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  • Comcast-NBC: Why is the FCC Involved?

    Bidding has begun on Comcast’s acquisition of a majority stake in NBC Universal. No, not the bidding between GE and Comcast over the terms of the sale. That was the comparatively easy part. The real bidding is over at the FCC, as various interests work to get concessions and pledges from Comcast as a condition of FCC approval of the deal. The jostling may put post-Thanksgiving Black Friday sales to shame. Everything from more kid’s shows to broadband open access mandates are potentially on the table.

    And that’s if the sale is approved by the FCC at all. Groups such as Free Press called for its rejection as soon as it was announced. Commissioner Michael Copps underscored the alpine nature of the approval process, stating bluntly that the deal “faces a very steep climb with me.”

    Amidst the din, however, one question has been drowned out: Why is the FCC involved in this at all?

    It’s not an idle question. The FCC does not, and never has, had general authority to approve or deny mergers in the media world. In fact, major major deals — such as News Corporation’s purchase of the Wall Street Journal — didn’t involve the FCC at all (to Mr. Copps’ dismay.)

    The FCC’s hook into such deals is in fact quite narrow: the transfer of spectrum licenses. And such transfers are a surprisingly small aspect of the deal. None of the key assets being purchased, Universal Studios, MSNBC or the other cable channels, or even the NBC network itself, is FCC-licensed (though some units may hold stray licenses for ancillary purposes).

    In fact, the only significant licenses among NBC’ Universal’s assets may be the broadcast licenses held by NBC’s 10 owned-and-operated local stations. And these are hardly the crown jewels of the transaction. While Comcast may value the content provided by Universal or CNBC, why would it want broadcast stations? After investing billions in a digital cable network, what earthly use does it have for towers and antennas? It would be like American Airlines buying a stagecoach line to supplement its transportation network.

    Yet, based on this thin reed, the FCC has gained approval authority over the entire NBC Universal transaction. It is of course, not the only agency that must approve — the the Federal Trade Commission or Department of Justice must also review it (which of the two is still to be decided). These agencies are not pushovers, and their OK should be sufficient to answer any concerns about harm to competition from the deal.

    It would be bad enough if the FCC merely duplicated the FTC or DOJ reviews. The additional delays alone could kill many deals — famously, it took the Commission 505 days to approve the merger of Sirius and XM Radio. But the harm goes beyond that. Unlike the antitrust authorities, who base their review upon established law, the FCC uses a free-roaming and undefined “public interest” test. As a result, the FCC’s reviews are largely unconstrained, and approval or rejection can be based upon virtually any factor that three of five commissioners find to be plausible. The result is a highly unpredictable, and political, process in which anybody can propose their own wish list of conditions and rationales.

    It makes one wonder why Comcast didn’t just say “no thank you” to the local broadcast albatrosses. But the bigger problem is with the law that gives the FCC such unneccessary and unconstrained power in the first place. Its unlikely for the moment, however, that Congress will be inclined to take away that power, or that the FCC will not use it. So it looks like the bidding will continue.

    Stay tuned.

    Cross-posted at Technology Liberation Front

    Posted in Economics [slideshow_deploy]

    13 Responses to Comcast-NBC: Why is the FCC Involved?

    1. Bobbie Jay says:

      The impositions. The infringements. The set-ups. The cover-ups. The take-over…

    2. Roger S., Ma. says:

      Now we know why they want control of the web, don't we?

      The second (and third) -raters, themselves incapable of creating such values, muscling in on the creators for an unearned income and undeserved glory! Vote them out! Send them home, the whole lot!

    3. Pingback: Climategate bigger than Watergate; Al Gore’s Credibility is Permanently Destroyed « VotingFemale Speaks!

    4. Thomas Barrington Il says:

      This whole government in every aspect of American life is starting to show it's ugly face. The Obama Government is looking to put such a stranglehold on business that it will be amazing if this Comcast/NBC deal ever gets done without Comcast having to somehow make this Government a minority partner. Just watch how this whole thing plays out. I mean Obama's strategy is to control the people and business. Welcome to the New World Order.

    5. jimmy howell blackst says:

      a sad state of affairs,can not even begin to describe the government's steady march toward state run media…GE gets what it wants.

    6. T, Boise says:

      The "thin reed" works, especially when it is part of the impressive array of infrastructure the cable and telephone companies brandish to extract terms from consumers. The more vertically integrated Comcast and Time Warner get, the more they stick it to consumers. And if it's not about the infrastructure, it's about the content, embodied by writers and actors.

      Commodification is the buyer's imperative: food, fuel, shelter, caveman-wise. Viewed separately, bandwidth and content are goods. Viewed together, they are "the entertainment experience". Yet it is all this value-adding nonsense that is making life increasingly unfair for the little guy. Net neutrality matters. The cost of things should be reasonable and justifiable.

      How many billions does it cost to make 4,000 hours of good television, enough for one year? Let's say $15 billion including 10% profit. Advertising pays for half. That leaves $25 per person per year. That covers content. If consumers pay for bandwidth, then distribution is effectively free.

      So, there are two competing realities.

      (1) The progressive way: Everything goes over the internet, content quality and choice improve, typical internet and television charges total $40 per month per household, and the content and bandwidth providers make a comfortable income.

      (2) The conservative way: Bandwidth providers use their bandwidth to give priority to their content, time shifting video content is difficult, vast amounts of unwatchable content is scheduled, television is unable to converge into the internet, typical internet and television charges total $120 per month, and some content and bandwidth providers make out like bandits, while others struggle amidst a climate of malaise and decaying infrastructure.

      The FCC darn well better get involved.

    7. Charlie Stogner, Jac says:

      I'm president of the national association of leased access programmers and while our organization is not taking a stance against Comcast purchasing NBC we hope FCC will take note that this is yet one more reason their Media Bureau needs to rescind the rule permitting cable to banish leased access to the digital stratosphere while retaining their own commercial local origination channels on basic.

      From all accounts, leased access was created by Congress because they deemed cable to have too much control over their vertical programming. Today cable has more.

      As an example our firm, StogTv, has is on channel 98 in a Comcast site where basic goes through channel 13. Channel 2 is NBC, Channel 10 is Comcast's own local commerical channel and one of the remaining 10 (channel 1 is not in the lineup) is one of the shopping networks.

      Cable has long had a mantra cry for a 'level playing field' when faced with competition. There is overwhelming evidence Congress intended leased access to at least be on the same tier as the local cable's own commercial channels; and now Comcast will own the local NBC programming, usually the network with the highest local ad insert rates.

      FCC needs to get some assurances from Comcast they'll provide that same 'level playing field' as the cable industry cries for.

    8. ebk, Pa. says:

      First off, this should not be approved by the FCC. Look at what has happened to the banking industry when all the big banks kept getting bigger by buying all the smaller banks they could get their hands on. What happened when "Ma Bell: got to her zenith. They had to be split up due to their size and they were momoplizing the phone market. If GE wants to sell NBC, fine, but not to a large broadcast network trying to get larger and quite possibily more controling. We need more competition in broadcasting not less.

    9. Jerry from Chicago says:

      I don't know who to distrust more, Comcast or the FCC. As I see it, the FCC's interest is a power grab. On the other hand Comcast is the largest cable network in the country and it appears to me they are trying to take control of the TV entertainment industry.

      AS I see it, Comcast doesn't have any serious competition where it comes to cable TV. At least not in the Chicago area. In the Chicago area, Comcast recently sent letters to their customers saying that due to the recent switch to digital broadcasting, new receiver boxes needed to be installed on every TV set you owned, if you wanted to continue receiving their broadcasts. Perhaps this is just a coincidence, but at the same time Comcast discovered that the standard packages they sold to people over the past several years were 'mistakenly' under-priced. If people wanted to keep the same packages they had bought and kept for years, then those people would have to come up with much higher fees.

      I believe that Comcast's attemt to buy NBC Universal is motivated by an attempt to corner the market in TV home entertainment. I don't blame them for trying, it's just business. But I think regulators should not allow this to happen.

    10. Tim Az says:

      The peoples interests will not be served until all govt. agencies are cleansed of the marxists within them. Yes it would be the biggest job turnover in history. I can't see any other way around it we could make it sound nice like implementing hope and change for the people by the people.

    11. Joe Stelle, Lake Wor says:

      The answer to the question "Comcast-NBC: Why Is the FCC Involved?" is easy. At least some of Obama's new people at FCC are revolutionary socialists. They have expressed deep affection for Venezuela's Hugo Chavez, whose "new" socialism seeks a one-party state through control of everything, especially the media. There is more: NBC is today the greatest outlet for sophisticated socialist indoctrination in America. With Comcast's majority ownership of NBC, the bullhorn of the Revolution may be taken away. Trust me: Obama's FCC will be faithful to the principle of centralization. It will fight or spoil this deal. My prediction is this: The FCC will fail on the whole, but precedents for interference looking to future control will be established unless greater attention is paid to this case.

    12. T, Boise says:

      There has been talk in the news that some jobs have a positive value to society and others a negative one. The metric is dollars lost or gained by society for every dollar paid to the employee.

      The fact is that most jobs don't deliver. On the whole, that is nobody's fault. Society is at the same time hugely productive and hugely inefficient.

      However, a comparison is in order. There are hundreds of solar cell companies. Most will fail, even as solar power becomes a central source of electricity.

      At the same time, there are hundreds of television programs in production. Many will fail.

      Consumers should not pay more than $1 per watt for home solar systems. Consumers should not pay more than $25 per year per person for a basic but satisfying video licensing package.

      It's commodification, Baby.

    13. W, Maryland says:

      The FCC is involved because the Federal statute that governs broadcast regulation (the Communications Act) requires FCC approval of the transfer of control of a broadcast station, of which NBC has over 25. The FCC has to conclude that the transaction is in the public interest. The Communications Act has required such approval for over 75 years, with the same test. Has nothing to do with who is in the White House. Calm down.

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