FCC Approves Adelphia Deal 4-1 with Wide Sports Net Limits
The FCC approved the $17 billion Adelphia deal in a rare split vote under Chmn. Martin. The order avoided net neutrality rules while agreeing to a leased access rulemaking backed by Comr. Adelstein. Adelstein issued a partial dissent to the order approving the deal. He raised concern that it lacked a net neutrality condition, on which sources had expected the FCC to punt (CD June 28 p2). Comr. Copps voted against approval. The Commission set broad mandates on sports programming arbitration in cases involving networks owned by buyers Comcast and Time Warner and channels seeking carriage on their systems.
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Comcast’s home turf, Philadelphia, dodged such a condition, despite opposition there by RCN and other firms to the terrestrial exclusion. Asked after the meeting why Philadelphia was excluded, as expected (CD July 13 p6), Martin said it was “the only market the Commission had looked at previously.” Mid-Atlantic Sports Network, in a months- long carriage spat with Comcast, was included in the order. “There’s no question that all the commissioners are committed to getting MASN carriage,” Martin told the media briefing after the oft-delayed meeting.
An aggrieved pay TV firm or regional sports network (RSN) not owned by Adelphia’s buyers can seek arbitration if it fails to get carriage on cable systems. First, an arbitrator will decide if carriage rules were violated, said Media Bureau Industry Analysis Chief Royce Sherlock. The arbitrator then will set a fair price, she said. Each party will submit a “final, best offer” to the arbitrator, Martin said. The rules will apply for 6 years, as in FCC curbs on News Corp.’s purchase of DirecTV, said Media Bureau Assoc. Chief Sarah Whitesell.
Media Bureau staffers’ testimony outlined many possible harms the deal could cause. Buying the bankrupt firm lets Comcast and Time Warner limit competition and raise prices for sports programming sold to rivals, said FCC lawyer Amy Brett. “Uniform price increases will result in higher prices for video programming services and could result in higher choices for consumers,” she testified, outlining potential downsides to the transaction.
Adelstein thanked Martin for agreeing to issue a notice of proposed rulemaking examining leased cable access. Martin will unveil the rulemaking within 3 months and “move… to a final order in a reasonable period of time,” Adelstein said. The inquiry will examine pricing and terms of leased access, Adelstein told us. The Adelphia order subjects such deals to arbitration.
Democratic commissioners chafed at the absence of net neutrality conditions. “We don’t say a word about broadband or net neutrality,” Copps said: “I'm disappointed this order gives such short shrift to network neutrality.” The FCC has been holding off on Internet rules while Congress debates them. Adelstein joined Copps in bemoaning the order’s failure to apply the net mandates imposed last year on 2 Bell transactions or to create a new rule to prevent what Adelstein described as “a principle on anticompetitive discrimination.”
FCC officials were mum about what net neutrality rules will apply to the transaction. Media Bureau officials declined to tell us how FCC net neutrality principles apply. Neither would they comment on whether Comcast’s PBS Kids Sprout VoD service, a concern to Comr. Tate and other commissioners, is dealt with in the order. “This is a very complex order. There are a lot of conditions,” Media Bureau Chief Donna Gregg told reporters: “I would be really reluctant for any of us to comment on it or solve a hypothetical question at this time.”
Several of the deal’s critics voiced pleasure at the FCC order. “This order is a huge victory for us,” said RCN Senior Vp Richard Ramlall, citing the sports programming conditions. The order protects RCN’s existing sports carriage deal with Comcast, he said: “Comcast can still use the terrestrial loophole to deny access to the satellite companies and Verizon but not us.” DirecTV also backed the FCC.
Time Warner lauded the FCC action. “With virtually all regulatory approvals in hand, we are in good shape to close this transaction by the previously announced target date of July 31,” said Time Warner. But the decision was criticized by media activists including Free Press for lacking net neutrality provisions. The glass was half full for Media Access Project Pres. Andrew Schwartzman, whose prepared statement said: “We got some of what we asked for, which was a whole lot more than anyone thought when this all started.”
The Thurs. FCC agenda meeting was delayed 4 hours by last minute 8th floor negotiations over the deal. Adelstein and Copps kept their Republican colleagues waiting in the FCC meeting room over an hour as they grappled with details. Martin, first to enter the room, convened the gathering just before the Adelphia vote for what he called a “3-minute pizza break.”