The Federal Communications Commission and the U.S. Department of Justice today approved a deal to create a joint venture between cable giant Comcast and NBC Universal.
In a 4-1 vote, the FCC determined that the deal is in the nation's public interest. The Justice Department also issued a statement that it has approved the union, which will be the first time a cable company has merged with a major TV network. The new joint venture, which will be majority-owned by Comcast, will become a media powerhouse joining the nation's largest cable operator with one of the leading movie studios and TV networks in the U.S..
The FCC and Justice Department put several conditions on the deal. Most of them focus on making sure that the deal does not hamper development of the online video market. Both the Justice Department and the FCC wanted to ensure that Comcast through its control over NBC Universal's content was not able to shut out online video competitors from accessing content. FCC Chairman Julius Genachowski said in a statement that the conditions imposed by the FCC "include carefully considered steps to ensure that competition drives innovation in the emerging online video marketplace."
But the rules that have been adopted are somewhat complicated. David Cohen, an executive vice president at Comcast, said during a press conference, that the stipulations in place do not mirror the same program access rules that are in place for Comcast's other paid TV competitors, such as satellite and phone companies. Instead, the rules are more narrowly defined only requiring Comcast and NBC to provide video content to online video providers, such as Apple TV, Netflix, YouTube or others, under certain circumstances. Cohen also explains Comcast's understanding of the conditions in a blog post.
Specifically, Comcast/NBC is required to offer content to an online provider if that provider has already gotten one of NBC's peers to offer similar content. And even then, NBC is only required to offer such content under similar terms and business models as are already being offered by an NBC competitor. For example, if Viacom is offering a reality series, NBC would only be required to offer reality programming under the same business terms as Viacom offers its content.
One major sticking point over the past year as the merger was being considered is whether Comcast/NBC would be allowed to keep its stake in Hulu, the online video site started by NBC and its partners News Corp. and Walt Disney Co. Several lawmakers had asked for Comcast to divest itself of its stake in Hulu.
Neither the Justice Department nor the FCC is requiring Comcast to sell its investment in Hulu. But the company will be required to give up NBC Universal's management stake in Hulu, which includes a board seat on Hulu. NBC Universal and its Hulu partners each have minority stakes in Hulu.
"Without such a remedy, Comcast could, through its seats on Hulu's board of directors, interfere with the management of Hulu, and, in particular, the development of products that compete with Comcast's video service," the Justice Department said in its press release.
Comcast said it would retain an economic stake in Hulu. It also said it plans to continue to provide TV shows and movies to the Hulu service as its partners are also doing.
Some of the other conditions put in place by the FCC are designed to help promote universal broadband access. For example, the FCC is requiring Comcast to offer standalone Internet broadband access at a "reasonable price" and with "sufficient bandwidth." Specifically, this means Comcast will be required to offer a nationwide standalone broadband service for $49.95 a month for the next three years.
Democratic Commissioner Michael J. Copps was the only member of the FCC to vote against the deal. He said in his dissenting statement that he was concerned about the concentration of media that the deal would bring into the market. He believes that Comcast will have too much power over entertainment and news as a result of the deal. Copps, the longest serving commissioner on the FCC, has long opposed big media mergers.
"The Comcast-NBCU joint venture opens the door to the cable-ization of the open Internet," he said in a statement. "The potential for walled gardens, toll booths, content prioritization, access fees to reach end users, and a stake in the heart of independent content production is now very real."
He went on to say, "In sum, this is simply too much, too big, too powerful, too lacking in benefits for American consumers and citizens... I would be true to neither the statute nor to everything I have fought for here at the Commission over the past decade if I did not dissent from what I consider to be a damaging and potentially dangerous deal.
The deal is expected to officially close by the end of the month.
Updated 3:45 p.m. PT:This story has been updated with comments and more information from a conference call with Comcast.