Congress Looking Skeptically at Comcast-NBC/Universal Deal

Congress Looking Skeptically at Comcast-NBC/Universal Deal
December 28, 2009

Jim Lakely

Jim Lakely is director of communications at The Heartland Institute, co-director of Heartland’s... (read full bio)

The announcement that Comcast had agreed to buy NBC/Universal from parent company General Electric was but a few hours old before members of Congress declared their intention to block the deal until they decide whether they approve the merger.

Comcast, the nation’s largest cable company, announced December 1 it had agreed to purchase a 51 percent stake in NBC/Universal—which produces content for the NBC and Telemundo television networks. Both companies promised the deal would not affect over-the-air TV broadcasts or NBC’s public affairs programming and news divisions.

The cable giant said its purchase would not lead to favoritism nor affect its plans to add new, independently owned channels to its cable lineup in the coming years.

Skeptics Scoff
Members of Congress, however, quickly lined up to criticize the deal and promised extensive hearings while also prodding the Federal Communications Commission (FCC) to weigh in with an opinion.

Rep. Henry Waxman (D-CA), chairman of the House Commerce Committee, said the deal “has the potential to reshape the media marketplace.”

“This proposal raises questions regarding diversity, competition, and the future of the production and distribution of video content across broadcasting, cable, online, and mobile platforms,” Waxman said in a statement. “It is imperative that the FCC, the Justice Department, and the FTC rigorously assess whether this transaction is in the public interest.”

Waxman said he’d coordinate his oversight with Rep. Rick Boucher (D-VA), chairman of the House Subcommittee on Communications, Technology, and the Internet. Meanwhile, Sen. John Kerry (D-MA), chairman of the Senate Subcommittee on Communications and Technology, said he’d be conducting his own probe.

“My subcommittee will monitor that process closely to ensure that any legitimate anticompetitive and public interest concerns are fully addressed,” Kerry said.

Concerns ‘Not Warranted’
Larry Namer, president of Metan Development Group, LLC, a media consultancy firm based in Encino, California, sees little reason for the federal government to block the deal.

“I have been in the cable business 38 years, having started out on the operator side of the business and then switched to the programmer side,” Namer said. “I have watched the Comcast entity grow over the years from what was a relatively small family business to what it is today. Each time Comcast made a significant leap to get bigger, there was some government outcry about consolidation of power.

“Yet when you look back, those concerns were not warranted,” he added. “In fact, as Comcast got bigger its eagerness to support programming innovation grew. Like many of the cable service providers they saw that new and different programming was the thing that consumers really wanted, and they supported new ventures that helped cable reach the penetration levels it enjoys today.

“It is interesting that now with the NBC/Universal deal the politicians think that their time is best spent scrutinizing this deal instead of fixing what really needs fixing—our economy and position in the world markets,” Namer said. “One need look no further than all the time wasted on overthinking the Time Warner-AOL deal to see that in today’s world it is almost impossible to be too big.”

Increasing Competition
Mike Jude, program manager of consumer communications at Stratecast, a division of the global research and consulting firm Frost & Sullivan, said he expects “this arrangement will take some time to shake out.” But he believes the deal will ultimately be good for consumers.

“Combining content delivery with network management is a complex process, and the two sides of the business have very different objectives,” Jude said “As the telecoms found out in the ’90s, it is hard for carriers and operators to get into the services business.”

Despite fears from members of Congress that Comcast’s purchase of NBC/Universal will reduce content, Jude says it will most likely increase competition in that market.

“Armed with Universal’s media library, Comcast will undoubtedly apply competitive pressure on other Web video providers like Hulu, NetFlix, and Blockbuster,” Jude said. “Depending on the price structure of any Comcast offerings, some of the existing players could be challenged to maintain viewers.”

‘More Choices Every Day’
“Even though Comcast is theoretically going to have some sort of monopoly control over this content—if in fact there is such a thing—if the demand warrants it, they’re going to figure out a way of making it available to others,” he added. “At the end of the day, the equation is reaching the maximum number of people willing to see it.”

Namer notes “the consumer has more choices every day,” and he says the Comcast-NBC/Universal deal won’t change that.

“The power of media consolidation was then and will always be held in check by the consumer,” Namer said. “Abuse them, and they find a way to punish you. As someone who has spent the last two decades working mainly outside the United States, I believe that the government needs to stay out of the way and let American media companies effectively compete in an ever more complex media world.”

Net Neutrality Concerns
Critics of the deal are also focusing on how Comcast may manage its cable broadband networks. With the enormous NBC/Universal library in the fold, the fear is that Comcast could give that content preference when streaming data and programming over the Internet.

Such a move, some say, violates net neutrality principles—which the FCC is considering making an enforceable rule. Coupled with the criticism Comcast received for throttling back the download speed of bandwidth hogs on its network in 2008, the company has become a rich target for net neutrality advocates.

“Net neutrality will be raised in discussions about the merger. In fact, it already has,” said Larry Downes, a nonresident fellow with the Stanford Law School Center for Internet & Society. “Comcast is already accused of applying non-neutral practices to high-bandwidth video content—throttling down or denying access to bitTorrent, for example, which the company says it did to manage traffic.

“The net neutrality advocates point out that high-bandwidth traffic is also shorthand for movies and television programs, which Comcast sells access to [when] wearing its cable TV provider hat,” Downes added. “The fear is that companies like Comcast that offer both Internet access and television programming access will limit the former in ways that make the latter more profitable.”

‘Just More Speculation’
Downes pointed to another concern being expressed: Comcast speeding up the delivery of the content it owns—not only NBC/Universal properties but also the E! network and the Golf Channel, which Comcast already owns.

“The fear is that Comcast will move to promote its own interests or interfere with delivery of some or all other content toward the same end,” Downes said. “I don’t think that will happen, but in any case this is just more speculation and more attenuated arguments for why the FCC should legislate now.

“To me it proves the opposite—given the swift pace of change in the entertainment and communications industries, the FCC is just as likely to make the wrong rules as the right ones when trying to guess what might happen,” he added.

James G. Lakely (jlakely@heartland.org) is co-director of the Center for the Digital Economy at The Heartland Institute and managing editor of InfoTech & Telecom News.

Jim Lakely

Jim Lakely is director of communications at The Heartland Institute, co-director of Heartland’s... (read full bio)