In Allowing Comcast/NBC Universal Merger, U.S. Government Recognizes the Importance of Online Video

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Yesterday, the U.S. Government officially recognized the competitive potential of online video. This isn’t a reason to cheer the approval of the merger between Comcast and NBCU—as Commissioner Copps recognized, no plausible conditions or commitments could remedy all of the bad effects of the merger. But observers have realized for a while that the merger was a done deal. All that was politically possible was to try to get the best conditions on it as possible. While the specifics of the conditions might not be perfect, the fact that so many of them address the potential of online video to compete with cable is good news. There’s now a precedent that online video distributors ought to be treated the same as rival cable or satellite program distributors (who, by law, are required to share their programming with each other, to ensure that content exclusives don’t entirely foreclose competition).

Yesterday’s actions by the FCC and DoJ acknowledge that online video isn’t just a “complementary” product to traditional cable or satellite subscriptions—something that people use in addition to, not instead of, their old pay TV subscriptions—but an emerging competitor. This is what a lot of people have been saying for some time: for some consumers, online video is already a substitute for their TV subscriptions, and unless the current media giants have their way, as time goes by more and more viewers will find that they can get all the content they want online. The conditions on the merger make it harder for Comcast and NBC to get their way, at least, and this could mean an increase in competition, more convenience, lower costs, and less need for one-size-fits-all “bundles” of content. The future isn’t necessarily entirely rosy—it’s not clear if IP networks will need to be updated to better accommodate the multicasting of popular live content, and content bundles often effectively subsidize less-popular programming—but the rise of online video is likely to be a net benefit for consumers.

The actual specifics of the conditions probably matter less than the establishment of the precedent that online video matters. But here they are. In its press release, the FCC claims that its order approving the merger

*Provides to all MVPDs, at fair market value and non-discriminatory prices, terms, and conditions, any affiliated content that Comcast makes available online to its own subscribers or to other MVPD subscribers.
* Offers its video programming to legitimate OVDs on the same terms and conditions that would be available to an MVPD.
* Makes comparable programming available on economically comparable prices, terms, and conditions to an OVD that has entered into an arrangement to distribute programming from one or more of Comcast-NBCU’s peers.
* Offers standalone broadband Internet access services at reasonable prices and of sufficient bandwidth so that customers can access online video services without the need to purchase a cable television subscription from Comcast.
* Does not enter into agreements to unreasonably restrict online distribution of its own video programming or programming of other providers.
* Does not disadvantage rival online video distribution through its broadband Internet access services and/or set-top boxes.

There may be loopholes here. It seems circular to hold Comcast/NBC to the standards of its peers, when its behavior will have an outsize influence on those peers. The conditions don’t seem to directly address anti-competitive issues that have already taken place—putting content online, for instance, but requiring that viewers demonstrate that have cable subscriptions before viewing it, and putting content online but selectively blocking it from browsers that make it easier to watch web content on TV screens. And who gets to decide who is a “legitimate OVD [online video distributor]”—is it the same as what the DoJ calls a “qualified OVD”? (Maybe these questions will be answered when the FCC publishes the actual text of its order.)

The DoJ’s proposed final judgment has a lot more detail than the FCC’s press release (and less than the FCC’s order is going to), but it’s less ambitious, and may also allow some bad behaviors to continue. It was apparently drafted in coordination with the FCC. But the precedent of the Department of Justice recognizing the role of online video in the media marketplace is nonetheless important.

A lot of people seem to think that this merger is doomed to fail, extrapolating from one example: the Time Warner/AOL merger, whose marked unsuccess had more to do with a botched transition to the broadband era than with any underlying “all big mergers must fail” principle. Maybe they’re right, and the joint venture will implode. Maybe they’re wrong, and all of the pessimistic predictions of public interest advocates will come true.

Whatever happens going forward, it’s now official policy that online video ought to be considered on a par with traditional pay TV video. By itself, this can do a lot of good.

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