Avoiding cable Comcast, NBC deal opens door for online video.(News)

Byline: Joelle Tessler Associated Press

WASHINGTON New Internet video services from companies such as Netflix and Apple are offering a glimpse of a home entertainment future that doesn't include a pricey monthly cable bill.

To challenge the cable TV industry's dominance in the living room, though, online video services need popular movies and TV shows to lure viewers, and access to high-speed Internet networks to reach them.

Yet they have had no rights to either until now.

To win government approval to take over NBC Universal last month, cable giant Comcast Corp. agreed to let online rivals license NBC programming, including hit shows such as "30 Rock" and "The Office." Comcast also agreed not to block its 17 million broadband subscribers from watching video online through Netflix, Apple's iTunes and other rivals yet to come.

Those requirements aim to ensure that the nation's largest cable TV company, with nearly 23 million video subscribers in 39 states, cannot stifle the growth of the nascent Internet video business. Although they apply only to Comcast and NBC, these conditions could serve as a model for other big entertainment companies in dealing with new online competitors. 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," 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."

The Federal Communications Commission and the Justice Department spent more than a year reviewing Comcast's plan to buy a 51 percent stake in NBC Universal from General Electric. 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.com, which distributes NBC and other broadcast programming online.

Government officials wanted to ensure that Comcast could not crush competition through its control over both a major media empire and the pipes that deliver cable and Internet services to millions of American homes.

But figuring out how to protect online video was tricky because the market is still taking shape.

Netflix offers subscription plans with unlimited online viewing for $8 a month. Apple and Amazon.com let customers rent or buy individual movies and TV shows for as little as a few dollars apiece providing an alternative for people who don't want big bundles of cable channels they may never watch. 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 building in Internet capabilities.

All these options could make it easier to cut the cable cord and the cable bill. In 2010, Comcast's cable customers paid an average of

$70 per month for video services.

With control of NBC Universal, Comcast could handicap Web rivals by overcharging for or withholding all sorts of top content. A "Top Chef" fan, for instance, might not drop cable if the show weren't available online. Comcast could also block or slow online video traffic on its massive broadband network. ITunes can't compete with cable if programs stutter online.

None of the major online video companies would comment about Comcast. The cable company insists it doesn't consider Internet video a threat. Indeed, the Internet lets Comcast expand beyond its existing cable service territory and distribute NBC content more widely, through a broad range of websites and devices.

Still, in approving the deal, federal officials attached dozens of conditions, including several big ones to protect Internet video:

* Comcast must sell its content to online video services. That gives them access to marquee NBC Universal programming.

* Comcast can't interfere with Internet video traffic flowing over its broadband network. That means that it cannot prevent its subscribers from accessing Netflix and other Web video services, or slow down traffic from these services to make them jerky, unreliable and hard to watch.

* Comcast must sell stand-alone Internet access at a reasonable price, without tying it to a cable TV package, to enable cord-cutting. That includes offering a standard 6-megabit-per-second plan, which is fast enough to handle Internet video, for roughly $50 a month.