Comcast Faces Government Questions on Online Video in NBC Universal Deal
Comcast Corp.’s merger with NBC Universal is nearing the final stages of a federal review, with U.S. officials considering whether to forbid the cable company from withholding online video from competitors, analysts said.
Comcast executives met Nov. 5 and Nov. 8 with Federal Communications Commission officials, including Chief of Staff Edward Lazarus, an adviser to FCC Chairman Julius Genachowski, and said the agency shouldn’t set rules for online video, according to the company’s disclosure filings at the FCC.
Video viewed over the Internet, which may emerge as an alternative to traditional monthly cable service, is “a big issue” that makes the Comcast-NBC deal “a lightning rod,” Rebecca Arbogast, a Washington-based analyst with Stifel Nicolaus & Co., said by e-mail today.
The FCC and Justice Department are weighing the proposed $28 billion acquisition of the General Electric Co. unit. The deal would give Comcast, the largest U.S. cable company, control of the NBC television network, broadcast stations, cable channels such as MSNBC and USA Network, a movie studio and a share of the online site Hulu LLC.
Online Video ‘Highly Dynamic’
In their FCC meetings, Comcast executives described the online video business as “nascent and highly dynamic” and “disputed the need for any conditions,” Comcast said in a filing.
NBC broadcast programs available on the nbc.com website for online viewing will continue to be available in that fashion, Comcast told FCC officials, according to the filing.
“While Comcast has no plans to change current practices, the dynamism of the online video sector makes it unwise to set in stone any plans,” the filing said. “The new NBCU will need the freedom to innovate.”
Issue Still Alive
Arbogast, the analyst, said Comcast and the government face the challenge of anticipating how online video will grow.
“Comcast-NBCU will want the maximum freedom to figure out how to monetize it and prevent it from cannibalizing its subscription service,” Arbogast said, while the government will want to make sure the online video market isn’t starved of programming it needs to grow.
The discussions between Comcast and the FCC “suggest the issue is still alive” but doesn’t necessarily indicate agency staff will recommend restrictions, Paul Gallant, a Washington- based analyst for MF Global, said in an interview.
Regulatory Approval Near
The merger, proposed Dec. 3, 2009, might receive final regulatory approval by the end of the year, Comcast Chief Executive Officer Brian Roberts told investors Oct. 27.
Arbogast, in an Oct. 15 note to clients, said it is “most likely” the government will scrutinize the deal into early 2011.
Jen Howard, a spokeswoman for the FCC, and Sena Fitzmaurice, a spokeswoman for Washington-based Comcast, declined to comment.
Bloomberg LP, the parent company of Bloomberg News, has filed papers opposing the Comcast-NBC Universal combination as it is currently proposed.
To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net
To contact the editor responsible for this story: Allan Holmes at aholmes25@bloomberg.net.
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