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Comcast Enters Home Stretch Kept Under Wraps at FCC

11/03/2002 7:00 PM Eastern

Comcast Corp. president Brian Roberts last week met with top Federal Communications Commission officials in an effort to keep confidential the terms of a broadband-carriage deal that AOL Time Warner Inc. reached in August with his MSO and AT&T Corp.

Upset that AT&T and Comcast — partners in what would be the largest cable merger ever — are adamantly opposed to divulging the contents of the deal to the regulator, Internet-service providers and consumer groups are pressuring the FCC to take action.

An FCC source would not say whether the agency would require AT&T and Comcast — which is in the process of combining with the telco's AT&T Broadband unit to form AT&T Comcast Corp., a 22-million-subscriber juggernaut — to cough up the agreement.

"We have got to decide," an FCC source said. "We are looking at it."

The FCC's self-imposed 180-day deadline to complete its review of the transaction expires on Nov. 5.

According to published reports, AOL Time Warner's America Online Internet-service provider unit agreed to pay AT&T Comcast $38 a month for each broadband subscriber it acquired on the company's cable systems.

The $38 month wholesale price tag — viewed by some as preposterously rich in today's broadband-access market — was either corporate spin or a clear indication that AT&T Comcast will have the market power to force the nation's most powerful ISP to close a deal on less than optimal terms.

Roberts, who would become the new cable company's CEO, visited the FCC on Oct. 29 for meetings with commissioners Kathleen Abernathy and Kevin Martin, Media Bureau chief Kenneth Ferree and other staff members, according to FCC records. Roberts urged agency officials to complete action on the merger as quickly as possible to allow the new company to finish upgrading AT&T Broadband cable lines.

Internet provider EarthLink Inc. and various consumer groups are demanding that the FCC require AT&T and Comcast to surrender the AOL agreement to the agency, and allow eligible parties to review it in confidential procedures.

"What is mind-boggling is, what's the big deal? What is in there that they are so desperate not to have seen?" said EarthLink outside counsel Earl Comstock.

Roberts calls Powell

Last Monday, Roberts spoke by phone with FCC chairman Michael Powell and lobbied him to reject those disclosure requests. He said the AOL carriage deal was irrelevant to the FCC's merger review, and expressed fear that the "highly proprietary, confidential nature" of the agreement would be compromised by the agency, FCC records show.

"Any such breach of confidentiality could be commercially harmful not only to [AT&T Comcast], but also to AOL Time Warner," Roberts told the FCC officials.

AT&T submitted a letter last week which claimed that EarthLink — as both a dial-up and broadband competitor to AOL — was looking for a commercial advantage by gaining access to the AOL Broadband carriage deal.

AT&T said the FCC should note "EarthLink's zeal" to see the contract as "particularly troubling," given EarthLink's status as a direct competitor.

Leaks feared

Lawyers and others who violate the FCC's nondisclosure rules can face harsh punishment, including losing the right to advocate for clients at the agency. According to one source, Roberts drew the line on the AOL deal because some parties have failed to keep records submitted by the cable companies confidential.

Andrew Jay Schwartzman — president of the Media Access Project, a group pressing to see terms of the AOL deal — took umbrage at the suggestion he would fail to obey FCC rules designed to block the unauthorized disclosure of confidential documents.

"It is unfortunate for Brian Roberts to presume that the commission won't maintain security of the documents," Schwartzman said. "If he doesn't trust us to adhere to such representations, I'd like him to say it to us directly."

Streaming angle

Cable critics claimed Roberts doesn't want the FCC to see that AOL Time Warner potentially agreed not to use its access to AT&T Comcast subscribers to provide Internet-based video streaming services that could compete with traditional cable programming fare purchased by the MSO's cable subscribers.

Center for Digital Democracy president Jeff Chester decried Roberts's personal campaign to keep the AOL broadband deal under wraps.

"Mr. Roberts is about to assume the position of America's most powerful media executive, responsible for supplying access to news and information networks to citizens and consumers through both cable TV and online," he said in a statement issued last Friday. "His unwillingness to engage in an open and forthcoming matter about this crucial matter raises serious questions about whether he and Comcast can be trusted with such a unique responsibility."

AT&T and Comcast hope to merge and create the largest cable TV company ever. Because the firms do not vie for subscribers in the same markets, the merger was never expected to undergo the kind of harsh antitrust examination that the FCC and the Justice Department gave to the proposed merger between direct-broadcast satellite providers EchoStar Communications Corp. and DirecTV Inc. parent Hughes Electronics Corp.

FCC staff members recommended that the four commissioners approve the cable merger, according to published accounts and other sources.

Two weeks ago, Powell indicated that the agency was close to finishing its work.

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