AT&T-Comcast deal approved; watchdogs vow to appeal

Nov 18, 2002  •  Post A Comment

The Federal Communications Commission voted 3-1 last week to approve the merger of cable TV giants AT&T Broadband and Comcast Corp., with the caveat that AT&T’s interests in Time Warner Entertainment be placed into an irrevocable trust.
Under the deal, the newly merged company-to be called Comcast Corp.-has 51/2 years from the deal’s closing to divest all interests in TWE. During the divestiture period, the company is supposed to be barred from any involvement in TWE’s video programming.
Critics have argued against the merger on the grounds it would consolidate too much media power into a single entity.
But the FCC’s Republican majority said the TWE divestiture plan-which the agency said was proposed by AT&T and Comcast-would ensure that the merger had no harmful “merger-specific” public interest effects and was apt to create “synergies and efficiencies that will result in significant cost savings.”
“The benefits of this transaction are considerable, the potential harms negligible,” said FCC Chairman Michael Powell.
But Michael Copps, the FCC’s sole Democrat, dissented.
“The sheer economic power created by this mega-combination and the opportunities for abuse that would accompany it outweigh the very limited public interest benefits that the applicants or the majority find here,” Mr. Copps said.
Still, FCC Republicans said the new company, absent TWE’s system interests, would reach 27.02 million subscribers, or 28.9 percent of multichannel video homes. With TWE, the company’s penetration would have reached 41 percent of subscribers, the FCC said.
In addition, the FCC majority said the divestiture would sever AT&T ties to Time Warner programming.
“On the facts here, this combination solves problems, it does not create them,” said Ken Ferree, chief of the FCC Media Bureau.
In the merger’s favor, the FCC majority said it is likely the deal would spur broadband deployment.
The FCC’s Mr. Copps said, however, he is particularly concerned about the anti-competitive effects the merger could have on programming.
“Although there is general agreement among interested parties that the TWE divestiture trust alleviates concerns about the merger’s potential for anticompetitive impact on video programming markets, there is nothing in place to preclude the merged entity from investing in other programming interests in the future,” Mr. Copps said.
“Indeed, the whole dynamic of the industry will-in fact, must-pull the combined company in that direction.
“Its expanded control over the channels of program distribution could afford it the ability not only to influence but perhaps to determine on its own what programming will be produced and offered to the consuming public, and at what cost. That is just too much raw commercial power.”
According to the FCC, even without its TWE investments, AT&T has stakes in three national networks: E! Entertainment, 10 percent; style, 10 percent; and iN Demand, 44 percent. In addition, AT&T has stakes in five regional networks, including Fox Sports New England, 50 percent; and Empire Sports Network, 33.33 percent.
Comcast, according to the FCC, has interests in eight national programming networks: QVC, 58 percent; Discovery Heath Channel, 20 percent; E! Entertainment, 40 percent; The Golf Channel, 91 percent; iN Demand, 11 percent; The Outdoor Life Network, 100 percent; style, 40 percent; and The G4 Network, 94 percent.
In addition, Comcast has interests in four regional networks, including Comcast SportsNet.
A coalition of watchdog groups led by the Media Access Project vowed to appeal the agency’s decision.
“The merger of the largest and the third-largest cable companies will exacerbate their monopoly power,” MAP said in a statement.