Government regulators on Tuesday gave Comcast Corp., the country's largest cable company, clearance to take over NBC Universal in a deal that is certain to transform the entertainment industry landscape.
Comcast is buying a 51 percent stake in NBC Universal, home of the NBC television network, from General Electric Co. for $13.8 billion in cash and assets.
The Justice Department and five state attorneys general said Tuesday that they have reached a court settlement allowing the companies to proceed with their combination, subject to conditions intended to preserve competition among TV providers.
In addition, the five-member Federal Communications Commission on Tuesday voted 4-1 to approve the transaction, subject to similar but broader conditions.
Among other things, regulators are requiring Comcast to make NBC programming available to competitors such as satellite companies, as well as new Internet video services that could pose a threat to the company's core cable business.
Government officials want to ensure that online video services from companies such as Netflix Inc., Amazon.com Inc. and Apple Inc. can get the movies and TV shows they need to grow — and potentially offer a cheaper alternative to monthly cable subscriptions. Still, the conditions did not go far enough for Michael Copps, one of the three Democrats on the FCC and a vocal critic of media consolidation. Copps voted against the deal, warning that it "confers too much power in one company's hands."
Philadelphia-based Comcast has about 23 million cable TV subscribers and nearly 17 million Internet subscribers. It also owns a handful of cable channels, including E! Entertainment and the Golf Channel, and has a controlling interest in the Philadelphia 76ers and Flyers sports teams. Comcast's SportsNet Philadelphia channel carries Flyers, Phillies and 76ers games.
Taking over NBC will transform the company into a media powerhouse. NBC Universal owns the NBC and Telemundo broadcast networks; 26 local TV stations; popular cable channels including CNBC, Bravo and Oxygen; the Universal Pictures movie studio and theme parks; and a roughly 30 stake in Hulu.com, which distributes NBC and other broadcast programming online.
The FCC approval establishes an arbitration process to resolve conflicts between Comcast and competitors that want to buy programming. It also prohibits Comcast from withholding programming during negotiations — a practice that broadcasters have been using recently to extract higher fees from cable companies.
Another condition imposed by both agencies requires Comcast to offer its programming to legitimate Internet video providers on the same terms and conditions that it offers other pay-TV providers. If an Internet video provider has reached an agreement to buy programming from another major media company, Comcast must also make comparable programming available at equivalent prices.
Yet another FCC condition requires Comcast to continue offering an affordable, standalone broadband option for customers who want Internet access but not cable TV service. This condition, too, is intended help drive the growth of online video by allowing consumers to cancel their cable subscriptions without losing their Internet connections.
In addition, the FCC and the Justice Department are requiring Comcast to relinquish its management rights — including board seats and shareholder control — in Hulu to ensure that it cannot interfere with the development of competing online services. Comcast will still be required to make NBC content available to Hulu, however.
Another key condition being imposed by both agencies bars Comcast from discriminating against Internet video traveling over its broadband network. Although the FCC recently adopted industry-wide "network neutrality" rules barring broadband providers from interfering with Internet traffic on their systems, those regulations are likely to be challenged in court. The condition would ensure that Comcast, which has come under fire for discriminating against Internet traffic in the past, would still have to abide by the rules.