Adelphia Sale to Comcast, TWX OKd by FCC

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Dec 3, 2003

FCC OKs Adelphia Sale to Comcast and Time Warner, With Conditions

PHILADELPHIA (AP) -- The Federal Communications Commission on Thursday approved a $17 billion deal to sell the assets of bankrupt cable provider Adelphia Communications to Comcast and Time Warner Cable, removing the last federal regulatory hurdle to the transaction.

But the agency's approval, which came in a 4-to-1 vote, came with conditions.

The FCC said Philadelphia-based Comcast Corp. and Time Warner Cable, a unit of Time Warner Inc. of New York, are prohibited from engaging in tactics that would effectively make regional sports programming unavailable to rivals, such as satellite TV.

"Time Warner and Comcast must make their affiliated RSNs (regional sports networks) available to others," FCC Chairman Kevin J. Martin said.

However, Comcast SportsNet in Philadelphia is exempt from the rule and will continue to be unavailable to DirecTV Group Inc. and EchoStar Communications Corp., owner of the DISH Network.

SportsNet is home to several local professional sports teams, including the Philadelphia 76ers, the Phillies and the Philadelphia Flyers of the National Hockey League.

The lone dissenter, Commissioner Michael Copps, said: "this decision is about big media getting bigger with consumers holding the bag."

Copps also noted that Philadelphia was "inexplicably" exempted from an order to make regional sports programming available to competitors. "Residents of Philadelphia are still stuck without competitive choice," Copps said.

The FCC also requires the two cable companies to enter into binding arbitration if they can't reach a deal with competitors on local sports programming. A similar requirement was imposed on News Corp. before its acquisition of a controlling interest in DirecTV was approved in 2004.

The agency also waded into the dispute over the airing of the Washington Nationals baseball team's games in the Baltimore-Washington area.

Comcast was told to enter into binding arbitration with the Mid-Atlantic Sports Network, or MASN, which carries the Nationals games.

MASN is owned by the Baltimore Orioles and Major League Baseball. Comcast has refused to carry the channel because of a dispute with Orioles owner Peter Angelos over TV rights to the team and control of the region's sports programming market.

Angelos plans to move Orioles telecasts to the MASN network next season after its deal with SportsNet expires. Comcast believes its contract was improperly terminated.

Earlier this month, three House members asked the FCC to tie its approval of the Adelphia purchase to resolution of the dispute.

Blair Levin, an analyst with Stifel Nicolaus, said the FCC decision was a mixed bag for Comcast and Time Warner. "Some competitors were very pleased," he said.

He also said the Adelphia purchase creates two cable companies that are significantly larger than other cable competitors. Comcast has 21.7 million subscribers while Time Warner has 11 million. Levin said third would be Cox Communications in Atlanta, with over six million subscribers.

The FCC did not add any "Net neutrality" requirements as part of the approval. Some Internet firms are seeking legislation or administrative rulings that would prohibit cable providers from charging extra to move data faster for Web sites willing to pay higher fees.

Comcast and Time Warner, the nation's top two cable operators, plan to divide the assets of Adelphia Communications Corp. and swap systems to strengthen their positions in several markets. Adelphia, with 4.8 million subscribers, was the nation's fifth-largest cable TV provider.

The acquisition strengthens Time Warner's positions in New York, Texas, California, Ohio and the Carolinas. Comcast boosts its presence in Pennsylvania, Washington, D.C., Florida and Massachusetts.

Comcast is expected to end up with over 23 million subscribers while Time Warner would have more than 14 million.

Adelphia declared bankruptcy in 2002 after disclosing $2.3 billion in off-balance-sheet debt. Founder John Rigas and one of his sons were convicted for their roles in company fraud. A second son received 10 months of home confinement after pleading guilty to a charge of making a false entry in a company record.

Time Warner said in a statement that the FCC approval puts the deal on track to close by its target date of July 31.

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