Comcast deal faces regulatory review
Experts predict process could take a yearNEW YORK - Comcast Corp.’s play for NBC Universal is expected to get a very close regulatory review that will be the first litmus test for how FCC chairman Julius Genachowski and other regulators swept in by the Obama administration will approach big media and entertainment deals.
Some experts have predicted that the review process could take a year or even longer, with fair and nondiscriminatory program access of other content firms to Comcast’s cable pipes likely to be a key focus.
Comcast chairman and CEO on a conference call Thursday morning indirectly signalled he also expects a long review, saying Comcast will control a majority of the enlarged NBC Uni post-2010. "This is an approvable transaction," he told analysts, adding that he is planning no divestitures of any parts of NBC Uni.
Asked if conditions that regulators may put on Comcast could hurt the company's cable business and outweigh the benefits of the deal, Roberts said he doesn't expect so. "If it became material, the deal wouldn't go through," he said. He also confirmed that there is no break-up fee in the deal documents in case the transaction doesn't go through.
To address regulatory concerns early in the process, Comcast took a pro-active approach when announcing the deal Thursday morning, making a range of voluntary public interest commitments and arguing that the new joint venture of its content assets and NBC Uni will benefit consumers. GE and Comcast said they will submit regulatory applications "supporting the pro-competitive and strong public interest benefits of the transaction, including how the joint venture will better meet the entertainment, communications and information needs of the American public."
Comcast executive vp David Cohen in a letter said the deal allows Comcast and the new entertainment powerhouse "to hasten the arrival of the multiplatform "anytime, anywhere" future that Americans want," among other things. He also promised "innovative programming that will better serve local viewers in markets where NBC Uni has TV stations, Hispanics, African Americans, children and families.
For example, he mentioned that using VOD and other services, local news and public affairs programming can be made available more widely. He also said Comcast will not move public, educational or government channels to digital delivery in its cable systems unless all channels have been converted to digital, will not meddle with the independent reporting of news organizations in its portfolio and will use its cable and online on demand platforms to feature Telemundo programming.
But critics of the deal have already started to line up.
For example, John Malone’s Liberty Media, which never got a real shot at making a counterbid for NBC Uni, has sounded skeptical tones. Liberty CEO Greg Maffei recently predicted "enormous challenges and debate" on the regulatory front (HR 11/12).
Malone, who has long spoken out in favor of the benefits of combining content and distribution assets, went a step further in a recent interview with the AP in an apparent attempt to rattle the cage a bit. Others in the industry will have to look closely at “how they can protect themselves from the kind of market power that (Comcast-NBC Uni deal) would represent,” he said.
Consumer and media advocacy groups have also sounded alarm bells. Free Press, for example, this week warned that Comcast would get “unprecedented control of marquee content and three major distribution platforms: Internet, broadcast and cable” in the deal.
Free Press has joined with the Consumers Federation of America and the CWA union to fight the planned Comcast-NBC Uni deal, including with a dedicated Web site.
"This merger's potential to foreclose competition and stifle innovation is significant and real," said Mark Cooper, research director for the Consumer Federation of America on Thursday.
"The correct response to this merger is to just say no," added Corie Wright, policy counsel at Free Press.
Analysts have said Comcast’s ability to truly benefit from the deal depends on how many concessions it has to make in Washington. "A new administration in Washington would possibly want to make its mark on the recently booming M&A market and demonstrate that it will not easily rubber-stamp mergers, horizontal or vertical," Miller Tabak analyst David Joyce has previously said.
“Any acquisition would almost certainly come with many strings attached,” Sanford C. Bernstein analyst Craig Moffett said when word of the deal talks first emerged. He said conditions could include binding arbitration and no-blackout provisions in the case of programming disputes.
Barclays Capital analyst Vijay Jayant said Thursday that "FCC target concessions could include programming (access to VOD content, Philly regional sports network access for satellite TV) and broadband (net neutrality)."
One issue that even industry insiders have had to read up on in terms of current regulation is the cross-ownership of NBC TV stations in Comcast's regional markets, such as Philadelphia, Chicago, and San Francisco, that a deal would create. While this could lead to concerns over concentration of market power, and some analysts have argued regulators may require divestitures of some TV stations in big markets, current rules do not prohibit such cross-ownership.