FCC Approves Comcast/NBCU Deal

Updated at 4:00 p.m. ET

The FCC commissioners voted Tuesday to give the green light to Comcast to team up with NBC Universal in a $30 billion joint venture, according to two sources close to the commissioners.

The vote was 4-1, with Commissioner Copps voting against it, providing a ringing dissent. A veteran media consolidation critic, Copps had all along said its approval was a very steep Hill for him, and ultimately it proved too high for him to climb.

As expected, the Justice Department followed the FCC in approving the Comcast/NBCU deal. The FCC was reviewing the deal for its impact on public interest, while Justice focuses on competition issues.

The FCC commissioners had been vetting a draft approval circulated last month, and made some edits, but sources say the draft is essentially the same. Comcast has signaled it could live with the conditions the FCC proposed.

The deal comes with plenty of those conditions, including on access to broadcast, cable, and online content, and network neutrality conditions. The network neutrality condition will be an "enforceable commitment" even if the rules are thrown out by the courts, according to a source.

The deal also comes not quite a year since the two companies officially filed the joint venture request with the FCC Jan. 28, 2010.

The deal, which FCC officials have stressed was a joint venture rather than a merger, combines the nation's largest cable operator with a studio library and cable channel content. It creates a company majority owned by Comcast (51%) that pools all of NBCU's media content with most of Comcast's, with Comcast retaining full control of its cable and Internet assets. Comcast has the option of buying out NBCU parent GE's 49% interest in the joint venture over the next three to seven years.

The FCC's review stemmed primarily from the transfer of NBCU's broadcast licenses, and Comcast/NBCU had the burden of proving that the venture served the public interest, which is the FCC's standard of review, and includes competition, innovation, localism and diversity. If the augmented benefits (say Comcast's public interest pledges) and mitigated harms (conditions on access to content) tip the scale toward the public interest, the deal is approved.

FCC Chairman Julius Genachowski and the transaction team signaled last month the deal, with conditions, tipped the balance in favor of the public interest.

Deal critics have disagreed, but even most of them conceded the deal was going through.

An FCC source says Comcast also late Monday filed in the merger review docket officially agreeing to commit to the network neutrality conditions voluntarily even if the FCC's network neutrality rules approved Dec. 21, are eventually thrown out by the courts.

It was being described as an enforceable voluntary commitment, rather than a condition, which might be an effort to appease commission Republicans.

The FCC Tuesday the following key conditions in the order:

• Ensuring Reasonable Access to Comcast-NBCU Programming for Multichannel Distribution. Building on successful requirements adopted in prior, similar transactions, the Commission is establishing for rival multichannel video programming distributors (MVPDs) an improved commercial arbitration process for resolving disputes about prices, terms, and conditions for licensing Comcast-NBCU's video programming. The Commission is also requiring Comcast-NBCU to make available through this process its cable channels in addition to broadcast and regional sports network programming.

• Protecting the Development of Online Competition. Recognizing the risks this transaction could present to the development of innovative online video distribution services, the Commission has adopted conditions designed to guarantee bona fide online distributors the ability to obtain Comcast-NBCU programming in appropriate circumstances. These conditions respond directly to the concerns voiced by participants in the proceeding-including consumer advocates, online video distributors (OVDs), and MVPDs -while respecting the legitimate business interests of the Applicants to protect the value of their content. Among other things, the Commission requires that Comcast and/or Comcast-NBCU:

-Provides to all MVPDs, at fair market value and non-discriminatory prices, terms, and conditions, any affiliated content that Comcast makes available online to its own subscribers or to other MVPD subscribers.

-Offers its video programming to legitimate OVDs on the same terms and conditions that would be available to an MVPD.

-Makes comparable programming available on economically comparable prices, terms, and conditions to an OVD that has entered into an arrangement to distribute programming from one or more of Comcast-NBCU's peers.

-Offers standalone broadband Internet access services at reasonable prices and of sufficient bandwidth so that customers can access online video services without the need to purchase a cable television subscription from Comcast.

-Does not enter into agreements to unreasonably restrict online distribution of its own video programming or programming of other providers.

-Does not disadvantage rival online video distribution through its broadband Internet access services and/or set-top boxes.

-Does not exercise corporate control over or unreasonably withhold programming from Hulu.

• Access to Comcast's Distribution Systems. In light of the significant additional video programming Comcast will control after the merger with NBCU-programming that may compete with third-party programming Comcast currently carries or otherwise would carry on its MVPD service-the Commission requires that Comcast not discriminate in video programming distribution on the basis of affiliation or non-affiliation with Comcast-NBCU. Moreover, if Comcast "neighborhoods" its news (including business news) channels, it must include all unaffiliated news (or business news) channels in that neighborhood. The Commission also adopts as a condition of the transaction Comcast's voluntary commitment to provide 10 new independent channels within eight years on its digital tier.

• Protecting Diversity, Localism, Broadcast and Other Public Interest Concerns. The Commission is also imposing conditions and accepting voluntary commitments concerning a numbers of other public interest issues, including diversity, localism, and broadcasting, among others. For example, to protect the integrity of over-the-air broadcasting, network-affiliate relations, and fair and equitable retransmission consent negotiations with the joint venture, the Commission adopts a series of conditions that were independently negotiated between the Applicants and various network affiliates.

The Applicants have also made a number of additional voluntary commitments, many of which the Commission has adopted as conditions to the transaction's approval. Most of these commitments are geared towards enhancing the public interest as a result of the joint venture. These commitments include:

• Broadband Adoption and Deployment. Comcast will make available to approximately 2.5 million low income households: (i) high-speed Internet access service for less than $10 per month; (ii) personal computers, netbooks, or other computer equipment at a purchase price below $150; and (iii) an array of digital-literacy education opportunities. Comcast will also expand its existing broadband networks to reach approximately 400,000 additional homes, provide broadband Internet access service in six additional rural communities, and provide free video and high-speed Internet service to 600 new anchor institutions, such as schools and libraries, in underserved, low-income areas.

• Localism. To further broadcast localism, Comcast-NBCU will maintain at least the current level of news and information programming on NBC's and Telemundo's owned-and-operated ("O&O") broadcast stations, and in some cases expand news and other local content. NBC and Telemundo O&O stations also will provide thousands of additional hours of local news and information programming to their viewers, and some of its NBC stations will enter into cooperative arrangements with locally focused nonprofit news organizations. Additional free, on-demand local programming will be made available as well.

• Children's Programming. Comcast-NBCU will increase the availability of children's programming on its NBC and Telemundo broadcast stations, and add at least 1,500 more choices to Comcast's on-demand offerings for children. It will provide additional on-screen ratings information for original entertainment programming on the Comcast-NBCU broadcast and cable television channels and improved parental controls. Comcast-NBCU also will restrict interactive advertising aimed at children 12 years old and younger and provide public service announcements addressing children's issues.

• Programming Diversity. Building on Comcast's voluntary commitments in this area, we require Comcast-NBCU to increase programming diversity by expanding its over-the-air programming to the Spanish language-speaking community, and by making NBCU's Spanish-language broadcast programming available via Comcast's on demand and online platforms. As noted above, Comcast also will add at least 10 new independent channels to its cable offerings.

• Public, Educational, and Governmental ("PEG") Programming. Comcast will safeguard the continued accessibility and signal quality of PEG channels on its cable television systems and introduce new on demand and online platforms for PEG content.

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.