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FCC chairman proposes conditions to approve Comcast merger with NBC Universal

Julius Genachowski wants to limit the ability of Comcast to egregiously flex its new muscle, according to senior FCC officials.

December 24, 2010|By Joe Flint and Meg James, Los Angeles Times

Cable television giant Comcast Corp.'s yearlong quest to win government approval of its proposed $30-billion merger with NBC Universal took a significant step forward Thursday when a key regulator proposed to vote for the deal if the companies agreed to a series of conditions.

Federal Communications Commission Chairman Julius Genachowski wants to limit the ability of Comcast — which would become the nation's largest media company — to egregiously flex its newfound muscle, according to senior FCC officials.

Genachowski is concerned that Comcast, loaded with NBC Universal content, could use its clout to thwart online video services that would compete with Comcast's bread-and-butter business of piping hundreds of TV channels into people's homes.

Comcast, the nation's largest cable TV operator and provider of broadband Internet service, needs FCC as well as Justice Department approval before it can take control of the entertainment company that owns the NBC network, Universal Pictures and cable channels such as CNBC, MSNBC, USA and Bravo.

The Comcast-NBC merger is a test for the Obama administration, which has said it intends to make the expansion of the Internet a cornerstone of its regulation of media companies.

Genachowski, an appointee of President Obama, on Thursday circulated to the four other FCC commissioners a proposed order to approve the deal, which will be reviewed by them and voted on in the next few weeks.

Comcast, which has spent more than $15 million lobbying the government for approval of the deal, is anxious to get the regulatory review behind it.

"After nearly a year, with one of the longest public comment periods in transaction review history, the filing of thousands of substantive comments, and the production of over 500,000 pages of documents by Comcast, we look forward to an expeditious vote in January by the full commission approving the transaction," Comcast said in a statement.

The combination of Comcast's cable and Internet distribution system with NBC Universal's TV shows and movies has prompted competitors, lawmakers and media watchdogs to worry that the merger would give Comcast an unfair advantage.

"We believe that consumers would be best served if the deal was rejected," said Parul P. Desai, an attorney with Consumers Union. "It's hard to imagine how a cable giant like Comcast owning a content empire like NBC Universal could be a plus for consumers' pocketbooks and competition."

Genachowski's proposed conditions include requirements that would attempt to prevent Comcast from favoring its own content over that of its competitors, agency officials said. There also will be conditions that would make it difficult for Comcast to withhold its own content from rivals.

These conditions, as is typical under merger reviews, would apply only to Comcast and not the rest of the TV industry.

Specifically, one condition would require Comcast to provide its programming to an online video service if rivals such as Walt Disney Co.'s ABC or News Corp.'s Fox were also feeding content to it.

That could be a bitter pill for Comcast to swallow because it would prefer to control its own programming rather than be forced to help competitors — such as Netflix or Google TV — build their businesses.

Federal regulators also are expected to place limits on Comcast's oversight of the online service Hulu. NBC Universal is a founder of Hulu and owns about a third of the venture along with Disney and News Corp. One proposal being weighed is to take away NBC's voting rights in Hulu.

Comcast might also be required to cluster similar channels in the same neighborhood with the channels that it owns. Bloomberg, for example, has fought to make the FCC require that its Bloomberg TV business news channel be placed alongside CNBC, a move that could boost viewership for a channel currently in the cable hinterlands.

In a regulatory filing, Comcast made other pledges to win over the Obama administration, including to "substantially increase broadband option in low income homes." Obama has said that making the Internet more available to underserved areas is a priority. Comcast said it would bring its existing broadband network to 400,000 additional homes by 2013 and include a low-cost, high-speed service for low-income residents.

The FCC this week pushed through controversial rules meant to prevent the owners of high-speed lines and airwaves such as Comcast from favoring their services over competitors' and to preserve open access to the Internet.

Although it is possible that the FCC could vote against Comcast, usually when the FCC chairman signs off, a majority will follow in favor of the decision. There are three Democrats, including Genachowski, and two Republicans on the commission.

joe.flint@latimes.com

meg.james@latimes.com

Times staff writer Jim Puzzanghera contributed to this report.

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