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FCC & DOJ Approve Comcast-NBC Universal Deal with Conditions

Tuesday, 18 Jan 2011 | 4:38 PM ET
Comcast
Comcast

Comcast and NBC Universal have received government approval for their joint venture — this afternoon both the Federal Communications Commission and the Department of Justice gave the deal the okay with certain conditions.

This clears the way for the deal to close before the end of January.

Back in December 2009 Comcast announced its deal to buy a 51 percent stake in NBC Universal, the parent of CNBC, from General Electric. The deal was approved by a four to one vote, with Democrat Michael Copps dissenting.

The conditions of the deal, particularly as they relate to internet video, could have a real impact on the content distribution landscape. These conditions with a duration of 7 years aim to keep Comcast from limiting competition — Comcast has 23 million cable customers as well as 16.7 million broadband subscribers. And the FCC doesn't want Comcast to flex its muscle to force consumers to subscribe to cable in order to access video over the web.

The FCC requires the new company to offer its content to online video distributors at "the same terms and conditions" that would be available to a cable or satellite TV operator — and it must offer the same terms and conditions. The DOJ's Christine Varneypointed out that this will allow online content distributors to step into the shoes of cable and satellite companies to license full content. Varney said that this is not an effort to shape a marketplace, but rather an effort to do what it takes to allow competition in a nascent marketplace.

The order also has some interesting restrictions for the company's ownership of Hulu — it does not require that the company divest of Hulu. But it does require that the company relinquish its management rights, to ensure it doesn't use its Hulu ownership to wield control over the digital content space. It's not uncommon to enforce divestiture, but the less extreme measure of removing control is less common. The question is whether the new merged company will decide to divest of Hulu because it can't exercise any control over the company.

And then there's that jargony buzz word — net neutrality — or "open Internet provisions" as they're called by the DOJ and FCC. The conditions prohibit Comcast from discriminating between its own content and services and other companies content and services.

The rules go one step further — the FCC weighs in on pricing, saying that the merged company must offer "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." In a way opens the door to consumers cutting the cord to their cable subscription, by removing the company's control over pricing.

The restrictions do *not* weigh in on Google TV — Comcast NBC Universal will not be prohibited from withholding its content as it does now.

Less surprising are the other requirements the FCC is imposing to require Comcast to take "affirmative steps to foster competition in the video marketplace." The new joint venture will "increase local news coverage to viewers; expand children's programming; enhance the diversity of programming available to Spanish-speaking viewers; offer broadband services to low-income Americans at reduced monthly prices; and provide high-speed broadband to schools, libraries and underserved communities among other public benefits.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.