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Smooth Sailing on the Potomac? Guess Again

NBC Chairman Robert Wright predicted last week that winning regulators' approval for the network's deal to control Vivendi Entertainment would require little more than a few pro forma signatures on the application form.

Opponents of media consolidation will do their best to make government review of the deal much tougher than that. "I can't just let them walk straight through," said Jeffrey Chester, executive director of the Center for Digital Democracy.

He will try to convince antitrust regulators in the U.S. and at the European Union (Vivendi is French) that the combination of NBC broadcast networks and program-production capabilities with assets, such as Sci Fi Channel and USA Network, that would be acquired from Vivendi warrant some type of requirement to carry programs developed by non-affiliated producers.

"There needs to be some type of safeguard mandating access to the distribution system," he said.

That will be no easy task given that the FCC did away with those regulations in the 1980s. Chester says he'll target the antitrust regulators assigned to the deal instead, either the Justice Department or the Federal Trade Commission, and argue that NBC has sufficient market power to revive the long-out-of-favor restrictions on in-house programming.

Chester said he was bolstered by a federal appeals court's decision last week staying new, looser broadcast-ownership rules approved by the FCC in June.

But Washington sources predicted that NBC and Vivendi would be able to structure the deal to limit regulatory oversight. At the FCC, for instance, NBC's continued control over its broadcast licenses would mean little regulatory review other than approval of a minor form indicating the addition of Vivendi shareholders as major investors.

Foreign investment in U.S. licensees is typically limited to a 20% direct stake and 25% indirect stake. Vivendi is, in fact, scheduled to hold only a 20% stake in the new company.