The federal government approved Comcast Corp.'s bid to take control of NBC Universal, creating a new media behemoth that puts under one roof TV networks, a Hollywood movie studio and broadband pipelines to a wide swath of the country’s homes.
Spending nearly a year scrutinizing the $30-billion merger, the Obama administration also drew a blueprint for the future of media, one that anticipates a world where the Internet becomes the primary source of entertainment for tens of millions of Americans.
Although Comcast and NBC Universal are not direct competitors and their corporate marriage did not trigger major antitrust issues, media watchdogs, lawmakers and competitors joined forces to warn that the combined company creates a de facto video drawbridge connecting consumers over the air, through cable and on the Internet.
Comcast can finally carry out its plan, unveiled 13 months ago, to combine General Electric Co.'s entertainment properties — which include storied broadcaster NBC, Universal Studios, the Spanish-language Telemundo network and a satchel of cable channels including USA, Syfy, Bravo, MSNBC and CNBC — with the country’s No. 1 cable TV operator. Comcast will own 51% of the joint venture. GE will retain 49%.
The deal is expected to close Jan. 28.
The Federal Communications Commission, one of the two government bodies reviewing the merger, voted 4 to 1 to approve the deal. Commissioner Michael J. Copps voted against it, saying it concentrated “too much power in one company’s hands.”
In giving the merger the green light, the government imposed far-reaching restrictions to prevent the Philadelphia-based cable giant from using its invigorated grasp — and NBC’s valuable programming — to crush smaller players, particularly in the fast-growing field of Internet video. The government set conditions, most of which expire in seven years, that prohibit Comcast from withholding its programming from rival cable TV and satellite providers as well as online distributors.
“The conditions include carefully considered steps to ensure that competition drives innovation in the emerging online video marketplace,” FCC Chairman Julius Genachowski said in a statement.
Comcast also made commitments to preserve NBC’s over-the-air television service and expand local news, public affairs and children’s programming. It pledged to carry at least eight new independent channels, four owned by African Americans and four owned or managed by Latinos. It further agreed to increase programming to serve Asian American communities and offer discount Internet service to low-income households.
Those safeguards were not enough to placate the FCC’s Copps, a stalwart liberal member of the regulatory agency who has long warned against the perils of media consolidation.
“Comcast’s acquisition of NBC Universal is a transaction like no other that has come before this commission — ever,” Copps said in a statement. “It reaches into virtually every corner of our media and digital landscapes and will affect every citizen in the land. It is new media as well as old; it is news and information as well as sports and entertainment; it is distribution as well as content.”
The Justice Department also weighed in with its own negotiated settlement with Comcast, which echoes the FCC’s conditions.
The merger as initially proposed “would have enabled Comcast to harm competition by either withholding or raising the price of NBCU content,” said Christine Varney, the Justice Department’s assistant attorney general for the antitrust division.
“The settlement,” she said, “ensures that the transaction will not chill the nascent competition posed by online competitors — competitors that have the potential to reshape the marketplace by offering innovative online services.”
Despite the conditions, Comcast Chief Executive Brian Roberts said, “our original vision for the combination remains intact so that consumers will benefit, and our competitors will be treated fairly.”
Rivals have worried that Comcast not only would stand over the production of movies and TV shows but also would control the distribution of that content through pipelines into more than 20 million homes.
With that in mind, the FCC and Justice Department set ground rules for Comcast.
Specifically, the FCC is requiring that Comcast sell its content to online distributors at the same price offered to cable and satellite companies. The FCC also said it would force Comcast to “offer stand-alone broadband Internet access services at reasonable prices and of sufficient bandwidth” so that customers have the option to watch online video services without having to be a Comcast cable customer.
The Justice Department said that the conditions imposed on the merger “will preserve new content distribution models that offer more products and greater innovation, and the potential to provide consumers access to their favorite programming on a variety of devices in a wide selection of packages.”
One area of particular interest for regulators is Hulu, the popular online video website that NBC Universal helped launch and that it partly owns. Critics contend that Comcast, worried over Hulu siphoning off viewers from cable, could sabotage the service — a concern that was shared by the Justice Department.
“Comcast has an incentive to prevent Hulu from becoming an even more attractive avenue for viewing video programming because Hulu would then exert increased competitive pressure on Comcast’s cable business,” the department wrote in court filings as part of its proposed settlement with Comcast.
Instead, Comcast will be stripped of its voting rights in Hulu, leaving it a passive investor and no longer entitled to receive “confidential or competitively sensitive information” about the business.
Asked whether such conditions are onerous enough to force Comcast to sell its stake in Hulu, David Cohen, an executive vice president, said the company was not currently weighing that option.
Many consumer groups and media watchdogs were pleased by the FCC and Justice Department actions.
“The FCC and the DOJ have put together a set of conditions and enforcement measures that we believe will protect consumers and promote the public interest,” said Mark Cooper, director of research for the Consumer Federation of America.
Not everyone, though, was as supportive.
“Letting one company control the pipes and the content that flows over those pipes is a formula for abuse,” said Josh Silver, president of Free Press, an advocacy group that says its mandate is to “reform the media.”
Others, including some on Wall Street and in Congress, thought the FCC’s restrictions were excessive.
When the merger was announced, many predicted that it would usher in a new era of media. But after seeing the restrictions, “it’s not clear that Comcast is going to have the ability to reinvent any of the models,” said Craig Moffett, an analyst at Sanford C. Bernstein & Co.
Rep. Fred Upton (R-Mich.) accused the Obama administration of “overreaching.” He compared the conditions to “more of a Chicago-style shakedown than the thoughtful deliberation that this transaction deserved.”