July 13, 2006 10:17 AM PDT
Adelphia sale nears completion
The Federal Communications Commission decided in a 4-1 vote Thursday to approve the sale of Adelphia to Comcast and Time Warner in a deal worth roughly $17.6 billion. The FCC's approval is the last regulatory hurdle before the companies can close on the sale, which is expected to happen by the end of the month.
Adelphia has been operating under Chapter 11 bankruptcy protection since 2002, when a scandal erupted that involved financial fraud by the company's founder, John Rigas, three of his sons and other former Adelphia executives.
Democratic Commissioner Michael Copps was the only one on the commission to vote against the merger. Fellow Democrat Jonathan Adelstein said he joined the three Republicans in supporting the merger because the commission imposed certain conditions on the merger.
The FCC approved the merger, but said Comcast and Time Warner must provide competitors access to local sports programming in all regions the cable companies operate except Philadelphia, where Comcast owns two of the city's sports franchises: the Philadelphia Flyers hockey team and the National Basketball Association's Philadelphia 76ers.
The FCC put similar restrictions on News Corp. in 2003 when the commission approved the media conglomerate's purchase of satellite TV provider DirecTV. As part of its approval for that merger, the FCC said News Corp. couldn't use DirecTV to withhold programming from competitors, charge higher prices or refuse to carry competing programs.
Consumer groups and competitors of Time Warner and Comcast--including DirecTV--have opposed the merger because they are concerned that Comcast, the largest cable operator in the country, and Time Warner, the second largest, will have too much market power when they add Adelphia's footprint and customer base to their rosters.
While consumer groups applaud the conditions the commission placed on the deal, they feel more conditions are needed. In particular, they are disappointed the commission didn't require Comcast and Time Warner to adhere to specific Net Neutrality rules that would ensure they wouldn't block or degrade third-party traffic running on their networks.
"We got some of what we asked for, which is a lot more than anyone thought when this all started," Andrew Jay Schwartzman, president and CEO of Media Access Project, said in a statement. "But nothing will fix the regional monopolies created by this deal. And without Net Neutrality, the future of the democratic and open Internet remains in doubt."
When Adelphia's assets are divvied up, Comcast would add 1.8 million new subscribers, bringing its total to 23 million. Time Warner plans to add 3.5 million subscribers, for a total of 14.5 million.
In addition to adding raw subscribers, the acquistions will also benefit Comcast and Time Warner by allowing them to concentrate their network footprints in certain areas, which should help them more efficiently market their services to customers.
For example, Comcast would increase its network concentration in areas such as Washington, D.C., West Palm Beach, Fla., and Pittsburgh. Time Warner would get a bigger footprint in cities such as Los Angeles and Cleveland.
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