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Posted at 12:50 PM ET, 12/ 6/2010

As Comcast-NBC try to tie up merger, news editorials differ on consequences

By Cecilia Kang

As Comcast and NBC Universal agreed to extend their agreement by 90 days last week, the New York Times weighed in with an editorial saying the FCC and Justice Department should take their time approving the merger.

In a Monday morning editorial, the Times argued the proposal is far more than a standard merger, as the two companies control different parts of the telecommunications market. If Comcast and NBCU join forces, the Times warned, they would control, “about a quarter of the multichannel market and about a fifth of broadband subscribers.” Without some serious restraints and regulations, the new communications behemoth could undermine the internet television movement and impose extra fees and restrictions on smaller content providers.

Industry analysts predict that the merger will go through, but with several conditions, early next year. Rebecca Arbogast and David Kaut of Stifel Nicolaus, a St. Louis-based investment firm, believe that a dustup between Level 3 and Comcast may give the government more to consider, but it will not derail the deal. They say regulators will likely impose conditions that force Comcast to share NBC content with Internet video distributors such as Netflix, YouTube and AppleTV. Regulators will likely impose net neutrality conditions on the merger but probably won't force Comcast to sell its stake in, the analysts say.

A source with knowledge of the antitrust review by the Justice Department said the agency is looking closely at how Comcast uses market power over “last mile” connections that reach consumers to potentially block competition. That concern was highlighted to Justice officials by Level 3’s accusations. Comcast’s head of regulatory affairs, Kathy Zachem, was recently at the FCC arguing against Level 3’s position.

Level 3 Communications redoubled its accusations against Comcast late last week on its Web site that Comcast charged the smaller company additional money to carry Comcast's content after the Level 3 sealed a deal with Netflix to carry its movies. Comcast argued that the fees were only fair, given the increase in content Level 3 would be streaming over its network -- a defense that Level 3 said “could not be more misleading.”

The Times editorial runs contrary to the position The Washington Post took in October. That editorial said that critics of the merger are merely crying wolf and that while the government should watch the new company closely, it can rely on its existing regulations regarding internet and television business practices. The editorial also said that many of the same critiques of the Comcast-NBCU deal were voiced in 2001 by hand-wringers nervous about the AOL-Time Warner merger – worries that came to naught.

By Cecilia Kang  | December 6, 2010; 12:50 PM ET
Categories:  Comcast, DOJ, FCC, Net Neutrality, Online Video  
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Next: FCC net neutrality plan gets picked apart from all sides

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