Comcast-NBCU Threatens Web Video Competition, FCC Told

Online video competition is among the media market threats from Comcast’s planned purchase of control of NBC Universal, many speakers said at a Chicago FCC field hearing on the deal that continued into Tuesday night. The combined companies have ample incentive to maintain exclusivity over their broadcast and cable programming, to the detriment of rival pay-TV companies, websites and other companies, some speakers said.

Commissioner Michael Copps, long a foe of media consolidation, said the conditions proposed by Comcast and NBC Universal are so paltry as to not pass the “red face test.” An economist who works for a group whose supporters include Comcast said the company faced the potential loss of profit by withholding content from others, while an executive at Nielsen, who took no stance on the deal, noted that the trend of cutting the cord by terminating video subscriptions in favor of Internet content remains nascent.

Copps called the deal in some ways “new and novel” and discussed how it would change the industry. “It will alter not only the media environment we are already familiar with, but it will be a scene setter for the future,” affecting the “media we'll be living with for years and years to come,” he said. “I am not of the opinion that our media environment can take too many more bad choices.” Approval of Comcast-NBC Universal “would be a very, very steep climb,” Copps said, as he has before. He was the only FCC member to speak.

Commission staff continue “cooperating closely” with the Justice Department on deal review (CED July 12 p4), FCC Chairman Julius Genachowski said in videotaped remarks at the event’s opening. “Learning your thoughts, and concern, is vital to our consideration of this transaction.” Executive Director Josh Silver of Free Press, whose group has criticized Genachowski for not attending, said he’s “disappointed that Chairman Genachowski chose to stay in Washington rather than come here.” That city “is a bubble” and Genachowski, who found time to attend the Allen & Co. media conference in Sun Valley, Idaho, last week, isn’t hearing “the voices” of those the agency is charged with protecting, Silver continued.

The deal isn’t benign, as the merging parties contend, said Dish Network Deputy General Counsel Jeff Blum. “Clearly, Comcast has no hesitations about blocking or degrading Internet applications of its choosing,” he said of the cable operator’s handling of BitTorrent peer-to-peer traffic, censured by the FCC and at the heart of this year’s Comcast court decision. “It is essential that the commission implement strict conditions” since the merging companies have shown they'll use their power to push competitors “out of the market completely,” Blum said.

Comcast has incentive to shield channels like CNBC from competition and prevent the disintermediation of content over set-top boxes and other devices, said Executive Director Markham Erickson of the NetCoalition, backed by merger opponents including Bloomberg. “Over time, online video will dominate the video market,” he said. Former White House aide Susan Crawford said she worries about the future of the Internet. “The Internet is not the friend of the incumbent media companies in America because it generally lowers the barriers of entry” and many such firms would like to avoid over-the-top video distribution, said Crawford, now a law professor after serving in the administration of President Barack Obama. “Generally, Comcast operates with enormous barriers of entry that would be enhanced with NBCU content.” She fears the continued building of “a moat of barriers to entry around its content distribution business,” one “that no competing online video distribution provider will be able to cross in the near term."

Comcast-NBC Universal could “dramatically” raise prices and force other cable operators to carry bundles of programming, Silver said. Senior Business Development Director Travis Parsons of Sezmi, an on-demand personal TV service, expects a continued “positive relationship” with Comcast should it buy NBC Universal, but worries the combined entity will have different incentives in dealing with companies like his, he said: It “may also have negative impact on consumer choice and competition."

The deal at hand primarily is a vertical merger joining video production and distribution, said Scott Wallsten of the Technology Policy Institute, whose backers include Comcast and Google. “More and better content could increase demand for all of Comcast’s products,” he said, saying he was speaking only for himself. Limiting access to NBC Universal programming could harm Comcast more than it helped it by getting consumers to buy its service, since the cable operator serves about a quarter of the country, Wallsten said. Nielsen Vice Chairman Susan Whiting said, “online video represents additional revenue streams that make the network stronger.” If NBC Universal tried to limit access to its content, that would be “lost revenue” for the company, she said, calling “slightly exaggerated” reports of the amount of video cord cutting occurring.