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Comcast and NBC Universal have jumped the last regulatory hurdle before making their multibillion-dollar marriage a reality, but what does it all mean to average consumers?
Earlier this week the companies, which are planning to form a joint venture that Comcast will control, got approval from both the Federal Communications Commission and the U.S. Department of Justice. The companies are expected to finalize the deal by the end of January.
The combination of the cable giant and media conglomerate has some watchdog groups and opponents of big mergers, such as FCC commissioner Michael Copps, wary. They are concerned that Comcast, which owns and operates the largest cable and broadband network in the U.S. , could abuse its newfound power.
In particular, regulators and others are worried this deal may kill the nascent online video market. Comcast could view these services as a threat to its core TV business and be tempted to withhold content or favor its own content over content offered through these services.
Wall Street analysts and pundits have chimed in with their opinions about what it means for the companies’ stock prices. But what does it really mean for the average consumer? CNET has tried to boil it down to the basics in plain English in this FAQ.
What are the nuts and bolts of this deal?
The joint venture between Comcast and NBC Universal will combine Comcast’s cable networks, such as E! and Golf Channel and Comcast’s regional sports networks with NBC Universal’s cable and broadcast stations. This includes NBC’s channels, such as USA, CNBC, MSNBC, and Bravo.
The new joint venture is valued at around $37.25 billion with NBC Universal assets contributing $30 billion of that valuation and Comcast’s programming segments adding about $7.25 billion.
The new company will be branded NBC Universal, and Comcast will own 51 percent of the new venture and NBC Univeral will own the remaining 49 percent.
Why does Comcast want NBC Universal?
Often companies combine entities to build a more efficient company and to save on costs of operating those businesses. But in this case, there are no real cost synergies associated with this joint venture. Comcast has said that 99.9 percent of NBC Universal’s employees are in businesses that don’t overlap with Comcast’s businesses.
Where Comcast sees value in NBC Universal is in controlling video content. Comcast owns the largest paid TV network in the country, as well as one of the largest broadband networks in the country. In the TV business and increasingly in the Internet business content is king. Comcast controls some of its own content, such as local sports and a few other cable TV channels. But the company would like to be in control of a lot more.
This is why Comcast tried to acquire Disney several years ago. By controlling a major media player such as NBC, Comcast can control the distribution of content. It can add to its own on-demand content and also earn income from providing that content to other paid TV services.
All this concentrated control doesn’t sound like a good thing for consumers. It sounds like Comcast could use its power to manipulate the market. Why did four out of the five FCC commissioners go along with this, including two Democrats?
This is exactly what opponents of the merger have argued. They do not believe that one huge company should be allowed to both create and deliver the content that consumers watch. With all this control, opponents are concerned that Comcast will abuse its power by refusing to offer content to competitors or charge its competitors more for access to NBC shows and movies.
For example, Sen. Al Franken (D-Minn.) thinks that the new Comcast controlled NBC will use its control to stifle innovation in the online video market. During a speech to a Netroots Nation gathering in Minnesota earlier this week he said that he had heard Comcast was already preparing to pull content from Netflix, an online video provider. Ultimately, Franken and others who oppose this idea, including the one dissenting FCC commissioner Michael Copps, believe that consumers will fewer choices for video content and will end up paying higher fees for access to TV and other video content.
To address these fears, the FCC and the Department of Justice have imposed some conditions on the deal, most of which will last seven years.
What are the conditions imposed by the FCC that would prevent Comcast from abusing its power?
The FCC already has what are called program access rules, which dictate that Comcast and other paid TV providers are required to provide their own content to competitors at fair and reasonable rates. These program access rules have been in place for years, and there is an arbitration system set up to deal with complaints or disputes if TV providers feel they are not getting a fair deal from a competitor.
The FCC enhanced these rules to deal with the Comcast-NBC deal. These conditions provide a more refined arbitration process for complaints about access to NBC content. The conditions also provide tighter timetables for this arbitration process.
Does this mean I will still get to see “30 Rock” if I subscribe to Verizon Fios TV?
Yes, you will still be able to watch “30 Rock.”
What about online video competitors? Are they included in the program access rules? I heard that the FCC is requiring Comcast to make the NBC content available to online distributors like Apple TV, Netflix, etc.
No they are not. But the FCC has adopted conditions that it claims will help protect the nascent online video market. Specifically, it will require Comcast-NBC to offer its content to online video providers if those providers are getting similar content from NBC’s peers. So if Viacom is offering reality shows to Apple TV, then NBC would be required to share similar reality content with Apple. But NBC would not be required to offer scripted dramas. NBC is also required to offer the same business terms for content to these online video providers that are consistent with terms its peers are already offering.
Does that mean all of NBC’s content will be available online now?
No necessarily. While the FCC claims that these conditions ensure that Comcast doesn’t squash the online video market before it’s really gotten started, the conditions by no means force NBC to put online. In fact, these rules make it sort of difficult to force NBC to share its content with online video providers. Under these rules, an online video provider must obtain a substantial amount of content from NBC’s competitors before NBC itself is required to make its TV shows and movies available.
What about local programming? Will Comcast have to make its local NBC content available to other providers and will Comcast air other local TV channels?
The conditions on the deal also require Comcast to continue carrying other networks for its subscribers. This means that CBS fans who subscribe to cable through Comcast don’t need to worry. They will still be able to see their local nightly news.
NBC is a stakeholder in the online video site Hulu , along with News Corp. and Disney. Will Comcast be able to shut down or withhold programming from Hulu as Comcast tries to grow its own online presence?
No, Comcast will not be able to monkey with Hulu. NBC and its partners have minority stakes in Hulu. None of them have enough control to call all the shots. But to ensure that Comcast doesn’t get too much power, the Department of Justice is requiring the new NBC give up its board seats on Hulu.
“Comcast must relinquish its management rights in Hulu, an OVD,” the agency said in a press release. ” Without such a remedy, Comcast could, through its seats on Hulu’s board of directors, interfere with the management of Hulu, and, in particular, the development of products that compete with Comcast’s video service. Comcast also must continue to make NBCU content available to Hulu that is comparable to the programming Hulu obtains from Disney and News Corp.”
Comcast will still retain an economic stake in Hulu. But the cable giant, whose business could be threatened by Hulu and other online video providers, will not have decision-making control at Hulu.
Did the FCC put any Net neutrality requirements into the deal for Comcast?
Comcast voluntarily agreed to adhere to the new Net neutrality rules that the FCC adopted in December. These regulation, which establish a set of rules of the road for the Internet, mainly prevent Comcast from slowing down or blocking traffic in favor of its own content and traffic. That said, it’s permitted to use reasonable network management practices to ensure its network isn’t overwhelmed with traffic.
Even though the new Net neutrality regulations were passed by a divided FCC, they have not yet gone into effect. And it’s likely that they may not take effect anytime soon. Verizon Communications has already filed the first legal challenge in federal court. And more challenges are sure to come.
But even if the rules are overturned in court or there is a delay in implementing them, Comcast has agreed to follow the rules anyway.
What kind of authority does the FCC have in enforcing any of these conditions on the merger?
The FCC can impose fines and it can pull broadcast licenses if companies violate its rules. But in reality assessing fines and pulling licenses rarely happens. And if Comcast doesn’t like the FCC enforcement, it can always take the agency to court as it did a couple of years ago when the FCC slapped it on the wrist for violating Net neutrality principles. This is why many people feel that even with conditions in place, this new mega media/cable company is a bad idea.
Will my cable rates go up as a result of this new deal?
I can’t say for sure what will happen to prices in the future. But if history is any indication, cable prices only seem to increase and rarely, if ever, do they decline. So I wouldn’t count on having tons of extra cash in your pocket as result of this deal. That said, Comcast may be able to control its own content costs more since it owns that content. The cost of acquiring rights to TV shows and movies is one of the reasons cable operators say they need jack up rates every year. But with so much control in its hands, Comcast could also use its position to charge its competitors more for the content it owns, in which case prices could go up.
In either case, only time will tell.
