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If Comcast Wants NBCU, It May Have to Agree to Arbitrations

Justice Department and FCC considering not just whether to arbitrate but how to structure them over programming

It appears likely that Comcast will have to agree to arbitrate disputes about carrying its own and rivals' programming in order to win government approval for its $30 billion deal for NBC Universal.

Three industry sources are confirming a story first reported by Bloomberg that both Justice Department and Federal Communications Commission officials reviewing the deal are asking lots of questions of the industry — and not about whether there should be an arbitration requirement, but instead about how to structure it.

“There have been a lot of questions about non-discrimination,” one industry lawyer told TheWrap. “I wouldn’t consider anything off the table.”

A second industry official said the structure is definitely a focus of federal officials reviewing the deal. “It’s clearly an issue that the commission and the Justice Department are looking at,” he said.

The Comcast-NBCU deal opens up a number of possibilities for disputes with cable and TV industry rivals.

— Comcast-NBCU will have to negotiate carriage fees for carrying NBCU’s TV broadcast stations, Comcast’s and NBCU’s cable channels and regional sports networks with rival cable systems and satellite broadcasters.

— Cable channels owned by rivals also will have to negotiate to get on Comcast’s system — whether the channel will be on basic or premium tiers and finally compensation.

— Then there are questions about the impact of the merger on the availability of Comcast and NBCU programming on rival system's seb and mobile sites that will have to be negotiated.

— Finally, there are questions about how Comcast will treat the websites of its internet and mobile subscribers when it offers competing video services.

Its rivals have complained that without some requirement to arbitrate disputes, Comcast could be in position to offer cable rivals two bad options — either pay big rate increases to carry Comcast-NBCU programming or face Comcast stealing market share by selling that same programming on the web.

The American Cable Association, which represents small cable systems, has complained that its members are already being charged much more to carry channels than larger systems.

The idea of arbitration isn't new. The Justice Department and the FCC required News Corp. to agree to arbitration of cable disputes when it bought DirecTV (which it subsequently sold) and also required Comcast and Time Warner Cable to agree to arbitration of disputes over regional sports networks when they split up Adelphia.

But the process then created problems. The American Cable Association it as being so expensive for small cable operators as to make them nearly useless for most disputes. The industry officials Friday said the focus of FCC and Justice Department officials is both how to make any arbitration easy to use and also whether to apply it to web and mobile video issues. 

“If the Bush Administration imposed significant arbitrations for regional sports networks and broadcast stations [in the earlier deals], you have to believe the magnitude and scope of this deal cries out for more,” said a third media executive.

All three media officials said the scope of the questioning seemed to indicate both the Justice Department and the FCC were a ways away from resolving exactly what arbitration to seek.

A spokeswoman for Comcast declined comment on the discussion.