Com­cast-NBC terms aim to open a door to on­line video

The Washington Post Sunday - - TECHNOLOGY & INNOVATION - ROB PEGORARO robp@wash­

Ide­ally, no­body should have to worry about one TV and In­ter­net provider buy­ing a TV net­work. In that ideal world, you’d have enough choices for those ser­vices that com­pe­ti­tion would keep the newly com­bined com­pany hon­est.

But we don’t live in that world. In this one, Com­cast— the nation’s largest TV and In­ter­net provider— has a mo­nop­oly in some homes and, more of­ten, is one of two op­tions for high-speed In­ter­net and one of three or four for TV.

What­ever you read about the union of Com­cast’s video prop­er­ties and those of NBC Uni­ver­sal, blessed by the govern­ment Tues­day, keep that in mind. This isn’t a func­tion­ing mar­ket along the lines of an Eco­nom­ics 101 text.

When the FCC and the Jus­tice Depart­ment ap­proved the Com­cast-NBC deal, they tried to ac­count for that prob­lem by plac­ing con­di­tions.

Will they avert what op­po­nents are call­ing a Com­cas­tro­phe, in which many peo­ple’s least fa­vorite com­pany crushes its ri­vals? When David Co­hen, Com­cast ex­ec­u­tive vice pres­i­dent, summed things up on a con­fer­ence call Tues­day by say­ing, “I don’t think any of the con­di­tions is par­tic­u­larly re­stric­tive,” does that mean Com­cast got a free ride?

Most of the rules and lim­its fall into two cat­e­gories: Those that aim to pre­vent abu­sive con­duct against the Philadel­phia com­pany’s cur­rent com­peti­tors and those that look to crack open the door to ad­di­tional ri­vals in the video-ser­vice mar­ket.

(Com­cast also pledged a va­ri­ety of moves to in­crease the di­ver­sity of the pro­gram­ming put out by the com­bined Com­cast-NBC Uni­ver­sal ven­ture. That is a good thing to do, but it’s also on Page 1 of cor­po­rate play­books.)

On re­flec­tion, the terms im­posed by the feds look a lit­tle more pos­i­tive than they seemed Tues­day. The govern­ment didn’t at­tempt to re­make this com­pany through reg­u­la­tion, but it does seem to have thought a fewchess moves ahead.

The most im­por­tant non-abuse pro­vi­sions limit Com­cast’s abil­ity to keep its and NBC’s video con­tent— in­clud­ing re­gional sports net­works, cable chan­nels such asMSNBCand theUniver­sal Pic­tures movie li­brary— from other ser­vices.

Com­cast can no longer withhold se­lected pro­gram­ming (such as the sports net­works it has re­fused to pro­vide to satel­lite broad­cast­ers in the Philadel­phia mar­ket). And any car­riage dis­putes over pric­ing will be set­tled in bind­ing ar­bi­tra­tion.

The com­pany can’t re­tal­i­ate against other net­works when they seek car­riage on its own cable sys­tems, al­though no bind­ing dis­pute-res­o­lu­tion sys­tem will set­tle the in­evitable dust-ups.

Com­cast is also pledg­ing to fol­low the ba­sic net-neu­tral­ity rules en­acted by the FCC— though any com­pany in its po­si­tion would say the same.

And in the bar­gain, Com­cast has to give up any con­trol over Hulu, al­though it will re­tain NBC’s par­tial own­er­ship of the pop­u­lar video site.

Un­for­tu­nately, the FCC and Jus­tice punted on the chance to re­quire that Com­cast and NBC stop block­ing In­ter­net users from view­ing videos on their pub­lic sites if they use the “wrong” soft­ware, such asGoogle TV.

Things get a lit­tle more in­ter­est­ing with pro­vi­sions gov­ern­ing how Com­cast-NBC may do busi­ness with cur­rent and emerg­ing on­line-video ser­vices.

First, Com­cast has to of­fer stand­alone, no-TV-re­quired In­ter­net ac­cess with down­loads of at least 6 mil­lion bits per sec­ond for $49.95 a month for the next three years. Al­though Com­cast says that rep­re­sents no change from its cur­rent prac­tice, it has charged ex­tra for In­ter­ne­tonly ser­vice in the past.

(It’s also pledg­ing to reach an ad­di­tional 400,000 homes and of­fer a dis­counted, $9.95/month plan for fam­i­lies with chil­dren el­i­gi­ble for free lunches in school un­der fed­eral guide­lines, which could ex­pand broad­band ac­cess across the coun­try.)

Sec­ond, Com­cast-NBC can’t say no to a video site that wants to re­sell its con­tent. In the sim­pler but less-likely sce­nario, a site could agree to carry the com­pany’s en­tire lineup on­line, pay­ing about the same as a cable or satel­lite ser­vice would.

In a sec­ond pos­si­bil­ity, once an In­ter­net video ser­vice inked a dis­tri­bu­tion deal with any of a de­fined set of com­peti­tors to NBC, Com­cast would have to of­fer it “com­pa­ra­ble” con­tent on sim­i­lar terms and con­di­tions. So, for ex­am­ple, it can’t yank NBC con­tent of­fNet­flix.

It’s pos­si­ble that none of these Hollywood com­pa­nies will go be­yond to­day’sWeb deals. They have seemed con­tent with re­stric­tive “ TV Ev­ery­where” schemes such as Com­cast’s Fan­castXfin­ity TV that limit ac­cess to cur­rent cable cus­tomers, with no op­tion for oth­ers to pay forWeb-only view­ing.

But maybe they will. Pub­lic Knowl­edge lawyerHarold Feld sug­gested that Vi­a­com had rea­son to up­set the cur­rent sys­tem, while Stifel Ni­co­laus tele­com an­a­lyst Re­becca Ar­bo­gast said Dis­ney might be more likely to be a spoiler.

And from then on, what Ar­bo­gast called a “one-way ratchet” could lead to an in­creas­ing va­ri­ety of cable-bound con­tent ap­pear­ing on­line.

We’ll find out in seven years, when all these con­di­tions ex­pire. If the en­ter­tain­ment in­dus­try con­tin­ues to march in lock step, against the ob­vi­ous wishes of cus­tomers look­ing for cheaper, more flex­i­ble ways to watch TV, the govern­ment’s gam­bit won’t go any­where. Then again, Com­cast’s share­hold­ers should be ner­vous about the odds of this far­ing any bet­ter than such ear­lier unions of con­tent and con­nec­tiv­ity as the ugly AOL-TimeWarner mar­riage.

There’s prob­a­bly only one safe pre­dic­tion to make about this union and its terms: Cable rates will con­tinue to go up.

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