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Comcast’s NBC Purchase May Mean Selling Stations or Arbitration

Anchors prepare for a Comcast SportsNet broadcast at Wachovia Center arena, which is owned by Comcast Corp. in Philadelphia, Pennsylvania, U.S. Comcast Corp., the largest U.S. cable-television operator, agreed to form a $37 billion joint venture combining General Electric Co.'s NBC Universal with its own media assets, strengthening a push into programming. Photographer: Bradley C. Bower/Bloomberg

Comcast Corp. may have to sell some NBC television stations or agree to have independent arbitration settle pricing disputes to get U.S. government approval for buying General Electric Co.’s NBC Universal.

These are among the remedies the U.S. Federal Communications Commission or the Justice Department may require to ease fears about keeping television markets competitive following the $28 billion deal, antitrust analysts said.

Comcast, the largest U.S. cable operator, would get control of the NBC television network and broadcast stations and sports networks in Boston, New York, Philadelphia, Chicago, San Francisco and Washington, six of the biggest U.S. television markets, plus Hartford, Connecticut. Comcast also would acquire NBC’s national cable networks, including Bravo, USA Network, MSNBC and CNBC, and national sports and Olympic Games programming.

Philadelphia-based Comcast’s power in key markets is “absolutely going to be a major concern” for officials, said Craig Moffett, an analyst at New York-based Sanford C. Bernstein & Co.

FCC and Justice Department spokeswomen declined to comment on their agencies’ investigations.

Comcast in a filing said the markets in question are “major communities” that will have at least seven TV stations it won’t own after the transaction closes.

The deal “is pro-competitive, pro-consumer and strongly in the public interest,” Sena Fitzmaurice, a Comcast spokeswoman, said in an e-mail.

Public Comments

The public has until Aug. 5 to weigh in on the deal, which was announced in December. Thousands of comments have been filed with the FCC, including demands that Comcast sell Hulu, NBC’s video website, and calls for disclosing how much revenue the company receives from pornography.

“The sheer complexity of the issues” confronting investigators will delay the conclusion of a government review until next year, Stifel Nicolaus & Co. analysts Rebecca Arbogast and David Kaut said in a July 8 note to clients.

Moffett said the government may demand arbitration procedures that ensure competitors get fair access to programming, as they have in other deals.

Federal authorities could pressure Comcast to sell stations if they think the company would quash new developments such as multiple digital channels offered over the airwaves, said Roger Noll, a senior fellow at the American Antitrust Institute, a Washington-based policy group.

Snuffing Competition

What federal enforcers are “going to worry about is on the distribution side, the snuffing out of competition,” Noll said in an interview.

Bloomberg LP, parent of Bloomberg News, has told the FCC it wants to ensure its channel will be located on Comcast cable near other business shows.

Comcast has gained supporters with recent agreements. It got NBC affiliates on board by promising not to move the Olympics and other major sporting events from broadcast to cable.

In a bid for minority backing, the company has said it plans to name a Latino to its board and will add to its offerings eight independent channels owned by blacks or Hispanics.

On July 12, Comcast, NBC Universal and the Los Angeles-based Independent Film & Television Alliance announced a plan requiring NBC to consider programs from independent producers.

U.S. authorities said they are examining all aspects of the acquisition.

Seeking Agreement

Assistant Attorney General Christine Varney, the top U.S. antitrust official, told senators last month the Justice Department will insist that the deal protects competition.

Investigators will take into account Comcast’s past attempts to thwart competition, said Lloyd Constantine, a former New York state assistant attorney general in charge of antitrust enforcement.

For more than a decade, Comcast has refused to sell Philadelphia sports programming to DirecTV and Dish Network Corp., two satellite competitors, DirecTV said in an FCC filing.

“They have in essence a rabid dog here,” Constantine said.

Noll said Comcast has several points in its favor, including its small share of national TV and cable channels and increased competition from the Internet to distribute programming.

Sports Programs

Chris Kelly, antitrust lawyer for Mayer Brown LLP in Washington, said Comcast’s power to deny programming to rivals is exaggerated and that it was unlikely the government would pressure the company to sell NBC stations.

“It just doesn’t strike me that that’s really much of an issue,” he said in an interview.

Comcast would still gain from the deal even if authorities insist the company sell stations, said Rick Franklin, a St. Louis-based communications analyst with Edward Jones.

“The value of those broadcast stations is pretty small compared with the $30 billion size of the deal,” he said.

The NBC stations could be worth several hundred million dollars each, said Mark Fratrik, a vice president with Chantilly, Virginia-based BIA/Kelsey.

Comcast may prefer to drop some stations rather than agree to arbitration, which could reduce the price Comcast gets for programs, New York-based Collins Stewart LLC analyst Tom Eagan said in an interview.

The deal “will go through,” he said. “The big question is the degree of concessions they would have to agree to.”

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