Why Are Federal Regulators Targeting Comcast Again?

By Markets Fool.com

Comcast CEO Brian Roberts might need a hug.

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The executive has put on a brave face in the wake of his company's failed $45 billion acquisition ofTime Warner Cable. When it became clear that the Federal Communications Commission was never going to approve that deal, he even offered a conciliatory statement.

Brian Roberts Source: Comcast.

"Today, we move on. Of course, we would have liked to bring our great products to new cities, but we structured this deal so that if the government didn't agree, we could walk away."

Sure, he sounded a bit like a guy who just got turned down for a date saying it would be better to stay friends, but Roberts at least attempted to put the proper spin on things.

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He might not be quite as accepting, though, should federal regulators take action against the cable giant for allegedly violating the 2011 agreements that enabled Comcast to buy NBCUniversal.

What could happen?
By attempting to buy TWC, Comcast opened itself up to intense public and regulatory scrutiny. One charge lobbed during that process was that the FCC should not trust any promises Comcast made for the merger because it did not live up to a number of conditions it accepted to secure the NBC purchase.

Both the FCC and Justice Department are researching possible action against the company in relation to the 2011 deal, theNew York Postreported.

"They're sitting on a ton of potential evidence," one source close to the process told the newspaper. "They're asking themselves if they can create a separate proceeding or whether they need a new complaint to allow [the evidence] to be introduced."

What might be charged?
It's not clear whether the FCC and DOJ will pursue a case, nor is it clear that there is a case to pursue. One possible problem is that the information garnered by regulators for the potential TWC purchase might not be usable for an action not related to that situation. While the agencies sort that out, they have identified a number of areas in which Comcast may have failed to live up to its obligations, according to thePost.

Nothing on this list is illegal or even improper. These are simply things Comcast had agreed to do (or not do) to ensure it could buy NBC.

  • Comcast tied linear programming negotiations with digital deals -- forcing programmers to sell Comcast digital rights to their content on the same or better terms than they sold it to other online video distributors -- when it promised not to.
  • Some minority-focused channels complained that they were given carriage deals on Comcast systems but they were not made widely available enough to support a real business.
  • NBCUniversal's just-announced deal to use Comcast set-top box data to help it win advertising creates an uneven playing field.
  • Comcast's alleged comments that Hulu, which it co-owns, should not be sold by its other owners -- 21st Century Fox and Disney -- allegedly broke an agreement not to interfere with the running of the digital video service.

This would not be the first time Comcast has violated its 2011 deal. It paid an $800,000 fine in 2012 for breaking promises to federal regulators that it would market a stand-alone Internet service not tied to its cable offering,The Washington Postreported.

At the time, Comcast paid the fine but denied the charge.

"As is often the case with services associated with government orders, the FCC had questions on how the service might have been rolled out in a different or even better way," Comcast Vice President of Communications Sena Fitzmaurice told the paper. "We are pleased that Comcast and the FCC were able to address such issues cooperatively and constructively in a consensual manner."

What does this mean for Comcast?
The latest investigation could lead to another fine or to either agency finding no actionable problems. That, however, does not end Comcast's woes as the cable and Internet giant has been working hard to change its reputation, Another government allegation -- even if it does not lead to much -- sets those efforts back and adds to the company's general air of untrustworthiness.

The company has been quick to deny these new charges, pointing out that it files annual compliance reports that have never been challenged.

"Comcast had no role in making, evaluating, or reconsidering any management decisions at Hulu, including the decision by Disney and Fox first to put Hulu on the market and subsequently the decision by them not to sell Hulu," the spokeswoman told theNew York Post.

For the cable leader, it's a sad case of smoke being almost as bad as fire. The company likely lost out on Time Warner Cable at least in part because the FCC did not trust it. Neither does much of the American public. To move forward, both with its customer base and in its relationship with the FCC and the DOJ -- two bodies that will control approval of any future deals -- Comcast needs to aggressively address these charges.

If there is truly nothing there, as the company states, then it can just move on. But if there areviolations -- even minor, unintentional ones -- of the 2011 deal, Comcast should apologize and take steps to fix them. Roberts' company has been aggressive in attempting to change its public perception, and admitting fault (if any exists) would be a great way to do that.

The article Why Are Federal Regulators Targeting Comcast Again? originally appeared on Fool.com.

Daniel Kline owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), Google (C shares), Netflix, and Walt Disney. The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), Netflix, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.