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Comcast-NBC merger sheds light on future of online video

The Federal Communications Commission focused Tuesday on how Comcast’s proposed merger with NBC Universal will impact the small, new but fast-growing market for video over the Internet.

If you listen to Comcast, the company said it has no incentive to withhold NBC shows and channels from Internet distributors such as YouTube and Vuze because they want as many eyeballs as possible. They say that market is too young to regulate and that the FCC shouldn’t impose conditions on the merged company that would force it to share NBC and Comcast channels with online video distributors.

Even if it did keep competitors from getting their shows, "there is no basis for expecting withholding current NBCU networks from online providers could significantly harm the ability of an online provider to attract or retain subscribers," according to a Comcast online video report written by Mark Israel and Michael Katz.

Indeed, the market for online video is dynamic. The number of videos online is booming. YouTube is still the top distributor of content, and in May it achieved a record level of viewing with 14.6 billion videos watched, according to Comscore. Eight out of 10 Internet users watched video online in May, and the average Hulu viewer watched 27 videos in May.

But regulators and critics of the merger say that market is precisely where the FCC and Justice Department should place much of its attention.

Democratic Commissioner Michael J. Copps said promises by the companies to behave well and not to block content aren’t enough.

“Approval of this proposed transaction would be a very steep climb," Copps said in his speech at the Chicago hearing. "I cannot, I will not, accept half-hearted pledges of fairness from industry when the future of the Web is at stake. And right now the assurances and conditions we have received on this Comcast/NBCU proposal don’t pass the red-face test."

Susan Crawford, a former White House adviser and professor at Cardoza Law School, said Comcast is motivated to merge with NBC in an attempt to avoid being a dumb pipe. That means it wants to prioritize its own content and withhold it from other distributors that would pose competition to its broadband and video business.

“Future growth for Comcast, already the country's leading broadband provider, will come from having the most subscribers to the fastest and most valued pipe,” she said in her testimony at the field hearing. “Comcast would like, instead, a pipe that is capable of controlling, tiering and prioritizing online content, just as a cable distributor does. The leadership of the company believes that increased participation in content will delay the day when that pipe is just a pipe.”

She and others said that if the merger is approved, there should be program access conditions similar to that in paid television that would force Comcast to share content to online video providers. There isn’t a similar program access rule that applies to Internet video distribution.

By Cecilia Kang  |  July 14, 2010; 8:00 AM ET
Categories:  Comcast  
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