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FCC Encourages Online Video With Comcast, NBC Merger

February 28, 2011

Your expensive, monthly cable bill may be a thing of the past.

Internet video services from the likes of Netflix and Apple offer a glimpse of a home entertainment future that doesn’t include cable, reports Joelee tessler of the Associated Press (AP).

To challenge to the cable TV industry’s dominance however, online video services need popular movies and TV shows to catch the eyes and interest of viewers.

The rights to offer many of the popular shows and films have been difficult and expensive to come by but this first step leads to a model for future entertainment options that more and more of the public is already embracing.

For cable giant Comcast to win government approval to take over NBC Universal last month, they had to agree to let online rivals license NBC programming. Hit shows such as NBC’s “30 Rock” and “The Office”, are among the many popular titles that Comcast has agreed to not block to its 17 million broadband subscribers from viewing through Netflix, Apple’s iTunes and other rivals yet to come, AP is reporting.

Aimed at requiring the nation’s largest cable TV company, with nearly 23 million video subscribers in 39 states, to not stifle the growth of the nascent Internet video business, these conditions could serve as a model for other entertainment companies in facing new online competitors, including the sharing of video through still popular torrenting outlets.

They also send a powerful message that the government believes these promising young rivals deserve an opportunity to take on established media companies.

“These conditions are not just window dressing. They come across as a pretty comprehensive effort to give Internet TV a real shot at taking off,” Paul Gallant, an analyst for financial brokerage MF Global, told Tessler.

The Federal Communications Commission (FCC) and the Justice Department reviewed Comcast’s plan to buy a 51 percent stake in NBC Universal from General Electric. The takeover allows Comcast to control NBC and Telemundo broadcast networks, cable channels such as CNBC and Bravo, the Universal Pictures movie studio and a stake in Hulu.com, which distributes NBC and other broadcast programming online.

The FCC is taking pains to ensure that Comcast will not stifle competition through its control over both a major media empire and the cables that deliver cable and Internet services to millions of American homes.

Cutting the cord and the cable bill, which averages $70 per month for basic Comcast services is becoming simpler and more accepted. Alternatives to cable’s traditional bundled viewing, which customers often complain include a myriad of channels they have no interest in, include Netflix, which offers subscription plans with unlimited online viewing for as little $8 a month. Apple’s iTunes and Amazon.com let customers rent or buy individual movies and TV shows for as little as a few dollars apiece.

Apple and Google make set-top boxes and software that transfer online video to television sets, freeing it from computer screens. TV makers are also beginning to offer sets with built-in internet capabilities.

Cable TV companies, according to existing FCC rules are required to license the channels they own to such rivals. New rules allow internet video services to license big packages of NBC Universal programming for the same price that a traditional rival pays. Or buy specific shows or channels if they are already licensing comparable programming from another major media company.

If Netflix, for example, negotiates to license children’s programming from The Walt Disney Co., Comcast must have comparable children’s programming available from NBC to Netflix under similar terms. Although only Comcast and NBC are bound by these conditions as of now they would pressure other companies to make their programming available to online services, too.

This arrangement could also serve as a guide for future merger reviews and even shape new FCC rules affecting the entire industry. “Before this deal, online video distributors had no rights to programming at all,” Stifel Nicolaus analyst Rebecca Arbogast tells AP. “This opens the door.”

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