Next week two important Subcommittees in the House and Senate are holding hearings on the proposed acquisition of 51% of NBC Universal by Comcast. Comcast Chairman and CEO Brian Roberts is expected to testify at that hearing. This morning he gave a sneak preview of his testimony in a Q&A with Alan Murray The Wall Street Journal at the annual State of the Net conference in Washington, D.C.

First, let’s admit up front that with NBC in the news right now with its late-night kerfuffle, it’s tempting to try a bit of humor here, perhaps in the spirit of digs against NBCU owner General Electric by the hit NBC show 30 Rock. Here’s an attempt by me (Craig Ferguson, you’re my favorite late-night host, feel free to use it): “Had Comcast already taken over NBC by now, they would have proposed a new time slot for Conan O’Brien — it would have aired every weeknight, at some point during a four-hour delivery window.”

(Full disclosure: NBCU is on the Copyright Alliance board. I very much hope that it will remain on our board once the merger goes through, although I may have just placed that in jeopardy.)

I looked forward to this session, because I covered Mr. Roberts for years as a reporter. I edited a newsletter dedicated to the cable industry; I’ve attended numerous NCTA shows. And I always found Mr. Roberts surprisingly candid. So, not surprisingly, there is a lot to discuss about Mr. Roberts’ remarks.

Let me start with his answer to a question about online piracy and illegal traffic.

“The key word in that sentence is ‘illegal,’” he said, insisting that an ISP needs to be able to manage its network in that area. He acknowledged that as both an ISP and an owner of valued content — NBC programming, Universal Pictures movies, and the shows on NBCU’s many cable channels such as USA and SyFy — Comcast is “going to be on both sides of that question” regarding enforcement of copyright on a broadband network.

Looking to the future, he said it is critical that consumers continue to have “the ability to enjoy content,” and that could only happen if there is an economic incentive (found in copyright) to produce creative works. He said his goal would be to find ways to ensure copyright was being respected while “not violating people’s privacy.” I would think any copyright owner would agree with this approach, and it’s worth noting that Comcast does own several cable channels of its own, such as the Golf Channel and Versus.

Addressing head-on the company’s headache regarding the slowdown of BitTorrent traffic a few years ago, Mr. Roberts called the company’s action “a mistake.” He noted that the company sat down with BitTorrent the company (there is also a protocol that goes by that name that the company uses) and worked out an arrangement — before the FCC acted — that he feels has worked. It has sped up consumer Internet access on Comcast’s network and hasn’t experienced the consumer complaints that the BitTorrent throttling did.

While there is no question that it is a difficult time to produce expensive creative works, given the ever-present dilution of rights being performed by infringers, Mr. Roberts made clear that he was willing to purchase NBCU because of its content and looked forward to NBCU, as a Comcast subsidiary, being a pure-play content company. There will be synergies, he said, noting in particular combining NBC Sports with the Golf Channel, but emphasized that regarding its content, “if it’s legal and not pirated and well done, profit is going to flow to it.” Note the important caveat regarding piracy.

As far as being vertically integrated, he said Comcast the parent company will be a distributor and NBCU the subsidiary will be a content producer, but there are many legal checks in place to prevent market abuse. Beyond antitrust law, Mr. Roberts noted, Comcast will be subject to program access and program carriage rules. Comcast will have to offer its programming on nondiscriminatory terms to other cable, satellite and telephone competitors, with the FCC adjudicating any disputes. He noted this was done for years when Time Warner owned Time Warner Cable and when News Corp. owned DirecTV.

Mr. Roberts insisted that he embraces the Internet, noting that through TV Everywhere he is extending the platform possibilities for his customers to the Internet, and that many programs are being made available to non-subscribers through Fancast and Hulu (the latter partially owned by NBCU). He said Comcast is a leader in providing multiple ways for consumers to enjoy creative works, noting that Comcast’s on-demand service has been used billions of times in recent years, at a higher level than iTunes downloads.

Asked if the Hulu model — free viewing supported by online advertising — makes sense, Mr. Roberts said: “The honest answer is I don’t know.” He said currently an online ad brings in less than 10% of the revenue of a broadcast ad, so broadcasting is subsidizing the Hulu player. He also noted that cable programming has two revenue streams — advertising and subscriptions — and it’s hard to justify wide-scale availability of such programming on a service like Hulu that has only one revenue stream (one that is, of course, much smaller as well). That said, he was bullish on the notion of bright minds continuing to work on satisfying consumer demand online while still ensuring the ability to produce the creative works those consumers crave.

And for those of you who still receive over-the-air signals (quite a few of you, particularly on 2nd or 3rd TVs) he repeated that NBC will stay a broadcast network after the acquisition.

There was one area in which he steadfastly refused to answer Mr. Murray’s questions; those were questions seeking to elicit Mr. Roberts’ take on the latest round of late-night wars and Mr. O’Brien’s multi-billion dollar buyout. Mr. Roberts remained mum, perhaps the only person in the U.S. to have done so on this subject in the last two weeks.

This entry was posted on Wednesday, January 27th, 2010 at 1:32 pm by Patrick Ross and is filed under FCC, advertising, economy, internet, licensing, network neutrality, p2p, piracy. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.