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Comcast-NBC merger could hinge on future of Internet video

The future of Internet video has now become the dominant issue in whether the federal government approves the merger application of Comcast and NBC Universal.

Federal regulators, according to a report from the Associated Press, are now pushing for tough conditions to ensure that Comcast can’t hold back the growth of online video. The cable giant could do this by withholding content or pushing up prices for NBC programs at a time viewers are starting to turn to the Internet for viewing television programming.

The government is trying to extract concessions from Comcast in its bid for NBC that could determine whether customers can someday realistically drop their cable subscriptions and go online-only for their TV, the AP reported.

So far broadcasters and cable providers have moved online with caution, attempting not to hurt their current business models. Many television shows and movies have been blocked from the Internet. Others have been part of walled gardens that limit where and when viewers can watch online television.

Comcast has been resisting the efforts of federal regulators to ensure a choice of Internet access providers. The cable operator has argued that the efforts are unnecessary because NBC Universal only accounts for about 10 percent of television viewing and less than 10 percent of box office revenue in the United States.

Even so, Comcast is participating in an industry-wide program to limit online viewing of many popular shows to cable subscribers. NBC has joined other broadcast networks in blocking access to full episodes of its shows through Google TV software, which delivers Internet content to TV sets.

Until recently, online viewing had largely been limited to personal computers. Now, a variety of new devices are available that bring Internet video to television sets. The Apple TV and Roku set-top boxes, for example, serve as bridges to deliver online programs to the TV. Some high-end sets — among the best sellers this holiday season — connect directly to the Internet.

Cable companies worry that easy viewing of Internet video on TVs could lead customers to drop their monthly subscriptions in favor of low-cost online alternatives. Comcast’s 22.9 million cable subscribers pay an average of $71 per month for cable television.

Broadcasters are also afraid that Internet video will cannibalize revenue from television commercials, which are far more lucrative than online ads. They fear cable cancellations, too, because cable companies increasingly pay them per subscriber for the rights to carry stations on their lineups.

One rule regulators are considering would require Comcast to make NBC’s broadcast and cable channels available to rival online providers at reasonable prices. Under current rules, cable TV companies have to share programming they own with rivals such as satellite companies, but not Internet distributors.

Regulators could also prohibit Comcast from requiring a cable subscription to get online access to NBC Universal’s shows and movies. They are also considering whether to force Comcast to sell NBC’s 32 percent stake in the Internet video service Hulu.

Whatever is decided, the AP report said, the two sides are close to an agreement, which could pave the way for the FCC and the Justice Department to approve the deal imminently.

Comcast’s proposed $13.75 billion purchase of a 51 percent stake in NBC Universal would give the nation’s largest cable television company control over a major movie studio, Universal Studios, and some of the most-watched channels on television. The programming properties include the NBC network and Telemundo on broadcast TV and CNBC, Bravo and Oxygen channels on cable.