Federal regulators appear poised to bless Comcast's proposed $30-billion takeover of NBC Universal, with conditions aimed at limiting Comcast's ability to harm competitors. Those conditions would not speed innovation in the market for TV services, but at least they would blunt Comcast's ability to impede online entrepreneurs and hinder rival networks.
The merger, if it goes through, would give the country's largest provider of cable and broadband services a major Hollywood studio and a leading television network, as well as Telemundo, several popular cable TV networks and a minority stake in Hulu — a website that makes hundreds of TV shows available online, potentially serving as an alternative to cable. But the newly formed powerhouse would have to adapt to a market that's rapidly changing, largely because broadband has become an effective and inexpensive way to distribute video.
The most troubling aspect of the deal is its implication for emerging online alternatives to cable. Under Comcast's control, NBC Universal would have a greater incentive to protect the cable TV business than it would on its own. Granted, the networks haven't exactly been racing to support online ventures that could substitute for cable in the living room; they produce a fraction of the revenue collected from cable. But once a TV-over-the-Internet service shows that it has the potential to generate considerable profits, an independent NBC would be far more likely to embrace it than one that's under Comcast's wing.
That's why the Federal Communications Commission and the Justice Department, which are setting the conditions for the merger, should try to ensure that Comcast's newly purchased networks and Hulu behave the same way they would if they hadn't been taken over by a cable operator. FCC officials have hinted that they will require Comcast to offer licensing deals to online video services on terms comparable to the ones offered by other networks and studios. Such strictures appear to strike the right balance between Comcast's interests and those of its would-be challengers.
It would help if the Justice Department applied this principle broadly, so that ventures such as TV Everywhere — a joint effort by Comcast and Time Warner to make cable programming available online to pay-TV subscribers — couldn't deny their services to other consumers. The department should also bar Comcast from vetoing Hulu's decisions about which devices and online services to support.
The Net neutrality rules adopted by the FCC this month prohibit Comcast from making its own content and services more accessible to its broadband customers than Netflix and other competitors. Those rules don't apply to Comcast's cable TV lineup, but the same protections should be in place for rival TV programmers — Comcast shouldn't make it harder for viewers to find or watch its competitors' channels than its own networks. The commission appears poised to impose that condition as well, which would help force Comcast's newly acquired networks to compete for viewers the way they did before the merger — fairly.