FCC OKs Comcast-NBCU, But the Devil Is in the Details

UPDATED Officials at the Federal Communications Commission have determined that the looming merger between Comcast (s CMCSA) and NBC’s (s GE) content properties is in the public interest, but the two companies will be subject to some “carefully tailored conditions” before the deal gets final approval. FCC Commissioner Julius Genachowski issued a draft order to the other four commissioners at the regulatory body Thursday that details those conditions and seeks consensus before giving Comcast and GE the final “OK” on the deal.

Without going into specifics, senior FCC officials said on a press briefing Thursday that the order takes into account several issues, including program access (the ability of other cable providers to have access to the new entity’s content), program carriage (the ability of third parties to get their content on Comcast systems), questions about the emerging online video industry and questions of broadcast diversity, localization and others.

Over-the-top video will clearly be a sticking point for the FCC, considering NBC’s stake in Hulu and Comcast’s interest in keeping its pay TV business from being cannibalized by free, ad-supported TV shows online. Comcast’s ability to influence the market through its Hulu stake or its control of NBC’s online rights, as well as its broadband ISP business, must give the commission pause.

Comcast has shown in the past it’s not afraid to discriminate against certain types of broadband traffic, as it did when it was found to be blocking BitTorrent on its network. The FCC ultimately lost that fight, after it censured Comcast for blocking the files only to have an appeals court tell the regulatory agency it had no authority to dictate what Comcast did on its pipes. Comcast is also in the midst of a very public skirmish with CDN provider Level 3 (s LVLT) over interconnection fees Comcast seeks for traffic Level 3 is trying to deliver to Comcast broadband subscribers.

So the FCC needs its conditions, as narrowly focused as it promises they will be, to ensure Comcast won’t act in a non-competitive manner when it comes to allowing its broadband subscribers to broadly access streaming video online. The commission also needs to ensure that Comcast won’t play favorites with streaming video — that is, give online content from NBCU properties a higher priority or better access than videos from Netflix (s NFLX) or YouTube, (s GOOG) for example.

The FCC’s new net neutrality rules should go a long way toward making sure Comcast won’t be able to prioritize NBC’s traffic over competitors, but it probably can’t hurt to place a few conditions in the deal anyway, especially since folks will fight the net neutrality rules for years to come. But will the agency try to force Comcast to give the same kind of consideration to online properties as it does cable and broadcast networks? That is, will the FCC enforce online access and carriage rules for Comcast’s broadband network in the same way it enforces broadcast access and carriage for Comcast’s cable network?

For now, that seems unlikely; after all, senior FCC officials say the commission was careful not to use the Comcast-NBCU deal to set industry-wide policymaking in its draft order. There’s a heavy emphasis on transaction-specific conditions here, not the type that will set a precedent for how the FCC will look at future online video issues.

With a week left in 2010, Comcast stated the obvious yesterday by telling employees and the press that the deal would likely be delayed until early 2011. The cable provider needs the approval of the FCC and the Department of Justice before moving forward with the deal, so it’s left waiting on the final order. But while the FCC and DOJ both separately have to review and approve the process, FCC officials said the two regulatory agencies have shown an unprecedented amount of coordination, so the final outcome of both reviews will likely be similar.

How soon the FCC will ratify the deal is an open question; with the holidays approaching, it’s unlikely any of the commissioners are going to reach consensus on the final order until at least early January. Senior FCC officials admitted as much today, but said all the commissioners are up to speed and have taken meetings with all interested parties, so the goal is to get the approval process done as expeditiously as possible. The FCC’s next agenda meeting is Jan. 25, so the Comcast-NBCU deal could go to vote then, or might sneak into February if the commissioners need more time.

Update: As a followup to our questions about the FCC’s enforcement of possible broadband program access rules, a source with knowledge of the draft order says one of the conditions for approval will be that Comcast is required to continue to make NBC content available to third-party providers online. As for the question of broadband carriage, it’s expected that Comcast’s treatment of other online traffic will fall under the FCC’s new net neutrality rules.

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