Latest Comcast deal revives debate about concentration of power

U.S. Sen. Al Franken (D., Minn.) says Comcast has tried to stretch the rules: "Simply put, the FCC does not write on a clean slate in this matter."
U.S. Sen. Al Franken (D., Minn.) says Comcast has tried to stretch the rules: "Simply put, the FCC does not write on a clean slate in this matter." (Getty Images)
Posted: April 08, 2014

WASHINGTON - When the Obama administration approved Comcast's 2011 purchase of NBCUniversal, regulators imposed a host of conditions meant to allay concerns about the company's new power and its potential to stifle competition.

Now, as a Senate committee prepares for a Wednesday hearing on another Comcast megadeal - a takeover of Time Warner Cable - the company and its critics are offering sharply different views of how it lived up to its promises the last time.

"It is simply indisputable that we have honored - in fact, over-delivered - on our commitments," Comcast executive vice president David L. Cohen wrote last month on the company's website. "We'll continue to do so."

But it has not always been simple.

Comcast paid a financial penalty for failing to deliver on one promise and engaged in a legal fight that stalled another key condition for nearly three years.

One term meant to restrain Comcast has even been turned into what rivals say is an unfair advantage, potentially giving it access to competitors' agreements with online video companies.

As the Senate Judiciary Committee prepares for its hearings, consumer watchdog groups and at least one committee member argue that Comcast has tried to stretch the rules to gain an edge.

"Simply put, the FCC does not write on a clean slate in this matter," Sen. Al Franken (D., Minn.) wrote in February to the Federal Communications Commission. Franken sits on on the Judiciary Committee, which is holding this week's hearing.

When Cohen made his case online, he touted the company's good work. He and other Comcast officials say they have overwhelmingly met the myriad conditions of the NBCU deal and in many cases gone beyond what was asked.

A key example: the Internet Essentials program, which Comcast says helped a million low-income customers obtain broadband service; it even expanded the rules to make more families eligible.

A Comcast spokeswoman said the focus should be on how it had lived up to its word. The company has faced only one FCC penalty related to the 2011 merger.

"There were 150 conditions on the deal. The FCC had an issue with exactly one of them, which was quickly settled," Sena Fitzmaurice wrote in an e-mail.

In that instance, Comcast paid $800,000 in a 2012 settlement after the FCC ruled it wasn't doing enough to tell customers of a $49.95 per month broadband option, a low-cost offering regulators had required in the merger.

Other conditions, though, have triggered fierce litigation.

A battle with Bloomberg

Comcast spent nearly three years fighting a requirement that it move Bloomberg TV, a business news channel, out of the hinterlands of the cable channel lineup and into the news "neighborhood" of the listings, where it would have a more desirable slot alongside similar channels.

The "neighborhooding" rule had been imposed to prevent Comcast from favoring channels it had acquired via the NBCU merger - such as MSNBC and CNBC.

Comcast had agreed to the rule as part of the merger, but then argued for months over how it applied. Bloomberg prevailed in an initial FCC ruling and a Comcast appeal.

More recently, one limit has been turned into an advantage: Citing the terms imposed on it, Comcast has sought access to its rivals' pacts with online video companies, FCC filings show.

The FCC has agreed Comcast is entitled to review those agreements - leaving competitors aghast.

The decision turns the condition "on its head," representatives for CBS, News Corp., Sony Pictures, Time Warner Inc., Viacom, and Walt Disney wrote the FCC in 2012, trying to block the decision.

Instead of guarding against anticompetitive behavior, they argued, the condition would hand Comcast "a powerful - and unprecedented - weapon providing a unique competitive advantage."

The rule in question was meant to ensure that Comcast, which now owns NBC and Universal's vast library of films and TV shows, couldn't starve competing online video companies of content. So when another big programmer agreed to sell movies and TV shows to an online outfit, Comcast was required to make its offerings available on similar terms.

In order to match the terms, Comcast argued to the FCC, it needed to the see and confirm the details of its rivals' deals.

The FCC agreed.

A Comcast spokeswoman said the company had struck many agreements with online video companies and other competitors. But the wrangling over the rule continues.

The disputes, Fitzmaurice wrote, involved "conditions that needed interpretation, and once that interpretation was clear, there were no issues with compliance."

Several neutral observers said the battles over the conditions, and in some cases their unintended consequences, showed how hard it was for regulators to draw up effective rules amid rapidly evolving technology.

"You run into some practical implementation issues. That's not necessarily Comcast's fault," said Paul Glenchur, an analyst with investment advisers Potomac Research Group. Even when regulators have an objective in mind, he said, it can be hard to get the desired outcome.

"Is Comcast a chronic violator of these conditions? I don't think that case has been made," Glenchur said. "The absence of perfection doesn't imply chronic noncompliance."

Cohen's March report laid out many ways he said Comcast had delivered on promises.

Among them: reaching agreements with companies such as Amazon and Netflix, providing more than $61 million in public-service announcements on issues such as parental controls and childhood obesity, and expanding its broadband infrastructure to reach nearly twice as many homes as required.

Media and technology watchdog groups such Free Press and Public Knowledge, however, have accused Comcast of greatly exaggerating its compliance, and in one case have filed a complaint with the FCC. Regulators have taken no action yet.

The groups argue that Comcast's battles with Bloomberg and others smack of following the letter of the 2011 conditions while trying to evade the spirit, and daring regulators to call them on it.

Those protracted fights eat into the life of the rules, many of which expire in 2018, and ward off competitors, who see that pushing for enforcement prompts long, costly legal strife, said Michael Weinberg, vice president of Public Knowledge in Washington.

"You don't need to get very many violations of the conditions," Weinberg said, "to show that Comcast is willing to at least push the boundaries on those conditions."


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