The executive stewards of the $30 billion merger of Comcast and NBC Universal began their congressional inquisition Thursday morning, answering questions from members of a House subcommittee on the potential anticompetitive implications of the blockbuster deal.
Comcast CEO Brian Roberts offered broad assurances that the combined entity would not use its market share to alter the existing rules of the road regarding television licensing and distribution, reiterating his promise preserve NBC's over-the-air broadcast content. But Roberts, who testified alongside NBC Universal President and CEO Jeff Zucker, who would head the new joint venture, remained somewhat vague about how the joint venture would approach online video.
"We have made several commitments to our competitors that we will compete fairly in the marketplace," Roberts said. "Together Comcast and NBCU can help deliver the anytime anywhere multiplatform video experience Americans want."
Comcast has signed onto a growing initiative in the cable and entertainment industries known broadly as TV Everywhere, through which cable subscribers can access premium television programming on-demand over the Web. But for smaller cable providers, such as Wide Open West (WOW), that model has taken on an anticompetitive tint that revisits the testy cable programming retransmission negotiations that often see licensing terms dictated by market power.
WOW President and CEO Colleen Abdoulah testified this morning that Comcast has refused to license to her company the programming available through Comcast's version of TV Everywhere, known as Fancast, and worried that the NBC merger, if consummated without conditions, would only further the competitive disadvantage of smaller providers.
"The prospect of having Comcast-NBC as the largest vertical integrator of content as my direct competitor does concern me," she said.
Mark Cooper, the director of research for the Consumer Federation of America, offered a bleaker assessment.
"Allowing Comcast to acquire NBC will increase the likelihood that the ugly business model of the cable cartel will be strengthened and extended to the Internet," Cooper said. "This is the first big policy test for the Internet as the video platform that can compete with cable."
Cooper's group has joined with several other advocacy organizations in launching a campaign to pressure regulators into scuttling the transaction. The deal is currently under review by antitrust authorities at the Justice Department and regulators at the Federal Communications Commission.
"The merger has so any anticompetitive and anticonsumer effects that it just can't be fixed. It can't be unraveled," Cooper said.
Roberts noted that Comcast is barred from imposing discriminatory pricing arrangements in its licensing agreements under existing FCC rules governing program access, though those rules do not apply to online distribution, and Comcast has mounted a legal challenge against the commission's authority in the matter. At the same time, he promised lawmakers who expressed concerns about online video that any content currently available through NBC's Web properties would remain freely accessible after the merger closes, rather than migrating to the TV Everywhere pay-wall model.
But Rick Boucher, the Virginia Democrat who chairs the Internet subcommittee that held today's hearing, expressed concern that entertainment companies have continued to resist new methods of online video distribution.
"Increasingly viewing television programs over the Internet has become a useful and attractive alternative to viewing those programs over cable television," Boucher said. He noted the dust-up last year when Hulu, an online video portal partially owned by NBC, cut off access to Boxee, a software firm that ports online video content to the TV.
"What Boxee was doing was illegally taking the content that was on Hulu without a business deal," NBC's Zucker said, claiming that the decision was made by Hulu's independent management, and that the site has willingly negotiated legitimate distribution deals with other third party firms.
Zucker, Roberts and other witnesses are set to testify this afternoon at a hearing before the Senate subcommittee on antitrust.
Republicans on this morning's panel expressed few reservations about the effect the transaction would have on consumers. They voiced greater concern that the congressional and regulatory reviews would seep into other areas, and were particularly keen to derail any effort to turn the proceeding into a referendum on net neutrality.
"I think this would be inappropriate," said Florida's Cliff Stearns, the ranking Republican on the panel, warning against the imposition of "unrelated conditions" on the merger.
Similarly, Republicans urged restraint from the Justice Department, arguing that blocking or imposing severe conditions on the vertical alignment of a content distributor and creator would be a hard turn away from antitrust precedent, which has historically focused on horizontal mergers.
The merger is more troubling for Democrats, who worry about that Comcast will have a far greater incentive to promote NBC's content on its broadband network, at the detriment to its competitors.
"This merger has the potential to place chokehold on the transfer of information on the Internet," said Anna Eshoo, a California Democrat representing Silicon Valley who introduced net neutrality legislation last August. "If anything, this merger I think demonstrates why we need net neutrality across the board."
The issue of copyright piracy also surfaced at the hearing, with several lawmakers asking Roberts how Comcast's stance on the subject would change once it becomes the steward of a major content producer. Speaking last week at a conference in Washington, Roberts noted that Comcast would naturally become a more active player in the online copyright wars, a position he reiterated today. But asked specifically about his intent to sign on to the controversial three-strikes policy -- an idea backed by many in the entertainment industries that would see alleged infringers lose their Internet access after three infractions -- Roberts hedged.
"Some have said we should go to that three strike[s]" policy, Roberts said. "We're trying to figure that out."