The Adelphia Day of Judgment Comes

For over a year now, I’ve intermitently tracked the transaction between Comcast and Time Warner for the bankrupt Adelphia systems. At tomorrow’s open meeting (assuming no last minute delays for further negotiations), the FCC will issue its decision.

How we got here, what happens, and why you should care below.

So all today, I’ve had One Day More from Les Miserables running through my head (or, in my more cynical moods,La Resistance from South Park: Bigger, Longer and Uncut). At the open FCC meeting tomorrow (July 13), the FCC will decide on the pending deal between Comcast and Time Warner and the bankrupt Adelphia.

I first wrote about thise deal almost a year ago. As I said at the time, I considered (and still consider) the national and regional growth of the largest and second largest cable companies in the country a phenomenally bad idea. Both companies have proven willing to use their market power to make it harder for companies to compete, jack up prices, lock in customers, and generaly behave like regional monopolists. Enhancing their capacity to bring this kind of conduct to broadband, as well as enhancing it in the cable world, just strikes me as a phenomenally bad idea even with out my general concern that concentrating to much power in the hands of too few media companies is bad for our democracy.

As of today. more than 30,000 individuals have filed comments (mostly prompted by my friends at Free Press and fellow travellers at places like Communications Workers of America. Public interest groups have lined up against the merger; neo-cons have supported it, and civil rights groups have split on it. The Attorney General of Maine has asked the FCC to impose divestitures, various members of Congress have written (primarily to ask the FCC to either give access to regional sports or get the Washington Nationals carried by Comcast).

In December, the FCC issued a sweeping demand for new information. As I remarked at the time, whatever happened, the FCc certainly has done more to review this proposed transaction than just about any other cable merger I can remember. Thus my disappointment at the end of January when the Federal Trade Commission, in a 3-2 party line vote, decided to take no action against the merger. Still, as long as the FCC remained split 2-2, giving the two Democrats significant bargaining power, I remained hopeful that the deal might get significant conditions or fall apart.

The confirmation of Robert McDowell at the end of May changed that. Once that happened, it seemed fairly sure the FCC would approve the merger (as the smart money had bet all along). But the question of conditions remained.

Chairman Kevin Martin’s decision to press for a vote at the open meeting tomorrow, now that he has his majority in hand, had the effect of shutting down any direct communications with the Commission as of last week. Under the Government In the Sunshine Act, an administrative agency must close the record on a proceeding before a public meeting at which it will decide on the proceeding, so that the public can know the basis for the decision. As a consequence, not much news has flowed out of the FCC this week.

Most press reports (like this one) agree the FCC will impose some kind of condition requiring Comcast and TW to make regional sports programing available to rivals. At the moment, this will probably still let Comcast keep exclusive rights to its home town teams in Philly. Also, the condition right now looks to apply only to RSNs Comcast and Time Warner own or have an interest in. Simply using local market power to force an exclusive arrangement won’t be covered.

On the one hand, even this is better than what most folks thought would happen a year ago, and would represent a recognition by the FCC that regional market power issues matter in cable (until now, the FCC has insisted that only national concentration matters). On the other hand, les face it, just this condition would suck rocks and allow Comcast and Time Warner to continue to use their market power to the detriment of viewers everywhere.

But even now, we get rumors circulating that conditions remain “in play.” I give below a list of issues raised by folks and likely disposition:

RSNs: The Commission may expand the current draft to include all RSNs, not just affiliated ones. It may also balk at the Philly carve out as failing to pass the “laugh test.” This is still very much up in the air.

PBS Kids/“must have” programming As I’ve discussed elsewhere, Comcast has used its market power to acquire PBS Kids video on demand (VoD) content. A number of folks have come in last minute to push for access to this and other “must have” programming. Will the FCC bite? Again, while it’s not in there now, it could be if one of the three Republicans decides to push.

Network Neutrality: As reported by Callahan’s Cleavland Diary and others, the current order does not have a network neutrality condition similar to that of the Bell mergers last fall (i.e., one that incorporates the FCC “Four Broadband Freedoms” as enforceable merger conditions). Failure to include such a condition here will make it hard to include such a condition in the AT&T/BellSouth merger. Martin has often said he thinks there is no problem that needs NN and opposed it in the Bell mergers, but included it in the past because the FCC was split 2-2 and he needed to get the Dems to go along.

This condition is made a bit more difficult because almost no one from industry showed up to lobby the FCC on this (did I mention how the tech companies regularly get spanked in DC?). Sure, the public interest folks want it and some folks from industry showed up at the end to say it would be nice. But given the fighting by competitors for access to programming, it is hard to convince the Republicans that private sector companies are in danger from Comcast and TW market power (never mind all the Democracy stuff the public interest folks care about) when the usual suspects like Google and Microsoft can’t be bothered to do more than mention it to a Commissioner or two at the end of the process.

So, will Martin hold out a similar condition to get a unanimous vote from the Dems? Will Robert McDowell, who used to represent competing telephone companies, insist on one? Or will McDowell go along with Martin and let the Dems dissent?

Nationals Carriage: A lot of folks want this solved. Martin will almost certainly argue that the way to solve it is resolving MASN’s pending carriage complaint (since MASN, which owns the rights, alleges that Comcast demands an equity piece of the Nationals TV rights — a demand that, if true, violates federal law). But a lot of folks point out that the FCC routinely plays this shell game of pointing to some other proceeding instead of the pending one to resolve problems. Given intense local interest and lobbying, will MASN get a bone here or will they continue to languish in program carriage complaint land.

The America Channel: A similar issue. TAC was negotiating with Adelphia for carriage and, according to its submissions to the FCC, had just come to terms when the current deal got announced. TW and Comcast then yanked the deal because, TAC alleges, it is not affiliated with Comcast or TW. Again, TAC has a complaint pending. Will the FCC do something here?

Independent programming generally As a general matter, evidence in the record shows that carriage on TW and Comcast is critical for a network to succeed, but that these two giants don’t put independents on their systems. We’ve asked the FCC to impose a condition that would make it easier for independents to lease access on cable systems (this right exists now, but it has serious problems that make it unprofitable for independents outside huge markets like NYC and LA). This one is a long shot, but I’ve flogged it like Hell and can’t stop hopping for a miracle win.

Protect PEG access We asked the FCC to make local PEG requirements enfroceable via the FCC rather than through the courts, as required today. Right now, Comcast has a habit of making promises to support local access then “unilaterally renegotiating” after it gets the franchise transferred. Because Comcast is huge and legal redress takes years of litigation, it usually wins. Don’t expect the FCC to act on this, given the current anti-local franchising mood in DC these days.

“Naked” broadband Similar to the “naked dsl” condition in the telco mergers, we asked the FCC to prohibit Comcast and TW from bundling broadband with video services to encourage competition. Very unlikely (especially as no competitors picked up on it).

Political/Competitive advertising Comcast and Time Warner have refused local cable advertising for rival servcies and have refused to take advertisements for politial positions they dislike. At the same time, they give political positions they support free advertising time. No action likely.

I’ll consider it a win if we get a decent NN condition and expansion of the RSN condition to include unaffiliated RSNs and/or Philly. I’ll consider it a huge win if the FCC does anything other than express sympathy for the independent programmers.

As the song says “Tomorrow we’ll discover what our God in Heaven has in store…”

Stay tuned . . . .

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