FCC Sets Adelphia Date

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The Federal Communications Commission said late last week it plans to vote at its July 13 public meeting to approve the $16.9 billion acquisition of Adelphia Communications by Time Warner Inc. and Comcast Corp., ending a review that has lingered at the agency for nearly 400 days.

Approval is expected to come with several conditions related to sports programming, but the FCC is not planning to impose Internet network-neutrality mandates on either Comcast or Time Warner, according to an FCC official.

If chairman Kevin Martin has three votes, approval of the Adelphia deal is expected. But if for some reason he lacks a majority, Martin always has the option of withdrawing the Adelphia merger from the meeting agenda. The FCC’s lengthy review of the Adelphia merger has been one of the longest involving cable systems in recent agency history.

Under a merger proposal supported by Martin, Comcast and Time Warner would be barred from charging noncompetitive rates in an effort to effectively withhold affiliated regional sports networks from competing multichannel-video-programming distributors, such as EchoStar Communications and DirecTV, an FCC official said.

Any dispute over terms and conditions would be resolved through compulsory arbitration, an FCC official said, noting that the condition was akin to the one the agency applied to News Corp. in January 2004 when it needed the commission’s approval to take a controlling interest in DirecTV.

The News-DirecTV arbitration requirement expires in 2010. Consistent with that approach, the FCC is expected to sunset the Adelphia merger arbitration conditions in six years, an FCC official said.

A pay TV lobbyist said Martin’s proposal would not break up exclusive sports-programming contracts that Time Warner and Comcast have with entities in which they do not have a financial interest. An FCC official confirmed that statement.

Adelphia currently has about 5 million subscribers. Time Warner Cable and Comcast intend to divide Adelphia’s assets in a series of cable-system trades designed to bolster their regional footprints in several large markets, including Los Angeles, Dallas and Minneapolis-St. Paul.

Time Warner Cable would emerge with a net gain of 3.5 million subscribers and Comcast with about 1.8 million. Those figures were announced last year, when Adelphia had about 5.4 million subscribers.

FCC rules require cable operators to sell satellite-delivered cable networks in which they have financial interests to pay TV distributors. The rules generally do not apply if cable-affiliated programmers are distributed terrestrially, such as via microwave systems or fiber optic lines.

In a setback for the two direct-broadcast satellite providers, Martin’s merger conditions would allow Comcast to continue to withhold Comcast SportsNet Philadelphia from EchoStar and DirecTV, mainly because the FCC had ruled in program-access complaints brought by DirecTV in 1998 and EchoStar in 1999 that Comcast was not required to offer them the channel.

In June 2002, the U.S. Court of Appeals for the D.C. Circuit affirmed the FCC in the case brought by EchoStar.

Comcast SportsNet is the pay TV home of the National Hockey League’s Philadelphia Flyers, the National Basketball Association’s 76ers and Major League Baseball’s Phillies. Comcast also owns the Flyers and 76ers. DirecTV and EchoStar have argued that they can’t compete effectively with Comcast’s cable properties in Philadelphia without the sports channel.

In another Martin proposal, the Adelphia merger would be approved without a commitment from Time Warner and Comcast to abide by the FCC’s August 2005 four broadband principles, also called Internet network-neutrality principles, an FCC official said.

Last October, the commission refused to grant mergers between SBC Communications Inc. and AT&T Corp. and between Verizon Communications Inc. and MCI Corp., unless the acquiring companies agreed to allow the commission to enforce the network-neutrality rules against them for a two-year period.

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