Comcast Could Suffer From Universal Access

Comcast may be paying relatively little to buy control of NBC Universal. But the true cost won't be clear until regulators have decided what conditions to impose. One subject investors should watch: how those reviewing the deal treat the fast-changing area of online video.

Public-interest groups and satellite-TV firms have asked the Federal Communications Commission to ensure that a merged Comcast-NBC Universal not be allowed to withhold its content from rivals online. That is a worrisome prospect for Comcast investors. It could potentially give a leg-up to online video services, ranging from Netflix to Sezmi, a venture-capital-backed broadband video service that competes directly with cable. In doing so, it would undermine Comcast's ability to protect its core cable-TV business. As Sanford C. Bernstein analyst Craig Moffett notes, one of the "critical lines of defense" in the debate about video cord-cutting—consumers dropping their cable subscription in favor of cheap Web video—is that content companies won't make their content available for alternative business models unless the economics make sense. The possibility of such FCC action can't be ruled out. There are already "program-access" rules that apply off-line, specifying that any cable operators that own programming have to make it available to rivals like satellite-TV firms and phone companies on "nondiscriminatory" terms.

In a recent case unrelated to Comcast, the FCC suggested in an interim ruling that those rules don't apply to online services, although it noted it was still reviewing the matter. Any expansion of the rules to include online would raise lots of questions, including who would be affected. DirecTV Group, for instance, has suggested a narrow extension of program-access rules to cover Comcast-owned content it decides to put purely online. But it suggests only cable, satellite and phone companies could claim a right to use the content, rather than online-only video services.