In Approving Comcast-NBCU, the FCC Blesses the Cable Model
To get more specific, in the press release there are 7 key conditions under the heading, “Protecting the Development of Online Competition” that Comcast and/or Comcast/NBCU are required to follow. These relate to online video and I have listed them out below. After each one I have added my analysis/reactions.
1. Provides to all MVPDs (note, the FCC calls Comcast and other pay-TV operators, “multichannel video programming distributors”), 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.
This means that if Comcast offers its Xfinity TV subscribers online access to NBCU’s USA Network shows like “Psych” or “Burn Notice,” it would have to allow other MVPDs to also offer these shows to their online users. This is no problem for Comcast, because it is a huge proponent of other MVPDs driving TV Everywhere services and would be supportive of them doing so (on consistent financial terms).
2. Offers its video programming to legitimate OVDs (online video distributors) on the same terms and conditions that would be available to an MVPD.
This is a prime example of the FCC protecting the cable model. This provision means that Comcast doesn’t need to give Netflix, Apple, Amazon or anyone else any special deal terms. If any of these companies want Comcast-NBCU programming they have to pay comparable rates as other distributors like Cablevision, DirecTV, etc. and cannot cherry-pick particular networks or programs. The FCC is essentially saying that the traditional cable model will not be undercut by any emerging online entrant gaining access to comparable content on advantageous terms.
3. 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.
This is the term most open to ongoing interpretation and controversy. It appears that the FCC is saying that if for example Netflix, an OVD, reached an agreement to distribute ABC content, then Comcast would be forced to offer Netflix NBC content, at comparable prices. But this raises questions like, what is “comparable” content? If ABC offers 3 reality series, does NBC then have to offer 3 reality series? What if they’re of vastly different popularity or vintage? Then there’s the pricing issue; for NBC to offer its shows at comparable prices, NBC would have to know what Netflix is paying ABC, something that neither Netflix nor ABC would want NBC (much less Comcast) to know. All of this and more make it unclear how this condition will work in the real world.
4. 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.
This shouldn’t be a problem; Comcast already offers standalone broadband service. The only question is what constitutes “reasonable prices and of sufficient bandwidth?” 5 megabits per second? 10? 20? 50? And what type of content is being sought (live, HD sports or on-demand drama) to define “online video services”?
5. Does not enter into agreements to unreasonably restrict online distribution of its own video programming or programming of other providers.
This is pretty broad, but shouldn’t be a problem either. Per the above provisions, the reasonableness standard will be comparable pricing and terms.
6. Does not disadvantage rival online video distribution through its broadband Internet access services and/or set-top boxes.
This one is interesting in light of recent news that Comcast is testing a new set-top box that would offer a selection of online video alongside traditional linear, VOD and DVR programming. At the time I raised the question of whether Netflix, for example, would be accessible on the new box? If Comcast were mandated by this provision to do so, that would give Netflix a really nice benefit, and would mean Comcast subscribers with the new box would be able to do a more direct side-by-side comparison of services, which might or might not be good news for Comcast given Netflix’s strong UI.
7. Does not exercise corporate control over or unreasonably withhold programming from Hulu.
This condition also seems open to interpretation. Depending on how Hulu’s bylaws were written, it’s possible that one primary equity-holder/founder (NBCU originally, but now Comcast as a result of the deal) could have the right to block any material company initiative. Under this condition, it would appear that Comcast would be relinquishing that right. That’s not necessarily a big deal if Hulu isn’t trying to do something that might be considered harmful to Comcast. But if it is, then who knows how this might play out. Meanwhile, Comcast’s EVP David Cohen said yesterday that Comcast has no plans to sell its stake in Hulu (and note the FCC’s conditions don’t prohibit it from doing so), but other than Hulu’s data being a great source of insight on the online video market (which isn’t trivial), it’s still not clear to me why Comcast would be interested in hanging on to its Hulu stake (especially since the IPO upside is off the table, for now at least). Net, net, Hulu’s future appears to be as cloudy as ever.
In addition to the above, there are a few other minor conditions (e.g. broadband access in 2.5 million low income homes, non-discrimination in channel clustering, commitment to localism, children’s programming and programming diversity), some of which are voluntary. But all in all, aside from the FCC trying to ensure a level-playing field going forward, Comcast looks like they ran the gauntlet of regulatory hurdles successfully and came out pretty much intact, with the FCC mostly blessing a business-as-usual approach.