FCC Approves Cable Mega-Merger, Predicts Rapid Broadband Rollout
November 14, 2002
On Nov. 12, the FCC approved the biggest cable merger ever, setting the stage for AT&T Comcast to move forward with 27 million subscribers and its eyes on video-on-demand, telephony and high-speed Internet access.
The new Philadelphia-based company will be sending monthly bills to nearly 30 percent of the nation's pay-TV customers. And, it is poised to take and hold a big share of the nation's high-speed Internet growth.
"The merger is likely to spur new investment and create synergies and efficiencies that will result in significant cost savings," the commission said in a release. "Thus, the merger will have a positive impact on the deployment of broadband services, which is an important FCC policy goal."
Potentially blocking or delaying the deal is a legal challenge by consumer groups and EarthLink, the ISP. Merger opponents are trying to convince a judge that the FCC failed to fully consider what might become of all that broadband. In particular, they're pointing to a deal for AOL to sell its high-speed Internet services over the new company's cable systems. The details of that deal are confidential and merger opponents are trying to convince a federal judge that they should have had a chance to review and comment on them.
Because the FCC refused to let opponents comment on the AOL deal, the groups - the Consumer Federation of America, Consumers Union, Media Access Project and the Center for Digital Democracy - are asking the U.S. Court of Appeals for the D.C. Circuit to intervene. If the court agrees, the merger will likely be delayed.
FCC Media Bureau Chief Ken Ferree dismissed the groups' quest as a "fishing expedition" aimed at finding some reason to block the merger. The AOL deal, he told reporters after the Nov. 12 approval, is related to the side issue of AT&T's divestiture of its stake in Time Warner Entertainment (TWE).
"It really has nothing to do with this merger," he said.
Consumer groups' concerns - about cable operators putting the pinch on programmers and whether MSOs should be required to open their lines to broadband competitors, for example - are being considered in other rulemaking procedures and are also not relevant to the merger, he said.
Harold Feld, associate director of Media Access Project, disagrees.
"That is a complete misunderstanding of [the FCC's] responsibilities under the Communications Act," he said. "The fact that there may be rules in the future [to address the concerns] does not give them the right to shut their eyes and cover their ears."
Next, the companies will sort out AT&T's stake in TWE, which was complicating the mix with programming interests and about 10 million cable subscribers. On closing, AT&T's interest, about 20 percent of TWE, will go into a trust with divestiture required within five-and-a-half years, a condition imposed by the FCC.
Michael Copps, the lone democratic commissioner, dissented from the approval of the merger, doubting its benefits and focusing on its potential drawbacks, particularly the new company's control over programming. "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," he said. "The more I review the issues at stake in this proposal, the more I am persuaded that it should not go forward."