Thursday, February 4, 2010

Public Interest Groups, Cable Ops, Unions Slam Comcast/NBCU Merger

By John Eggerton -- Broadcasting & Cable
Organizations raise "grave concerns;" call for tough conditions
A group of more than two dozen organizations, including cable operators, advocacy groups and unions have joined forces to slam the Comcast/NBCU merger and call for tough conditions.

In a letter to President Barack Obama and members of Congress the groups say they have "grave concerns" that the merger will have a "devastating effect" on the marketplace and give the merged company "unprecedented control" over new media outlets. The letter, which comes just short of outright opposition to the deal, levels numerous criticisms before ending with the request that the government "take a hard look at this merger and take the necessary measures to prevent harm to both consumers and competition."

Given the divergence of the group's members, that closing allows room for interpretation-outright opposition for some-or conditions so onerous that they kill the deal or, at baseline, tough conditions for others.

Comcast suggested the groups criticisms were a parade of horribles without substance. "Viewed objectively, the GE/Comcast NBCU transaction is pro-consumer and strongly in the public interest, and we look forward to making that case to Congress, the Justice Department, and the FCC," said Comcast spokeswoman Sena Fitzmaurice. "There is absolutely no evidence that this proposed transaction would produce any of the adverse effects these groups claim the deal would cause. In fact, existing law already prohibits any discrimination by Comcast against other providers regarding programming we own and would preclude Comcast from "prioritizing" NBCU channels. Further, the emerging online video market is extraordinarily competitive, with sites like YouTube, Netflix, iTunes and dozens of others already offering video from a wide range of content providers, large and small."

The letter hits most of the talking points-less choice, reduced competition, higher consumer costs-of many of the members' past criticisms of the deal. That group includes Free Press, Public Knowledge, Consumers Union, and Media Access Project.

Earlier in the week they took aim at the online industry initiative TV Everywhere, saying the merger put an "exclamation point" on their concern about control of online video."The merged giant would have strong incentives to discriminate against other multi-channel video providers in granting access to its wealth of programming, including all of its broadcast stations and 'must-have' national and regional networks that air live or same-day sporting events, as well as the market power to enforce anticompetitive "bundling," they wrote.
"The proposed deal could make it even harder for diverse and independent voices to find an audience, as Comcast would have the incentive to prioritize NBC channels and programs over others. Control of NBCU programming also would give Comcast the opportunity to prioritize its own online video products over those of its competitors - or sharply reduce online video distribution altogether - pushing independent producers out of the picture."The groups branded "merely window dressing" Comcast's public interest proposals, outlined by Comcast Executive VP David Cohen in a memo released at the time of the deal.

They said that promises to extend program access rules to broadcast and HD programming would not mitigate the potential "danger" of vertical integration or get at the concern over online video distribution. "To prevent a disastrous impact on competition and consumer choice, any approval of the merger must include meaningful conditions that extend well beyond those previously imposed on less significant mergers."
"In its ads, Comcast and NBCU ask people to 'Dream Big' but small cable operators know this deal will be a nightmare for its millions of customers without appropriate conditions," ACA President Mattt Polka said.

The coalition's move was not a big surprise.

In an interview with B&C/Multi on the eve of the merger announcement, Polka, whose group represents about 900 smaller and midsized cable operators, signaled his group could have big problems with the merger. "I am sure that we will be working with other industry and consumer groups suggesting quite aggressively the harms to consumers that will result from this [merger]," he said at the time.

The letter comes a day after the Justice Department drew the long straw in deciding whether it or the Federal Trade Commission would review the merger. Comcast is expected to file the deal for review by Justice in the next few days.

The eclectic group, which includes those opposed to the deal outright and those who have suggested it needs major government conditions, comprises American Cable Association, Center for Media Justice, Common Cause, Communications Workers of America, Concerned Women of America, Consumer Federation of America, Consumers Union, Free Press, Kids First Coalition Media Action Grassroots Network, Media Access Project, Media and Democracy Coalition, Morality in Media, National Association of Independent Networks National Consumer League, National Organization for Women, National Telecommunications Cooperative Association, Organization for the Promotion and Advancement of Small Telecommunications Companies, Parents Television Council Public Knowledge, Satellite Broadcasting and Communications Association Sports Fans Coalition, U.S. PIRG, Writers Guild of America East, Writers Guild of America West.

Groups in Opposition to Comcast/NBCU Merger Will Outline Complaints Wednesday

By John Eggerton -- Broadcasting & Cable

Groups opposing part or all of the Comcast/NBCU merger will outline their beefs in a conference call Wednesday (Feb. 3), the day before back-to-back hearings on the $30 billion deal in the House and Senate.Representatives of Media Access Project, Wealth TV (whose program carriage complaint is still pending before the FCC), the Communications Workers of America, Free Press and the American Cable Association all argued the FCC and the Justice Department need to look closely at a number of issues, including pricing, program diversity and access to programming on-air as well as online.

Comcast does not disagree that the government needs to look at those issues, but says its conclusion should be that the deal is pro-competitive and consumer-friendly. Comcast argues that they will enact voluntary conditions and existing FCC rules that protect access to, and carriage of, programming.

Affiliates Worried About Comcast Merger

By Kim McAvoy
TVNewsCheck, Feb 3 2010, 9:06 AM ET

At tomorrow's scheduled House hearing on Comcast's proposed $30 billion takeover of NBC Universal, NBC TV Affiliates Broad Chairman Michael Fiorile is expected to raise concerns about the first-ever combination of a major broadcast network and a major cable provider.

According to his prepared testimony obtained by TVNewsCheck, Fiorile will target three key issues: siphoning of key programming from the NBC to Comcast-owned cable channels; making NBC programming available on websites and local VOD platforms prior to its airing on NBC affiliates; and the affiliates' continued ability to negotiate fairly for retransmission consent fees.

Fiorile's testimony makes clear that the affiliates are not trying to crater the deal, only to win protections.

"With concrete and enforceable safeguards and conditions, this transaction should continue to serve the public interest and strengthen, not diminish the network-affiliate partnership," it says.
But the NBC affiliates are not the only broadcasters worrying about what the merger will mean to their businesses. Owners of stations that compete with NBC O&Os and affiliates are also concerned that the merger will put them at a disadvantage, particularly in markets where Comcast is a major cable provider.

These non-NBC broadcasters are expected to register their own concerns with the FCC and Justice Department just as Fiorile is expected to do tomorrow and seek their own safeguards.
In fact, the broadcasters' concerns have already seeped into the thinking of the House Communications Subcommittee.

A briefing memo for subcommittee members says: ``The transaction raises several potential issues related to the relationship between Comcast and the affiliates, including the future of the NBC network, the relative balance of power in corporate negotiations and the impact of this transaction on affiliate advertising sales."

Last December, Comcast, the nation's largest cable operator with 24 million subscribers announced plans to buy a controlling interest from General Electric in NBCU and its 26 TV stations, of which 10 are NBC O&O's.

NBCU also operates the NBC and Telemundo TV networks, 13 cable channels, a movie studio and two amusement parks.

Both the Justice Department and the FCC must sign off on the deal. And Comcast must win over the key members of Congress. Slated for tomorrow are hearings on the merger before the House Communications Subcommittee and the Senate Anti-Trust Subcommittee.

According to industry sources, ABC, CBS and Fox affiliates fear the proposed merger may give Comcast the upper hand in retransmission consent negotiations and cable carriage arrangements.

"They're very concerned about discriminatory treatment," says one insider. "There are a lot of questions. Will Comcast, to the extent it owns NBC, discriminate in favor of its owned and operated stations, and in favor of its affiliated stations?" says one long-time affiliate TV observer.

"Comcast has said all the right things publicly that you would expect. But nobody believes any of the political PR rhetoric. I would not be surprised if affiliate groups actively participate in the proceeding," he adds.

The Meredith TV group has one NBC affiliate, but operates mostly CBS and Fox affiliates.
"Certainly we want to have some degree of comfort that the new entity would not discriminate against Fox or CBS affiliates," says Paul Karpowicz, president, Local Media Group.

"I am most concerned about retransmission consent and access to the cable system. It would be unfair, for example, if I'm on ch. 5 on the cable system and all of a sudden I get relegated to 505 and the NBC stations stays at ch. 6.

"Our company is not saying we're against it, we're looking for more information and more assurances that this will be handled in a way that everybody can get comfortable with it," says the broadcast TV executive.

Karpowicz chairs the NAB TV board, but the trade group is not taking a position on the merger.
Other non-NBC affiliates think the merger might create an imbalance in the advertising market. They fear the combined sales forces of Comcast and the NBC O&Os and affiliates could put them at a serious disadvantage.

Like the NBC affiliates, the non-NBC broadcasters aren't seeking to block the deal, only to build in certain safeguards to protect them.

"I am nervously waiting to see what conditions will be imposed so we won't get hosed in any retransmission consent fight," says one.

Several of the broadcasters point to the conditions that were imposed on DirecTV when News Corp., owner of the Fox broadcast network, its O&O stations and cable networks, acquired a controlling interest in the satellite provider.

The restrictions were aimed at making sure that DirecTV did not favor Fox channels over those of independent programmers and to make sure Fox did not discriminate against cable systems or Dish Network is making content available.

And for broadcasters there was a provision mandating the use of "baseball-style arbitration" for any retransmission consent disputes with DirecTV.

the past 15 years, regulations that would have barred the merger of a full-blown broadcast network like NBC and a major cable provider have been eliminated. In 1996, the FCC under former Chairman Reed Hundt cast off the broadcast network/cable television ownership rule to conform to requirements in the Telecommunications Act of 1996.

Under the aegis of the Network Affiliated Stations Alliance, broadcast affiliates challenged the action. But that petition was denied in 1998 when the FCC was headed by Bill Kennard.

"Combinations between major networks and cable operators have not yet been formed, nor does the record reflect specific examples of potential problems," the FCC said at the time. "Accordingly, safeguards are not necessary at this time."

In 2003, the Michael Powell FCC repealed the rule prohibiting ownership of a cable system and TV station in the same market. The agency was responding to a 2002 mandate from the U.S. Court of Appeals for the D.C. Circuit.

According to the Fiorile testimony, the NBC affiliates' chief concern appears to be retransmission concent.

"Every NBC affiliate has two sets of bet-the-company contractual relationships," the testimony says. "The first is the affiliate's contract with its network. The second is its complement of retransmission consent contracts setting out the terms and conditions under which its signal is retransmitted on cable systems and other MVPDs. Understandably, then, any combination that would merge both of these relationships into a single entity would raise concerns about the accumulated leverage that could result from one company being the key to both of these relationships.

"For example, a combined NBC-Comcast could seek to tie together retransmission consent payments with payments for network programming provided under an affiliation agreement, or force affiliates to accept unfavorable affiliation agreement provisions to obtain market-based retransmission consent payments. In either case, the combined entity would be using its unique leverage over affiliates to undermine their ability to negotiate fair retransmission consent agreements.

"We tentatively believe that a strong set of structural separation requirements for the subsidiaries of Comcast that will negotiate retransmission consent agreements and those that will administer the network's relations with affiliates can permit the combination to go forward while minimizing concerns about maintaining market-based negotiations for retransmission consent."

No comments: