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Watchdogs Target Comcast

Feb 16, 2004  •  Post A Comment

Comcast Corp. has yet to convince The Walt Disney Co. to accept its takeover offer, but it already faces a significant hurdle. A coalition of consumer groups that showed considerable political muscle during the battle over broadcast deregulation last year is vowing to oppose the $66 billion deal on legal grounds, in Congress and throughout the regulatory process that will be required for approval.
“If they think they’ve got easy pickings, they’ve got another think coming,” declared Jeff Chester, executive director of the watchdog Center for Digital Democracy.
One of the consumer groups’ primary strategies will be to work for passage of legislation that would resurrect a Federal Communications Commission rule that until two years ago barred companies from owning cable TV systems and broadcast stations in the same markets. If passed, that would be a problem for the deal, because Disney owns ABC TV stations in key Comcast cable markets, including Philadelphia, where Comcast is headquartered.
The FCC cleared the way for deals like the Comcast-Disney combination by quietly pulling the plug in 2002 on the regulation, which was intended to check the power of media companies. During a legal challenge, the rule was vacated by a federal appeals court on grounds that the FCC had failed to adequately justify it. In its decision, the court said the FCC was free to try to reinstate the regulation even though it might be difficult to justify.
But the FCC, with its deregulation-minded Republican majority, decided not to try to save the broadcast-cable prohibition. Instead, with little fanfare, the commission let it lapse. “We did not propose breathing new life into it,” FCC Media Bureau Chief Ken Ferree said at the time.
A major lobbying effort by consumer groups could slow down the regulatory process for the Comcast-Disney deal, which most observers feel would face few impediments if the two companies can resolve their differences. The agreement would have to pass muster at the FCC, where the station licenses would have to be transferred, and at either the Federal Trade Commission or the Department of Justice, where it would face antitrust scrutiny. That isn’t expected to be a major issue, because Disney and Comcast, though already giants in their own fields, are essentially in different businesses.
“We have analyzed the issues associated with regulatory approval and are confident that all necessary approvals can be obtained in a timely fashion,” said Brian Roberts, Comcast president and CEO, in a letter last week to Disney chief Michael Eisner.
But Mr. Chester said watchdog groups are already scrambling to reassemble a wide-ranging coalition that effectively organized strong and enduring protest during the FCC’s media ownership deregulation last year.
Comcast’s political action committee is a major campaign contributor on Capitol Hill. According to the Center for Responsive Politics, Comcast has contributed $116,350 to lawmakers during the current campaign cycle, including $10,000 to Senate Minority Leader Tom Daschle, D-S.D. According to center records, Comcast has given $5,000 contributions to other key congressional leaders, including Sen. John McCain, R-Ariz.; House Majority Leader Tom DeLay, R-Texas; Rep. Fred Upton, R-Mich.; Rep. Joe Barton, R-Texas; and Rep. John Dingell, D-Mich.
Stephen Burke, Comcast Cable president, has contributed at least $200,000 to the Bush-Cheney re-election campaign.
“The only thing that can stop this deal dead in its mouse tracks is Congress,” Mr. Chester said.
Watchdog group representatives say they’re particularly concerned about the merger because it would give Comcast major leverage over television programming production and distribution. “When you combine an oligopolistic content provider like Disney with a monopolistic cable system operator like Comcast that will favor Disney content, there will be far fewer opportunities for smaller, independent voices to get on Comcast systems,” said Jonathan Rintels, executive director of the Center for Creative Voices in Media.
Added Gene Kimmelman, senior public policy director for Consumers Union, “This proposed Comcast deal will just further the enormous consolidation we’ve seen in the industry that has led to less competition and higher costs for consumers.”
Despite Comcast’s political clout, at least some prominent lawmakers-still smarting from the FCC’s effort to gut media ownership rules-were flashing warning signals. “I will continue to monitor the possible merger but believe that further media consolidation in the industry is troubling,” said Sen. McCain, chairman of the Senate Commerce Committee.
Sen. Mike DeWine, R-Ohio, and Sen. Herb Kohl, D-Wis., the chairman and ranking minority member, respectively, of the Senate antitrust subcommittee, said in a statement: “If in fact this deal moves forward, the antitrust subcommittee will examine it very carefully to make sure that competition and consumers are protected.”
In a statement last week, the Legg Mason research firm said that it, like Comcast, saw no existing regulatory or antitrust problems for the deal. However, the firm warned that there could be a “huge” political reaction.
“The fact that it would be reviewed in a presidential election year, in what could be a close race, adds to the volatile nature of the deal, though final consideration would likely not come until after the election,” the firm said. “So there is a political risk that actions in Washington could affect the value of the deal.”