only the nation’s largest cable company, with 24 million customers, but it has 15 million Internet users and controls most must-have regional sports programming. If it takes on NBC Universal, it adds a major television network, 27 local televisions, cable channels including CNBC, MSNBC, Telemundo, Bravo, USA Network and more, plus Hulu, a growing stop especially for households under age 35,” the union noted.

“This vertical integration of two very different companies – one controlling distribution and another controlling content – would give the merged company leverage over both in broadcast and network television and the market power to control pricing of content on the Internet. It clearly would threaten competition in the distribution of content and programming,” the CWA said.

The union is also worried about what might happen to its members at NBCU under Comcast ownership. “Comcast also has a long history of violating workers’ rights, firing workers who want union representation, refusing to bargain fairly for contracts, running aggressive campaigns to decertify unions and much more,” the union said. CWA said it represents about 2,000 Comcast workers and about 2,500 NBC Universal broadcast technicians and other workers.

The American Cable Association (ACA) issued a statement urging regulators to scrutinize the proposed Comcast-NBC Universal transaction “and take appropriate action, whether through conditions or forced divestiture, to prevent the new programming giant from using its enhanced market power to raise prices and limit choices for consumers of small and medium-sized cable and broadband operators.”

ACA represents small cable system operators, while Comcast is the giant of the industry. ACA has already been fighting for government to curtail retransmission consent payments to TV stations – and worries that Comcast-NBCU will up the ante.

"Without broad government intervention, regulators in Washington, DC will see Comcast-NBCU wield its unprecedented power to drive up artificially the cost of its programming, particularly for its newly acquired local broadcast TV stations and its 'must-have' national and regional cable networks that air live sporting events. Without restrictions, the new media conglomerate will also leverage its enhanced market power to force other pay-television providers to distribute all of its combined Comcast-NBCU programming on basic tiers, regardless of consumer interest in paying for this content," said ACA President and CEO Matthew Polka.

How Comcast plans to make its case in DC

Winning regulatory approval for cable giant Comcast to acquire a majority stake in NBC Universal won’t be easy. Opponents are coming out of the woodwork. But that was anticipated and Comcast has already spelled out how it plans to sell the proposal to the FCC, antitrust regulators and Congress.

Among the documents that Comcast and General Electric posted for investors and reporters dealing with the NBCU transaction was a memo from Comcast Executive Vice President David L. Cohen, whose duties include government relations.

In it, he spelled out the points that Comcast will make in trying to persuade the government that the deal to have Comcast acquire a 51% stake in NBCU from GE should be approved.“While we believe that this transaction is, and will be determined to be, pro-competitive, proconsumer, and strongly in the public interest, we recognize that competitive concerns will be raised about the combination of such significant multiplatform assets in a single company,” he said, in what may be quite an understatement. “Therefore, we also intend to make a number of affirmative voluntary commitments in our applications for approval that we believe will effectively address any such concerns.”

Cohen spelled out how Comcast-NBCU will enhance its public interest commitments, saying the combined company will build on the “strengths and histories of Comcast and NBCU in children's programming, diversity, and local programming, and reinforcing the combined companies' commitment to broadcasting, the companies make the following commitments:

1. NBC has a proud history in broadcasting with both NBC and Telemundo. Notwithstanding the turbulence in the current media marketplace and the ongoing threats to the business model of a national broadcast network, the combined company remains committed to continuing to provide free over-the-air television through its 0&0 stations and through local broadcast affiliates across the nation. As we negotiate and renew agreements with our broadcast affiliates, we will continue our cooperative dialogue with our affiliates toward a business model to sustain free over-the-air service that can be workable in the evolving economic and technological environment.

2. The NBC owned-and-operated broadcast stations ("0&OS ") have a demonstrated record of quality local programming in major markets around the country. Comcast also has demonstrated its commitment to local programming, including sports and public affairs, and in providing support for public, educational, and government (PEG) access programming. We want to use the combined resources of NBC and Comcast to strengthen localism:

a. We intend to preserve and enrich the output of local news, local public affairs, and other public interest programming on NBC 0&0 stations. Through the use of Comcasts On Demand and On Demand Online platforms, time slots on cable channels, and use of certain windows on the 0&0 schedules, we believe we can expand the availability of all types of local and public interest programming.

b. With respect to PEG channels, we will not migrate PEG channels to digital delivery on any Comcast cable system until the system has converted to all-digital distribution (Ie., until all analog channels have been eliminated), or until a community otherwise agrees to digital PEG channels, whichever comes first.

c. To enhance localism and strengthen educational and governmental access programming, we will also develop a platform to host PEG content On Demand and On Demand Online within three years of closing.

3. Since NBCU was acquired by GE in 1986, the owners have abided by a policy (summarized in a filing with the FCC) of ensuring that the content of NBC's news and public affairs programming would not be influenced by the non-media interests of General Electric.

a. The combined company will continue these policies with respect to the news programming organizations of all NBCU networks and stations, and will extend these policies to the potential influence of each of the owners.

b. To ensure such independence, the combined companies will continue in effect the position and authority of the NBC News ombudsman to address any issues that may arise.

4. Comcast and NBCU have strong track records in children's programming and children's issues. The combined company will make an expanded commitment to meeting the viewing needs of children, and the needs of parents to better control their family's viewing.

a. We will use Comcast’s On Demand and On Demand Online platforms and a portion of the NBC O&Os' digital broadcast spectrum to speak to kids. We intend to develop additional opportunities to feature children's content on all available platforms.

b. We reaffirm our commitment to provide clear and understandable on-screen TV Ratings information for all covered programming across all networks (broadcast and cable) of the combined company, and to apply the cable industry's best practice standards for providing on-screen ratings information in terms of size, frequency, and duration.

c. In an effort to constantly improve the tools and information available for parents, Comcast will expand its growing partnership with Common Sense Media ("CSM") a highly respected organization offering enhanced information to help guide family viewing decisions. Comcast will work to creatively incorporate CSM information in its emerging On Demand and On Demand Online platforms and other advanced platforms, and will look for more opportunities for CSM to work with NBCU.

5. Comcast and NBCU have been major forces in bringing diverse programming to American television audiences. With the new company's interests in Telemundo and Mun2, and with Comcast’s founding role in TVOne and its extensive offerings of channels meeting the needs of diverse viewers, we will be second to none in providing and promoting diverse programming. But we want to do even more:

a. We intend to expand the availability of over-the-air programming to the Hispanic community utilizing a portion of the digital broadcast spectrum of the Telemundo O&O's (as well as offering it to Telemundo affiliates) to enhance the current programming of Tel em undo and Mun2.

b. We will use Comcast’s On Demand and On Demand Online platforms to feature Telemundo programming.

c. We intend to continue expanding the availability of Mun2 on the Comcast cable, On Demand, and On Demand Online platforms.

The memo makes several other points, as well, designed to hit the hot buttons of regulators and lawmakers. Some of them address the position that Comcast will be in as both a program provider and the nation’s largest cable MSO.

One of those is a voluntary commitment to extend the FCC’s program access rules pertaining to cable/satellite networks to negotiations with other cable companies for retransmission rights to the NBC and Telemundo O&O stations.

RBR-TVBR observation: What stands out is that rather than wanting to exit the broadcasting side of the business, as many expected Comcast to do at NBCU, the NBC/Telemundo O&O station groups are being used as a major selling point for the deal.

“Localism” is a hot issue at the FCC and Comcast is emphasizing how the NBCU television will play a big role in having the merged company promote local programming and public service.

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