With NBC Deal, Comcast’s Pipes Just Got Smarter

Comcast (s cmsca) and GE (s GE)  said this morning that the two firms would merge Comcast’s entertainment properties with GE’s NBC Universal to create a joint venture valued at $37.25 billion. Comcast will have a 51 percent stake in the joint venture and GE will hold a 49 percent stake. The purchase gives the cable and Internet service provider access to popular cable networks such as E! Online, USA Bravo and the Golf Channel; web sites such as Hulu and iVillage; Universal Studios and a few theme parks. It also gives Comcast some of the smartest pipes around as ISPs worry about becoming dumb pipes that merely carry other companies’ content.

While I’m a little concerned about what happens to Hulu with Comcast managing NBCU, the move may be a savvy one if the cable operators can pass through the regulatory approval process. In the last few weeks public interest groups have been calling for the government to block the deal, citing the threat to media diversity and programming in general. But while critics may cause the regulatory process to move at glacial speeds, they won’t stop the deal from going through, according to a note released last week from Stifel Nicolaus, an investment bank in Washington. According to the note:

We believe it’s more likely the DOJ/FTC and FCC would clear Comcast-NBCU with significant remedial conditions after subjecting the transaction to heavy scrutiny, probably extending at least into 4Q10. We note there could be some added risk if there were follow-up deals by major players that produce a backlash against media consolidation.

Indeed, Comcast is gaining the ability to strike deals with the cable channels to get some of their content online, as well as a license to move that content across its pipe in whatever way it wants — and advantage for Comcast as the web and TV converge. Comcast notes as much in its release:

The opportunity to combine these assets makes possible some innovative programming opportunities that will permit the new company to better serve the interests of many key segments of the viewing audience, … This combination also permits us to hasten the arrival of the multiplatform, “anytime, anywhere” future that Americans want.

Regulators will likely require non-discrimination clauses that mean Comcast won’t be able to block access to certain content for other pay-TV providers or ISPs in search of a competitive advantage. But by simply owning the assets Comcast is able to profit off the fees paid for its cable channels by its competitors who want to carry those channels. It’s worthwhile to note that in a letter detailing its commitment to the public interest, Comcast focuses mostly on appeasing worries about consolidation in the current media landscape of pay-TV, rather than making promises about the new media landscape of web TV. Simply by owning these assets, Comcast could take a significant chunk of them off the web, or put them behind its TV Anywhere efforts, now dubbed Xfinity, under its control.