Consumer Groups Cry Foul on Comcast’s NBC Play

Comcast and General Electric’s long-anticipated merger agreement — which would see see the cable giant take a controlling stake in NBC Universal — is already facing strident opposition from consumer groups, and concerns from lawmakers around the alliance of content with distribution.

To critics, the deal to create the nation’s biggest entertainment conglomerate invites a host of scenarios where Comcast could unfairly favor NBC programming through its television and Internet services.

“Antitrust regulators must ensure that all content providers are treated fairly on the Comcast platform, and that Comcast does not get undue advantages in gaining access to programming,” Sen. Herb Kohl, chairman of the Senate antitrust subcommittee, said in statement today, saying he planned to hold a hearing on the matter.

The deal would see Comcast take a 51 percent stake in the joint venture that it would manage, paying GE $6.5 billion in cash and contributing $7.25 billion in cable networks and other assets. GE would acquire the 20 percent share in NBC Universal held by French firm Vivendi for $5.8 billion, and retain a 49 percent share of the combined operation.

NBC Universal would arrange for $9.1 billion in loans to distribute to GE. The deal values NBC Universal at $30 billion.

The deal would fold the two companies’ cable programming divisions together, bring together all of NBC’s online content and some of Comcast’s, as well as NBC Universal’s broadcasting business, movie studio and theme parks.

NBC President and CEO Jeff Zucker would serve as CEO of the new venture, reporting to Comcast COO Steve Burke.

The principals are pitching the deal as a grand synergy that will deliver premium value to both GE and Comcast shareholders, while delivering consumers the “broadest possible access to content” across every platform.

Announcing the deal, Comcast CEO Brian Roberts said the venture “will allow us to become a leader in the development and distribution of multiplatform ‘anytime, anywhere’ media that American consumers are demanding.”

But some consumer groups, who launched a campaign to block the deal three weeks before it was announced, worry that the combination would be a dangerous consolidation of media entities that have been increasingly offering competing services.

“Removing the competitive tension between a major multichannel video program distributor and a major video content producer, such as Comcast and NBC, would eliminate the hard bargaining for distribution and content that has historically occurred between these two entities,” Consumer Federation of America and Free Press wrote in a report released today (available here in PDF format). “Instead, a Comcast/NBC cable provider would pay itself for its own content.”

Those concerns extend into Web video, most notably NBC’s stake in the online video hub Hulu.

For Net neutrality advocates, the integration of content and distribution revisits the longstanding worry about Internet service providers such as Comcast favoring their own content at the expense of their rivals.

“The combination of the country’s largest cable company, a TV network and a movie studio could present grave dangers to a free and open Internet,” Public Knowledge President Gigi Sohn said this morning. “The sheer size of the transaction makes a Net neutrality rule that much more necessary, as more content comes under the control of another giant media company.”

The deal will have to pass through a long regulatory gauntlet. The companies will need to secure the blessing of the Federal Communications Commission, as well as an antitrust sign-off from either the Department of Justice or the Federal Trade Commission. International regulators will also likely weigh in.

FCC Chairman Julius Genachowski promised a “thorough, fair and fact-based” review of the deal.

In an open letter, Comcast Executive Vice President David Cohen this morning outlined several commitments the companies have made to address the concerns that the deal could harm consumers and competition.

Comcast pledged to continue to offer free over-the-air television content once it absorbs NBC’s broadcast stations, and promised to continue to invest in local programming, and expand the distribution of NBC’s Telemundo and Mun2 channels.

Christopher King, an analyst with Stifel Nicolaus, said the regulatory concerns would be significant, though he expected the deal to eventually clear with some conditions attached.

“We doubt the government would block the deal, despite the host of vertical integration issues raised by the combination of video content and distribution as well as broadband/Internet assets,” King said in a research note. “We believe it’s more likely the DOJ/FTC and FCC would clear Comcast-NBCU with significant remedial conditions after subjecting the transaction to heavy scrutiny, probably extending at least into [the fourth quarter of next year].”

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