filings.toolsItem 1. Business
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Item 1. Business
We are a global media and technology company with three primary businesses: Comcast Cable, NBCUniversal and Sky. We were incorporated under the laws of Pennsylvania in December 2001. Through our predecessors, we have developed, managed and operated cable systems since 1963. Through transactions in 2011 and 2013, we acquired NBCUniversal, and in the fourth quarter of 2018, we acquired Sky.
We present our operations for (1) Comcast Cable in one reportable business segment, referred to as Cable Communications; (2) NBCUniversal in four reportable business segments: Cable Networks, Broadcast Television, Filmed Entertainment and Theme Parks (collectively, the “NBCUniversal segments”); and (3) Sky in one reportable business segment.
| • | Cable Communications: Consists of the operations of Comcast Cable, which is a leading provider of high-speed internet, video, voice, wireless, and security and automation services to residential customers in the United States under the Xfinity brand; we also provide these and other services to business customers and sell advertising. |
| • | Cable Networks: Consists primarily of our national cable networks that provide a variety of entertainment, news and information, and sports content; our regional sports and news networks; our international cable networks; our cable television studio production operations; and various digital properties. |
| • | Broadcast Television: Consists primarily of the NBC and Telemundo broadcast networks, our NBC and Telemundo owned local broadcast television stations, the NBC Universo national cable network, our broadcast television studio production operations, and various digital properties. |
| • | Filmed Entertainment: Consists primarily of the operations of Universal Pictures, which produces, acquires, markets and distributes filmed entertainment worldwide; our films are also produced under the Illumination, DreamWorks Animation and Focus Features names. |
| • | Theme Parks: Consists primarily of our Universal theme parks in Orlando, Florida; Hollywood, California; and Osaka, Japan. In addition, we are developing a theme park in Beijing, China along with a consortium of Chinese state-owned companies, and an additional theme park in Orlando, Florida. |
| • | Sky: Consists of the operations of Sky, one of Europe’s leading entertainment companies, which primarily includes a direct-to-consumer business, providing video, high-speed internet, voice and wireless phone services, and a content business, operating entertainment networks, the Sky News broadcast network and Sky Sports networks. |
Our other business interests consist primarily of the operations of Comcast Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center arena in Philadelphia, Pennsylvania, and other business initiatives, such as the development of Peacock, our direct-to-consumer streaming service that will feature NBCUniversal content.
For financial and other information about our reportable business segments, refer to Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2 to each of Comcast’s and NBCUniversal’s consolidated financial statements included in this Annual Report on Form 10-K.
Available Information and Websites
Comcast’s phone number is (215) 286-1700, and its principal executive offices are located at One Comcast Center, Philadelphia, PA 19103-2838. NBCUniversal’s phone number is (212) 664-4444, and its principal executive offices are located at 30 Rockefeller Plaza, New York, NY 10112-0015. Comcast and NBCUniversal’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such reports filed with or furnished to the SEC under Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge on the SEC’s website at www.sec.gov and on Comcast’s website at www.comcastcorporation.com as soon as reasonably practicable after such reports are electronically filed with the SEC. The information posted on our websites is not incorporated into our SEC filings.
| Comcast 2019 Annual Report on Form 10-K | 1 |
Description of Our Businesses
| Cable Communications Segment |
Cable Communications offers high-speed internet, video, voice, wireless, and security and automation services in the United States individually and as bundled services at a discounted rate over its cable distribution system to residential and business customers. Revenue is generated primarily from residential and business customers that subscribe to our services, which are marketed individually and as bundled services, and from the sale of advertising. Bundled service offerings aim to meet the needs of various segments of our customer base, ranging from high-speed internet services packaged with video or streaming services that include a limited number of channels, to a five-product bundle, consisting of high-speed internet, video, voice, wireless, and security and automation services. Subscription rates and related charges vary according to the services and features customers receive and the types of equipment they use, and customers are typically billed in advance on a monthly basis. A portion of our residential customers are subject to minimum-term contracts for their cable services, which are typically 1 to 2 years in length. Substantially all business customers are initially under minimum-term contracts, which typically range from 2 to 5 years. Customers with minimum-term contracts may only discontinue service in accordance with the terms of their contracts.
As of December 31, 2019, Cable Communications had 31.5 million total customer relationships, including 29.1 million residential customer relationships and 2.4 million business customer relationships, and passed more than 58 million homes and businesses. Homes and businesses are considered passed if we can connect them to our cable distribution system without further extending the transmission lines and are estimated based on the best available information. As of December 31, 2019, total customer relationships penetration of homes and businesses passed was 54%.
The Areas We Serve
The map below highlights Cable Communications’ cable distribution footprint as of December 31, 2019 and the designated market areas (“DMAs”) where we have 250,000 or more customer relationships, with the locations that are bolded representing one of the top 25 U.S. television DMAs as of December 31, 2019.
| 2 | Comcast 2019 Annual Report on Form 10-K |
High-Speed Internet
Cable Communications offers high-speed internet services with downstream speeds that range up to 1 gigabit per second (“Gbps”) and fiber-based speeds that range up to 2 Gbps. These services include access to an online portal and mobile apps, which provide users with the ability to manage their home Wi-Fi network, email, an address book, calendars and online security features.
Throughout its footprint, Cable Communications deploys wireless gateways to customers that combine an internet and voice modem with a Wi-Fi router to deliver reliable internet speeds and enhanced coverage through an in-and-out-of-home Wi-Fi network. Customers with wireless gateways may also personalize and manage their Wi-Fi network remotely with the xFi branded whole-home application and online portal, which includes viewing and changing their Wi-Fi password, identifying which devices are connected to their in-home network, setting parental controls and schedules, advanced security, and other features. Cable Communications continues to expand its network of residential, outdoor and business Wi-Fi hotspots. Certain high-speed internet customers who do not subscribe to our video services also receive Flex, a streaming device with access to various programming and other third-party internet apps on their television.
As of December 31, 2019, 26.4 million residential customers subscribed to our high-speed internet services.
Video
Cable Communications offers a broad variety of video services, primarily through our X1 platform, an Internet Protocol (“IP”) and cloud-enabled video platform. Video customers have access to hundreds of channels depending on the level of service, which typically range from limited basic service with access to between 20 and 60 channels to full service with access to more than 300 channels. Video services generally include programming provided by national broadcast networks, local broadcast stations, and national and regional cable networks, as well as government and public access programming. Our video services also include access to video on demand services (“On Demand”) and an interactive, on-screen program guide. Our On Demand service provides video customers with access to hundreds of thousands of programming choices included in our library. Other content, primarily movies and special-events programming, such as sporting events and concerts, can be rented or in some cases purchased to own digitally. Customers also receive high-definition (“HD”) video service that provides high-resolution picture quality, improved audio quality and a wide-screen format through an HD set-top box, and a broad selection of HD programming choices. Customers also have the option to subscribe to additional services, including a digital video recorder (“DVR”) service that allows customers to record and store programs and play them at their convenience, including online and through our mobile app, and to pause and rewind live television. Additionally, customers may subscribe to premium networks that generally provide, without commercial interruption, movies, original programming, live and pre-recorded sporting events and concerts, and other features. We also offer video service packages that include extensive amounts of foreign-language programming and other specialty tiers of programming. We tailor our video services for particular programming preferences, demographics and geographic areas in accordance with applicable local and federal regulatory requirements.
Through the X1 platform, customers have integrated search functionality, including the use of a voice-activated remote control, personalized recommendations and access to, and integration of, certain third-party internet apps, such as Netflix, Amazon Prime Video and YouTube. Additionally, a variety of music apps such as Pandora are offered through X1.
Customers have access to their video services through the Stream mobile app and an online portal that allow them to view certain live programming and On Demand content and to browse program listings. Additionally, Cable Communications offers a streaming video service throughout our footprint that allows high-speed internet customers to purchase video services and stream live programming to a computer, tablet, smartphone or other device for a monthly fee.
As of December 31, 2019, 20.3 million residential customers subscribed to our video services.
Voice
Cable Communications offers voice services using interconnected Voice over Internet Protocol (“VoIP”) technology. The services provide either unlimited or usage-based local and domestic long-distance calling and include options for international calling plans, voicemail, voicemail transcriptions, text messaging and various call features such as caller ID and call waiting. For customers with high-speed internet services, voice services also include the ability to access and manage voicemail, text messaging and other account features through an online portal or mobile apps.
As of December 31, 2019, 9.9 million residential customers subscribed to our voice services.
| Comcast 2019 Annual Report on Form 10-K | 3 |
Wireless
Cable Communications offers wireless phone services using mobile virtual network operator (“MVNO”) rights to provide the services over Verizon’s wireless network and our existing network of in-home and outdoor Wi-Fi hotspots. The services are currently offered only as part of our bundled service offerings to residential customers that subscribe to high-speed internet service within our cable distribution footprint and may in the future also be offered to small business customers on similar terms. Customers may choose to pay for services on an unlimited data plan or per gigabyte of data used. Customers have the ability to bring their own device or purchase handsets with the option to pay upfront or finance the purchase interest-free over 24 months.
As of December 31, 2019, there were 2.1 million activated wireless lines that were subscribed to our wireless services. Individual customer relationships may have multiple lines.
Business Services
Cable Communications offers a variety of products and services to businesses. High-speed internet services provide downstream speeds that range up to 1 Gbps and fiber-based speeds that range up to 10 Gbps. Our service offerings for small business locations primarily include high-speed internet services, as well as voice and video services, that are similar to those provided to residential customers, as well as cloud-based cybersecurity services, wireless backup connectivity, advanced Wi-Fi solutions, video monitoring services and cloud-based services that provide file sharing, online backup and web conferencing, among other features. We also offer Ethernet network services that connect multiple locations and provide higher downstream and upstream speed options to medium-sized customers and larger enterprises, as well as advanced voice services, along with video solutions that serve hotels and other large venues. In addition, we provide cellular backhaul services to mobile network operators to help them manage their network bandwidth.
Cable Communications has expanded its service offerings to include a software-defined networking product for medium-sized and enterprise customers. Larger enterprises may also receive support services related to Wi-Fi networks, router management, network security, business continuity risks and other services. These service offerings are primarily provided to Fortune 1000 companies and other large enterprises with multiple locations both within and outside of Cable Communications’ cable distribution footprint, where we have agreements with other companies to use their networks to provide coverage outside of our service areas.
Advertising
As part of Cable Communications’ distribution agreements with cable networks, we generally receive an allocation of scheduled advertising time that is sold through our advertising business to local, regional and national advertisers. In most cases, the available advertising units are sold by our sales force. In some cases, we work with representation firms as an extension of our sales force to sell a portion of the advertising units allocated to us. Cable Communications also represents the advertising sales efforts of other multichannel video providers in some markets. In addition, we generate revenue from the sale of advertising on our digital platforms. We also provide technology, tools, data-driven services and marketplace solutions to customers in the media industry, which allow advertisers to more effectively engage with their target audiences.
Other
Cable Communications offers security and automation services that provide home monitoring services and the ability to manage other functions within the home, such as lighting and room temperature, through our online portal, mobile apps or the X1 platform. We also license our technology platforms to other multichannel video providers.
As of December 31, 2019, 1.4 million residential customers subscribed to our security and automation services.
Technology
Cable Communications’ cable distribution system uses a hybrid fiber-optic and coaxial cable network that we believe is sufficiently flexible and scalable to support our future technology requirements. This network provides the two-way transmissions that are essential to providing high-speed internet services, interactive video services such as On Demand, voice services, and security and automation services.
Cable Communications continues to focus on technology initiatives to design, develop and deploy next-generation media and content delivery platforms, such as the X1 platform and related cloud DVR technology, and Flex, which use IP technology and our own cloud network servers to deliver video and advanced search capabilities, including through a voice-activated remote control, and that provide access to certain third-party internet apps.
Cable Communications continues to deploy 1 Gbps high-speed internet services that leverage DOCSIS 3.1 technology across its footprint and will continue to expand the capacity of its DOCSIS 3.1 infrastructure, including the implementation of DOCSIS FDX that will enable multi-gigabit services to be launched through our hybrid fiber-optic and coaxial cable network.
| 4 | Comcast 2019 Annual Report on Form 10-K |
Sources of Supply
Cable Communications licenses software products for our high-speed internet services, such as email and security software, and content, such as news feeds for its online portal, from a variety of suppliers. Under these contracts with these suppliers, we generally pay on a fixed-fee basis, on a per subscriber basis in the case of software product licenses or on a video advertising revenue share basis in the case of content licenses.
To offer video services, Cable Communications licenses a substantial portion of programming from cable and broadcast networks, as well as from local broadcast television stations. We attempt to secure long-term programming distribution agreements with these programming providers. The fees associated with these programming distribution agreements are generally based on the number of subscribers who are able to watch the programming and the platforms on which the content is provided. We seek to include in distribution agreements the rights to offer such programming through multiple delivery platforms, such as through our On Demand service, online portal, mobile apps and streaming services.
For voice services, software products such as voicemail and text messaging are licensed from a variety of suppliers under multiyear contracts. The fees paid are generally based on the consumption of the related services.
For wireless services, we have an MVNO agreement that allows us to offer services using Verizon’s wireless network.
Cable Communications purchases from a limited number of suppliers a significant number of set-top boxes and certain other customer premise equipment, network equipment and services to provide services to residential and business customers.
Cable Communications uses two primary vendors to provide customer billing for our residential and business customers.
Customer and Technical Services
Cable Communications’ customer service call centers provide 24/7 call-answering capability, telemarketing and other services. Our technical services group performs various tasks, including installations, plant maintenance and upgrades to its cable distribution system.
Sales and Marketing
Cable Communications offers services directly to residential and business customers through its customer service call centers, retail stores, customer service centers, websites, door-to-door selling, telemarketing, and third-party outlets, as well as through advertising via direct mail, television and the internet.
| Comcast 2019 Annual Report on Form 10-K | 5 |
| NBCUniversal Segments |
NBCUniversal is one of the world’s leading media and entertainment companies that develops, produces and distributes entertainment, news and information, sports, and other content for global audiences, and owns and operates theme parks worldwide.
Cable Networks
Cable Networks consists of a diversified portfolio of national cable networks that provide a variety of entertainment, news and information, and sports content; regional sports and news networks; international cable networks and cable television studio production operations. It also owns various digital properties, which include brand-aligned websites.
The table below presents a summary of NBCUniversal’s national cable networks and their advertising reach to U.S. households.
| Cable Network | Approximate U.S. Households as of December 31, 2019 (in millions)(a) | Description of Programming | |
| USA Network | 87 | General entertainment | |
| E! | 84 | Entertainment and pop culture | |
| Syfy | 84 | Imagination-based entertainment | |
| Bravo | 84 | Entertainment, culture and arts | |
| MSNBC | 83 | News, political commentary and information | |
| CNBC | 82 | Business and financial news | |
| NBC Sports Network | 80 | Sports | |
| Oxygen | 70 | Crime, mystery and suspense for women | |
| Golf Channel | 68 | Golf competition and golf entertainment | |
| Universal Kids | 54 | Children’s entertainment | |
| The Olympic Channel | 34 | Olympic sports events and Olympic-themed original content | |
| CNBC World | 28 | Global financial reviews |
| (a) | Household data is based on The Nielsen Company’s December 2019 Household Universe Estimate report, except for the Olympic Channel, which is derived from information provided by SNL Kagan. The Nielsen report includes estimates based on subscribers to both traditional and certain virtual multichannel video providers. The Nielsen report is not based on information provided by us and is included solely to permit comparisons between our cable networks and those operated by our peers. |
Our regional sports and news networks together serve more than 26 million households across the United States, including in markets such as Baltimore/Washington, Boston, Chicago, Philadelphia, Portland, Sacramento and San Francisco.
Revenue is generated primarily from the distribution and licensing of programming and from the sale of advertising on our networks and digital properties. We market and distribute cable network programming in the United States and internationally to multichannel video providers, including both traditional providers of linear programming and virtual providers who provide streaming services for linear programming. We also market and distribute cable network programming to subscription video on demand services, such as those offered by Amazon, Hulu and Netflix. These distributors may provide the content on television, including via video on demand services, online and through mobile apps.
Cable Networks produces owned programs or acquires the rights to programming from third parties, including sports programming rights that are discussed below under the heading “Broadcast Television.” NBCUniversal’s cable television studio production operations identify, develop and produce original content for our own cable networks and third parties. We license owned content to cable and broadcast networks and subscription video on demand services. We also sell owned content on standard-definition DVDs and Blu-ray discs (together, “DVDs”) and through digital distribution services such as iTunes. We anticipate that our cable television studio production operations will also produce content for and license content to Peacock.
Broadcast Television
Broadcast Television operates the NBC and Telemundo broadcast networks, which together reach viewers and advertisers in all 50 states, as well as our owned NBC and Telemundo local broadcast television stations, the NBC Universo national cable network, broadcast television studio production operations, and various digital properties, which primarily include brand-aligned websites. Revenue is generated primarily from the sale of advertising on our networks and digital properties, from the licensing of programming, and from the fees received under retransmission consent agreements and associated fees received from NBC-affiliated and Telemundo-affiliated local broadcast television stations.
| 6 | Comcast 2019 Annual Report on Form 10-K |
NBC Network
The NBC network distributes entertainment, news and sports programming that reaches viewers in virtually all U.S. television households through more than 200 affiliated stations across the United States, including NBCUniversal’s 11 owned NBC-affiliated local broadcast television stations. The NBC network’s programming library consists of rights of varying nature to more than 100,000 episodes of popular television content, including current and classic titles, unscripted programming, sports, news, long-form and short-form programming, and locally produced programming from around the world.
The NBC network produces owned programs or acquires the rights to programming from third parties. NBCUniversal has various contractual commitments for the licensing of rights to multiyear programming, primarily sports programming. The most significant sports programming commitments include the U.S. broadcast rights for the summer and winter Olympic Games through 2032 and agreements with the NFL to produce and broadcast a specified number of regular season and playoff games, including Sunday Night Football through the 2022-23 season and the Super Bowl in 2022. We also have U.S. broadcast rights to a specified number of NHL games through the 2020-21 season, English Premier League soccer through the 2021-22 season, certain NASCAR events through 2024 and certain PGA TOUR and other golf events through 2030. NBCUniversal’s sports programming agreements also include the rights to distribute content on our national cable networks, including the NBC Sports Network and Golf Channel, and regional sports networks, and online, including through mobile apps.
The broadcast television studio production operations develop and produce original content, including scripted and unscripted programming series and talk shows. This original content is licensed to broadcast networks, cable networks and local broadcast television stations owned by NBCUniversal and third parties, as well as to subscription video on demand services, and it is sold on DVDs and through digital distribution services both in the United States and internationally. The broadcast television studio production operations also produce first-run syndicated shows for local markets that are broadcast on local broadcast television stations in the United States on a market-by-market basis. We currently distribute some of our television programs after their initial broadcast, as well as older television programs from the library, to local broadcast television stations and cable networks in the off-network syndication market. We anticipate that our broadcast television studio production operations will also produce content for and license content to Peacock.
NBC Local Broadcast Television Stations
As of December 31, 2019, NBCUniversal owned and operated 11 NBC-affiliated local broadcast television stations, including stations in 8 of the top 10 general markets, that collectively reached approximately 31 million U.S. television households and represent approximately 29% of U.S. television households. In addition to broadcasting the NBC network’s national programming, our local broadcast television stations produce news, sports, public affairs and other programming that addresses local needs and acquire syndicated programming from other sources.
Telemundo
Telemundo is a leading Hispanic media company that produces, acquires and distributes Spanish-language content in the United States and internationally. Telemundo’s operations include the Telemundo network, 30 owned local broadcast television stations and the NBC Universo national cable network.
The Telemundo network is a leading Spanish-language broadcast network featuring original telenovelas, movies, news, specials and sporting events. Telemundo develops original programming primarily through its production studio and also acquires the rights to programming from third parties. We hold the Spanish-language U.S. broadcast rights to FIFA World Cup soccer through 2026.
Telemundo Local Broadcast Television Stations
As of December 31, 2019, Telemundo owned 30 local broadcast television stations affiliated with the Telemundo network, including an independent television station in Puerto Rico and stations in 19 of the top 20 U.S. Hispanic markets, which collectively reached approximately 72% of U.S. Hispanic television households as of December 31, 2019.
Filmed Entertainment
Filmed Entertainment primarily produces, acquires, markets and distributes filmed entertainment worldwide. It also includes Fandango, a movie ticketing and entertainment business, our consumer products business and our live stage production business. We also distribute filmed entertainment produced by third parties.
Filmed Entertainment produces content both alone and jointly with other studios or production companies, as well as with other entities. NBCUniversal’s films are produced primarily under the Universal Pictures, Illumination, DreamWorks Animation and Focus Features names. Films are marketed and distributed worldwide primarily through NBCUniversal’s own marketing and distribution operations. Filmed Entertainment also acquires distribution rights to films produced by others, which may be limited to particular geographic regions, specific forms of media or certain periods of time. Filmed Entertainment’s content includes theatrical films, direct-to-video movies and a film library, which is comprised of more than 5,000 movies in a variety of genres.
| Comcast 2019 Annual Report on Form 10-K | 7 |
Filmed Entertainment has entered into, and may continue to enter into, film cofinancing arrangements with third parties, including both studio and nonstudio entities, to jointly finance or distribute certain of our film productions. These arrangements can take various forms, but in most cases involve the grant of an economic interest in a film to an investor. Investors generally assume the full risks and rewards of ownership proportionate to their ownership in the film.
The majority of our produced and acquired films are initially distributed for exhibition in movie theaters. After their release in movie theaters, we sell and license films through various methods. We distribute films globally by selling them on DVDs to retail stores and rental kiosks, and through digital distribution services and video on demand services provided by multichannel video providers, including the Cable Communications and Sky segments. We also license films, including selections from the film library, to cable, broadcast and premium networks, to subscription video on demand services, and to video on demand and pay-per-view services. The number of films licensed through subscription video on demand services is increasing as consumers continue to seek additional ways to view the Filmed Entertainment’s content. We anticipate that our film studios will also produce content for and license content to Peacock.
Theme Parks
Theme Parks consists primarily of Universal theme parks in Orlando, Florida; Hollywood, California; and Osaka, Japan. Universal Orlando includes two theme parks, Universal Studios Florida and Universal’s Islands of Adventure, and our water park, Volcano Bay, and we are building an additional theme park named Universal’s Epic Universe. Universal Orlando also includes Universal CityWalk Orlando, a dining, retail and entertainment complex, and features on-site themed hotels in which we own a noncontrolling interest. The Universal theme park in Hollywood, California consists primarily of Universal Studios Hollywood, as well as Universal CityWalk Hollywood. The Universal theme park in Osaka, Japan consists primarily of Universal Studios Japan. NBCUniversal is also developing a theme park in Beijing, China along with a consortium of Chinese state-owned companies. In addition, Theme Parks licenses the right to use the Universal Studios brand name and other intellectual property, and also provides other services, to third parties that own and operate the Universal Studios Singapore theme park on Sentosa Island, Singapore.
Revenue is generated primarily from guest spending at Universal theme parks in Orlando, Florida; Hollywood, California; and Osaka, Japan. Theme Parks licenses the right to use a substantial amount of intellectual property from third parties for its themed elements in rides, attractions and merchandising.
| Sky Segment |
Sky is one of Europe’s leading entertainment companies operating in seven territories, including three of the four largest pay television markets in Western Europe: the United Kingdom (“U.K.”), Italy and Germany. The majority of revenue is derived from Sky’s direct-to-consumer business, which has 24.0 million retail customers, and primarily involves the distribution of a wide array of video channels to both residential and business customers. Sky owns a diverse portfolio of pay television channels that offer entertainment, news, sports and movies, which are included in Sky’s subscription video services and are also licensed through various distribution partnerships to third-party video providers that reach an additional 3.9 million households. Sky also provides high-speed internet, voice and wireless phone services in select countries. Sky’s video, high-speed internet, voice and wireless phone services may be purchased individually or in bundles.
Video
Sky’s video services include a direct-to-home (“DTH”) video service delivered through a combination of both satellite transmission and broadband connection and marketed under the Sky brand in the U.K., Ireland, Italy, Germany and Austria. Sky also offers an over the top (“OTT”) video service providing video content over the internet which is marketed as a distinct brand in these countries, as well as in Spain and Switzerland.
Sky’s DTH video service is sold directly to customers in packages that include a diverse selection of Sky’s owned entertainment and sports channels, channels owned by third parties and local free-to-air public broadcasting channels. In addition to live-linear content, Sky’s platform also provides access to On Demand and current and prior season libraries for certain television shows. Sky’s service offerings are tailored by country, with separate packages offered in each market. Basic packages include up to approximately 98 pay television channels in the U.K. and Ireland, approximately 72 channels in Italy, and approximately 28 channels in Germany and Austria. Specialty tiers for children’s, sports, movie and HD programming are available for additional fees. Sky’s services also have pay-per-view programming for certain live sporting events and allow customers, as well as those without a subscription, to buy or rent programming for a fee.
Sky’s DTH video service is primarily distributed to customers through a set-top box video platform, including through Sky Q, which is Sky’s next-generation video platform. Customers have the ability to record several shows at once, to download content and recordings to watch offline on compatible devices, and for Sky Q households, to pause programming in one room and continue
| 8 | Comcast 2019 Annual Report on Form 10-K |
watching in another. Sky Q customers are offered personalized content recommendations and the use of a voice activated remote control, as well as integrated access to content from other providers such as Netflix, Spotify, Vevo and YouTube.
Sky’s OTT video service offers packages for purchase ranging from daily, weekly or monthly access to entertainment, sports, movies and children’s programming. The entertainment package includes Sky’s owned entertainment channels and a broad range of On Demand programming series. The sports package provides access to Sky’s owned sports channels and the movie package includes access to a library of films, including 40 or more new films per month. The children’s package includes thousands of hours of child-friendly on demand programming.
Other than those who subscribe to Sky’s OTT video service, customers generally are required to subscribe for an initial contractual term of at least 1 year and may only discontinue service in accordance with the terms of their contracts. Subscription rates and related charges vary according to the services and features customers receive and the types of equipment they use, and customers are typically billed in advance on a monthly basis.
Television Channels
Sky’s owned entertainment channels include Sky One, Sky Arts and Sky Atlantic in the U.K. and Ireland; Sky Atlantic, Sky Uno and Sky Arte in Italy; and Sky Atlantic and Sky 1 in Germany and Austria. Sky also owns premium sports channels under the Sky Sports brand and premium movie channels under the Sky Cinema brand, including family and children’s movie channels. Sky also broadcasts several Sky branded free-to-air channels, including Sky News in the U.K. and Ireland, Sky TG24 in Italy and Sky Sport News in Germany.
Sky acquires the rights to programming for owned channels from third parties, in some cases on an exclusive basis. Sky has various contractual commitments for the licensing of rights to multiyear programming, primarily sports programming and exclusive entertainment programming. Our most significant sports programming commitments include the U.K. broadcast rights for English Premier League soccer games through 2022; German broadcast rights to Bundesliga and Union des Associations Européennes de Football Champions League (“UCL”) through 2021; and Italian broadcast rights to UCL and Lega Nazionale Professionisti Serie A through 2021. Our most significant entertainment programming commitments include exclusive rights with HBO, Showtime, Warner Bros., NBCUniversal and The Walt Disney Company (“Disney”). Sky is also increasingly creating and investing in original scripted content that is broadcast across all of its territories and sold to other markets and we anticipate that our Sky studio production operations will also produce content for and license content to Peacock.
In addition to including owned channels as part of its video services, Sky distributes some of its owned channels on third-party platforms through both wholesale arrangements and arrangements with partners who distribute Sky’s owned channels as agents to their respective customer bases. Additionally, Sky licenses owned and acquired programming to third-party video providers.
Advertising
Sky sells advertising and sponsorships across its owned television channels and where it represents the sales efforts of third-party channels. Sky also sells targeted advertising and generates revenue from online and mobile advertising and advertising across its On Demand services.
Other Services
Sky offers high-speed internet and voice services in the U.K. and Ireland. Sky offers fiber-to-the-cabinet, standard copper digital subscriber line (“DSL”) broadband and fiber-to-the-home (“FTTH”) services, with download speeds up to 150 megabits per second in the U.K. and up to 1 Gbps in Ireland. In the U.K., Sky uses a combination of its own core fiber network and wholesaling arrangements over third-party telecommunication providers’ networks as the core network and also accesses the “last mile” network from third-party network operators for a fee to provide its services to customers. In Italy, Sky offers video service with high-speed internet and phone services through co-marketing agreements with several Italian broadband and telecommunications providers, and plans to launch FTTH services using Open Fiber to provide high-speed internet access and voice services in 2020. Sky offers wireless phone services to customers in the U.K. using a combination of its own core fiber network and an arrangement to access network assets from Telefónica.
Technology and Sources of Supply
For a majority of customers, Sky’s DTH video platform is delivered via one-way digital satellite transmission for the distribution of linear television channels, augmented by a set-top box with local DVR storage and high speed two-way broadband connectivity to provide access to a broad range of On Demand and other services. The Sky platform also incorporates Wi-Fi connectivity for in-home distribution enabling wireless multi-room consumption, and Sky has also developed a range of back-end and client software applications that provide customers with access to its content across multiple third-party devices and On Demand in and out of the home. Sky’s OTT video service is delivered via the internet.
| Comcast 2019 Annual Report on Form 10-K | 9 |
Sky relies on various telecommunications providers to deliver video, high-speed internet, voice and wireless phone services to its customers. For example, Sky relies on satellites leased from third parties to provide most of its video services. In addition, pursuant to the current regulatory regime in the U.K. and Italy, Sky is able to access networks owned by third-party telecommunication providers for a fee to provide its high-speed internet and voice services in most cases, on regulated terms.
To offer video services, in addition to its owned channels, Sky licenses programming from third-party programming providers that operate television channels. Sky attempts to secure long-term programming distribution agreements with these programming providers. The fees associated with these programming distribution agreements are generally based on the number of customers who are able to watch the programming and the platforms on which Sky provides the content. Sky seeks to include in distribution agreements the rights to offer such programming through multiple delivery platforms, such as through On Demand services, mobile apps and streaming services.
Customer and Home Services
Sky’s customer service operations are increasingly a digital first offering. The home service group performs various tasks, including installing, servicing and performing upgrades of customer premise equipment.
Sales and Marketing
Sky offers direct-to-consumer services to retail customers through customer service call centers, websites, telemarketing, a limited number of retail outlets, as well as through advertising via direct mail, television and the internet.
| Corporate and Other |
Our other business interests consist primarily of the operations of Comcast Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center arena in Philadelphia, Pennsylvania, and other business initiatives, such as the development of Peacock.
Competition
All of our businesses operate in intensely competitive, consumer-driven and rapidly changing environments and compete with a growing number of companies that provide a broad range of communications products and services, and entertainment, news and information content to consumers. Technological changes are further intensifying and complicating the competitive landscape and challenging existing business models. In particular, consumers are increasingly turning to online sources for viewing and purchasing content, which has and likely will continue to reduce the number of our video customers and subscribers to our cable networks even as it makes high-speed internet services more important to consumers. In addition, the increasing number of entertainment choices available to consumers has intensified audience fragmentation and disaggregated the way that content traditionally has been viewed by consumers. This increase has caused and likely will continue to cause audience ratings declines at our programming channels.
| Cable Communications Segment |
Competition for Cable Communications’ services consists primarily of phone companies with fiber-based networks and direct broadcast satellite (“DBS”) providers that typically offer features, pricing and packaging for services comparable to ours.
High-Speed Internet
Cable Communications competes with a number of companies offering internet services, including:
| • | wireline phone companies and other providers of wireline internet service |
| • | wireless phone companies and other providers of wireless internet service |
| • | municipal broadband networks and power companies |
| • | satellite broadband providers |
Phone companies such as AT&T, CenturyLink, Frontier and Verizon have built and are continuing to build fiber-based network infrastructure farther into their networks, which allows them to provide data transmission speeds that exceed those that can be provided with traditional DSL technology, and are offering these higher-speed services in many of our service areas. Certain companies that offer DSL service have increased data transmission speeds, lowered prices or created bundled services to compete with our high-speed internet services.
| 10 | Comcast 2019 Annual Report on Form 10-K |
Certain other companies have launched FTTH networks that provide high-speed internet services in a limited number of areas in which we operate, and certain municipalities in our service areas are also building fiber-based networks.
Various wireless companies are offering internet services using a variety of network types, including 3G and 4G, and recently 5G which is currently available in limited locations, wireless broadband services and Wi-Fi networks. These networks work with devices such as smartphones, laptops, tablets and mobile and fixed wireless routers, as well as wireless data cards. A growing number of commercial venues, such as retail malls, restaurants and airports, also offer Wi-Fi service. Numerous local governments are also considering or actively pursuing publicly subsidized Wi-Fi and other internet access networks. The availability of these wireless offerings could negatively impact the demand for our high-speed internet services.
Video
Cable Communications competes with a number of different sources in the United States that provide news, sports, information and entertainment programming to consumers, including:
| • | DBS providers, including AT&T’s DIRECTV and DISH Network, that transmit satellite signals to substantially all U.S. households to provide video programming and other information similar to our video services |
| • | phone companies, including AT&T and Verizon, that have built and continue to build fiber-based networks that provide services similar to ours, which overlap a substantial portion of our service areas, and that in some cases provide bundled offerings that include wireless phone services |
| • | OTT service providers including: |
| ◦ | virtual multichannel video providers who offer streaming services for linear programming that generally involve smaller packages of programming networks at prices lower than our traditional video service package offerings |
| ◦ | subscription video on demand services, such as those offered by Amazon, Apple, Disney, Hulu and Netflix, that offer online services and devices that enable internet streaming and downloading of movies, television shows and other video programming |
| ◦ | traditional television and film programmers, networks and media companies that provide content directly to consumers |
| • | other providers that build and operate wireline communications systems in the same communities that we serve, including those operating as franchised cable operators |
| • | satellite master antenna television systems that offer to their subscribers both improved reception of local broadcast television stations and much of the programming offered by our cable systems and generally serve multiple dwelling units (“MDUs”), office complexes and residential developments |
| • | other companies, such as local broadcast television stations, that provide multiple channels of free over-the-air programming, as well as video rental services and home entertainment and gaming products |
Many of these competitors also have significant financial resources and have further intensified competition through mergers and acquisitions.
Voice
Cable Communications competes with wireline and wireless phone companies, including incumbent local exchange carriers (“ILECs”) and competitive local exchange carriers (“CLECs”), and other internet-based and VoIP service providers. Certain phone companies, such as the ILECs AT&T and Verizon, have longstanding customer relationships, and extensive existing facilities and network rights-of-way. A few CLECs also have existing local networks and significant financial resources. In addition, we are increasingly competing with other phone service providers as customers replace traditional wireline phone services with wireless and internet-based phone services, such as Skype.
Wireless
Cable Communications competes with national wireless phone service providers in the United States, including AT&T and Verizon, which offer wireless service on both a standalone basis or along with other services as bundled offerings, as well as regional providers of wireless communications services.
| Comcast 2019 Annual Report on Form 10-K | 11 |
Business Services
Cable Communications primarily competes with a variety of phone companies, including ILECs and CLECs and wide area network managed service providers. These companies either operate their own network infrastructure or use all or part of another carrier’s network. We also compete with satellite operators who offer video services to businesses and VoIP companies that target businesses of all sizes. Our video monitoring services compete with companies that provide video surveillance services that use both traditional and cloud-based/digital solutions.
| NBCUniversal Segments |
Cable Networks and Broadcast Television
NBCUniversal’s cable networks, broadcast networks and owned local broadcast television stations compete for viewers’ attention and audience share with all forms of programming provided to viewers, including cable, broadcast and premium networks; OTT service providers; local broadcast television stations; home entertainment products; pay-per-view and video on demand services; online activities, such as social networking and viewing user-generated content; gaming products; and other forms of entertainment, news and information.
NBCUniversal’s cable networks, broadcast networks and owned local broadcast television stations compete for the acquisition of programming and for on-air and creative talent with other cable and broadcast networks, OTT service providers, and local television stations. The market for programming is very competitive, particularly for sports programming, where the cost for such programming is significant.
NBCUniversal’s cable networks compete with other cable networks and programming providers for carriage of their programming by multichannel video providers and OTT service providers. Our broadcast networks compete with the other broadcast networks in markets across the United States to secure affiliations with independently owned television stations, which are necessary to ensure the effective distribution of broadcast network programming to a nationwide audience.
In addition, NBCUniversal’s cable television and broadcast television studio production operations compete with other production companies and creators of content for the acquisition of story properties, for creative, performing and technical personnel, and for distribution of, and consumer interest in, their content.
Filmed Entertainment
Filmed Entertainment competes for audiences for films and other entertainment content with other major studios and independent film producers, as well as with alternative forms of entertainment. The competitive position of Filmed Entertainment primarily depends on the number of films produced, their distribution and marketing success, and consumer response. Filmed Entertainment also competes to obtain creative, performing and technical talent, including writers, actors, directors and producers, as well as scripts for films. We also compete with the other major studios and other producers of entertainment content for the exhibition of films in theaters and the distribution of films on premium networks, and with OTT service providers.
Theme Parks
Theme Parks competes with other multi-park entertainment companies as well as other providers of entertainment, lodging, tourism and recreational activities. To help maintain the competitiveness of our theme parks, we have invested and continue to invest significant amounts in existing and new theme park attractions, hotels and infrastructure, including the new theme parks in Beijing, China and Orlando, Florida.
| Sky Segment |
Sky competes with a broad range of companies engaged in media, entertainment and communications services in Europe, including cable operators, providers of both paid-for and free-to-air programming, service providers making use of new fiber optic networks, other satellite television providers, digital terrestrial television providers, telecommunications providers, other internet service providers, content aggregators, home entertainment products companies, companies developing new technologies and devices, and other suppliers and providers of news, information, sports and entertainment that deliver streaming, downloading and other online video services. Sky’s competitive position may be negatively impacted by an increase in the capacity of, or developments in, the means of delivery competitors use to provide their services as well as lowered prices, product innovations, new technologies or different value creation approaches. Sky also competes with organizations that are publicly funded, in whole or in part, to fulfill a public service broadcasting mandate.
Sky’s owned channels compete for the acquisition of programming content with a wide range of providers, particularly for sports programming, where the cost for such programming is significant.
| 12 | Comcast 2019 Annual Report on Form 10-K |
| Advertising |
Cable Communications, Cable Networks, Broadcast Television and Sky compete for the sale of advertising with other television networks and stations, as well as with all other advertising platforms, such as digital, radio and print media. The willingness of advertisers to purchase advertising from us may be adversely affected by lower audience ratings at the related networks, stations or channels. Declines in audience ratings can be caused by increased competition for the leisure time of viewers and by audience fragmentation resulting from the increasing number of entertainment choices available, including content from OTT service providers, online media and other digital sources. In addition, advertising revenue is adversely affected by the growing use of technologies, such as DVRs and video on demand services, which give consumers greater flexibility to watch programming on a time-delayed or on-demand basis or to fast-forward or skip advertisements within programming.
Seasonality and Cyclicality
Each of our businesses is subject to seasonal and cyclical variations. Cable Communications’ results are impacted by the seasonal nature of residential customers receiving our services in college and vacation markets. This generally results in fewer net customer relationship additions in the second quarter of each year.
Revenue and operating costs and expenses (comprised of total costs and expenses, excluding depreciation and amortization expense and other operating gains) are cyclical as a result of our periodic broadcasts of major sporting events, such as the Olympic Games, which affect Cable Networks and Broadcast Television, and the Super Bowl, which affects Broadcast Television. In particular, advertising revenue increases due to increased demand for advertising time for these events and distribution revenue increases in the period of broadcasts of the Olympic Games. Operating costs and expenses also increase as a result of our production costs for these broadcasts and the amortization of the related rights fees.
Revenue in Cable Communications, Cable Networks, Broadcast Television and Sky is also subject to cyclical advertising patterns and changes in viewership levels. Advertising revenue in the U.S. is generally higher in the second and fourth quarters of each year and in even-numbered years due to increases in consumer advertising in the spring and in the period leading up to and including the holiday season and advertising related to candidates running for political office and issue-oriented advertising, respectively. Revenue in Cable Networks and Broadcast Television fluctuates depending on the timing of when our programming is aired, which typically results in higher advertising revenue in the second and fourth quarters of each year. Revenue at Sky has seasonally higher audience levels in winter months and increased competition during major sporting events where public service broadcasters lease the rights, such as the Olympic Games and the FIFA World CupTM.
Revenue in Filmed Entertainment fluctuates due to the timing, nature and number of films released in movie theaters, on DVDs, and through various other distribution platforms. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods. As a result, revenue tends to be seasonal, with increases experienced each year during the summer months and around the holiday season. Content licensing revenue in Cable Networks, Broadcast Television and Filmed Entertainment also fluctuates due to the timing of when our content is made available to licensees.
Revenue in Theme Parks fluctuates with changes in theme park attendance that result from the seasonal nature of vacation travel and weather variations, local entertainment offerings and the opening of new attractions, as well as with changes in currency exchange rates. Theme Parks generally experiences peak attendance during the spring holiday period, the summer months when schools are closed and the Christmas holiday season.
Sky results are impacted by the seasonal nature of residential customers receiving our DTH and OTT video services, including the start of the new soccer seasons and the Christmas holiday. This generally results in greater net customer relationship additions and higher subscriber acquisition costs in the second half of each year due to higher marketing expenses.
Exclusive sports rights, such as local European and UCL soccer, Formula 1, and English cricket, play a key role within Sky’s wider content strategy. In Europe, broadcasting rights for major sports are usually tendered through a competitive auction process, with the winning bidder or bidders acquiring rights over a three to five-year period. This creates some level of cyclicality for Sky, although the staggered timing of major sports rights auctions usually gives Sky time to react to any material changes in the competitive dynamics of the prevailing market. Certain of Sky’s significant sports rights agreements require payments at the start of each season, resulting in increases in sports rights payments in the third and fourth quarter of each year.
| Comcast 2019 Annual Report on Form 10-K | 13 |
Legislation and Regulation
The Communications Act of 1934, as amended (the “Communications Act”), and Federal Communications Commission (“FCC”) regulations and policies affect significant aspects of our businesses that operate in the United States. These businesses are also subject to other regulation by federal, state and local authorities and to agreements we enter into with local cable franchising authorities. In addition, our international businesses are subject to the laws and the jurisdiction of the foreign regulatory authorities where they operate.
Legislators and regulators at all levels of government frequently consider changing, and sometimes do change, existing statutes, rules or regulations, or interpretations of existing statutes, rules or regulations, or prescribe new ones, any of which may significantly affect our businesses. These legislators and regulators have been active in considering rulemakings and legislation, at times looking to adopt regulatory approaches from different countries that may be more burdensome, and they, along with some state attorneys general and foreign governmental authorities, have also been active in conducting inquiries and reviews, regarding our services. In addition, regulators and the courts could adopt new interpretations of existing competition laws as new competition law theories emerge. Any future legislative, judicial, regulatory or administrative actions may increase our costs or impose additional restrictions on our businesses, some of which may be significant. The U.S. Congress may consider proposals to address communications issues, including whether it should rewrite the entire Communications Act to account for changes in the communications marketplace, whether it should enact new, permanent open internet requirements, and whether it should fund new broadband infrastructure. We are unable to predict the outcome or effects of any of these potential actions or any other legislative or regulatory proposals on our businesses.
The following paragraphs summarize the significant legal and regulatory requirements affecting our businesses, although reference should be made to the Communications Act, FCC regulations and other legislation and regulations for further information.
| Cable Communications Segment |
High-Speed Internet
We provide high-speed internet services to our customers. Many of these services are subject to a number of regulatory obligations or commitments described below. As an internet service provider (“ISP”), we are also subject to a requirement to implement certain network capabilities to assist law enforcement in conducting surveillance of persons suspected of criminal activity. From time to time, the FCC considers imposing new regulatory obligations on ISPs. In addition, states and localities may consider new broadband-related regulations, including those regarding government-owned broadband networks. New broadband regulations, if adopted, may have adverse effects on our businesses.
Open Internet Regulations
In 2017, the FCC reversed its prior classification of broadband internet access service as a Title II telecommunications service under the Communications Act and classified it as an “information service” under Title I. In addition, it eliminated its prior rules prohibiting ISPs from blocking access to lawful content; impairing or degrading lawful internet traffic on the basis of content, applications or services (“throttling”); prioritizing certain internet traffic in exchange for consideration (“paid prioritization”); and generally prohibiting ISPs from unreasonably interfering with or unreasonably disadvantaging consumers’ ability to access and use the lawful internet content, applications, services or devices of their choosing or unreasonably interfering with or disadvantaging edge providers’ ability to make lawful content, applications, services or devices available to consumers (“general conduct”). The FCC stated that jurisdiction to regulate ISP conduct would rest at the Federal Trade Commission (“FTC”). In addition, the FCC revised the transparency rule to add a requirement that ISPs disclose any blocking and throttling practices, and any paid or affiliated prioritization practices associated with their broadband offerings. We have disclosed that we do not block, throttle, or engage in affiliated or paid prioritization, and have committed not to block, throttle, or discriminate against lawful content. The FTC has authority to enforce these public commitments, and the FCC has authority to enforce compliance with its transparency rule.
The FCC’s 2017 decision was challenged, and in 2019, the U.S. Court of Appeals for the District of Columbia largely upheld the FCC’s decision, including the classification of broadband as a Title I information service and repeal of its prior rules. However, it vacated the FCC’s express preemption of all state Open Internet laws, but noted that state laws may nevertheless be preempted on a case-by-case basis if those regulations conflict with federal law or policy. Parties have sought further review of the court’s opinion.
Several states have passed or introduced legislation, or have adopted executive orders, that impose Open Internet requirements in a variety of ways, and new state legislation may be introduced and adopted in the future. Certain of these state initiatives have been challenged in court, and additional challenges may be filed. Such attempts by the states to regulate have the potential to create a patchwork of differing and/or conflicting state regulations. Congress may also consider legislation addressing these regulations
| 14 | Comcast 2019 Annual Report on Form 10-K |
and the regulatory framework for broadband internet access services. We cannot predict whether or how the rules might be changed, the impact of potential new legislation or the outcome of any litigation.
Broadband Deployment/Infrastructure Initiatives
In 2018, the FCC adopted rules aimed at removing barriers to the deployment of broadband infrastructure, including the preemption of certain state and local laws or regulations that may unreasonably impede the deployment of wireless broadband networks. These orders are being challenged in federal court, and we cannot predict the outcome of the litigation. If the orders are upheld, some of these reforms may create regulatory imbalances that favor wireless services over wireline broadband services like our own. The FCC is currently considering additional measures that could result in further preemption of state and local laws or regulations as part of its broader efforts to accelerate wireless broadband infrastructure deployment. We cannot predict whether or how any FCC rules might be changed, how state or local laws or regulations may be impacted, or how such changes may affect our business.
Video
Program Carriage
FCC regulations prohibit us from unreasonably restraining the ability of an unaffiliated video programming network to compete fairly by discriminating against the network on the basis of its non-affiliation in the selection, terms or conditions for its carriage. In addition, cable operators and other multichannel video programming distributors (“MVPDs”) in the United States are prohibited from requiring as a condition of carriage a financial interest in, or exclusive distribution rights for, a video programming network. We have been involved in program carriage disputes at the FCC, and increasingly in the courts, and may be subject to new complaints in the future.
Must-Carry/Retransmission Consent
Cable operators are required to carry, without compensation, programming transmitted by most local commercial and noncommercial broadcast television stations. As an alternative to this “must-carry” requirement, local broadcast television stations may choose to negotiate with the cable operator for “retransmission consent,” under which the station gives up its must-carry rights and instead seeks to negotiate a carriage agreement with the cable operator, which frequently will involve payments to the station. We currently pay certain local broadcast television stations in exchange for their required consent for the retransmission of the stations’ broadcast programming to our video services customers and expect to continue to be subject to demands for increased payments and other concessions from local broadcast television stations. Failure to reach a retransmission consent agreement with a broadcaster could result in the loss of popular programming on our video services. For information on must-carry and retransmission consent issues relating to our broadcast television business, see “NBCUniversal Segments - Broadcast Television” below and refer to the “Must-Carry/Retransmission Consent” discussion within that section.
Pricing and Packaging
While the vast majority of our video services, including equipment and installation fees, are no longer subject to rate regulation by the FCC, certain state entities monitor and challenge the marketing and advertising of our services, and some have attempted to regulate the service packages we offer. We cannot predict the outcome of any current litigation with state entities or whether other states may pursue similar actions.
Franchising
Cable operators generally operate their cable systems under nonexclusive franchises granted by local or state franchising authorities. While the terms and conditions of franchises vary materially from jurisdiction to jurisdiction, franchises typically last for a fixed term, obligate the franchisee to pay franchise fees and meet service quality, customer service and other requirements, and are terminable if the franchisee fails to comply with material provisions. Franchising authorities also may require adequate channel capacity, facilities and financial support for public, educational and governmental access programming, and other in-kind contributions. The Communications Act also contains provisions governing the franchising process, including renewal procedures designed to protect incumbent franchisees against arbitrary denials of renewal, including unreasonable renewal conditions. We believe that our franchise renewal prospects are generally favorable but cannot guarantee the future renewal of any individual franchise. The FCC adopted an order in 2019 that prohibits state and local authorities from imposing duplicative franchise and/or fee requirements on the provision of broadband and other non-cable services over franchised cable systems, and ruling that in-kind contributions are treated as franchise fees subject to the statutory cap on franchise fees of 5% of cable service revenue unless those contributions are expressly excluded by statute. The order has been appealed, and we cannot predict the outcome of this litigation.
Voice
We provide voice services using VoIP technology. The FCC has adopted a number of regulations for providers of nontraditional voice services such as ours, including regulations relating to privacy of customer proprietary network information, local number portability duties and benefits, disability access, E911, law enforcement assistance, outage reporting, Universal Service Fund
| Comcast 2019 Annual Report on Form 10-K | 15 |
contribution obligations, rural call completion, customer equipment back-up power, service discontinuance and certain regulatory filing requirements. The FCC has not yet ruled on whether VoIP services such as ours should be classified as an “information service” or a “telecommunications service” under the Communications Act. The classification determination is important because telecommunications services are regulated more extensively than information services. One federal court of appeals has held that VoIP is an information service and preempted state regulation of VoIP, but that ruling is limited to the seven states located in that circuit. State regulatory commissions and legislatures in other jurisdictions may continue to consider imposing regulatory requirements on our voice services as long as the regulatory classification of VoIP remains unsettled at the federal level.
Wireless
In 2017, we began offering a wireless voice and data service. We offer this service using our MVNO rights to provide the service over Verizon’s wireless network. MVNOs are subject to many of the same FCC regulations as facilities-based wireless carriers (e.g., E911 services, local number portability, etc.), as well as certain state or local regulations. The FCC or other regulatory authorities may adopt new or different regulations for MVNOs and/or mobile broadband providers in the future, which could adversely affect our wireless phone service offering or our business generally.
| NBCUniversal Segments |
Cable Networks
Program Access
The Communications Act and FCC regulations generally prevent cable networks affiliated with cable operators from favoring cable operators over competing MVPDs. The FCC and Congress have considered proposals that would require companies that own multiple cable networks to make each of their networks available individually when negotiating distribution agreements with MVPDs and potentially with online video distributors; Maine has enacted a law mandating retail a la carte distribution by cable operators that, if upheld by the courts, may have similar effects. We currently offer our cable networks both on a bundled basis and, when requested, individually. We have been involved in program access disputes at the FCC and may be subject to new complaints in the future.
Children’s Programming
Under federal regulations, the amount of commercial content that may be shown on cable networks, broadcast networks and broadcast television stations during programming originally produced and broadcast primarily for an audience of children 12 years of age and under is limited, and certain television station programming must serve the educational and informational needs of children 16 years of age and under.
Broadcast Television
Licensing
Local broadcast television stations may be operated only in accordance with a license issued by the FCC upon a finding that the grant of the license will serve the public interest, convenience and necessity. The FCC grants broadcast television station licenses for specific periods of time, which may be renewed with or without conditions. The FCC renewed all of our broadcast television station licenses without conditions during the last license renewal cycle; the next television license renewal cycle begins in 2020. Although our licenses have been renewed, there can be no assurance that we will always obtain renewal grants.
Ownership Restrictions
The Communications Act and FCC regulations impose certain limitations on local and national television ownership, as well as limits on foreign ownership in a broadcast television station. In addition, each of the four major broadcast television networks - ABC, CBS, Fox and NBC - is prohibited from being under common ownership or control with another of the four.
Must Carry/Retransmission Consent
Every three years, each commercial television station must elect for each cable system in its DMA either must carry or retransmission consent. A similar regulatory scheme applies to satellite providers. For the current three-year period, which commenced on January 1, 2018, all of our owned NBC broadcast television stations and our owned Telemundo broadcast television stations elected retransmission consent. The next three-year period will commence on January 1, 2021, with elections to be made by October 1, 2020.
Filmed Entertainment
Our filmed entertainment business is subject to “trade practice laws” in effect in 25 states and Puerto Rico relating to theatrical distribution of motion pictures. In countries outside the United States, a variety of existing or contemplated laws and regulations
| 16 | Comcast 2019 Annual Report on Form 10-K |
may affect our ability to distribute and license motion picture and television products, as well as consumer merchandise products. The ability of countries to deny market access or refuse national treatment to products originating outside their territories is regulated under various international agreements.
Theme Parks
Our theme parks are subject to various regulations in the United States and internationally, including laws and regulations regarding environmental protection, privacy and data protection, consumer product safety and theme park operations, such as health, sanitation, safety and fire standards, as well as liquor licenses.
| Sky Segment |
Sky is subject to regulation primarily under Austrian, German, Irish, Italian, U.K. and European Union (“EU”) law, including telecommunications and media-specific regulation described below, as well as regulation under generally applicable laws, such as competition, consumer protection, data protection and taxation. Sky is currently, and may be in the future, subject to proceedings or investigations from regulatory and antitrust authorities in the jurisdictions in which it operates. In addition, in connection with our acquisition of Sky, we have made certain legally binding commitments with respect to Sky’s operations, including for example, to maintain annual funding for Sky News in an amount no lower than Sky News’ 2017 fiscal year expenditures, as adjusted by inflation, until 2029.
Platform Services
In the U.K., Sky is required to ensure that agreements to provide its electronic program guide (“EPG”) and conditional access (“CA”) services to other programming providers are on fair, reasonable, and non-discriminatory terms, among other things, so that those providers’ content is available on Sky’s satellite platform via the EPG on Sky’s set-top boxes. Sky also has voluntarily committed to the U.K.’s communications regulator, the Office of Communications, or Ofcom, to provide access control services to third parties that enable them to provide interactive services. Sky is subject to similar EPG and CA obligations in Germany.
Television Channels
Sky holds a number of licenses and authorizations for its portfolio of pay TV channels. In the U.K., Sky is subject to various codes issued by Ofcom affecting the content and delivery of these channels. Sky also holds various nationwide broadcast licenses in Germany, Italy and Austria, and must comply with rules and regulations covering issues such as the acquisition and exploitation of sports rights, media concentration and plurality, television advertising, the protection of children, accessibility, airtime for commercials and teleshopping, sponsorship, and ensuring clear distinctions between program content and advertising.
High-Speed Internet and Voice
Sky provides broadband and voice services in the U.K. and Ireland pursuant to wholesale distribution agreements that third-party broadband and telecommunications companies either make available commercially or are required to make available under applicable laws in those jurisdictions. Material changes to these regulations could affect Sky’s business. Sky is also subject to EU open internet regulations, which prohibit the blocking, throttling, or discrimination of online content, applications, and services and require ISPs to disclose their traffic management, throughput limitations and other practices impacting quality of service in customer contracts.
| Other Areas of Regulation |
Intellectual Property
Copyright, trademark, unfair competition, patent, trade secret and other proprietary-rights laws of the United States and other countries help protect our intellectual property rights. In particular, unauthorized copying, distribution, and piracy of programming and films over the internet, through devices, software and websites, and through counterfeit DVDs, and other platforms, interfere with the market for copyrighted works and present challenges for NBCUniversal’s and Sky’s content businesses. We have actively engaged in the enforcement of our intellectual property rights and likely will continue to expend substantial resources to protect our content. Although many legal protections exist to combat such practices, the extent of copyright protection is ambiguous and the use of technological protections are controversial. Modifications to existing laws, a weakening of these protections or their enforcement, or a failure of existing laws, in the United States or internationally, to adapt to new technologies could have an adverse effect on our ability to license and sell our programming.
U.S. copyright laws also require that our video distribution business contribute a percentage of revenue to a federal copyright royalty pool in exchange for retransmitting copyrighted material in broadcast signals under a cable compulsory license and that we pay standard industry licensing fees for the public performance of music in the programs we create or distribute. The compulsory
| Comcast 2019 Annual Report on Form 10-K | 17 |
copyright license and the royalties we pay are subject to audits and possible regulatory and legislative changes that could impact the royalty fees we pay and our ability to retransmit broadcast signals over cable systems. In addition, the landscape for music licensing is constantly changing, and music fees we pay are subject to new fee demands and negotiations. We cannot predict how changes to the compulsory copyright license and music licensing will impact the fees that we pay.
Privacy and Data Security Regulation
Our businesses are subject to federal, state and other foreign laws and regulations that impose various restrictions and obligations related to privacy and the handling of consumers’ personal information. In the U.S., the Communications Act generally restricts cable operators’ nonconsensual collection and disclosure to third parties of cable customers’ personally identifiable information, except for rendering service, conducting legitimate business activities related to the service, and responding to legal requests. We are also subject to various state and federal regulations that provide privacy protections for customer proprietary network information related to our voice services.
The FTC generally exercises oversight of consumer privacy protections using its enforcement authority over unfair and deceptive acts or practices. We are also subject to stringent data security and data retention requirements that apply to website operators and online services directed to children 12 years of age and under, or that knowingly collect or post personal information from children 12 years of age and under.
In addition, certain states have enacted detailed laws establishing consumer privacy protections and data security requirements in their respective states. For example, the California Consumer Privacy Act (“CCPA”) gives California residents new rights to receive certain disclosures regarding the collection, use, and sharing of “Personal Information,” as well as rights to access, delete, and restrict the sale of certain personal information collected about them. The CCPA went into effect on January 1, 2020, and compliance with that law will increase the cost of providing our services in California. More generally, the FTC and state attorneys general regularly initiate efforts to update or enforce transparency requirements about the collection and use of consumer information, which may require ongoing review of new and rapidly evolving technologies and methods for delivering content and advertising to ensure that appropriate notice is given to consumers and consent is obtained where required. Additionally, all 50 states have security breach notification laws that generally require a business to give notice to consumers and government agencies when certain information has been disclosed to an unauthorized party due to a security breach.
Certain of our businesses are subject to the EU’s General Data Protection Regulation (“GDPR”), which broadly regulates the processing of personal data collected from individuals in the EU. GDPR, and the Member States’ legislation implementing the GDPR affect our ability to process certain personal data.
Privacy and data security legislation remained a priority issue in 2019. Attempts by state and local governments to regulate consumer privacy have the potential to create a patchwork of differing and/or conflicting state regulations. Additionally, there are pending federal legislative proposals that, if enacted, could create new consumer privacy protections or impose new requirements on entities that collect and use consumer personal information, including us. We cannot predict whether such legislation will be enacted at the federal or state level and, if so, the impact of any such laws on our business.
FCC 5G Spectrum Proceedings and Other Wireless Laws and Regulations
In multiple regulatory proceedings, the FCC has established or is in the process of evaluating and potentially modifying its rules to make available additional spectrum that will likely be used for new 5G services. Cable Communications and NBCUniversal use some of this spectrum to provide our services and there is a risk that certain proposed rule changes could affect our ability to use such spectrum and could disrupt certain operations. We cannot predict what rules or legislation, if any, will ultimately be adopted or how any such changes would affect our businesses.
State and Local Taxes
Some states and localities have imposed or are considering imposing, through both legislative and administrative channels, new or additional taxes or fees on, or limiting or eliminating incentives or credits earned or monetized by, the businesses operated by our Cable Communications and NBCUniversal segments, or imposing adverse methodologies by which taxes, fees, incentives or credits are computed, earned or monetized. These include combined reporting or other changes to general business taxes, central assessments for property tax and taxes and fees on the businesses operated or services provided by our Cable Communications and NBCUniversal segments. In some situations, DBS providers and other competitors that deliver their services over a high-speed internet connection do not face the same state tax and fee burdens. Congress has also considered, and may consider again, proposals to bar or limit states from imposing taxes on these DBS providers or other competitors that are equivalent to the taxes or fees that we pay. The Internet Tax Freedom Act (“ITFA”), which prohibits most states and localities from imposing sales and other taxes on our internet access charges, was made permanent by 2016 legislation; however, some jurisdictions may challenge the ITFA or the application of the ITFA to our business, or may assert that certain taxes akin to right-of-way fees are not preempted by the ITFA.
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U.K. Exit from the European Union
The telecommunications and media regulatory framework applicable to Sky and NBCUniversal’s businesses in the U.K. and the EU may be subject to greater uncertainty upon the U.K.’s withdrawal from the EU. We cannot predict the extent of any potential changes to the regulatory framework involving U.K. and EU regulation of telecommunications and media, or changes to certain mutual recognition arrangements for media and broadcasting.
Other Regulations
U.S. states and localities, and various regulatory authorities actively regulate other aspects of our businesses, including accessibility to our video and voice services and broadcast television programming for people with disabilities, customer service standards, inside wiring, cable equipment, pole attachments, universal service fees, public safety, telemarketing, leased access, indecency, loudness of commercial advertisements, advertising, political broadcasting, Emergency Alert System, equal employment opportunity and other employment-related laws, environmental-related matters, regulatory fees and technical standards relating to the operation of cable systems and television stations. In addition, our international businesses are subject to various international regulations, including those that cover television broadcasting, programming and advertising. We are occasionally subject to enforcement actions and investigations at the FCC and other federal, state and local agencies, as well as foreign governments and regulatory authorities, which can result in us having to pay fines or being subject to other sanctions.
Employees
As of December 31, 2019, we had approximately 190,000 full-time and part-time employees calculated on a full-time equivalent basis. Of these employees, approximately 88,000, 66,000 and 34,000 were associated with Cable Communications, NBCUniversal and Sky, respectively. We also use freelance and temporary employees in the normal course of our business.
Caution Concerning Forward-Looking Statements
The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. In this Annual Report on Form 10-K, we state our beliefs of future events and of our future financial performance. In some cases, you can identify these so-called “forward-looking statements” by words such as “may,” “will,” “should,” “expects,” “believes,” “estimates,” “potential,” or “continue,” or the negative of these words, and other comparable words. You should be aware that these statements are only our predictions. In evaluating these statements, you should consider various factors, including the risks and uncertainties listed in “Risk Factors” and in other reports we file with the SEC.
Additionally, we operate in a highly competitive, consumer-driven and rapidly changing environment. This environment is affected by government regulation; economic, strategic, political and social conditions; consumer response to new and existing products and services; technological developments; and, particularly in view of new technologies, the ability to develop and protect intellectual property rights. Our actual results could differ materially from our forward-looking statements as a result of any of such factors, which could adversely affect our businesses, results of operations or financial condition. We undertake no obligation to update any forward-looking statements.
| Comcast 2019 Annual Report on Form 10-K | 19 |
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