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Cable Technology Feature Article

February 28, 2011

Will Viewers Rejoice as New Deal from Comcast, NBC Allows for Online Video?

By Jamie Epstein, TMCnet Web Editor

Many people are sick of their ultra-high monthly cable bill, instead turning to other ways to see their favorite TV shows and movies. Netflix and Apple are currently seeing a growing number in viewers who desire the same type of entertainment you can purchase through a cable company, for a lot less money.  

Online video services need the rights to offer these movies and TV shows however, as well as access to high-speed Internet networks to reach them.

Just last month, cable dominator Comcast agreed to let online services license the most recent NBC programming, including highly popular shows such as "30 Rock" and "The Office." Comcast also confirmed it would not to block its 17 million subscribers from viewing video online through Netflix, Apple's iTunes, as well as any competitors that will soon enter the online viewing industry.

Comcast is currently the nation's leading cable TV company, with nearly 23 million video subscribers in 39 states. This agreement will maintain the fact that the company will not be able to control the growth of the current Internet video business.

These terms agreed to in this agreement could work as the foundation for when other entertainment companies must decide whether to embrace new viewing technologies or fight against them.

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

It took the Federal Communications Commission and the Justice Department more than a year to review the deal, and provide a decision on whether Comcast's plan to purchase a 51 percent stake in NBC Universal (News - Alert) from General Electric would be approved.

The deal gives Comcast control over the NBC and Telemundo broadcast networks, cable channels such as CNBC and Bravo, the Universal Pictures movie studio and a stake in Hulu (News - Alert).com, which distributes NBC and other broadcast programming online, an article stated.

Government officials wanted to make sure that Comcast would not become a monopoly over both a major media empire, as well as the control over all services that that deliver cable and Internet services to countless American homes.

Devising a plan fair to both sides was quite a challenge. Currently, Netflix has subscription plans with unlimited online viewing for $8 a month, while Apple and Amazon.com (News - Alert) let customers rent or buy individual movies and TV shows for only a couple of dollars apiece.

Apple and Google offer set-top boxes and software that was designed to transfer online video to television sets. TV makers are also building in Internet capabilities.

Comcast feared these much cheaper options would take the majority of customers-In 2010, Comcast's cable customers paid an average of $70 per month for video services.

However, now with control of NBC Universal, Comcast can completely alter the cable game, maintaining the power to charge heavily or just not allow access to all types of media.  

An example of this is if a "30 Rock" fan, might decide to keep their cable service if the show weren't available online. Comcast also has the power to completely block or greatly reduce the time of online video traffic on its wide network.

Although the deal was approved, federal officials added in multiple conditions in order to protect Internet video including:  Comcast must sell its content to online video services, which gives viewers access to NBC Universal programming;   Comcast can't interfere with Internet video traffic flowing over its broadband network, which doesn’t allow subscribers to be blocked from  Netflix and other Web video services, or slowing down traffic from these services and;  Comcast must sell stand-alone Internet access at a reasonable price, without tying it to a cable TV package, the article stated.

Although these requirements can not conclusively say new online video services will remain successful, they were included into the deal to ensure that Comcast cannot trample on online businesses-, so  limits will remain.

"Before this deal, online video distributors had no rights to programming at all," Stifel Nicolaus (News - Alert) Analyst, Rebecca Arbogast said in an interview. "This opens the door."

Corie Wright, policy counsel for the public interest group Free Press, commented she is disappointed that the government conditions do not attempt to break up a new online service being pioneered by Comcast and other subscription-television providers. This service, which Comcast calls Xfinity, puts popular cable shows on the Internet, but restricts access to subscribers.

"The government may have effectively blessed a business model that forces consumers to pay for a cable subscription to watch video online," she said.

Only time will tell which service cable subscribers will remain loyal to. But, at a time like this when every penny needs to be pinched, what option would you chose?

Jamie Epstein is a TMCnet Web Editor. Previously she interned at News 12 Long Island as a reporter's assistant. After working as an administrative assistant for a year, she joined TMC (News - Alert) as a Web editor for TMCnet. Jamie grew up on the North Shore of Long Island and holds a bachelor's degree in mass communication with a concentration in broadcasting from Five Towns College. To read more of her articles, please visit her columnist page.

Edited by Jamie Epstein