News

FCC Approves Adelphia Breakup

7/14/2006 8:00 PM Eastern

Washington— The Federal Communications Commission voted Thursday to approve the $16.9 billion acquisition of Adelphia Communications Corp. by Time Warner Inc. and Comcast Corp., removing the last regulatory hurdle facing the deal.

Approval came, however, with several sports programming conditions. One would bar Time Warner and Comcast from relying on non-satellite distribution of an affiliated regional sports network in order to withhold it legally from pay-TV rivals. But the FCC preserved the so-called terrestrial loophole for only Comcast’s Philadelphia sports network, which means the channel will continue to be off-limits to DirecTV Inc. and EchoStar Communications Corp.

FCC chairman Kevin Martin joined Republicans Deborah Taylor Tate and Robert McDowell to produce the necessary three votes for approval. FCC Democrat Michael Copps voted against it.

FCC Democrat Jonathan Adelstein split his vote. Nevertheless, Martin aides insisted that the merger vote was 4-1.

FCC approval culminated one of the longest cable-system transactions in recent FCC history, taking nearly 404 days. In contrast, the Federal Trade Commission approved the deal in late January without conditions.

Copps attacked the deal as producing unacceptable consolidation in the cable industry. He said the absorption of bankrupt Adelphia’s 5 million subscribers would produce less competition and therefore higher cable bills.

“This decision is about Big Media getting bigger, with consumers left holding the bag,” he said.

Meanwhile, the FCC refused to force Comcast or Time Warner to offer programming a la carte, even on a trial basis, or to bolster their family programming tiers by adding popular sports channels, such as ESPN.

Lastly, the agency declined to mandate compliance with its Internet network neutrality principles, even though the agency applied them to the mergers between SBC Communications Inc. and AT&T Corp. and between Verizon and MCI Corp.

Final Conditions
The FCC’s conditions last for six years and center on sports programming.
Pay-TV competitors may take Comcast and Time Warner to arbitration to settle disputes over the price of regional sports networks controlled by either cable company.
Such sports networks unaffiliated with Comcast or Time Warner may seek arbitration to obtain carriage and establish license fee terms. This is an effort to resolve Comcast’s refusal to carry the Mid-Atlantic Sports Network, the pay-TV home of the Washington Nationals baseball team.
Comcast and Time Warner are barred from using terrestrial delivery of a regional sports network to maintain legal exclusivity. Comcast SportsNet Philadelphia alone is exempt, meaning Comcast may continue to withhold it from DirecTV Inc. and EchoStar Communications Corp. But Comcast cannot withhold it from pay-TV distributors with existing contracts, such as RCN Corp. Verizon Communications Inc. may not demand access to the channel.
Entities that rent channel capacity from cable operators may seek rate arbitration under an FCC formula for leased access channels.

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