FCC Approves Adelphia Deal By John Eggerton Broadcasting & Cable
7/13/2006 2:05:00 PM http://www.broadcastingcable.com/article/CA6352882.html As expected, the FCC Thursday approved--by a 4-1 vote--Comcast and Time Warner's $17.6 billion purchase of bankrupt Adelphia Communications, with the two dividing up the systems. Democrat Jonathan Adelstein joined the Republicans in voting for the deal, leaving only Democrat Michael Copps opposing. Adelstein did dissent in part, saying the commission should have imposed network neutrality conditions, a deficit that also troubled Copps. Adelstein said, on balance, that the more compelling interest was to get Adelphia out of bankruptcy and improve service to its customers. It has been "rotting on the vine," in the interim, he said. The merger, said the commission, serves the public interest, complies with all rules and statues and whatever public interest harms there might be are outweighed by public interest benefits, including principally system upgrades that will bring high speed voice and data, HDTV and video on demand to Adelphia's systems that are upgraded, and resolving the Adelphia bankruptcy. The key conditions the FCC did put on the merger had to do with regional sports networks. Comcast and Time Warner must put disputes over pricing or access to its regional sports networks (RSNs) to arbitration. The companies also cannot deny access to its sports networks to other multichannel programming providers, with, as expected, a carve-out for Philadelphia. The decision does close the terrestrial loophole for regional sports networks, which means that program access rules will now apply to landline-delivered RSNs. Previously, they only applied to satellite-delivered programming. "The conditions apply regardless of the means of delivery. Terrestrial means are included." Comcast and Mid Atlantic Sports Network (MASN) will now have to submit their dispute to binding arbitration, which means likely resolving a fight that has kept the Washington Nationals baseball games out of many Washington homes. That was an issue that many on Capitol Hill had pushed the FCC to address. New Commissioner Robert McDowell was given credit for working on that issue. There is not guaranteed outcome to that arbitration, however, only a guarantee of arbitration, which is a two-step process. First, the arbitrator must decide whether there was an unlawfull process, if so, then in a second step, the two parties make their best carriage deal, and the arbitrator picks one. If the arbitrator found no illegality in the impasse, however, no final arbitration would be triggered. McDowell had some strong words for the FCC, saying it had been slow to resolve and address program carriage issues. He said he wholeheartedly supports launching a review of program access rules, which the FCC also agreed to do. "The MASN complaint has been left to rot in some small crypt in this building," he said. McDowell said it had become clear to him that complaints wait too long for action, attributing it to an "indolent bureaucracy's failure to obey simple congressional mandates." To that end, he praised the decision to put a shot clock on resolving those complaints. The conditions on the merger sunset after six years. Competitors, congressmen and media reform activists had all called for some conditions on the merger, which allows the top two cable MSO's, Comcast and Time Warner, respectively, to get even bigger. Chairman Kevin Martin had telegraphed his intention to put some programming access conditions on the deal, particularly after input from many complaining of the access to home team sports broadcasts that Comcast controls. Copps was unhappy that there were not tougher program access and other conditions, saying that "while rescuing Adelphia is laudable, the antcompetitive combination of asssets is not." Copps said nothing in the order "rebuts the truth that less competition means higher prices." It is big media getting bigger, he said, without sufficient protections from dominating programming and potentially broadband access as well. Martin said he did not believe that network neutrality conditions were called for absent any showing of present harm, but said the FCC would stand by its four network neutrality principles and monitor for potential harms.. Copps also took issue with the regional sports remedies. He said arbigration was a positive step, but oppposed the carve-out for Philadelpia. Time Warner Cable and Comcast will divvy up Adelphia systems serving 5.2 million subscribers scattered across 31 states. The two cable operators will further swap systems from their existing portfolios to create stronger geographic clusters. The deal will allow Time Warner to emerge as the largest cable operator in the Los Angeles market, which has been the most fragmented major market in the country. The deal will also allow Comcast to fulfill its promise to regulators to unwind its 21% ownership of Time Warner Cable, something inherited in a past deal. Antitrust regulators frowned on such a significant link between the two largest cable operators—a legacy of the AT&T deal. As part of the various system swaps, Comcast will give Time Warner that stock back. Friedman Billings Ramsey analyst Brian Coyne said two weeks ago that the analysts sees major system upgrades, and cable tech fortunes, spurred by the decision to allow Comcast and Time Warner to divvy up Adelphia's almost 5 million basic subs. The FCC had pledged to move on its decision on the sale of Adelphia by the Aug 31 deadline for the deal to close--pushed back from an initial Aug. 31 deadline. At the end of the day, Time Warner will grow from 10.9 million subscribers to 14.4 million. FCC Chairman Kevin Martin had wanted to move earlier on the merger approval, but was deadlocked with a 2-2 commission until recently, with the two Demcratic commissioners wanting stronger conditions put on the merger. Utlimately, the conditions were sufficient to win over Adelstein to the majority. In addition, Adelphia has been in protracted bankruptcy proceedings that affected the timing of the approval as well. Coyne noted that Comcast alone plans to spend $150 million to upgrade the Adelphia systems and Time Warner potentially more since it is getting more systems out of the deal. In fact, Commissioner Adelstein said Thursday that the two had commited to $1.6 billion in upgrades between them. ================================================= George Antunes Voice (713) 743-3923 Associate Professor Fax (713) 743-3927 Political Science Internet: antunes at uh dot edu University of Houston Houston, TX 77204-3011 Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
