With a lengthy pitch on the public interest value of creating a new content-focused joint venture that will boost quantity, quality, diversity and "local focus," Comcast, NBC Universal and General Electric jointly filed a merger application/public interest statement with the Federal Communications Commission Thursday (Jan 28), launching what will likely be an almost year-long review.
That followed the filing earlier in the week with the Justice Department, which will look at competitive issues only. The FCC's review goes beyond competition to look at the public interest impact of the deal, hence the lengthy filing (136 pages) accompanying the request for transfer of various cable and broadcast licenses. The $30 billion deal will also get scrutiny on Capitol Hill in hearings beginning next week.
The document lays out the public interest benefits in terms of the FCC's four key interests: localism, diversity, competition and innovation. It argues that the deal promotes the first by increasing the quality and variety of content more than either company could do alone. With its commitment to boost local news programming by 1,000 hours on the O&O stations, as well as increase children's and family programming and more, it argues that it is promoting localism.
The deal will spur the competition to up its game, which takes care of number three, they argue, and the new company will experiment with new business models and distribution platforms that will spell innovation.
The document also argues that the transaction violates no FCC rules and is not even the sort of media concentration the FCC is traditionally concerned about regulating through market or cross-ownership limits.
In Thursday's filing, Comcast and company renewed and expanded on some earlier public interest pledges--though they did not sweeten the pot with any new ones--and said the deal was the kind of primarily vertical combo with "limited horizontal issues" that the commission has generally found to not threaten competition. Vertical means combining a content and a distribution company, rather than two companies that compete primarily in either space.
They pledged to keep the broadcast networks and stations a going concern, although with ongoing conversations about what that may entail. "Comcast will continue its cooperative dialogue with its affiliates toward a business model to sustain free over-the-air service that can be workable in the evolving economic and technological environment," the statement said.
Comcast also pledged to obey program access rules, extend them to retransmission negotiations, expand the amount of news programming on local stations and adopt a cable model for on-screen ratings. It made no pledges about access to online content, which it sees as a nascent and wildly competitive space.
The filing called NBCU an "American Icon" and said it was joining with a "pioneer" (Comcast) in delivering content anytime, anywhere "on the devices they want," echoing the sort of open access language the FCC majority has used to promote Internet openness.
Comcast points out that its content side is only a "fraction" of its business. Comcast Chairman Brian Roberts has been emphasizing that the company's interest in NBCU is primarily in content, like cable channels and film libraries, rather than the distribution platform.
In fact, while the NBC distribution system--the broadcast network and owned-stations--will be part of the new venture, the Comcast cable systems will remain under the sole control of the Comcast Corp. mother ship.
The companies argue that they are offering up an "unprecedented array" of public interest commitments.
They also argue that there is no "plausible basis for any claims of anti-competitive effects." Even combining the Comcast and NBC cable channels, they say, the combined company will only account for about 12% of national cable ad and affiliate revenue, with approximately six out of seven Comcast networks unaffiliated with either Comcast or NBCU. The limited number of markets where
Comcast will own both a TV station and cable system are large ones with at least seven other TV stations and radio, as well as other media outlets, leaving "numerous diverse voices and a vibrantly competitive local advertising environment,"
They tell the FCC not to worry about the combination of Internet properties, which they say "poses no threat to online competition." In particular, Comcast says its 32% interest in Hulu is non-controlling and non-management, and that Hulu has less than a 10% share of online viewing, a tenth that of Google (YouTube), adding the share is "still small" if the field is narrowed to "professional content."
As it has before, the companies said that the FCC already has a mechanism in place to deal with any potential complaints--the program access and program carriage rules.
"In the end," they write, "the proposed transaction simply transfer ownership and control of NBCU from GE, a company with a very diverse portfolio of interest, to Comcast, a company with an exclusive focus on, and a commitment to investing in, the enhancement of its media and communications assets."
They point out that they have "publicly affirmed their continuing commitment to free, over-the-air broadcasting, and that the new company will only be the fourth-largest owner of national cable networks, "the same rank NBCU has today."
Among the public interest pledges outlined Thursday were a commitment to the same amount of local news and information programming on NBC O&O's for three years after the merger is approved, "a particularly significant commitment to promote localism given the economic challenges facing all broadcasters today."
In addition, the 10 NBC O&O's will commit to producing a collective 1,00 additional hours of content on various platforms, including Comcast regional networks, VOD, online and multicast channels.
The new company promises to add thousands of new VOD offerings aimed at "children and families," and will adopt the cable standards for on-screen ratings, boosting the duration of onscreen ratings information from five to 15 seconds after each commercial break. That goes directly to a major FCC priority, which is improving the V-chip ratings system as part of a wider effort to boost and simplify parental content-control options.
It also pledges to expand their relationship with Common Sense Media--FCC Chairman Julius Genachowski is a founding board member--to include more extensive programming information and content-control tools, saying they are in discussions with CSM on a "broader partnership."
Echoing its settlement of a complaint by several Michigan communities, Comcast pledged not to move any public, educational or government access (PEG) channels to a digital tier until the system goes all-digital or a community agrees to the move.
Comcast echoed its earlier pledge--when the deal was announced--to add two independent channels per year for three years once it has migrated its channel lineups to all digital, which it says should be no later than the end of next year.
It will also voluntarily accept applying program access rules to the HD feeds of any network whose SD feed is subject to those rules, so long as the access rules remain in place. It will also apply those access rules to retrans negotiations for NBC and Telemundo-owned stations.
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