The American Cable Association is urging regulators to scrutinize the proposed Comcast-NBC Universal transaction -- a deal that would create the country's most powerful online and traditional programming company -- and take appropriate action, whether through conditions or forced divestiture, to prevent the new programming giant from using its enhanced market power to raise prices and limit choices for consumers of small and medium-sized cable and broadband operators.
"Without broad government intervention, regulators in Washington, D.C. will see Comcast-NBCU wield its unprecedented power to drive up artificially the cost of its programming, particularly for its newly acquired local broadcast TV stations and its 'must-have' national and regional cable networks that air live sporting events. Without restrictions, the new media conglomerate will also leverage its enhanced market power to force other pay-television providers to distribute all of its combined Comcast-NBCU programming on basic tiers, regardless of consumer interest in paying for this content," ACA President and CEO Matthew M. Polka said.
Under the proposed transaction, Comcast would take majority control of the NBC broadcast network, 10 local NBC TV stations and 16 TV stations owned by the Spanish-language Telemundo network, and the Universal movie studio. The deal would also put Comcast in command of NBCU's widely popular cable programming assets, including USA, Syfy, CNBC, MSNBC, Bravo, Weather Channel, Oxygen, Chiller, Sleuth, Telemundo, Universal HD, and mun2.
These NBCU cable programming assets would be combined with Comcast's existing stable of cable networks, which includes Golf Channel, E! Entertainment Television, Style Network, and VERSUS.
At the close of the transaction, Comcast -- already the owner of 10 regional sports networks -- would gain enormous new clout in the sports TV market as NBCU already has the rights to the Olympic Games and the rights to air regular season NFL games on Sunday night.
ACA believes that the consolidation of programming assets by the nation's largest pay television and residential broadband provider represents a serious threat to the financial stability of smaller operators. Independent operators already have very little leverage in their negotiations with broadcasters for retransmission consent and with the national and regional sports networks for carriage rights. These problems become far worse when they have to negotiate programming deals with an entity that has the alternative option to distribute the content directly to customers either through their cable plant or online.
"With two broadcast networks, 26 owned-and-operated stations, influence over broadcast affiliates, a stable of cable networks with popular live sporting events, the Comcast-NBCU transaction represents significant harm to consumers through a distortion of competition, including price gouging, that must be addressed," Polka added.
In addition to being a major cable content owner, Comcast is the country's largest cable TV service provider, with 23.8 million subscribers, and the largest residential broadband access provider, with 15.7 million customers. It also provides digital phone service to 7.4 million customers.
In the online arena, the Comcast-NBCU transaction could fundamentally alter the way consumers view video programming on the Internet. In controlling NBCU, Comcast would assume NBCU's 30% minority, but nonetheless influential, interest in Hulu.com, the Internet video streaming site that is free to broadband access providers and their consumers who want to sample some of NBC's primetime fare in an on-demand fashion.
"ACA is troubled that by having one of the nation's largest cable programmers take control of so much valuable content, Comcast-NBCU will be able to force its preferred business model for online video distribution upon others, regardless of whether such a model is in the best interest of consumers," Polka said.
ACA believes that the concessions already proposed by Comcast-NBCU do not go far enough to afford consumers protection from all the massive anti-competitive harms inherent in a transaction that unites the largest pay-TV provider in the country with a dominant content provider like NBCU.
"Comcast's proposed concessions designed to gain regulatory approval will not achieve the important goal of alleviating all the serious harms that this transaction would cause consumers of small cable and broadband operators. Applying a Band-Aid to an ax wound is hardly a solution," Polka said.
Links to Related News Stories
Comcast's Roberts Begins Merger Talking Tour With The Post, Regulators (Washington Post, 12/9)
Small Cable Companies Worried About Comcast-NBC Deal (The Hill, 12/8)
NBC On Record Opposing Consolidation (National Journal, 12/7)
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