Comcast talks with regulators on NBC deal heat up

NEW YORK/WASHINGTON (Reuters) - Talks have intensified in recent days between U.S. regulators and representatives of cable giant Comcast Corp over its bid to take control of NBC Universal, according to people familiar with the talks.

Comcast is pushing to close the deal by year-end, the sources said.

Regulators from the Department of Justice and the Federal Communications Commission have already indicated to Comcast the United States is "likely to impose significant conditions" on the $30 billion combined broadcast, cable, movie studio and theme parks business, one of these people said.

The three areas of contention are online video, program access and program carriage, two of these people said. But the discussions are "ratcheting up" and the deal is still expected to close by year-end, though it could be as late as December 31, said one person.

The people could not be identified as the talks are still ongoing.

Specifically, regulators are concerned that Comcast could be in a position to stifle the fledgling online video market if it assumes partial control of Hulu, a joint venture of General Electric Co's NBC Universal, News Corp and Walt Disney Co.

Regulators also want to prevent Comcast from anti-competitive discrimination with the wealth of programing and networks it will own once the deal closes, including leading networks like USA, Bravo and MSNBC.

"We've told them the nature of the concerns about their market power, so the ball is in Comcast's court," said the first person.

With major cable operators like Comcast losing TV subscribers for consecutive quarters in the last year, there has been growing talk of customers cutting the cable cord in favor of Web video services like Hulu or Netflix Inc.

Comcast and other cable companies have blamed the slow economy for most of their losses rather than users fleeing to cheaper Web video services.

But regulators and those who oppose the merger are worried a powerful player like Comcast, which is also the No. 1 U.S. residential broadband provider, could manipulate video distribution over its cable systems, giving preference to its own programing.

In other words, there are fears Comcast could do away with 'net neutrality' principles even though Comcast has previously promised regulators not to give preference to its own content or slow down any legal content that is transmitted over the public Internet through its pipes.

One other area of interest for regulators is the ability of Comcast, as the No. 1 cable TV operator, to make it difficult for competing networks to get fair distribution on its cable systems. Companies like Bloomberg LP, whose TV business news network competes with NBC Universal's CNBC, have raised this concern.

"We're likely to see improvements or modifications made to baseball-style arbitration," said another person who has worked with FCC on the deal.

One example of how all three areas of contention could come into play occurred last month during the 15-day blackout of Fox Networks' local stations on Cablevision Systems Corp. On the first weekend of the dispute Cablevision broadband customers found out they had lost access to Fox shows on Hulu and Fox.com.

The programing was soon restored because Fox and Cablevision could not immediately differentiate between customers that had both cable TV and broadband services and those who only took broadband. But the action was immediately highlighted by industry as an example of the future power of cable companies who are the dominant suppliers of high-speed Internet connections in the United States.

(Reporting by Yinka Adegoke; Editing by Gary Hill)