House Democrats challenge Comcast, NBC on deal

Thu, 02/04/2010 - 7:45am
AP wire report

WASHINGTON (AP) – House Democrats are challenging executives from Comcast and NBC Universal to show that the cable TV operator's plan to take control of the NBC media empire won't hurt consumers and competitors.

Members of a House subcommittee on communications and technology sounded skeptical about the deal at the first of two congressional hearings Thursday. They worry that the transaction could lead to higher cable rates, fewer video programming choices and other competitive harms.

Comcast Corp. is seeking government approval to acquire a 51 percent stake in NBC Universal from General Electric Co. The Justice Department and the Federal Communications Commission are currently reviewing the transaction.

Comcast says the deal doesn't raise significant antitrust concerns because the companies operate in separate and highly competitive markets.

Since the merger was announced, competitors, customers, and consumer groups have been demanding that approval for the deal be contingent upon assurance that the combined entity will not abuse its market power.

Colleen Abdoulah, president and CEO of WOW! Internet, Cable & Phone, spoke at the hearing, arguing that a combined Comcast-NBCU would push up cable prices for consumers and threaten competitive multichannel video and Internet content markets if regulators failed to impose meaningful conditions on this unprecedented media combination.

"Regulators must understand that the Comcast-NBC Universal merger will harm consumers and competition because a company like WOW! will be forced to pay discriminatory prices for an array of content owned by a dominant provider like Comcast-NBCU, depriving us of critical financial resources needed to add network capacity to meet the demands of broadband subscribers,” Abdoulah said, according to her prepared remarks. “Make no mistake about it: Comcast-NBCU will have the incentive to treat WOW! unfairly in the pricing of cable, broadcast and broadband content because we compete head-to-head with Comcast for cable, phone and broadband subscribers."

Abdouleh continued: “In the post-combination world, Comcast will have so much power that it can create its own economic reality and make one plus one equal five," Abdoulah said. "This makes all distributors quake as they will be forced to pay more for the content so essential to their businesses.  Further, it means that American consumers will pay more as well.  This is the antithesis of a pro-competitive deal."

Andrew Schwartzman, president and CEO of the Media Access Project, is flat-out opposing the merger as a dangerous instance of media concentration. In prepared testimony, he claimed to be speaking for some cable competitors and cable customers, who feared speaking out directly for fear of retaliation from Comcast.

Schwartzman, in his prepared remarks, said, “If Comcast is permitted to purchase the NBC TV stations and its highly viewed cable networks, Comcast will be able to bundle its programming when it seeks carriage deals with other multichannel video programming distributors (“MVPDs”) such as telephone and satellite companies.

“This enables Comcast to obtain distribution for new and secondary channels which otherwise would never receive such treatment. Each time a Comcast channel is forced into the program menu, there is one less slot for independently owned programming.”

Continuing to lay out the potential peril of the merger, Schwartzman said, “The problem is even greater with respect to carriage on Comcast’s own cable systems. The existing legal framework already gives Comcast every incentive to favor its own programming over independently produced cable channels. This can include refusal to carry competitors, paying them far less for carriage or placing them on a lesser watched program tier.

“After the acquisition, Comcast will have even more cable networks to favor in deciding what to carry on its cable platform. Because it will create incentives for Comcast to make programming decisions based on self-serving financial factors rather than program quality, approval of the merger would mean that the public will get inferior programming. Discrimination of this kind also generates higher prices for all Americans, not just Comcast customers. Since Comcast will be paying itself for program carriage, it can set a higher wholesale price for its programming, so that competing MVPDs will also have to pay higher prices. This, of course, will be passed on to their customers,” Schwartzman said.

Comcast has issued a set of promises, but they have failed to assure those urging caution, including the American Cable Association.

ACA president Matthew Polka took the opportunity of a congressional hearing to address Comcast’s promises: “A month ago, Comcast-NBCU pledged to operate in a manner consistent with certain ‘public interest commitments.' Because Comcast and NBCU drafted these public interest commitments on their own, it shouldn't shock anyone that they are totally porous and inadequate. One of the commitments calls for Comcast-NBCU to self-apply the FCC's program access rules to its TV stations. This ‘commitment' isn't without irony, given that Comcast is asking a federal appeals court to tear up those rules and toss them in the wastebasket.”

Brian Santo contributed to this story

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