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Cablevision/Fox Spat Could Affect Comcast/NBCU Deal

Updated: Fox’s blocking of the network’s content on Hulu draws FCC warnings from Dish Network, DirecTV and the American Cable Association

It’s looking increasingly like Fox’s spat with Cablevision could wind up having repercussions for Comcast’s deal for NBC Universal.

Being questioned is an unprecedented tactic Fox employed early in the Cablevision dispute and only for hours — blocking Cablevision’s internet subscribers from accessing Fox content on Hulu.

Dish Network, DirecTV and the American Cable Association on Wednesday wrote FCC chairman Julius Genachowski warning about the tactic and its potential impacts in the $30B Comcast/NBCU deal.

“Without appropriate safeguards, it is reasonable to assume that Comcast/NBCU would take similar action against non-Comcast broadband subscribers in the event of a dispute because it could increase its leverage in carriage negotiations and encourage subscriber defection to Comcast’s own video and broadband platforms,” the letter warned.

Also read: D.C. Fed Up: Sen. Kerry Wants to Ban Carriage-War Blackouts

Fox’s move, the letter said, highlighted the impact the Comcast-NBCU has not just on cable and broadcast but on internet content.

“Fox’s actions also seems to belie Comcast’s claim that a combined Comcast-NBCU with ‘a minority non-controlling interest in Hulu’ could not ‘cause’ Hulu to refuse to deal with third parties.’”

Fox imposed the blocking early Saturday and removed it by late Saturday afternoon, after learning that a number of Cablevision’s internet subscribers whose access was being blocked actually get their cable TV programming from other phone, cable and satellite distributors.

A Fox spokesman confirmed that an FCC official called Saturday to express concern about the blocking, but said Fox had moved to remove the block before the call.

Up to now, consumer groups and some Hollywood unions have expressed concern to the FCC about the control of internet content that the Comcast deal could give the company. But that discussion has been largely theoretical and about what might happen.

The Hulu incident is serving to buttress those warnings.

Indeed, the incident drew immediate Congressional attention from Rep. Ed Markey, D-Mass. In a letter over the weekend to Genachowski, Markey ripped Fox's tactic.

“This is not only contrary to the Commission's Broadband Internet Policy Statement of 2005, which states, in part, that ‘…consumers are entitled to access the lawful internet content of their choice’,” Rep. Markey said. “The tying of cable TV subscription to access to internet fare freely available to other consumers is a very serious concern. 

“Consumers are losing their freedom to access the internet content of their choice — through no fault of their own — and this is patently anti-consumer,” he said.

FCC analysts agreed. “It will increase the likelihood that the commission will look to some appropriate, retransmission consent condition” for the Comcast deal, Stiffel Nicolaus Managing Director Rebecca Arbogast, one of the country's leading independent analysts on FCC action, told TheWrap.

In a research note last week to clients, Arbogast said the incident “could reinforce increased scrutiny of internet video issues, including in the context of the Comcast-NBCU.”

Andy Schwartzman, SVP and policy direct of the Media Access Project, a public-interest law firm specializing in FCC issues, also told TheWrap the incident served to reinforce some of the concerns that public interest groups had made to the FCC.

“It underscores the power of combining content ownership and content distribution,” he said. “I doubt it’s the straw that will break the camel’s back; nonetheless it is a significant factor.”

An FCC spokeswoman declined to discuss the agency’s role in the discussions.