The entire pay TV industry, along with the investment and content worlds, are fixated this week, on just what kind of shape Comcast will be in, if and when it gets the go ahead from both the FCC and the Justice Department, to take control of NBC Universal.
Bloomberg has found insiders prepared to speak to it about the likely conditions that could be placed on Comcast in order to allow the deal through, and these could reach the light of day inside a week. They include the idea that Comcast will not be allowed to pick and choose who gets to use the NBCU content, and that it won’t be allowed to hold it back from, or impose worse conditions on, online networks, but must offer them at arms-length and at market rates.
The FCC is also expected to impose a Net Neutrality condition which would stop Comcast in any way interfering with or slowing rival video traffic on its network. Both conditions would be in place for 7 years, regardless of how the Network Neutrality regulations shape up from the proposal the FCC has just put forward.
Another idea is that Comcast could not favor its affiliated online content, which would then include Hulu, over other Web traffic on its broadband lines, and it wouldn’t be allowed to use technologies in its set-top boxes to unfairly direct subscribers away from competing content.
Comcast may also be told that data caps, if imposed, would have to apply just as much to Comcast web traffic, as rival traffic. So its current practice of allowing subscribers to watch its Xfinity TV Everywhere service without it adding to broadband costs is fine, but if it imposes data caps, that practice would have to stop and usage count towards the cap.
Like many such decisions, the devil is in the detail. It is undesirable (and unproductive) to place a condition on Comcast that either a) stopped the deal going ahead or b) meant that other rivals were in a better condition to compete than the new merged entity. So the detail of what Comcast CAN actually do in terms of keeping illegal file-sharers off its networks, which will not keep Netflix and others of its networks, will be extremely important.
So while, for instance, Comcast won’t be able to impose one sided peering charges to CDNs such as Level 3, in order to bring rival video services such as Netflix, to its customers, it needs to be able to either block video activity from file-sharers, or impose sensible data caps on its customers.
But like we say, it’s all down to the detail. What would a sensible data cap be and for how long would it be sensible, given that common data usage is going up and up all the time, and access network speeds are doing the same.
A data cap of 10 GB a month might have made sense on a 500 Kbps line, but on a 100 Mbps line that’s a single 22 hour burst at full speed. Or a one hour TV program every working day for a month. That might sound sensible right now, but will be madness in a year or two.
We know that these two requirements go against the grain for Comcast. It has already gone to court to overturn a general network neutrality ruling by the FCC, and would consider going to court once again. It could easily accept the terms of the merger and then argue in court that they went beyond the FCC’s remit and aim to get them revoked.
It will be no happier about the idea that for the next seven years it would have to offer NBC Universal programs to all its rivals. What is the point of owning a content business if you can’t leverage its assets to increase your customer base. But every content business around the world that also owns one of the routes to market for content, has encountered this problem and regulators generally have to intervene to prevent content control.
Back in September we highlighted the predicament of tiny US Internet broadcasting company ivi TV, which has been asked by the FCC for evidence of how cable operators, particularly Comcast, restrict TV networks from putting their content on the internet using restrictive clauses in its content contracts.
ivi said that Comcast has insisted on having non-internet clauses in content contracts which prevent most cable networks both working with Comcast and looking for their own internet partnerships. Instead they must give Comcast the chance to drive all the internet based revenue.
So the FCC probably has some very big sticks to beat Comcast with if it refuses to play ball on these special considerations, for instance announcing a major investigation into its content contracts.
So far there is still no date set for putting this issue to a vote of the 5 FCC Commissioners and no public document listing the detail.
We think that deep down Comcast CEO Brian Roberts, would stop at nothing to get his hands on a studio. On the one hand he wants this because he feels that it is the key to getting exclusive and privileged content and on the other, because it’s a great business to be in, long term, anyway. Our instincts are that he has few other opportunities to get such a company under his control and a 7 year prohibition on two activities might not be a deal breaker. Sure he’ll fight them, but he last bid for a studio back in 2004 when he went after Disney, so he would have just been coming up to the end of such 7 year special terms by now.