Comcast dilemma: Buy NBC, but allow rivals access?

Comcast would have to allow Internet competitors access to NBC programming for merger to go forward, FCC head proposes .

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    In this Dec. 3, 2009 file photo, a sign outside the Comcast Center (left) is shown in Philadelphia. The head of the Federal Communications Commission laid out regulatory conditions Dec. 23 to ensure that cable giant Comcast Corp. cannot stifle video competition once it takes control of NBC Universal.
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The head of the Federal Communications Commission is proposing regulatory conditions to ensure that cable TV giant Comcast Corp. cannot stifle competition in the video market once it takes control of NBC Universal.

The conditions laid out Thursday by FCC Chairman Julius Genachowski are intended to guarantee that satellite providers and other rival television services can still carry marquee NBC programming and that new Internet video distributors can get the content they need to grow and compete.

Comcast's takeover of NBC Universal could have profound consequences for the nascent market for Internet video — a market that could eat into Comcast's core cable TV business if enough consumers drop their cable subscriptions in favor of low-cost alternatives online.

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Genachowski wants to ensure that Comcast won't be able to use its control over NBC's vast media empire to withhold content from emerging online competitors such as Netflix Inc., Amazon.com Inc. and Apple Inc. — locking consumers into costly monthly cable bills to get access to a wide range of popular programming.

Genachowski now needs at least two of the other four FCC commissioners to back his proposal, and he is likely to make modifications to win the support he needs to cap off the yearlong regulatory review.

The FCC is expected to approve the deal, with conditions, early next year.

The deal also faces scrutiny at the Justice Department, which has been working closely with the FCC and is likely to impose conditions similar to whatever the FCC ultimately approves, subject to its own ability to enforce them under antitrust laws.

Comcast suggested that it could accept what it believes to be in Genachowski's proposal. In a statement, the company said the proposal would ensure that the deal delivers "real public interest benefits" and "enable us to operate the NBC Universal and legacy Comcast businesses in an appropriate way."

Comcast is seeking government approval to buy a 51 percent stake in NBC Universal from General Electric Co. for $13.8 billion in cash and assets.

The combination would give the nation's largest cable TV company control over the NBC and Telemundo broadcast networks, popular cable channels including CNBC, Bravo and Oxygen and the Universal Pictures movie studio. It would also give Comcast a roughly 30 percent stake in Hulu.com, which has become a popular online platform for broadcast programming from NBC, ABC and Fox.

Although Comcast already owns a handful of cable channels, including E! Entertainment and the Golf Channel, it has built its business on distributing television programming and providing Internet connections. The company has about 23 million cable TV subscribers and nearly 17 million Internet subscribers.

Taking over NBC Universal would transform Comcast into a media powerhouse, too. Genachowski's proposed conditions are intended to prevent the company from trampling competitors once it owns content as well as distribution platforms.

FCC officials wouldn't disclose details about the conditions Thursday because commissioners were still reviewing Genachowski's proposal.

But two people outside the FCC described them to The Associated Press. They had knowledge of the details but spoke on condition of anonymity because the discussions were confidential.

One measure aims to guarantee that satellite operators, phone companies and rival cable TV services can still get access to NBC broadcast and cable channels, Comcast's regional sports networks and other must-have programming at reasonable prices.

That condition would mandate arbitration to settle any disputes and would potentially prohibit Comcast from withholding NBC Universal content during negotiations — a practice that broadcasters have been increasingly turning to in the push for higher fees.

Another condition would require Comcast to make NBC Universal programming available to Internet video distributors under certain circumstances. Existing FCC rules require cable companies to provide channels they own to rivals such as satellite companies, but right now those rules do not apply to Internet distributors. Imposing similar obligations on Comcast in dealing with Web distributors would help prevent Comcast from stunting the growth of Internet video.

Yet another measure would bar Comcast from pressuring independent programmers into restricting online distribution of their content, too, in order to get a spot on Comcast's cable systems.

In addition, Genachowski's proposal would prohibit Comcast from requiring consumers to subscribe to cable in order to get online access to certain NBC Universal content, including NBC broadcast programming.

Genachowski's proposal would also require Comcast to continue offering an affordable, standalone broadband option for customers who want Internet access but not cable. This condition, too, could help drive the growth of online video by allowing consumers to cancel their cable subscriptions without losing their Internet connections.

The chairman's proposal would also bar Comcast from interfering with online traffic that travels over its systems, including Internet video from online services such as Apple's iTunes.

Although the FCC just this week adopted such rules for all broadband providers, they could get overturned by Congress or the courts. The condition would ensure that Comcast would still have to abide by them. The company has come under fire for discriminating against Internet traffic in the past.

One condition missing from Genachowski's proposal is a requirement that Comcast divest NBC's stake in Hulu. One influential lawmaker, Sen. Herb Kohl, D-Wis., has urged regulators to force Comcast to do that, given that the service could represent a competitive threat to Comcast's core cable business. Kohl chairs the Senate Judiciary subcommittee that oversees antitrust policy and consumer rights.

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