NBCU, Comcast and the Hollywood Lesson

A year and change after announcing its intent to buy a 51% stake of NBC Universal, Comcast has been granted the $30 billion joint venture, courtesy of the FCC and the Department of Justice. From the Wall St Journal:

The FCC imposed a variety of conditions on the deal designed to prevent Comcast from denying NBC programming and Comcast regional sports networks from its pay-TV and online competitors. The nation’s largest cable company will be required to set aside a number of channels for independent programmers and agreed to keep NBC network programming on free over-the-air TV stations.

Comcast is also barred from favoring its own online programming over competitors and the company agreed to abide by the FCC’s new “net neutrality” rules — which would bar the company from deliberately blocking websites or slowing broadband traffic — for seven years. The cable giant will be required to live under the net neutrality rules even if a federal appeals court ultimately throws them out, which is a possibility.

…The company agreed to air more children’s programming, limit interactive advertisements for children and offer stand-alone Internet access for $49.95 a month. It promised to adopt a hands-off approach to the NBC News division….More recently, Comcast agreed to offer $10 a month Internet access (Ed.: to 2.5 million low-income Americans) and subsidized computer equipment to low-income Americans who have children in the federal school-lunch program at the urging of Democratic FCC Commissioner Mignon Clyburn, who has expressed concerns about the digital divide. She voted in favor of the deal Tuesday.

Seven years is an unusually long time for conditions on a media merger, but then again, this is the first time ever that a cable company has gained control of a major broadcast network, according to Media Decoder, which also highlights an important part of Comcast’s strategy:

One result of the consumer tilt towards online video has been the rise of Netflix, which has pivoted from its beginnings as a DVD-by-mail business to a streaming video company. The success of Netflix in changing consumer behavior has raised fears that the heart of Comcast’s business — selling cable subscriptions — could be in jeopardy. To that end, the deal to acquire NBC Universal will give Comcast a significant role in the future of online television viewing.

In an overt conflict of interest, Comcast will both provide the cable connection and the broadcasting shown on that connection. If it behaves anything like Hollywood studios in the early 20th century, which took advantage of vertical integration to become oligopolies, this ruling will be trouble in a few years. Comcast could start fixing prices at artificially high levels, ousting whatever competition it can under current restrictions or, if this ruling opens the gates for other big media consolidations, participate in some kind of oligopoly. That’s not to mention how consolidation will affect our lofty #20 Press Freedom ranking. Apparently, for the Obama administration, this was a risk worth taking.