“Hulu Handcuff:” a signal to broadcasting and cable?

Hulu HandcuffThe “Hulu Handcuff” condition that was a part of the government’s approval of the Comcast-NBC merger this week is an important and insightful look into the mind of not only the Genachowski FCC but also what the Obama administration views as important downstream. If you thought that the status quo has defenders in the White House, you should probably think again, and that has meaning for any kind of legacy media.

The so-called Hulu Handcuff blocks Comcast from any decision-making or influence on the future of Hulu. NBC would still be allowed some participation, but the government sees Comcast as a potential threat to the viability of Hulu and wants assurances that Hulu will be protected. The Justice Department explained in court filings:

“Comcast has an incentive to prevent Hulu from becoming an even more attractive avenue for viewing video programming because Hulu would then exert increased competitive pressure on Comcast’s cable business. If the proposed transaction were to be consummated without conditions, (Comcast) would hold seats on Hulu’s board of directors and could exercise their voting and other governance rights to compromise strategic and competitive initiatives Hulu may wish to pursue.”

In an FCC press release, commissioners wrote that Comcast-NBCU will be required to take affirmative steps to foster competition in the video marketplace in addition to backing away from Hulu.

…Comcast-NBCU will increase local news coverage to viewers; expand children’s programming; enhance the diversity of programming available to Spanish-speaking viewers; offer broadband services to low-income Americans at
reduced monthly prices; and provide high-speed broadband to schools, libraries and underserved communities, among other public benefits…

…Ensuring Reasonable Access to Comcast-NBCU Programming for Multichannel Distribution…

…Protecting the Development of Online Competition…

What’s interesting to me here is the message this action telegraphs to the whole “video transmission” industry, and it’s pretty huge: “Don’t mess with unbundled video distribution via the Web.” Reading between the lines can’t make anybody in the licensed spectrum world feel all warm and fuzzy inside, because the government’s priority should be seen as online and not over-the-air, although that may seem like splitting mobile broadband hairs.

These conditions are set for at least seven years, seven crucial years in the development of the online video marketplace. Monetizing all that content on behalf of rights owners is something that’s still very mushy and in need of serious leadership. It’s the innovator’s dilemma that Clayton Christensen (keynoter at the upcoming Borrell Conference in March) talks about. Broadcasters want and need to protect their core competency while disruptive forces are demanding a different model. This week’s action by the Justice Department and the FCC sends a clear signal as to which area has Washington’s ear.