WASHINGTON — Comcast is by far the biggest pay-TV provider in the Bay Area. It controls TV rights to Giants, A’s, Sharks and Warriors games. Many of its customers also sign up for high-speed Internet service. And the company, if it has its way, is about to get a whole lot bigger.
In a deal valued at $30 billion that was announced a year ago but has received scant attention outside the nation’s capital, Comcast is attempting to buy a majority share of NBC Universal. The merger would give the nation’s largest cable company control of a vast array of programming, in addition to the pipes that deliver it. And that powerful combination is prompting warnings that the company could use its newfound leverage to muscle out competitors like DirecTV and Dish Network, stifle the nascent market for TV over the Web and, over time, raise prices for subscribers with near impunity.
Federal regulators appear to be taking those issues seriously. While the deal is expected to win approval by the Department of Justice and the Federal Communications Commission within weeks or months, regulators are weighing a range of options to prevent Comcast from abusing its expanded market power.
Comcast’s case
Comcast calls criticism of the proposed merger overblown and says the deal will benefit consumers by reinvigorating NBC and its program offerings. Comcast has also promised to invest in local news and commit extra space in its cable lineup for independent and minority-owned channels.
The recent emergence of TV online — and how it could be affected by a company that is the main Internet service provider in many cities and also owns a lineup of popular channels — makes the deal different from past big media mergers. In a growing threat to entrenched cable companies like Comcast, TV-over-the-Web upstarts such as Apple, Google and Netflix are aiming to give people cheaper alternatives to their monthly cable subscription. A Netflix online streaming subscription costs just $8 a month.
In the past two quarters this year, more than 330,000 households canceled their paid-TV subscriptions, according to research firm SNL Kagan. That trend, the firm said, can be traced to cash-strapped families looking to cut household expenses, some by opting for free over-the-air broadcast signals and TV available through the Web.
In markets where Comcast dominates, companies delivering online video such as Netflix have little choice but to send movies and shows over the cable firm’s high-speed Internet lines, which are often the only ones capable of delivering seamless HD programming. Critics say Comcast could leverage that control in any number of ways: by degrading the quality of non-Comcast TV signals traveling over its Internet lines, for example, or by withholding its programming from online TV competitors, or charging them exorbitant rates for it, making it that much less tempting for people to ditch cable.
NBC owns several cable channels, including Telemundo, Bravo, CNBC, MSNBC and USA Network.
“Comcast has made a massive investment in delivering video over its cable systems, and Internet distribution poses an existential threat to that business model,” said Andrew Jay Schwartzman of Media Access Project, a public interest law firm. “They want to protect that $60 or $80 or $100 a month that they’re charging.”
The merger could have big implications for firms like Sezmi, a Belmont-based startup that makes a device that delivers a combination of over-the-air TV signals and video via the Web. Sezmi executive Travis Parsons said the company is not opposing the merger but wants assurances that Comcast’s broadband network “remains accessible to our customers” and that “we at least have the ability to try and negotiate for (Comcast-NBC TV) content.”
Comcast and NBC oppose being forced to provide programming to online video distributors as a condition of the merger, according to a letter they filed with the FCC last month.
Content concentration
Similar concerns are being aired that Comcast will use its clout to muscle out competing pay-TV providers such as DirecTV or Dish Network. For the past few weeks, Dish subscribers have had Sharks games blacked out because of a price dispute with Comcast.
“The unprecedented concentration of ‘must-have’ content within a single company poses grave threats to the ability of competing (pay-TV providers) to obtain rights to critical content on fair prices, terms and conditions,” Dish said in a recent letter to the FCC.
The complaints, Comcast said in one FCC filing, amount to an attempt by competitors to “extract unwarranted concessions” and use the government review process to “foist unprecedented and onerous burdens” on the combined company.
Comcast has mounted a massive lobbying effort to get the merger approved, spending more than $90 million and hiring at least 80 former government employees to navigate the regulatory path, said Susan Crawford, a professor at Cardozo Law School who is writing a book about the effort.
“The lobbying story here,” she said, “is unparalleled.”
Contact Mike Zapler at 202-662-8921.
56%
Comcast’s share of Bay Area pay-TV subscribers. For the full market breakdown, see Page A10.
