Comcast being pressured by four key issues (Update 3/3: Andrew Lack reported close to retaking top NBC News role)

Tom Paine

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Brian Williams  in 2011 / Wikipedia

Comcast is facing pressure on several fronts. This does not necessarily constitute a crisis for the company's core businesses, which will probably continue on just fine (see yesterday's earning release). But it may raise the issue of whether its management is overstretched, and has failed to anticipate likely problems resulting from its policies.

The four key issues are:

  • The crisis at NBC News
  • The FCC's planned imposition of Title ll regulations on broadband providers
  • The increasingly problematical outlook for getting the Comcast/Time Warner Cable merger approved
  • Its customer service "nightmare" stories

These are to some extent interrelated. Perhaps they are the inevitable results of the company's push to firmly establish itself as a nationwide giant.

The six-month suspension without pay of Brian Williams (and scrubbing his memory from NBC websites) was a stunning move, but one that seemed necessary because of his tendency to occasionally create tall tales out of his experiences. It was a particularly sensitive issue given the credibility entrusted to the role of a network news anchor and the extent to which that person represents the entire network. No one knows if Williams will eventually be reinstated or will return in an alternative role. But it hasn't been the only troublesome issue at NBC News, about which Brian Roberts said at the time the NBCU acquisition closed in 2011:

“I will tell you my view on news, it is the crown jewel of Comcast. It may not be the biggest part of the new company, but it is a huge responsibility and an opportunity and I take it quite seriously. All parts of NBC News and MSNBC.”

David Gregory was pushed out as host of 'Meet the Press' last summer after a long struggle, to be replaced by Chuck Todd. There was also the case of Ann Curry leaving the 'Today Show' (supposedly because of Matt Lauer) in 2012, and the short-lived tenure of Jamie Horowitz, who joined 'Today' from ESPN in September of last year as the show's senior vice president and general manager and was gone three month later.

Some outside observers point a figure at Pat Fili-Krushel, the chairman of NBCUniversal News Group, an ally of NBCU CEO Steve Burke who had worked with her at ABC. When Comcast took control of NBC and NBC News, it was implied that one of its goals was to temper a culture driven by the huge, combative egos who dominated fiefdoms within the organization. Whether Comcast has been successful in that effort is uncertain. Also, there is a question as to whether NBCU should have picked up or acted on Williams' quirks earlier.

The FCC is expected to vote Thursday on net neutrality regulations, and its Democratic majority (of 3 to 2) is expected to approve Commission chair Tom Wheeler's proposal to reclassify broadband as a so-called Title II telecommunications service under the 1934 Communications Act, in the ancient manner that POTS (plain old telephone service) of the old Bell System network was regulated. President Obama endorsed a Title ll approach in November.

Actually, there are varying definitions of "net neutrality", and the politicization of the issue has led to greater obfuscation, rather than increased clarity, over its meaning. It is unlikely that any impact will be felt for some time, and indeed Title ll powers might be used only as an implicit threat rather than as actual policy. Its also certain to face long legal challenges, and the FCC doesn't have a great record of having its rulings upheld in the courts.

In yesterday morning's conference call, CEO Brian Roberts commented: "We think the Title II regulation is antiquated and has real downsides so our attention just like everyone else is on the actual text to the order, the upcoming vote, the strength of forbearance and ultimately the commission’s focus on preservation of incentives for the private sector to continue to invest aggressively in broadband." Vice Chairman & CFO Michael Angelakis added, "the uncertainty that Title II may provide I think does provide us with the opportunity for a higher degree of scrutiny on capital and broadband. We really, as Brian said, need to look at the details but there will be some internal scrutiny here in terms of what our investment plans look like with broadband."

Some last minute drama: The Hill, citing FCC officials, reported that Mignon Clyburn, one of three Democrats on the FCC, has asked Chairman Tom Wheeler to roll back some of his provisions before the full commission votes on them, mostly points governing peering agreements.

My guess is that Comcast's merger plans pushed momentum for Title ll regulation forward. Of course, Comcast might have just wanted some clarity over the rules it was playing under before completing the acquisition.

Last week Craig Moffett of MoffettNathanson Research, perhaps the most widely known analyst covering Comcast on Wall Street, cut his firm's probability of
the Time Warner Cable merger being approved from 70/30 to 60/40, after previously lowering it from 80/20. “If anyone doubts the hostility of the regulatory climate in Washington now, imagine how clear it would be on the morning after a rejection. These risks must at least be acknowledged,” Moffett was quoted as saying by Variety. Others have given it lower probabilities.

The New York Times DealBook column also came up with a 60% chance of approval based on an anlaysis of where the two companies' stocks were trading relative to Comcast's offering price and TWC's price at the time of the offer.

Comcast reiterated yesterday that it remains confident that the deal will be completed in early 2015. The FCC, which has until March 30 to make a decision, is expected to turn its attention to the deal after Thursday's Title ll vote. The Department of Justice is also in the process of reviewing whether the deal would be anti-competitive.

If huge obstacles arise, Comcast could simply walk away (it does not have to pay a breakup fee to TWC) or perhaps cut the scope of the deal, something its already done by agreeing to spin off customers to a joint venture with Charter. Comcast may also have to agree not to legally challenge some regulatory conditions.

Comcast's much-publicized customer service gaffes could possibly derail the deal, some analysts say. “The customer service nightmares of the past 12 months certainly aren’t going to help,” Moffett told the Chicago Tribune.

Comcast has acknowledged and openly apologized for several of the incidents, though some may have received more publicity than usual because of the intense campaign against the merger. Roberts commented during yesterday's earnings call, "In short we want customer service to be our best product. We have not always lived up to that."

Update 3/3: Andrew Lack said to be close to retaking top role at NBC News (LA Times)

Links 2/24: Comcast drops more WiFi hints, broadband may soon outdraw video; Xero raises another $147 million

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