FCCers Back Comcast Merger

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The largest cable merger ever last week moved one step closer to gaining approval from the Federal Communications Commission.

FCC staff members have filed a report with the agency's four commissioners recommending approval of a combined AT&T Broadband and Comcast Corp., according to published accounts and other sources.

Chairman Michael Powell last week indicated that the commission was nearing action on the merger. The FCC's self-imposed 180-day review timetable expires on Nov. 5.

"[We're] not too far," Powell told reporters at a downtown Washington, D.C., hotel. "It'll take a little more time."

The 22 million subscriber AT&T Comcast Corp. (as the post-merger company will be called) would become the country's largest pay TV provider, with a dominant presence in 17 of the top 20 markets.

When the deal was unveiled last December, the companies said they would serve 5 million digital video households, 2.2 million high-speed-data customers and 1 million local phone subscribers.

For weeks, FCC sources have said that because the cable deal involved companies that did not compete for subscribers, it would not clash with antitrust law and public-interest concerns to the same degree as the proposed merger of direct-broadcast satellite providers EchoStar Communications Corp. and DirecTV Inc. parent Hughes Electronics Corp.

TWE was key

FCC sources said the one issue that potentially harmed the cable merger was the AT&T Corp. unit's 27.6 percent interest in Time Warner Entertainment L.P., which includes about 10 million cable subscribers and such programming assets as pay TV programmer Home Box Office and the Warner Bros. film and television studio.

In August, AT&T and Comcast arranged their exit from the TWE partnership. The companies promised the FCC to place their TWE assets (including a prospective 21 percent stake in what will eventually be the publicly traded Time Warner Cable Inc.) in a trust, until they could be sold.

Although the cable merger requires Justice Department clearance, AT&T and Comcast said in September they could close the deal, because Justice had failed to block it within deadlines established by the Hart-Scott-Rodino Act.

On Oct. 10, the FCC rejected the satellite merger as a huge reduction in competition in the pay TV market, and referred it to an administrative law judge for a hearing. The FCC said the DBS merger would remove a viable pay TV provider from every U.S. market.

Over the last few weeks, EchoStar has attempted to rework the deal in order to gain merger approval from the Justice Department, and then bring the revamped arrangement to the FCC.

Powell's mind is open

FCC chairman Michael Powell, who slammed the DBS merger as monopolistic for the millions of homes not served by cable, last week indicated that he had an open mind about giving a fresh look to a restructured DBS merger, were one to emerge.

"That's an important point. The companies have never offered the commission an alternative. We don't have a proposed plan or remedy before us," Powell said.

Even with DOJ clearance, FCC approval of the $28.6 billion DBS merger remains a long shot, because officials at that agency do not believe that a satellite rival to a combined EchoStar-DirecTV can emerge quickly and offer robust competition.

Nevertheless, EchoStar has been negotiating a DBS plan with cable operator Cablevision Systems Corp., which hopes to take effective control of an orbital slot at 61.5 degrees West longitude and offer a robust package of high-definition programming and other digital TV services to most states.

EchoStar representatives are scheduled to meet with Justice Department officials on Oct. 28 to review new merger proposals.