Court Decision Aided Comcast's Disney Bid

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In bidding $66 billion Wednesday for The Walt Disney Co., Comcast Corp. became the first cable company to take advantage of an early 2002 court ruling that made it possible for cable systems to combine with local TV stations.

In February 2002, a panel of the U.S. Court of Appeals ordered the Federal Communications Commission to abolish a rule that effectively banned cable companies from owning local TV stations. The ruling was a surprise because the case involved other media-ownership rules that the court did not abolish but sent back to the FCC for possible revision.

As proposed, Comcast would take control of 10 ABC stations owned by Disney, including WPVI in the MSO’s hometown of Philadelphia.

However, the FCC and the Department of Justice or the Federal Trade Commission could use the merger-review process to block Comcast's ownership of TV stations in its cable markets.

Ironically, the FCC adopted the cable-TV station cross-ownership ban in 1970 to prevent the mature broadcast industry from dominating the nascent cable sector.

Over the objections of Time Warner Entertainment, the FCC sought to retain the rule, claiming that cable operators that owned TV stations would discriminate against competing TV stations.

But in striking down the rule, the court reasoned that the FCC failed to show "a substantial enough probability of discrimination to deem reasonable a prophylactic rule as broad as the cross-ownership ban."

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