Comcast-NBCU union likely to face big regulatory challenge

Privacy, antitrust issues to be reviewed

Federal regulatory approval of the vast Comcast-NBC Universal joint venture announced today could be intense and could last longer than the full year that top officials at the two media companies suggest.

A variety of consumer interest and net neutrality proponents, as well small broadcasters, raised concerns about the deal today. Those concerns include that the new entity could stifle competition from small Internet video-streaming companies and pose threats to consumer privacy through data collected with new interactive cable technology.

Already, U.S. Rep. Henry Waxman, chairman of the U.S. House Committee on Energy and Commerce, has raised red flags about the deal and has promised to hold hearings on it.

It is "imperative" that the Federal Communications Commission, the Federal Trade Commission and the Justice Department "rigorously assess whether this transaction is in the public interest," Waxman said. The FCC said through a spokeswoman that the agency is committed to a "thorough, fair and fact-based ... review" of the merger.

Waxman said he is concerned not only about competition issues, but also the future of the production and distribution of video content across broadcasting, cable, online and mobile platforms.

The joint venture, valued at $37 billion, would control 82% of cable programming channels, according to Comcast officials. Regulators will be concerned whether Comcast, operating in certain cities where it dominates cable TV access, could limit access to its video content by other cable providers. The agency will also be watching whether Comcast could limit access to its content to emerging video providers that use wired or wireless networks, said two antitrust experts.

"It's hard to tell whether there are serious antitrust claims to be made, but claims and assertions have been made that, once merged, Comcast might have incentives to favor its own media content versus other content distributed through its cable distribution network," said Keith Hylton, a professor at Boston University School of Law, in an interview. In addition, Comcast's future video content might somehow be restricted from other sources of television traffic, such as rival Verizon DSL, he added.

Antitrust attorney Brian Weinberger, at the firm of Buchalter Nemer in Los Angeles, said in an interview that he expects "serious scrutiny" of the merger by various regulatory agencies that could last 18 months, because so many third parties will want to weigh in with comments.

Weinberger said industry groups representing sports programmers, among others, might object to the merger, noting NBC's strong coverage of sporting events, including the Olympics.

"They could well lobby for some restriction on NBC's access rights," he said.

The FCC will probably review city-by-city the amount of cable and Internet distribution that Comcast currently has, and will likely stipulate how it distributes content in each location, Weinberger said.

"Ultimately, I'd say the government approves the deal with stipulations," he said.

For companies delivering video over IP (sometimes called "over the top video"), using wired and wireless networks, the merger could prove fairly dire, said Andrew Schwartzman, president of the nonprofit Media Access Project.

"All these over-the-top video companies depend on a broad access to programming," Schwartzman said in an interview. "The new Comcast could make programming deals that don't make the programming available to other providers."

Schwartzman said he believes companies like Hulu Ltd., one of the over-the-top video providers that is minority-owned NBCU, could have its plug pulled, although Comcast and NBCU officials gave no indications today that would happen. Vuze Inc., a company that uses the BitTorrent P2P protocol to distribute Web-based video, and Boxee Inc., an online media provider, are also in peril, he said.

On another front, the Center for Digital Democracy, a privacy rights advocacy group based in Washington, raised concerns about consumer privacy with the merger, noting that Comcast is arranging interactive polling technology through its cable operations and advertising company Canoe Ventures. Such polling is being tested with 10,000 cable subscribers using cable set-top devices starting next year, Comcast officials said today, to provide real-time decision-making for providing targeted advertising to consumers.

What bothers the center is that the information gleaned from interactive polling will be stored in a database that needs to be safeguarded.

The concerns raised by public interest groups were dismissed by the Free State Foundation, a conservative think tank. Foundation president Randolph May said in a statement that the merger should receive "close scrutiny," but that it will be too risky for Comcast to favor its own content over the content of other providers.

Hylton, the BU professor, also said there is a potential benefit to consumers with the deal, since the merger primarily vertically integrates a content creating company (NBCU) and a content distribution company (Comcast). "If you have a single owner of the whole stream [of media], theoretically it will set the best price for both access to distribution and content, so in that sense it's good for consumers."

IDG News Service Staff Writer Grant Gross contributed to this story.

Copyright © 2009 IDG Communications, Inc.

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